Half Year Results

RNS Number : 4660F

JPMorgan Indian Invest Trust PLC

23 May 2013

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN INDIAN INVESTMENT TRUST PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED

31ST MARCH 2013

Chairman's Statement

Performance

The first six months of the Company's financial year has again been a volatile period for the Indian markets. The Company's benchmark, the MSCI India Index (in Sterling terms), ended the period up by 4.1%, but this return masks the movements seen within the six months. Your Company saw an increase in diluted net assets of 3.8%, marginally underperforming the Index. On an undiluted basis, the Company returned 4.0%. The Company's share price total return was 2.4%, reflecting the widening of the discount from 10.8% to 12.0%. The background against which the Company performed is discussed in more detail in the Investment Manager's Report.

Gearing

The Company has a one year floating rate US$ 25m loan facility with RBS to provide the investment managers with the flexibility to gear the portfolio should circumstances appear favourable. As at the date of this report, the Company's level of gearing is 0.7%.

Discount Management

The Board has guidelines in place with regard to the management of any discount/premium that may develop between the Company's share price and its net asset value per share. The Company currently holds 14,199,788 ordinary shares in treasury and, under current guidelines, these may only be reissued at a premium to the prevailing net asset value at the time of reissue.

Share Capital

In November 2008, the Company issued 21,001,937 subscription shares to shareholders on the basis of one subscription share for every five ordinary shares previously held. Each subscription share confers the right (but not the obligation) to subscribe for one ordinary share on any business day during the period from 2nd January 2009 to 2nd January 2014, after which the rights under the subscription shares will lapse.

As at the date of this report, 15,007,968 of the original 21,001,937 subscription shares (71.5%) have been converted, raising proceeds in excess of £35.9m.

Further details of the subscription shares, including the subscription periods and their respective prices and the bonus cost for the calculation of taxation, can be found on the Company's website at www.jpmindian.co.uk.

Outlook

Our Managers continue to be positive as to the prospects for Indian equities over the medium to long term, however over the short term, returns are expected to remain volatile.

Hugh Bolland

Chairman                                                                                                                           23rd May 2013

Investment Managers' Report

Market Review

In a volatile first half of the year, markets initially rose sharply, but retraced the bulk of those gains as concerns around the 'sequestration' in the US, the muddled outcome from the Italian elections and the state of the Cypriot banking system led to risk aversion in February and March. Nonetheless, foreign portfolio investors continued to be net buyers of Indian equities over the period, investing over US$18 billion, although this was partially offset by net sales of around US$10 billion by domestic institutions, mainly insurers, who sold stock to invest as part of the government's divestment programme.

In a follow up to its raft of policy announcements in September, the government won a vote in the winter session of Parliament over the decision to open up organised retail to Foreign Direct Investment. The cabinet also approved the formation of the Cabinet Committee on Investment chaired by the Prime Minister, which is meant to expedite the clearance of projects above INR 10 billion, in an attempt to stimulate investment activity in the economy. That said, politics continues to remain in a state of flux, with a key coalition partner (DMK) withdrawing support from the government, technically reducing it to a minority in the lower house of parliament. The Congress party is clinging on to power however, with the support of a couple of regional parties, although the latest session of parliament ended up being the least productive in history as the opposition continued to disrupt proceedings over the ongoing investigations into the scandals relating to the allocation of telecom licenses and coal blocks. Nonetheless, the government persisted with the monthly adjustment in fuel prices and liberalised the norms for FII investment in domestic corporate bonds in a bid to attract foreign portfolio flows.

The Union budget announced in February, for which there had been such lofty expectations, disappointed. There were no major announcements to revive growth momentum in the economy. Besides, the reduction in the fiscal deficit in financial year 2014 is predicated on optimistic assumptions on receipts from the auction of wireless spectrum and divestment of stakes in state owned enterprises. The Finance Minister also increased the effective tax rate by imposing surcharges on corporates and individuals. However, in the context of the upcoming national elections, the budget was not overly populist either, which was positive.

