Annual Financial Report

RNS Number : 9446R

JPMorgan Indian Invest Trust PLC

15 December 2016

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN INDIAN INVESTMENT TRUST PLC

FINAL RESULTS FOR THE YEAR ENDED 30TH SEPTEMBER 2016

The Directors of JPMorgan Indian Investment Trust plc announce the Company's results for the year ended 30th September 2016.

Chairman's Statement

Results

The year to 30th September 2016 was a positive one for Indian investors, as measured by the Company's benchmark index, the MSCI India Index (in sterling terms), which returned +23.8%. The weakness of sterling against the Rupee was a significant factor.

I am pleased to report that the Company again outperformed the index, producing a return on net assets of +27.9% over the year. The return to shareholders was a little less than this, at +25.8%, reflecting a widening of the discount from 12.3% to 13.7% over the year.

This continues the Company's excellent long term performance record. Our Investment Managers deserve credit for the results that they have achieved. They set out the key factors affecting the Indian economy and equity market as well as the portfolio's performance over the financial year, and give their view of the prospects for the future, in their report below.

Conditional Tender

On 29th November 2013, following consultation with the Company's large shareholders and its advisers, the Board announced an obligation to make a tender offer to shareholders at net asset value less costs if, over the three years to 30th September 2016, the Company underperformed its benchmark index, any such tender to be for up to 25% of the Company's issued share capital. I am very pleased to report that the Company has significantly outperformed the index over the three years, producing a return on net assets of +102.4%, which compares very favourably with the index return of +71.3%. The return to shareholders over that three year period was +105.0%. Therefore the Board will not make such a tender offer, but it renews its commitment to shareholders by undertaking to offer a tender for up to 25% of the issued share capital, at net asset value less costs, should the Company underperform the benchmark index over the three years to 30th September 2019. The Board believes this will continue to incentivise the Manager to produce outperformance.

Tax

As I reported in my half year statement, on 10th May 2016 it was announced that the India-Mauritius tax treaty is to be amended. The advantages of investing in India via Mauritius, whereby gains made on investments held for less than 12 months are not currently subject to capital gains tax, will be removed as a result (the capital gains tax rate on investments held for more than 12 months will continue to be zero). There will be transitional arrangements in place between March 2017 and March 2019, when tax will be applied to short term gains at half of the prevailing rate (i.e. at 8.1%). The new treaty rules become fully effective thereafter. Our Investment Managers tend to hold investments for longer than 12 months and hence, in the normal course of business, it is not expected that the amendments to the tax treaty will have a material effect on the Company.

However, the Board is continuing to take professional advice on this matter, both from JPMorgan and from external lawyers. No decision has yet been taken on whether to continue to invest via the Company's Mauritius subsidiary, or the timetable for any change of structure, but the Board expects to be able to provide more information to shareholders in the first half of 2017.

Gearing

During the year, the Company had in place a three year floating rate £70 million loan facility with Scotiabank to provide the Investment Managers with the flexibility to gear the portfolio when they believe it is appropriate. At the end of the financial year £62.8 million was drawn and the portfolio was 7.0% geared. As at the date of this report, the gearing level is approximately 7.4%. Subsequent to the financial year end, the capacity of the loan facility was increased to £100 million to allow the Investment Managers scope to maintain the level of gearing should the market continue to rise.

Investment Manager

The Board has reviewed the investment management, company secretarial, sales and marketing services provided to the Company by JPMorgan Funds ('JPMF'). This annual review included the performance record, management processes, investment style, resources and risk control mechanisms. The Board was satisfied with the results of the review and therefore in the opinion of the Directors, the continuing appointment of JPMF for the provision of these services, on the terms agreed, is in the best interests of shareholders as a whole.

Share Issues and Repurchases

At the Annual General Meeting in January 2016 shareholders renewed the Directors' authority to repurchase up to 14.99% of the Company's shares for cancellation or into Treasury. The Company repurchased a total of 391,183 shares into Treasury during the year and there are now a total of 20,329,971 shares held in Treasury. The Board believes that such a facility is an important tool in the management of discount volatility and is, therefore, seeking approval from shareholders to renew the authority to repurchase the Company's shares at the forthcoming Annual General Meeting.

Shareholders also granted the Directors authority to issue new ordinary shares. At various times in the past, the Company's shares have traded at a premium to net asset value ('NAV'), which has enabled the issue of new shares. The Board has established guidelines relating to the issue of shares and if these conditions are met, this authority will be utilised to enhance the Company's NAV per share and therefore benefit existing shareholders.

