Final Results

RNS Number : 4334Z

JPMorgan Indian Invest Trust PLC

15 December 2017

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN INDIAN INVESTMENT TRUST PLC

(the 'Company')

FINAL RESULTS FOR THE YEAR ENDED 30TH SEPTEMBER 2017

Legal Entity Identifier: 549300OHW8R1C2WBYK02

Information disclosed in accordance with the DTR 4.1.3

The Directors announce the Company's results for the year ended 30th September 2017.

chairman's statement

Results

The year to 30th September 2017 was another positive one for Indian investors, as measured by the Company's benchmark index, the MSCI India Index (in sterling terms), which returned +10.5%. The Company's performance was slightly less than that of the index, producing a return on net assets of +9.0% over the year. However, the return to shareholders was ahead of the benchmark, at +12.0%, reflecting a narrowing of the discount from 13.7% to 11.4% over the year. In their report, the Investment Managers 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.

It is always disappointing to report underperformance for a financial year, but the Board judges performance over the longer term and I would emphasise that the Company's excellent long term performance record remains intact, having comfortably outperformed the index over three, five and ten years. Our Investment Managers deserve credit for the results that they have achieved and indeed were recognised recently when the Company won the Emerging Market Single Country award at the 2017 Citywire Investment Trust Awards. This was judged on the best information ratio (a measure of the risk-adjusted return), based on the three year net asset value total return against the benchmark index as at 31st July 2017.

Tax

As I reported last year, in May 2016 it was announced that the India-Mauritius tax treaty was to be amended. The advantages of investing in India via Mauritius, whereby gains made on investments held for less than 12 months were not subject to capital gains tax, have been removed as a result. There are transitional arrangements in place between April 2017 and March 2019, when tax is applied to short term gains at 50% 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. The Board has continued to take professional advice on this matter, both from JPMorgan and from external lawyers, with the intention of ceasing to invest via the Company's Mauritian subsidiary and transferring its assets to the UK parent company. Subject to finalisation of this advice, it is hoped that this process will be able to begin in the coming months.

IFRS 10

The amendment to International Financial Reporting Standard 10 ('IFRS 10') came into effect for reporting periods beginning on or after 1st January 2016.

The financial statements of the Company contained in the Annual Report have been prepared in accordance with the amended IFRS 10. This is explained in note 2(c) to the accounts, informing shareholders that the accounts no longer consolidate our Mauritian subsidiary. As you know, this subsidiary holds virtually all of our investment portfolio, is the entity which borrows our loan from Scotiabank and pays almost 98% of the fee to JPMorgan for managing the business. The total fee paid by the Company and its subsidiary was £8.0 million.

As a consequence of the non-consolidation of the Mauritian subsidiary's accounts this year, it is the Board's view that the financial statements do not disclose the full cost of operating the enterprise or the total level of our liabilities. We have 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 2017 by including pro forma unaudited group financial statements and reconciliations of the Company's statutory financial statements prepared under the amended accounting standard IFRS 10 to these pro forma unaudited group figures, i.e. figures which are comparable to those which have been reported to you in previous years. I would urge shareholders to consider these figures if they want to judge how the Company has performed this year alongside the 'Financial Statements' which we have been compelled to present to you in the mandated form in which they appear in this Annual Report. On a brighter note, as explained above, once we have transferred the subsidiary's assets to the UK parent company, our reporting will become much simpler.

Gearing

During the year, the Company, through its Mauritian subsidiary, 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 £78.5 million was drawn and the portfolio was 7.4% geared. Subsequent to the year end, a further £4 million has been drawn down and, as at the date of this report the gearing level is approximately 6.2%.

Management Fee

I am pleased to report that the Board has reached agreement with JPMorgan to reduce the Company's management fee from 1% on the Company's assets less current liabilities to a fee of 1% on the first £300 million and 0.75% thereafter, with effect from 1st October 2017. This reduction reflects changes within the investment management industry and ensures that shareholders and potential investors benefit from a competitive ongoing charges ratio.

