Annual Financial Report

RNS Number : 8387X

JPMorgan Indian Invest Trust PLC

23 December 2019

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN INDIAN INVESTMENT TRUST PLC

FINAL RESULTS FOR THE YEAR ENDED 30TH SEPTEMBER 2019

Legal Entity Identifier: 549300OHW8R1C2WBYK02

Information disclosed in accordance with the DTR 4.1.3

CHAIRMAN'S STATEMENT

Results

The year to 30th September 2019 was another positive one for Indian investors, as measured by the Company's benchmark index, the MSCI India Index (in sterling terms), which returned +10.8%. I am pleased to report that the Company outperformed the index, producing a total return on net assets of +11.4% over the year. The share price rose from 630.0p to 744.0p and the discount narrowed from 14.5% at the beginning of the year to 9.3% at the year end, resulting in a total return to shareholders of +18.1%.

The Board judges performance over the longer term and, whilst underperformance in recent years means that the Company has underperformed the benchmark index over three years, it has outperformed over five and ten years. As you would expect, the Board continues to monitor performance closely. In their report, the Investment Managers set out the key factors affecting the portfolio's performance as well as the Indian economy and equity market over the financial year and give their view of the prospects for the future.

Tender Offer

In November 2013, the Board announced that it planned to introduce an obligation on the Board to make a tender offer to shareholders at NAV less costs if, over the three years from 1st October 2013, the Company underperformed its benchmark. Over the three years to 30th September 2016, the Company significantly outperformed its benchmark index and therefore no such tender offer was made. However, the Board renewed its commitment to shareholders by undertaking to offer a tender for up to 25% of the issued share capital, at NAV less costs, should the Company underperform the benchmark index over the three years to 30th September 2019. Unfortunately the outperformance of the benchmark over the past year was not sufficient to achieve outperformance over that three year period, with the Company under-performing by some 15.4%. Therefore all shareholders are being offered the opportunity to tender up to 25% of their holding in the Company. Details are set out in the circular which will be sent as a separate document to the annual report. The Directors do not intend to tender their own shares.

Taxation

As I have reported previously, the India-Mauritius tax treaty has been amended and the advantages of investing in India via Mauritius have, to a large degree, been removed. However, it remains advantageous for the Company to continue to hold its investments made prior to February 2018 through the Mauritius subsidiary company until such time as the Investment Managers decide to reduce or sell those holdings. Therefore the Company's assets are in the process of moving to the UK parent company through natural trading and this is likely to take a number of years. At the time of writing approximately £220 million of the Group's investments are held directly by the parent company.

IFRS 10

Consistent with the past two financial years, the financial statements of the Company contained in the Annual Report have been prepared in accordance with the amended IFRS 10. As a result, the financial statements do not consolidate our Mauritian subsidiary, which still holds the majority of our investment portfolio. As a consequence of the non-consolidation of the Mauritian subsidiary's financial statements, it is the Board's view that these financial statements do not disclose the full cost of operating the enterprise or the total level of our liabilities. Therefore, we have again sought to provide shareholders with a fuller picture of the combined operations of the Company and its subsidiary during the year and their combined financial position as at 30th September 2019 by including in note 22 to the financial statements supplemental information and reconciliations to the statutory financial statements, i.e. figures which are comparable to those which have been reported in years prior to 2017. As this information is within the notes to the financial statements it is audited. The Board again urges shareholders to consider these figures if they want to judge how the Company has performed this year, alongside the statutory financial statements.

Gearing

During the year, the Company had in place a three year floating rate £100 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 the loan was not drawn and the portfolio was 5.4% net cash, i.e. 94.6% invested. Subsequent to the year end, £30 million has been drawn down but at the time of writing, the Company's portfolio is approximately 1.2% net cash.