To supplement this authority, the Board will reissue shares from Treasury when appropriate. Issuing shares out of Treasury would be cheaper than issuing new shares since it avoids the necessity of the Company paying listing fees to the London Stock Exchange and the UK Listing Authority. The Board will only buy back shares at a discount to their prevailing NAV and issue new shares, or reissue Treasury shares, when they trade at a premium to their NAV, so as not to prejudice continuing shareholders.

Annual General Meeting

This year's Annual General Meeting will be held at JPMorgan's office at 60 Victoria Embankment, London EC4Y 0JP on Wednesday, 1st February 2017 at 12.30 p.m. As in previous years, in addition to the formal part of the meeting, there will be a presentation from one of the Investment Managers, who will answer questions on the Company's portfolio and performance. There will also be an opportunity to meet the Board and representatives of JPMorgan.

As we have done at previous Annual General Meetings, in order to prevent overcrowding, entry will be restricted to shareholders only and guests will not be admitted to the meeting.

If you have any detailed or technical questions, it would be helpful if you could raise them in advance with the Company Secretary at 60 Victoria Embankment, London EC4Y 0JP or via the 'Ask a Question' link on the Company's website. Shareholders who are unable to attend the AGM are encouraged to use their proxy votes.

Outlook

I have learned over the ten years that I have been a Director of our Company that forecasting movements in the Indian stock market is an extraordinarily difficult and unrewarding endeavour. The long term positives are always there - a huge population with a substantial and growing middle class, a firmly rooted democratic system of government, an established if slow legal system, a well understood role for shareholder owned companies in the economic system and, overall, excellent prospects for long term growth. I will not depress you by setting out an equally long list of negative factors, which have often been mentioned in my predecessors' statements!

Now, however, seems to be a peculiarly difficult time to make any kind of short term forecast for the Indian economy and market. In the medium and long term, the passage of legislation to introduce a national Goods and Services Tax should be a very major improvement. But in the immediate future the dramatic move by the Government to withdraw all 500 and 1000 rupee notes (which constitute over 80% of the cash circulating in one of the most cash-dependent economies in the world) from circulation with immediate effect a month ago may have severe short term deleterious effects on economic activity and profits. Or it may not. This is a policy move, designed to root out endemic corruption, that has never been tried on this scale before, anywhere. Economists may be relishing the opportunity to watch and learn from that rare thing, a real life experiment in their discipline, but for investors this is a very uncomfortable time.

At present, we are proceeding on the basis that this event will prove to be of only short term significance to economic activity, comparable perhaps to the 2011 earthquake and tsunami in Japan. If this is right, then the stock market weakness seen in November and the fall in our NAV since the end of the financial year will be only temporary and I will be able to report on another satisfactory year in twelve months time. However, I have to tell you that my confidence in this forecast is lower than I would like.

Richard Burns

Chairman

15th December 2016

Investment managers' report

Market Review

It was yet another year of volatility. This appears to be a permanent feature of markets and investing. The important question is: how do we, as managers of shareholders' money respond to this? We think we know how: being macro aware, yet putting even more emphasis on bottom-up, stock level fundamentals - more on this below.

A quick review of the financial year highlights some continuing challenges on the macro front, as well as some meaningful reforms that should lay the foundation for a much more robust overall environment for investment in Indian equities.

Growth has remained weak - green shoots appear, only to disappear. There is certainly no synchronized economic recovery underway, with GDP growth stuck at approximately 7.5% (equivalent to approximately 5.5% under the old calculation method). As a natural consequence, overall corporate earnings growth has remained weak and continued to see downgrades, which is usually a headwind for equities. This has been overcome by hope and optimism about the future. This optimism needs to prove justified if equities are to sustain current levels and indeed rise further.

The coordinated effort of the Reserve Bank of India ('RBI') and the government to manage inflation has so far worked. Consumer price inflation has largely been contained at 5% and wholesale price inflation (better reflecting corporate pricing power) turned from negative to positive. Benign inflation has allowed the RBI to cut interest rates (by 50bp), banks have cut lending rates and the bond market has rallied with yields declining by as much as 100bp. Luck played a role too: India had a good monsoon in 2016, after two consecutive weak seasons: this is good for agricultural output, food price inflation and farm sector prosperity.