The Board

In accordance with corporate governance best practice, an independent evaluation of the Board and its committees is undertaken every three years, the most recent of which was during the current financial year. The evaluation confirmed that there is an appropriate mix of skills and experience on the Board and that the Directors work together effectively. Consequently, all Directors will stand for reappointment at the forthcoming Annual General Meeting ('AGM'). In due course we will look to appoint a new Director in order to ensure orderly succession planning and continuity. To allow for a temporary increase in the size of the Board, and also to allow headroom for possible increases in the level of fees payable to individual Directors in the years ahead, at the forthcoming AGM shareholders will be asked to approve an increase in the maximum aggregate fees paid to Directors each year, from £150,000 to £200,000. This will be the first increase in the overall limit on Directors' fees since 2005.

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 AGM held in February 2017 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 29,000 shares into Treasury during the year and as at the date of this report there is 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 AGM.

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 AGM will be held at JPMorgan's office at 60 Victoria Embankment, London EC4Y 0JP on Tuesday 6th February 2018 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 AGMs, in order to prevent overcrowding, entry will be restricted to shareholders only and guests will not be admitted to the meeting.

Outlook

In contrast to this time last year, when demonetisation had just happened and its impact on the economy was impossible to gauge, the outlook for the Indian economy seems more assured this year. The long awaited national Goods and Services Tax, which is expected to make the economy work much more efficiently, was introduced at the beginning of July and in October a major recapitalisation of the state banks was announced, which should mean greater availability of credit to businesses and consumers. These developments are both welcome and necessary and they confirm that, despite delays and setbacks, India is continuing to make progress in fundamental structural reform to its economy. With the global economy benefiting from improving conditions in North America and Europe, there is every hope that India's growth rate will be more rapid in 2018 than it has been in 2017.

Whether this will translate into further increases in Indian share prices is less certain, given the high valuations commented on in the Investment Managers' Report. However, I firmly believe that India, with its great human potential and huge scope for improving economic efficiency, is a market which has great appeal for a long term equity investor. I hope that I will be able to report to you on another satisfactory year in twelve months' time.

Richard Burns

Chairman

15th December 2017

Investment managers' report

The last year saw India, under the leadership of Prime Minister Modi, continue towards a more transparent, fair, technology driven, less corrupt political economy which should be able to generate higher and more inclusive growth on a more sustainable basis.

There have been a number of key steps taken in the last two years to forward this process. These include signing up nearly 1.2 billion people to the Unique ID ('UID') programme and the launch of the Jan Dhan scheme, which has resulted in 300 million individuals, who had had no contact with the official banking system, opening bank accounts. The anti corruption drive continued with the announcement of a one-time amnesty scheme accompanying a firm crack down on unaccounted funds in the black economy combined with the bold move to cancel around 85% of the currency in circulation (demonetisation). At the same time there has been a significant thrust towards the use of digital money and transactions. The banking sector has seen the Reserve Bank of India leading a review of asset quality within the sector followed by the recent announcement of the multi-billion dollar recapitalisation of the public sector banks. There has also been significant progress made in formulating a clear and effective bankruptcy code, whilst the passage and implementation of the complex Goods and Services Tax ('GST') has liberalised the movement of goods and services across India.

Market Review

The beginning of the financial year turned out to be particularly eventful, with the Modi government following up its black money amnesty with demonetisation. Indian equities corrected sharply in the immediate aftermath, as the implications of such a big move were hard to predict. While clearly impacting growth in the short term, the market after reflection assumed the effects would be temporary and share prices rebounded. The move may not have led to a fiscal bonanza but it flushed a lot of money through the banking system, producing a huge surge in digital banking and e-money. Politically, this was a bold move, coming just before the important elections in Uttar Pradesh. The messaging was clever and effective - the BJP and Mr Modi were crusaders for the poor against the corrupt rich. Mr Modi's party not only won the state election, but did so with a staggering 77% majority, a thumping endorsement of his reforms and politics.