The Board

In accordance with corporate governance best practice, an independent evaluation of the Board and its committees was undertaken recently. The evaluation confirmed that there is an appropriate mix of skills and experience on the Board and that the Directors continue to work together effectively. However, we are aware of the changes implemented by the revised UK and AIC Corporate Governance Codes and therefore, in order to ensure orderly succession planning and continuity, in October we announced the appointments of Vanessa Donegan and Jeremy Whitley as Directors with effect from 1st February 2020. They bring complementary experience and skills to the Board. Vanessa joined Allied Dunbar Assurance in 1986 and became a Founder Executive Director of Threadneedle Investments when Allied Dunbar Assurance merged with Eagle Star in 1994. She remained with the group until her retirement in 2018, holding various senior positions, including Head of Asia Pacific Equities, EMEA. She is also a non-executive director of Herald Investment Management. Jeremy is a non-executive director and chairman of the audit committee of The Scottish Oriental Smaller Companies Trust plc and chairman and trustee of Sustainable Inshore Fisheries Trust. He left Aberdeen Asset Management in March 2017, where he had been Head of UK and European equities since July 2009, following a twenty nine year investment career. Previous roles with Aberdeen included Senior Investment Manager on the global equities team as well as the Asian equities team, based in Singapore, where he was lead manager of the Edinburgh Dragon Trust. I am sure they will both be excellent additions to the Board.

I shall retire from the Board at the conclusion of the forthcoming General Meetings on 5th February 2020, having served as a Director since 2006. I have thoroughly enjoyed my time on the Board representing the shareholders and would like to thank my fellow Directors for their support. Rosemary Morgan will succeed me as Chairman and I leave the Board confident that the Company is in very good hands.

In accordance with best practice, all Directors, other than myself, will stand for reappointment at the forthcoming AGM.

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. Notwithstanding the underperformance over the last three years, 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.

Discount and Share Repurchases

The discount at which the Company's shares trade narrowed over the course of the year, from 14.5% to 9.3%. At the AGM held in February 2019, shareholders renewed the Directors' authority to repurchase up to 14.99% of the Company's shares for cancellation or into Treasury. The Company has not repurchased any shares during the year and as at the date of this report there remains a total of 21,042,646 shares held in Treasury. Although it has not felt it necessary to buy back shares during the year, 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 AGM.

Annual General Meeting

The AGM will be held at JPMorgan's office at 60 Victoria Embankment, London EC4Y 0JP on Wednesday, 5th February 2020 at 12.00 noon. 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 AGMs, in order to prevent overcrowding, entry will be restricted to shareholders only and guests will not be admitted to the meeting.

Outlook

The Indian stock market did well last year, despite the disappointing performance of the economy, whose growth rate fell well short of what had been expected twelve months ago. Whether that trick can be repeated this year is an open question, but it is hoped that the Indian government will continue to press on with addressing the structural economic and financial issues which are discussed in the Investment Managers' Report.

However, there ample opportunities for stock picking in the Indian market and many high quality businesses to choose from. We expect our Managers to concentrate on these rather than worry about the structural issues which are not within our power to influence. Investing in stocks is what the Company is about and that has been the basis of its success up to now. As I leave the Board, I have great confidence in its ability to continue to prosper in the years ahead.

Richard Burns

Chairman                                                                                                                                 

23rd December 2019

INVESTMENT MANAGERS' REPORT

The year in review

The Company's return on net assets for the year to 30th September 2019 was +11.4%, modestly outperforming its benchmark, the MSCI India Index, which rose by +10.8% (on a total return, net basis, in sterling terms). This was achieved against a background of declining economic growth, weakening manufacturing output and consumer confidence, and a shortage of credit caused by continued structural problems in India's financial system. Corporate revenue growth has been slow and earnings expectations subject to persistent downgrades. Although India has strong, well-managed companies that can take advantage of adverse conditions to outpace weaker competitors, the number of Indian companies able to thrive in this environment has been shrinking.

Market review: slowing economic growth and challenges all around

The pace of annual GDP growth declined during the year, falling to a six-year low of 5% in the April-June 2019 quarter. The IMF estimates that growth could slip to 6.1% for calendar 2019, compared with 6.9% in 2018. This is before taking account of recent analysis of India's reporting of national output, which suggests that headline GDP numbers may significantly overstate underlying expansion of the economy.