Among other key events, India made a smooth transition from one RBI Governor (Dr Rajan) to the next (Dr Patel) and continuity and credibility have been maintained; the passage of the Goods and Services Tax (on which more below) and important changes in the banking sector should eventually lead to healthier banks, better allocation of capital and eventually a new growth cycle. For some banks, the process of reconstruction and repair will inevitably be painful.

Performance Review

However, investing purely on the basis of the macro view is not our approach. We are confident that, in a more volatile macro environment, focusing on individual company level fundamentals is even more important than in more stable times. The factors we think important include the economics of the business, the duration of the opportunity and the overall quality of management that enable companies to gain market share and further strengthen their competitive advantage during periods of adversity.

Some examples of stocks that helped our portfolio perform well include: UltraTech Cement, which used its strong balance sheet to acquire cement assets at distressed prices; HDFC Bank & Indusind Bank, two private sector banks which we have held for many years, rapidly gaining market share; and Motilal Oswal Financial Services, a small cap financial services company that is an example of strong entrepreneurship in a tough industry.

Needless to say, there were stocks that cost us performance. Some were in the commodity sector, which saw a strong rally, but which we did not own. Given our general preference for more durable businesses we tend, more often than not, not to own deep commodity cyclicals. This can be painful at times. Others are names such as Jubilant Foods, which we own, but which has suffered from slower than expected growth in discretionary consumption (people are eating less pizzas than we had hoped). This is a well-run business and we continue to own it.

Overall, being disciplined, bottom-up investors with a preference for buying quality companies, yet being macro aware, has worked well this year. The market, as measured by the benchmark index, was up 23.8% over the financial year and the Company's total return on net assets was +27.9%.

Recent Developments

In an unexpected move Prime Minister Modi announced on 8th November that the Rs 500 and Rs 1000 notes would be withdrawn from circulation with immediate effect, to be replaced by new Rs 500 and Rs 2000 notes. One of Modi's key objectives in this move has been to attack corruption. Unaccounted for or 'black' money is a manifestation of corruption, an aspect of the economy which he wants to clamp down on. This comes after an amnesty scheme, which ended in September 2016, where individuals were allowed to declare their previously unreported wealth, pay the tax due and escape any penalties or prosecution. Reducing counterfeit currency and cracking down on terrorist financing have also been cited as objectives of the Government.

There will be several implications, including some unintended consequences given the unprecedented nature of this move and its enormous scale (these notes account for 85% of the cash in circulation). At this stage, it is too early to predict the outcome.

Outlook

Whilst recovery of economic and earnings growth is taking longer than we expected, India has years, if not decades of consumption and investment growth before it reaches anywhere near saturation. But the real attraction is the vast array of companies across so many sectors (including exciting new ones) which we can choose from - a fertile ecosystem for a bottom-up investor. While macro-economic variables are likely to remain volatile in the short term, we remain focused on and optimistic about the long term.

Amongst the major changes of the last year the establishment of a goods and sales tax is a key medium to long term positive for the Indian economy. This is a marked shift from the Modi government's reforms up to now, which have been purely administrative, and reflects its ability and willingness to engage and negotiate with all parties and stakeholders on reform. Some estimates suggest that, once fully implemented, the tax could add approximately 150 bps to the sustainable GDP growth rate. Eventually, it could be a major contributor to the efficiency of doing business as well as efficiency in tax collection. We would expect the private sector, in which the Company invests, to benefit at the expense of the public sector. Overall we view this as a major positive for India, a stimulant to sustainable growth and a catalyst for improved productivity.

Rukhshad Shroff, CFA

Rajendra Nair, CFA

Investment Managers

15th December 2016

Principal Risks

The Directors confirm that they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. The risks identified and the ways in which they are managed or mitigated are summarised as follows.

With the assistance of the Manager, the Board has drawn up a risk matrix, which identifies the key risks to the Company. In assessing risks and how they can be mitigated, the Board has given particular attention to those risks that might threaten viability. These key risks fall broadly under the following categories:

•      Investment and Strategy: An inappropriate investment strategy, or poor execution of that strategy, for example stock selection, asset allocation or the level of gearing, may lead to under-performance against the Company's benchmark index and competitor funds.

        The Board manages these risks by diversification of investments through its investment restrictions and guidelines which are monitored and reported by the Manager. JPMF also provides the Directors with timely and accurate management information, including performance data and attribution analyses, revenue estimates, liquidity reports and shareholder analyses. The Board monitors the implementation and results of the investment process with the Investment Managers, who attend all Board meetings, and review data which show statistical measures of the Company's risk profile.