Macro data continued to be dismal with the GDP figure for the December quarter growing at the slowest pace in over three years (at 4.5% year on year). The current account deficit for the same period also jumped to a life time high of 6.7% of GDP, which was substantially worse than expected due to a surge in gold imports and soft external demand hurting exports. However, on the positive side, the Wholesale Price Inflation figure for March decelerated to 6.0% year on year, which was the lowest in over three years. Consumer Price Inflation continued to remain elevated, although it did moderate somewhat to 10.4% year on year. As a result, the Reserve Bank of India has cut policy rates three times by a cumulative 0.75% this year, although the commentary remained surprisingly hawkish, suggesting limited room for further easing.

Earnings announcements during the period were broadly in line with expectations at an aggregate level but, there is material dispersion in the results of the individual companies. Forecasts continue to edge lower however, as analysts reduce revenue growth and margin assumptions to reflect the sluggishness in the economy.

Performance Review

The Trust marginally under performed the benchmark as the underweight in technology and the overweight in cement stocks detracted from performance while the underweight in global cyclicals and overweight in the defensive sectors of staples and healthcare contributed positively to relative performance.

Outlook and Fund Strategy

The near term direction of the markets is reliant on the global macro environment. Growth momentum in the economy is likely to remain sluggish in the near term and politics within India is also likely to remain an overhang, with a few key state and national elections due within the next year. However, from a longer term perspective, a combination of easing interest rates and bottoming of growth expectations with valuations below long term averages makes for a compelling investment case for India.

Rukhshad Shroff

Raj Nair

Investment Managers                                                                                                   23rd May 2013

Interim Management Report

The Company is required to make the following disclosures in its Half Year Report.

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Company fall into the following broad categories: investment and strategy; market; accounting, legal and regulatory; corporate governance and shareholder relations; operational; and financial. Information on each of these areas is given in the Business Review within the Annual Report and Accounts for the year ended 30th September 2012.

Any change in taxation legislation or taxation regime applicable to the Mauritian Subsidiary could affect the value of the investments held by the Group, affect the Company's ability to provide returns to Shareholders or alter the post-tax returns to Shareholders. In particular, it is intended that the Mauritian Subsidiary will continue to benefit from the India/Mauritius Double Tax Treaty. Future changes to Mauritian or Indian law or to the India/Mauritius Double Tax Treaty, or the interpretations given to them by the regulatory authorities, could impose additional costs or obligations on the activities of the Mauritian Subsidiary, which in turn may have adverse effects on the performance of the Company. The terms of the India/Mauritius Double Tax Treaty were challenged in India but were upheld by the Supreme Court of India in October 2003. However, more recently, there have been discussions between the Indian and Mauritian authorities with regard to re-negotiation of the Treaty. Adverse tax consequences would result if the Mauritian Subsidiary ceased to qualify for the benefits under the India/Mauritius Double Tax Treaty (for example, if it were held that the Mauritian Subsidiary was not a resident of Mauritius). There can be no assurance that the Mauritian Subsidiary will continue to qualify for or receive the benefits of the India/Mauritius Double Tax Treaty or that the terms of the India/Mauritius Double tax Treaty will not be changed. Such an event may require the Mauritian Subsidiary to pay or provide for tax liabilities that would reduce the net asset value of the Ordinary shares.

Related Parties Transactions

During the first six months of the current 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 period.

Going Concern

The Directors believe, having considered the Company's investment objective, risk management policies, capital management policies and procedures, nature of the portfolio and expenditure projections, that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future. For these reasons, they consider there is reasonable evidence to continue to adopt the going concern basis in preparing the accounts.

Directors' Responsibilities

The Board of Directors confirms that, to the best of its knowledge:

(i)    the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with the Accounting Standards Board's Statement 'Half-Yearly Financial Reports'; and

(ii)   the interim management report includes a fair review of the information required by 4.2.7R and 4.2.8R of the UK Listing Authority Disclosure and Transparency Rules.