A further positive fallout of demonetisation was the surge in the deposit base, which led to a fall in deposit rates across the board even though the newly constituted Monetary Policy Committee ('MPC') of the Reserve Bank of India ('RBI') cut policy rates only twice, by a cumulative 0.5%, during the financial year. In fact, the MPC also surprisingly changed the accommodative policy stance to neutral in February citing upside risk to inflation from higher commodity prices as the Consumer Price Index ('CPI') rebounded from a five year low, though it remains within the RBI's long term target.

Sentiment improved dramatically, with both domestic as well as foreign investors buying Indian equities, pushing the market to new highs. Domestic retail investors continued to increase their exposure to equities, particularly as the appeal of alternatives such as gold and real estate waned. To put this in context, retail investors have invested approximately $60 billion in equities since the Modi government came to power in 2014. This represents an increase of approximately 3 percentage points in the allocation from the domestic household balance sheet.

Another key development during the year was the roll out of the GST in July. This legislation has taken nearly ten years to be enacted and is perhaps the most significant change in the domestic economic landscape over the past thirty years. At last India will operate as a single market rather than an aggregate of 29 individual state economies, with the consequent inefficiencies. GST has replaced a plethora of production and sales taxes levied by the Central and state governments with one tax. However, the hurried implementation did lead to some teething issues and disruption in economic activity.

In the near term, as a result of the aftershocks of demonetisation and the disruption around the launch of the GST, GDP growth decelerated to a three year low, at 5.7% in the three months ended 30th September 2017. This has been disappointing although it is mainly due to the anaemic investment cycle as consumption has remained fairly resilient. In spite of the government's attempts to stimulate public sector investment in certain areas such as roads and railways, private sector corporate capital spending has remained weak due to low utilisation levels and excess leverage on corporate balance sheets.

In October, after the end of the Company's financial year, the government finally announced a long overdue plan to recapitalise state owned banks. This plan envisages an infusion of INR 2.1 trillion (US$ 32 billion) in two stages, financed by the issuance of 'Recapitalisation' bonds. This is a significant move since the quantum of the infusion is large enough to enable the state owned banks, if they choose, to write down a substantial portion of their stressed loans yet have sufficient capital to fund credit growth for the next three years. This sparked a sharp rally in public sector banks and a rotation from private sector financials, which lagged as a result.

Performance Review

The Indian market delivered a return of 10.5% in sterling terms for the financial year. Our portfolio delivered a 9% return, disappointingly less than the index. The tilt towards domestic cyclicality continued to help with the overweight in private sector financials and the autos sector outperforming the market. HDFC Bank, IndusInd Bank and Kotak Bank continued to do well in a sluggish macro environment as private sector banks gained market share from state owned banks, which continued to be bedevilled by nonperforming loans and weak capital adequacy. The overweight in the autos sector also helped as demand recovered after the initial shock of demonetisation. HDFC Bank requires special mention since the price of the shares available for foreign investment, which are the shares held by the Company, significantly lagged the underlying local stock price by more than 20% as the premium on the shares open to foreigners contracted sharply. As a result our largest holding has contributed much less than the good operating performance of the bank and its domestic shares would have led one to expect, and this one factor accounts for half of the 'stock selection' negative contribution shown in the table below. Our holdings in some of the mid and small caps holdings, such as Motilal Oswal Financial Services and Godrej Industries, were also among the key contributors as mid and small caps continued to significantly outperform large caps on the back of the tidal wave of liquidity from domestic retail investors.

Reliance Industries, which we do not hold, was the largest detractor to our relative performance as the stock rose sharply following the strong response to the launch of its telecom business. The other major detractor was the underweight in global cyclicals as the sector rallied on the back of the rebound in commodity prices over the year.

Portfolio Changes

During the year we have made significant reductions in two sectors of the portfolio, Information Technology and Health Care. In the first case we have sold our long standing and large position in Infosys, partly because of growing concern about the increasing challenges, both structural and cyclical, affecting the Indian IT services companies in general but more particularly because of specific management issues at the company. In the case of the pharmaceutical sector, growth has slowed and this appears to be for long term structural reasons rather than short term cyclical factors. The proceeds of these reductions have been invested in companies which we believe will benefit from improving domestic growth prospects, such as Axis Bank, BHEL, Bharti Infratel and ITC.