        The Investment Managers employ the Company's gearing within a strategic range set by the Board.

•      Market: Market risk arises from uncertainty about the future prices of the Company's investments. It represents the potential loss that the Company might suffer through holding investments in the face of negative market movements. The Board monitors performance regularly as set out in the 'Investment Strategy' section above.

•      Legal and Regulatory: In order to qualify as an investment trust, the Company must comply with Section 1158 of the Corporation Tax Act 2010 ('Section 1158'). Details of the Company's approval are given under 'Business of the Company' in the annual report. Were the Company to breach Section 1158, it would lose its investment trust status and, as a consequence, gains within the Company's portfolio would be subject to Capital Gains Tax. The Section 1158 qualification criteria are continually monitored by the Manager and the results reported to the Board each month.

        The Company must also comply with the provisions of the Companies Act and, since its shares are listed on the London Stock Exchange, the UKLA Listing Rules and Disclosure Guidance and Transparency Rules ('DTRs'). A breach of the Companies Act could result in the Company and/or the Directors being fined or the subject of criminal proceedings. Breach of the UKLA Listing Rules or DTRs could result in the Company's shares being suspended from listing which in turn would breach Section 1158.

        The Board relies on the services of its Company Secretary and its professional advisers to ensure compliance with the Companies Act and the UKLA Listing Rules and DTRs.

•      Taxation: Since the Company's launch in 1994, it has held the majority of its investments through its Mauritius based subsidiary company, thereby benefitting from the India/Mauritius Double Tax Treaty (the 'Treaty').

        The Board has stated previously that there could be no assurance that the Company's subsidiary would continue to qualify for or receive the benefits of the Treaty or that the terms of the Treaty would not be changed. Indeed, on 10th May 2016 it was announced that the Treaty is to be amended. The advantages of investing in India via Mauritius, whereby gains made on investments held for less than 12 months are not currently subject to capital gains tax, will be removed as a result. There will be transitional arrangements in place between March 2017 and March 2019, when tax will be applied to short term gains at half of the prevailing rate. The new Treaty rules become fully effective thereafter. Our Investment Managers tend to hold investments for longer than 12 months and hence, in the normal course of business, it is not expected that the amendments to the Treaty will have a material effect on the Company.

        The Board is taking professional advice on this matter and no decision has yet been taken on whether to continue to invest via the Company's Mauritius subsidiary, or the timetable for any change of structure. The Board expects to be able to provide more information to shareholders in the first half of 2017.

•      Corporate Governance and Shareholder Relations: If the Company's share price lags the NAV by a significant level, this will result in lower returns to shareholders. The Board seeks to manage the volatility and absolute level of the discount by judicious use of its share repurchase authority, taking account of market conditions and its peer group discounts.

        Details of the Company's compliance with Corporate Governance best practice, including information on relations with shareholders, are set out in the Corporate Governance report within the annual report.

•      Operational, including Cyber Crime: Loss of key staff by the Manager, such as the Investment Managers, could affect the performance of the Company. In this respect the Board receives information on contingency and succession planning from JPMF. Disruption to, or failure of, the Manager's accounting, dealing or payments systems or the Depositary's or Custodian's records could prevent accurate reporting and monitoring of the Company's financial position.

        Details of how the Board monitors the services provided by the Manager and its associates and the key elements designed to provide effective internal control are included in the Risk Management and Internal Control section of the Corporate Governance statement within the annual report.

        The threat of cyber attack, in all its guises, is regarded as at least as important as more traditional physical threats to business continuity and security. The Board has received a summary of the cyber security policies of its key third party service providers and JPMF has confirmed that the Company benefits directly or indirectly from all elements of JPMorgan's Cyber Security programme. The information technology controls around the physical security of JPMorgan's data centres, security of its networks and security of its trading applications are tested by independent review and reported on every six months against the AAF standard.

        The risk of fraud or other control failures or weaknesses within the Manager or other service providers could result in losses to the Company. The Audit and Risk Committee receives independently audited reports on the Manager's and other service providers' internals controls, as well as a report from the Manager's Compliance function. The Company's management agreement obliges the Manager to report on the detection of fraud relating to the Company's investments and the Company is afforded protection through its various contracts with suppliers, of which one of the key protections is the Depositary's indemnification for loss or misappropriation of the Company's assets held in custody. The Company's Mauritian subsidiary company is not subject to the Alternative Investment Fund Managers Directive and therefore it has not appointed a depositary, but has its own custody agreement.