Structural weaknesses in India's financial system had a major impact on the economy throughout the year under review. The collapse in August 2018 of the large non-bank finance company IL&FS severely aggravated a shortage of credit that had already arisen from the inability of public-sector banks to expand their balance sheets. Confidence in non-bank finance companies, an important source of credit for residential property and consumer durables, was damaged, and their funding sources were constrained. Government policy aimed at resolving the bottleneck in the financial system caused by the balance sheet weakness of the still dominant public sector banks, remained largely ineffective. Mergers proposed between public sector banks will not on their own resolve the public sector banks' legacy of high non-performing loans, weak management, and capital constraints caused by their own underperformance and the unwillingness of government to see its controlling share in the sector diluted.

Economic performance in the year to September 2019 demonstrated clearly that the political achievement of the BJP in securing a national majority in elections in 2014 and again in May 2019 has yet to deliver the policies required for a sustained high rate of economic growth. There are also costs, as well as benefits, from re-shaping the Indian economy, evidenced by the setback to the large informal sector from the implementation from 2017 of the much needed reform of tax on goods and services.

By the end of the year under review, business confidence in India was fragile, a situation that the government acknowledged in September by announcing a reduction in corporation tax from 30% to 22%. All sectors of the economy have felt the negative impact of declining economic growth, and private sector investment remains weak, disappointing long-standing hopes of an investment-led recovery.

Spotlight on stocks and sectors

Our aim is to invest in high quality businesses with superior, long-term growth prospects, and we hold a high conviction, relatively concentrated portfolio of stocks.

We continue to be significantly overweight in the financial sector and, within it, both HDFC Bank and Kotak Mahindra Bank delivered, making the largest contributions to performance. More recent portfolio additions also contributed, including India's largest commodity derivatives exchange MCX.

It is worth noting that the focus on quality names within financials also resulted in beneficial decisions not to own certain names, as the testing environment caused a steep bifurcation of performance within the sector.

The best management teams earned their stripes while other players were more challenged. The zero weightings in Yes Bank and Indiabulls Housing Finance were both amongst the top ten relative contributors over the year.

IndusInd Bank, by contrast, a strong performer in the past, was weakened by its exposure to the liquidity crisis in the non-bank finance company sector. Other casualties of the NBFC crisis in the portfolio were Maruti Suzuki (which sells cars) and Ashok Leyland (a truck company).

An underlying assumption in the portfolio has been that the investment cycle in India was due to recover. We owned a variety of names which caused us to be overweight in the industrials sector. Stock selection in that sector proved to be a headwind. As well as Ashok Leyland mentioned above, power equipment manufacturer BHEL acted as a drag on performance. Meanwhile, Hindustan Unilever and Asian Paints, defensive names which we did not hold, were also amongst the top ten detractors. Both are extremely high quality franchises with stable revenue streams and as such are safe havens in a difficult economic environment. However, we found it difficult to justify the full valuations of either.

At the sector level our overweight position in consumer discretionary names was a headwind as the lacklustre economy weighed on consumers' wallets. However, that was more than compensated for by the stocks we picked within the sector, for example gold and jewellery play Titan; and by those that we chose to avoid, such as four-wheeler stocks Mahindra & Mahindra and Tata Motors (the latter with its Jaguar Land Rover franchise).

Being very underweight energy stocks detracted, not due to anything actually taking place within the energy complex but because that sector includes Reliance Industries. Reliance has been diversifying into retail and telecoms, with an exceptionally aggressive competitive strategy for its mobile operator JIO. The market has welcomed both JIO's market share gains and also signs that Reliance might take steps to deleverage its balance sheet. We maintained a view that the former is value destructive and indeed our performance benefited from zero exposure to pure telecoms names which have been buffeted by JIO's advances. Meanwhile the valuation offers insufficient upside given the uncertainty relating to the latter. This remains the Company's single largest stock underweight.