Outlook

After the strong performance of the market over the past three years valuations may pose a headwind for equities, given that relatively slow earnings growth is expected, especially in mid and small caps, and where valuations are near ten year highs. This is particularly relevant in the context of the disruption following the launch of the GST in July, as the economy adapts to the most significant change in the economic landscape in several decades.

Nonetheless, GST is likely to be a significant positive in the long term as the sustainable growth rate of the economy is likely to rise, with the formal economy gaining share from the informal economy, which will struggle to operate in the new tax regime. A combination of the forced clean up of non-performing loans through the bankruptcy code and the bank recapitalisation plan is likely to be a key step in the process of starting a new investment cycle in the long term. This should lead to a revival in earnings growth, which remains cyclically depressed. Earnings have been flat over the past three years, since Mr. Modi came to power, though they have compounded at 11% over the past twenty five years (with very strong 20%+ periods of strong cyclical performance). Therefore, any recovery in the cycle is likely to be the key catalyst for equity returns over the next three to five years.

India is going through a 'reset': many long held traditions and practices are being reformed and new laws and procedures are being implemented. Many of these changes are difficult and indeed initially quite painful. That this is happening when the economy is cyclically weak, only magnifies the impact. Much needs to be done yet and as is often the case with many countries, the journey will not always be smooth. It is the belief of the Investment Managers that the broad direction is right. As the economy recovers to a higher than current level of sustainable growth rate and the country's ability to attract capital continues to improve, the top down view remains encouraging. When combined with vibrant entrepreneurship, our ability to find well managed businesses, with sustained growth prospects, remains intact. Overall, notwithstanding the many inevitable challenges, we remain upbeat about the outlook for Indian equities.

Rukhshad Shroff, CFA

Rajendra Nair, CFA

Investment Managers

15th December 2017

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 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' 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. Indeed, in May 2016 it was announced that the Treaty was 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 are transitional arrangements in place between April 2017 and March 2019, when tax is 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 has taken professional advice on this matter and it has decided to move the Company's assets from the Mauritian subsidiary company to the UK parent company. It is expected that this process will be completed before the end of the current financial year.

• 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 in 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 19 on pages 53 to 58. 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.

related partY Transactions

Details of the pro forma Group and the subsidiary's transactions with the Manager and related parties are given in the Shareholder Information section of the annual report.

Details of the management contract are set out in the Directors' Report in the annual report. The management fee payable to the Manager for the year was £177,000 (2016: £182,000) of which £nil (2016: £nil) was outstanding in the financial statements at the year end. In addition £113,000 (2016: £182,000) was payable to the Manager for the administration of savings scheme products of which £56,000 (2016: £nil) was outstanding in the financial statements at the year end.

Included in administration expenses in note 6 to the accounts are safe custody fees payable to JPMorgan Chase as custodian of the Company amounting to £13,000 (2016: £11,000) of which £3,000 (2016: £2,000) 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 £nil (2016: £nil) of which £nil (2016: £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 £1,000 (2016: £1,000) during the year, of which £nil (2016: £nil) was outstanding at the year end.

The Company also holds cash in the JPMorgan US Dollar Liquidity Fund. At 30th September 2017, the holding in JPMorgan US Dollar Liquidity Fund was valued at £11,180,000 (2016: £3,849,000). During the year, the Company made purchases in this fund amounting to £8,245,000 (2016: £nil) and sales on this fund amounting to £821,000 (2016: £2,774,000). Income receivable from this fund amounted to £43,000 (2016: £24,000) of which £nil (2016: £nil) was outstanding at the year end. JPMorgan earns no management fee on these funds.