•      Financial: The financial risks faced by the Company include market price risk, currency risk, interest rate risk, liability risk, credit risk and borrowing default risk. Further details are disclosed in note 21 in the annual report. The Company has exposure to foreign currency as part of the risk reward profile inherent in a company that invests overseas. The income and capital value of the Company's investments can be affected by exchange rate movements.

•      Political and Economic: The Company faces risks from possible policy changes including the imposition of restrictions on the free movement of capital.

Related Parties Transactions

During the financial year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company during the year.

statement of directors' responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union and Article 4 of the IAS Regulation and have also chosen to prepare the Parent Company financial statements under IFRS as adopted by the EU. Under company law the Directors must not approve the accounts unless they are satisfied that, taken as a whole, the annual report and accounts provide the information necessary for shareholders to assess the Company's performance, business model and strategy and that they give a true and fair view of the state of affairs of the Company and of the total return or loss of the Company for that period. In order to provide these confirmations, and in preparing these financial statements, the Directors must be satisfied that, taken as a whole, the annual report and accounts are fair, balanced and understandable; and the Directors are required to:

•      select suitable accounting policies and then apply them consistently;

•      make judgements and accounting estimates that are reasonable and prudent;

•      state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements; and

•      prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business;

and the Directors confirm that they have done so.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The accounts are published on the www.jpmindian.co.uk website, which is maintained by the Company's Manager. The maintenance and integrity of the website maintained by the Manager is, so far as it relates to the Company, the responsibility of the Manager. The work carried out by the auditors does not involve consideration of the maintenance and integrity of this website and, accordingly, the auditors accept no responsibility for any changes that have occurred to the Annual Report since they were initially presented on the website. The Annual Report is prepared in accordance with UK legislation, which may differ from legislation in other jurisdictions.

Under applicable law and regulations the Directors are also responsible for preparing a Strategic Report, a Directors' Report and Directors' Remuneration Report that comply with that law and those regulations.

Each of the Directors, whose names and functions are listed in the Directors' Report, confirms that, to the best of his or her knowledge the financial statements, which have been prepared in accordance with IFRS and applicable law, give a true and fair view of the assets, liabilities, financial position and return or loss of the Company.

The Board confirms that it is satisfied that the annual report and accounts taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the strategy and business model of the Company.

For and on behalf of the Board
Richard Burns
Chairman

15th December 2016

GROUP statement of comprehensive Income

for the year ended 30th September 2016

	2016			2015
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Investment income	6,725	-	6,725	6,136	-	6,136
Other income	34	-	34	1	-	1
Gains from investments held at fair value through profit or loss	-	168,925	168,925	-	76,601	76,601
Foreign exchange gains/(losses)	-	586	586	-	(155)	(155)
Total income	6,759	169,511	176,270	6,137	76,446	82,583
Management fee	(6,379)	-	(6,379)	(6,151)	-	(6,151)
Other administrative expenses	(1,463)	-	(1,463)	(1,462)	-	(1,462)
(Loss)/profit before finance costs and taxation	(1,083)	169,511	168,428	(1,476)	76,446	74,970
Finance costs	(691)	-	(691)	(759)	-	(759)
(Loss)/profit before taxation	(1,774)	169,511	167,737	(2,235)	76,446	74,211
Taxation	(67)	-	(67)	(105)	-	(105)
Net (loss)/profit	(1,841)	169,511	167,670	(2,340)	76,446	74,106
(Loss)/earnings per share	(1.75)p	160.68p	158.93p	(2.21)p	72.32p	70.11p

Group and Company Statements of Changes in Equity

for the year ended 30th September 2016

		Group
	Called up				Exercised	Capital
		share	Share	Other	warrant	redemption	Capital	Revenue
		capital	premium	reserve	reserve	reserve	reserves	reserve	Total
		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2014		31,404	97,316	41,929	5,886	6,362	363,920	(15,971)	530,846
Profit/(loss) for the year		-	-	-	-	-	76,446	(2,340)	74,106
At 30th September 2015		31,404	97,316	41,929	5,886	6,362	440,366	(18,311)	604,952
Repurchase of shares into Treasury		-	-	-	-	-	(1,884)	-	(1,884)
Profit/(loss) for the year		-	-	-	-	-	169,511	(1,841)	167,670
At 30th September 2016		31,404	97,316	41,929	5,886	6,362	607,993	(20,152)	770,738