PERFORMANCE ATTRIBUTION

FOR THE YEAR ENDED 30TH SEPTEMBER 2019

	%	%
Contributions to total returns
Benchmark return		10.8
Sector allocation	2.5
Stock selection	(0.6)
Currency effect	0.1
Gearing/(net cash)	(0.3)
Investment Manager contribution		1.7
Portfolio return		12.5
Management fee/other expenses	(1.1)
Share buybacks/issuance	0.0
Return on net assetsA		11.4
Return to shareholdersA		18.1

Source: Factset, J.P. Morgan and Morningstar. All figures are on a total return basis.

Performance attribution analyses how the Company achieved its recorded performance relative to its benchmark.

^A      Alternative performance measure ('APM').

Many of our key convictions remained unchanged over the year under review: it is only possible to benefit from the compounding of high quality equities by holding them over the longer term. Financials remained our largest overweight. We also retained overweight positions in industrials and consumer discretionary stocks and underweights in expensive staples and energy (which as mentioned has implicit telecoms exposure). One key change was that over the year we reduced the size of our underweight in information technology, having increased our active position in our favoured IT name, TCS, by approximately 200 basis points.

With an eye on the macro environment, but without deviating from our core focus on individual franchises, we reduced cyclicality in the portfolio. We exited Bajaj Auto, reduced cement plays ACC and Ambuja Cements, and moved from overweight to underweight in Hero Motocorp. Additions included names which are less tied to the fortunes of the economy, for example Apollo Hospitals. Within the consumer discretionary space the decision to move to an overweight position in Titan was vindicated by its subsequent excellent performance.

Given the levels of domestic and global uncertainty, we have adopted a cautious stance on gearing since May 2018. At the date of this report, the Company's gearing level is -1.2% (-0.3% as at 30th September 2018).

Outlook

Our longest-standing shareholders are familiar with the challenges India has faced over time and are also aware that investing in a single market can involve a higher level of risk than a more diversified portfolio. While there are pockets of growth and opportunity, economic growth has recently been disappointing by historical standards, and there are no immediate signs of a cyclical recovery.

India retains the potential for long-term rapid growth because it has untapped human resources. India has a relatively young population, with large numbers reaching working age each year, and it remains a mainly rural society, with great potential for productivity gains from migration off the land. Whether these resources can be effectively channelled into a rapidly growing economy depends on structural reforms of a scope that have often been beyond what the Indian federal and state governments can deliver.

Despite these challenges, we see many investment opportunities ahead, with value emerging from the bottom up and we can identify new stocks - both smaller and larger companies - to add to the portfolio.

Rukhshad Shroff, CFA

Rajendra Nair, CFA

Investment Managers                                                                                                                  

23rd December 2019

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, including emerging risks, 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 gearing within a strategic range set by the Board.

•      Environmental

The Board has identified climate change as an emerging risk. Climate change could have a varying but significant impact on different regions, sectors and companies within India. The Investment Managers incorporate environmental, social and governance issues into their investment process and this is discussed with 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' above. 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 and, in May 2016, it was announced that the Treaty was to be amended. The advantage of investing in India via Mauritius, whereby gains made on investments held for less than 12 months were not previously subject to capital gains tax, has been removed. As a result, gains on the sale of investments held for less than 12 months are now taxed at the rate of 15%. In 2018, the Indian government announced the introduction of a 10% capital gains tax on realised gains from investments held for more than 12 months. However, investments made before February 2018 are protected from this charge and as a result it is advantageous for the Company to continue to hold its historic investments through the Mauritian subsidiary company. The Board envisages that the assets will move to the UK parent company over the coming years, through natural trading and this process is underway. 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.

•      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 the discount of companies in its peer group.

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 of 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 Audit and Assurance Faculty ('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, including the Depositary's indemnification for loss or misappropriation of the parent 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 with similar indemnity provisions.

•      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 20 within 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 are 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. At the time of the publication of this report, there is political unrest in Hong Kong, where the Company's Investment Managers are based. The Board has been assured by the Manager that appropriate business continuity plans are in place, which are tested on a regular basis, to deal with such eventualities.

Transaction with the Manager and related parties

Details of the Group and the subsidiary's transactions with the Manager and related parties are given in note 22 within the annual report.