At the year end, the Company held bank balances of £1,055,000 with JPMorgan Chase Bank, N.A. (2016: £298,000). Interest amounting to £1,000 received by the Company (2016: £nil) during the year, of which £nil (2016: £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 in 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 pages 20 and 21, 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

15th December 2017

 

statement of comprehensive Income

for the year ended 30th September 2017

	2017			2016
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Gains from investments held at fair value through profit or loss	-	70,114	70,114	-	167,475	167,475
Net foreign currency (losses)/gains	-	(239)	(239)	-	746	746
Income from investments	475	-	475	382	-	382
Interest receivable and similar income	44	-	44	24	-	24
Total income	519	69,875	70,394	406	168,221	168,627
Management fee	(177)	-	(177)	(182)	-	(182)
Other administrative expenses	(734)	(22)	(756)	(775)	-	(775)
(Loss)/profit before taxation	(392)	69,853	69,461	(551)	168,221	167,670
Taxation	-	-	-	-	-	-
Net (loss)/profit	(392)	69,853	69,461	(551)	168,221	167,670
(Loss)/earnings per share	(0.37)p	66.34p	65.97p	(0.52)p	159.45p	158.93p

Statement of Changes in Equity

for the year ended 30th September 2017

	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 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
Repurchase of shares into Treasury	-	-	-	-	-	(197)	-	(197)
Profit/(loss) for the year	-	-	-	-	-	69,853	(392)	69,461
At 30th September 2017	31,404	97,316	41,929	5,886	6,362	680,261	(23,156)	840,002

statement of financial position

at 30th September 2017

	2017	2016
	£'000	£'000
Non current assets
Investments held at fair value through profit or loss	4,043	14,029
Investments in subsidiaries held at fair value through profit or loss	823,823	752,615
Total non current assets	827,866	766,644
Current assets
Other receivables	51	46
Cash and cash equivalents	12,235	4,147
	12,286	4,193
Current liabilities
Other payables	(150)	(99)
Net current assets	12,136	4,094
Total assets less current liabilities	840,002	770,738
Net assets	840,002	770,738
Amounts attributable to equity holders
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	680,261	610,605
Revenue reserve	(23,156)	(22,764)
Total equity shareholders' funds	840,002	770,738
Net asset value per share	797.8p	731.8p

Statement of Cash Flows

for the year ended 30th September 2017

	2017	2016
	£'000	£'000
Operating activities
Profit before taxation	69,461	167,670
Deduct dividends received	(475)	(382)
Deduct bank interest received	(44)	(24)
Deduct gains on investments held at fair value through profit or loss	(70,114)	(167,475)
(Increase)/decrease in prepayments, VAT and other receivables	(5)	1
Increase/(decrease) in other payables	51	(8)
Net cash outflow from operating activities before interest and taxation	(1,126)	(218)
Dividends received	475	382
Interest received	44	24
Net cash (outflow)/inflow from operating activities	(607)	188
Investing activities
Purchases of investments held at fair value through profit or loss	-	(831)
Sales of investments held at fair value through profit or loss	8,892	-
Net cash inflow/(outflow) from investing activities	8,892	(831)
Financing activities
Repurchase of shares into Treasury	(197)	(1,884)
Net cash outflow from financing activities	(197)	(1,884)
Increase/(decrease) in cash and cash equivalents	8,088	(2,527)
Cash and cash equivalents at the start of the year	4,147	6,674
Cash and cash equivalents at the end of the year	12,235	4,147

Notes to the financial statements

for the year ended 30th September 2017

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.

2.     Accounting policies

(a)   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 on page 28 of 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 January 2017 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.

3.     Return per share

		2017	2016
		£'000	£'000
	Earnings per share is based on the following:
	Revenue loss	(392)	(551)
	Capital return	69,853	168,221
	Total return	69,461	167,670
	Weighted average number of shares in issue	105,288,645	105,496,718
	Revenue loss per share	(0.37)p	(0.52)p
	Capital return per share	66.34p	159.45p
	Total return per share	65.97p	158.93p

4.     Net asset value per share

		2017	2016
	Net assets (£'000)	840,002	770,738
	Number of shares in issue excluding shares held in Treasury	105,287,615	105,316,615
	Net asset value per share	797.8p	731.8p

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

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. 

2017 Financial Information

The figures and financial information for 2017 are extracted from the Annual Report and Accounts for the year ended 30th September 2017 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. 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

15th December 2017

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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