						Company
	Called up				Exercised	Capital
		share	Share	Other	warrant	redemption	Capital	Revenue
		capital	premium	reserve	reserve	reserve	reserves	reserve	Total
		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2014		31,404	97,316	41,929	5,886	6,362	369,449	(21,500)	530,846
Profit/(loss) for the year		-	-	-	-	-	74,819	(713)	74,106
At 30th September 2015		31,404	97,316	41,929	5,886	6,362	444,268	(22,213)	604,952
Repurchase of shares into Treasury		-	-	-	-	-	(1,884)	-	(1,884)
Profit/(loss) for the year		-	-	-	-	-	168,221	(551)	167,670
At 30th September 2016		31,404	97,316	41,929	5,886	6,362	610,605	(22,764)	770,738

Group and Company statement of financial position
at 30th September 2016

	Group	Group	Company	Company
	2016	2015	2016	2015
		Restated		Restated
	£'000	£'000	£'000	£'000
Non current assets
Investments held at fair value through profit or loss	824,906	614,242	766,644	598,338
Current assets
Other receivables	46	2,718	46	47
Cash and cash equivalents	8,960	11,344	4,147	6,674
	9,006	14,062	4,193	6,721
Current liabilities
Other payables	(374)	(352)	(99)	(107)
Net current assets	8,632	13,710	4,094	6,614
Total assets less current liabilities	833,538	627,952	770,738	604,952
Creditors: amounts falling due after more than one year	(62,800)	(23,000)	-	-
Net assets	770,738	604,952	770,738	604,952
Amounts attributable to equity holders
Called up share capital	31,404	31,404	31,404	31,404
Share premium	97,316	97,316	97,316	97,316
Other reserve	41,929	41,929	41,929	41,929
Exercised warrant reserve	5,886	5,886	5,886	5,886
Capital redemption reserve	6,362	6,362	6,362	6,362
Capital reserves	607,993	440,366	610,605	444,268
Revenue reserve	(20,152)	(18,311)	(22,764)	(22,213)
Total equity shareholders' funds	770,738	604,952	770,738	604,952
Net asset value per share	731.8p	572.3p	731.8p	572.3p

Group and Company Statement of Cash Flows
for the year ended 30th September 2016

	Group	Group	Company	Company
	2016	2015	2016	2015
		Restated		Restated
	£'000	£'000	£'000	£'000
Operating activities
Profit before taxation	167,737	74,211	167,670	74,106
Deduct dividends received	(6,725)	(6,136)	(382)	(264)
Deduct bank interest received	(34)	(1)	(24)	-
Add back interest paid	691	759	-	3
Deduct gains on investments held at fair value through profit or loss	(168,925)	(76,601)	(167,475)	(74,731)
Add back exchange gain on liquidity holding	-	94	-	94
Decrease/(increase) in prepayments, VAT and other receivables	51	61	1	(24)
Decrease in amounts due from brokers	2,621	1,531	-	-
Increase/(decrease) in other payables	22	(13)	(8)	(16)
Decrease in amount due to brokers	-	(1,452)	-	-
Net cash outflow from operating activities before interest and taxation	(4,562)	(7,547)	(218)	(832)
Interest paid	(691)	(759)	-	(3)
Tax paid	(67)	(105)	-	-
Dividends received	6,725	6,136	382	264
Interest received	34	1	24	-
Net cash (outflow)/inflow from operating activities	1,439	(2,274)	188	(571)
Investing activities
Purchases of investments held at fair value through profit or loss	(123,412)	(126,601)	(831)	(1,402)
Sales of investments held at fair value through profit or loss	81,673	146,340	-	8,086
Net cash (outflow)/inflow from investing activities	(41,739)	19,739	(831)	6,684
Financing activities
Repurchase of shares into Treasury	(1,884)	-	(1,884)	-
Drawdown of ING short term loans	-	37,200	-	-
Drawdown of Scotiabank long term loans	39,800	23,000	-	-
Repayment of ING short term loans	-	(67,100)	-	-
Net cash inflow/(outflow) from financing activities	37,916	(6,900)	(1,884)	-
(Decrease)/increase in cash and cash equivalents	(2,384)	10,565	(2,527)	6,113
Cash and cash equivalents at the start of the year	11,344	779	6,674	561
Cash and cash equivalents at the end of the year	8,960	11,344	4,147	6,674

As disclosed in note 2(a), certain comparatives have been restated.