Details of the management contract are set out in the Directors' Report within the annual report. The management fee payable to the Manager for the year was £640,000 (2018: £145,000) of which £nil (2018: £nil) was outstanding in the financial statements at the year end. In addition £84,000 (2018: £20,000) was payable to the Manager for the administration of savings scheme products of which £nil (2018: £17,000) was outstanding in Company's financial statements at the year end.

Included in other administration expenses in note 6 to the financial statements are safe custody fees payable to JPMorgan Chase Bank, N.A. as custodian of the Company amounting to £98,000 (2018: £17,000) of which £25,000 (2018: £3,000) was outstanding at the year end.

The Manager carries out some of its dealing transactions through group subsidiaries. These transactions are carried out at arms' length. The commission payable to JPMorgan Securities for the year by the Company was £21,000 (2018: £nil) of which £nil (2018: £nil) was outstanding in Company's financial statements at the year end.

Handling charges payable on dealing transactions undertaken by overseas sub custodians on behalf of the Company amounted to £11,000 (2018: £1,000) during the year, of which £3,000 (2018: £1,000) was outstanding at the year end.

The Company also holds cash in the JPMorgan Sterling Liquidity Fund. At 30th September 2019, the holding in JPMorgan Sterling Liquidity Fund was valued at £18,700,000 (2018: £2,000,000). During the year, the Company made purchases in this fund amounting to £165,000,000 (2018: £5,000,000) and sales on this fund amounting to £148,300,000 (2018: £3,000,000). Income receivable from this fund amounted to £74,000 (2018: £4,000) of which £nil (2018: £1,000) was outstanding at the year end. JPMorgan earns no management fee on this fund.

During the previous year, the Company made sales in JPMorgan US Dollar Liquidity Fund amounting to £nil (2018: £11,464,000). As at the year-end, the holding in this fund was valued at £nil (2018: £nil). Income receivable from this fund amounted to £nil (2018: £150,000) of which £nil (2018: £nil) was outstanding at the year end. JPMorgan earns no management fee on this fund.

At the year end, the Company held bank balances of £427,000 with JPMorgan Chase Bank, N.A. (2018: £405,000). A net amount of interest of £1,000 (2018: £4,000) was receivable by the Company during the year, of which £nil (2018: £nil) was outstanding at the year end.

Details of the Directors' shareholdings and the remuneration payable to Directors are given in the Directors' Remuneration Report within the annual report.

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 financial statements in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union. 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 on page 22 of the annual 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 financial statements taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the position and performance, business model and strategy of the Company.

For and on behalf of the Board

Richard Burns

Chairman

23rd December 2019

 

Statement of Comprehensive income

For the year ended 30th September 2019

		2019			2018
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Gains/(losses) from investments held at
fair value through profit or loss		-	88,483	88,483	-	(64,537)	(64,537)
Net foreign currency (losses)/gains		-	(378)	(378)	-	216	216
Income from investments		1,437	-	1,437	256	-	256
Interest receivable and similar income		75	-	75	158	-	158
Total income/(loss)		1,512	88,105	89,617	414	(64,321)	(63,907)
Management fee		(640)	-	(640)	(145)	-	(145)
Other administrative expenses		(842)	-	(842)	(682)	-	(682)
Profit/(loss) before finance costs and taxation		30	88,105	88,135	(413)	(64,321)	(64,734)
Finance costs		(533)	-	(533)	(65)	-	(65)
(Loss)/profit before taxation		(503)	88,105	87,602	(478)	(64,321)	(64,799)
Taxation		-	(118)	(118)	-	-	-
Net (loss)/profit		(503)	87,987	87,484	(478)	(64,321)	(64,799)
(Loss)/earnings per share (note 2)		(0.48)p	84.14p	83.66p	(0.45)p	(61.24)p	(61.69)p

statement of changes in equity

For the year ended 30th September 2019

	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 2017	31,404	97,316	41,929	5,886	6,362	680,261	(23,156)	840,002
Repurchase of shares into Treasury	-	-	-	-	-	(5,058)	-	(5,058)
Loss for the year	-	-	-	-	-	(64,321)	(478)	(64,799)
At 30th September 2018	31,404	97,316	41,929	5,886	6,362	610,882	(23,634)	770,145
Profit/(loss) for the year	-	-	-	-	-	87,987	(503)	87,484
At 30th September 2019	31,404	97,316	41,929	5,886	6,362	698,869	(24,137)	857,629

 

statement of financial position

At 30th September 2019

	2019	2018
	£'000	£'000
Non current assets
Investments held at fair value through profit or loss	151,029	8,362
Investment in subsidiary held at fair value through profit or loss	681,559	759,474
	832,588	767,836
Current assets
Other receivables	6,257	62
Cash and cash equivalents	19,127	2,405
	25,384	2,467
Current liabilities
Other payables	(225)	(158)
Net current assets	25,159	2,309
Total assets less current liabilities	857,747	770,145
Non current liabilities
Provision for capital gains tax	(118)	-
Net assets	857,629	770,145
Amounts attributable to shareholders
Called up share capital	31,404	31,404
Share premium	97,316	97,316
Other reserve	41,929	41,929
Exercised warrant reserve	5,886	5,886
Capital redemption reserve	6,362	6,362
Capital reserves	698,869	610,882
Revenue reserve	(24,137)	(23,634)
Total shareholders' funds	857,629	770,145
Net asset value per share (note 3)	820.1p	736.5p

statement of cash flows

For the year ended 30th September 2019

	2019	2018
	£'000	£'000
Operating activities
Profit/(loss) before taxation	87,602	(64,799)
Deduct dividends received	(1,437)	(256)
Deduct interest received	(75)	(158)
Add interest paid	533	65
(Deduct gains)/add losses on investments held at fair value through profit or loss	(88,483)	64,537
Decrease/(increase) in prepayments, VAT and other receivables	39	(19)
Increase/(decrease) in other payables	45	(27)
Net cash outflow from operating activities before interest and taxation	(1,776)	(657)
Interest paid	(511)	(30)
Dividends received	1,377	256
Interest received	76	166
Net cash outflow from operating activities	(834)	(265)
Investing activities
Purchases of investments held at fair value through profit or loss	(148,882)	(4,507)
Sales of investments held at fair value through profit or loss	166,438	-
Net cash inflow/(outflow) from investing activities	17,556	(4,507)
Financing activities
Repurchase of shares into Treasury	-	(5,058)
Net cash outflow from financing activities	-	(5,058)
Increase/(decrease) in cash and cash equivalents	16,722	(9,830)
Cash and cash equivalents at the start of the year	2,405	12,235
Cash and cash equivalents at the end of the year	19,127	2,405

Notes to the financial statements

For the year ended 30th September 2019

1.     Basis of Preparation

Basis of accounting

The Company's 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 within 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 November 2014, and updated in February 2018 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 revised SORP issued in October 2019 is applicable for accounting periods beginning on or after 1st January 2019.  The Company has chosen not to early adopt the revised 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.

2.     (Loss)/earnings per share

	2019	2018
	£'000	£'000
(Loss)/earnings per share is based on the following:
Revenue loss	(503)	(478)
Capital profit/(loss)	87,987	(64,321)
Total profit/(loss)	87,484	(64,799)
Weighted average number of shares in issue	104,574,940	105,034,167
Revenue loss per share	(0.48)p	(0.45)p
Capital earnings/(loss) per share	84.14p	(61.24)p
Total earnings/(loss) per share	83.66p	(61.69)p

3.     Net asset value per share

	2019	2018
Net assets (£'000)	857,629	770,145
Number of shares in issue excluding shares held in Treasury	104,574,940	104,574,940
Net asset value per share	820.1p	736.5p

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

4.     Status of results announcement

2018 Financial Information

The figures and financial information for 2018 are extracted from the Annual Report and Financial Statements for the year ended 30th September 2018 and do not constitute the statutory accounts for the year. The Annual Report and Financial Statements include 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.

2019 Financial Information

The figures and financial information for 2019 are extracted from the published Annual Report and Financial Statements for the year ended 30th September 2019 and do not constitute the statutory accounts for that year. The Annual Report and Financial Statements include 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 Financial Statements 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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