Notes to the financial statements

for the year ended 30th September 2016

1.     Principal activity

The principal activity of the Company is that of an investment holding company within the meaning of Section 1158 of the Corporation Tax Act 2010. The principal activity of its subsidiary company, JPMorgan Indian Investment Company (Mauritius) Limited, is that of an investment company.

2.     Accounting policies

(a)   Basis of accounting

The Group and Company financial statements have been prepared in accordance with the Companies Act 2006 and International Financial Reporting Standards ('IFRS'), which comprise standards and interpretations approved by the International Accounting Standards Board ('IASB'), the International Accounting Standards and Standing Interpretations Committee and interpretations approved by the International Accounting Standards Committee ('IASC') that remain in effect and to the extent that they have been adopted by the European Union.

The financial statements have been prepared on the going concern basis. The disclosures on going concern in the Directors' Report in the Annual Report form part of these financial statements. The principal accounting policies adopted are set out below. Where presentational guidance set out in the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the 'SORP') issued by the Association of Investment Companies ('AIC') in January 2009 is consistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.

The Company's share capital is denominated in sterling and this is the currency in which its shareholders operate and expenses are generally paid. The Directors have therefore determined the functional currency to be sterling.

Restatement

The investments in liquidity funds in the prior year have been re-presented as a current asset and cash equivalent rather than as a non-current asset as previously presented. This change in classification has also resulted in a restatement of the Group and Company Statement of Cash Flows. Consequently, prior year balances have been restated to make the required adjustments based on IAS 8. There was no impact on net assets, NAV per share, earnings or earnings per share as a result of the restatement. In addition, no comparative statement of financial position at 1st October 2014 has been presented as no liquidity funds were held at this date.

The affected financial statement line items for the prior year have been restated as follows:

Impact on Group and Company Statement of Financial Position

		Group	Company
		30th September 2015	30th September 2015
		£'000	£'000
	Investments in liquidity fund held at fair value through profit or loss	(9,741)	(5,941)
	Cash and cash equivalents	9,741	5,941
	Net impact on equity	-	-

Impact on Group and Company Statement of Cash Flows

		Group	Company
		30th September 2015	30th September 2015
		£'000	£'000
	Operating activities
	Exchange gain on liquidity holding	94	94
	Investing activities
	Purchases of investments held at fair value through profit or loss	49,161	5,853
	Sales of investments held at fair value through profit or loss	(39,435)	(6)
	Cash and cash equivalents at the end of the year	(9,741)	(5,941)
	Net impact on cash flows	-	-

3.     Earnings per share

		2016	2015
		£'000	£'000
	Earnings per share is based on the following:
	Revenue loss	(1,841)	(2,340)
	Capital return	169,511	76,446
	Total return	167,670	74,106
	Weighted average number of shares in issue	105,496,718	105,707,798
	Revenue loss per share	(1.75)p	(2.21)p
	Capital return per share	160.68p	72.32p
	Total return per share	158.93p	70.11p

4.     Net asset value per share

			Group
		2016	2015
		£'000	£'000
	Net assets (£'000)	770,738	604,952
	Number of shares in issue excluding shares held in Treasury	105,316,615	105,707,798
	Net asset value per share	731.8p	572.3p

The Company will only re-issue shares held in Treasury at a premium and therefore these shares have no dilutive potential.

5.     Status of results announcement

2015 Financial Information

The figures and financial information for 2015 are extracted from the Annual Report and Accounts for the year ended 30th September 2015 and do not constitute the statutory accounts for the year. The Annual Report and Accounts include the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

2016 Financial Information

The figures and financial information for 2016 are extracted from the published Annual Report and Accounts for the year ended 30th September 2016 and do not constitute the statutory accounts for that year. The Annual Report and Accounts has been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and Accounts will be delivered to the Register of Companies in due course.

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement

JPMORGAN FUNDS LIMITED

ENDS

A copy of the annual report will shortly be submitted to the National Storage Mechanism and will be available for inspection at www.morningstar.co.uk/uk/NSM

The annual report will shortly be available on the Company's website at www.jpmindian.co.uk where up-to-date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.

JPMORGAN FUNDS LIMITED

 

END

 

 

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