For and on behalf of the Board

Hugh Bolland

Chairman                                                                                                                 23rd May 2013

Group Income Statement

for the six months ended 31st March 2013

	(Unaudited)			(Unaudited)				(Audited)
	Six months ended			Six months ended				Year ended
	31st March 2013			31st March 2012				30th September 2012
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue		Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000		£'000	£'000
Investment income	1,241	-	1,241	1,306	-	1,306	6,294		-	6,294
Other income	3	-	3	15	-	15	39		-	39
Gains on investments held at fair
value through profit or loss	-	16,538	16,538	-	7,773	7,773	-		21,291	21,291
Foreign exchange losses	-	(72)	(72)	-	(163)	(163)	-		(114)	(114)
Total income	1,244	16,466	17,710	1,321	7,610	8,931	6,333		21,177	27,510
Management fee	(2,890)	-	(2,890)	(2,809)	-	(2,809)	(5,477)		-	(5,477)
Other administrative expenses	(668)	-	(668)	(670)	-	(670)	(1,346)		-	(1,346)
(Loss)/profit before finance
costs and taxation	(2,314)	16,466	14,152	(2,158)	7,610	5,452	(490)		21,177	20,687
Finance costs	(85)	-	(85)	(185)	-	(185)	(277)		-	(277)
(Loss)/profit before taxation	(2,399)	16,466	14,067	(2,343)	7,610	5,267	(767)		21,177	20,410
Taxation	-	-	-	-	-	-	-		-	-
Net (loss)/profit	(2,399)	16,466	14,067	(2,343)	7,610	5,267	(767)		21,177	20,410
(Loss)/earnings per Ordinary
share (note 4)
- undiluted	(2.20)p	15.08p	12.88p	(2.02)p	6.55p	4.53p	(0.66)p		18.28p	17.62p
- diluted	(2.17)p	14.89p	12.72p	(2.00)p	6.49p	4.49p	(0.65)p		18.13p	17.48p

The Group does not have any income or expense that is not included in net (loss)/profit for the period. Accordingly the 'Net (loss)/profit for the period' is also the 'Total comprehensive income for the period', as defined in IAS 1 (revised) and no separate Statement of Comprehensive Income has been presented.

The 'Total' column of this statement represents the Group's Income Statement, prepared in accordance with IFRS. The supplementary 'Revenue' and 'Capital' columns are prepared under guidance published by the Association of Investment Companies.

All items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period.

All of the (loss)/profit and total comprehensive income is attributable to the equity shareholders of JPMorgan Indian Investment Trust plc, the Company. There are no minority interests.

Group Statement of Changes in Equity

	Called up			Exercised		Capital
Six months ended	share	Share	Other	warrant	Capital	redemption	Revenue
31st March 2013	capital	premium	reserve	reserve	reserves	reserve	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2012	30,032	82,000	41,929	5,886	337,232	6,362	(15,236)	488,205
Exercise of Subscription shares
into Ordinary shares	(1)	1	-	-	-	-	-	-
Issue of Ordinary shares on conversion
of Subscription shares	20	218	-	-	-	-	-	238
Repurchase of shares into Treasury	-	-	-	-	(33,891)	-	-	(33,891)
Net profit/(loss) for the period	-	-	-	-	16,466	-	(2,399)	14,067
At 31st March 2013	30,051	82,219	41,929	5,886	319,807	6,362	(17,635)	468,619
	Called up			Exercised		Capital
Six months ended	share	Share	Other	warrant	Capital	redemption	Revenue
31st March 2012	capital	premium	reserve	reserve	reserves	reserve	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2011	29,486	76,903	41,929	5,886	327,620	6,362	(14,469)	473,717
Exercise of Subscription shares into
Ordinary shares	(23)	23	-	-	-	-	-	-
Issue of Ordinary shares on conversion
of Subscription shares	563	5,007	-	-	-	-	-	5,570
Repurchase of shares into Treasury	-	-	(7,056)	-	-	-	-	(7,056)
Net profit/(loss) for the period	-	-	-	-	7,610	-	(2,343)	5,267
At 31st March 2012	30,026	81,933	34,873	5,886	335,230	6,362	(16,812)	477,498
	Called up			Exercised		Capital
Year ended	share	Share	Other	warrant	Capital	redemption	Revenue
30th September 2012	capital	premium	reserve	reserve	reserves	reserve	reserve	Total
(Audited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2011	29,486	76,903	41,929	5,886	327,620	6,362	(14,469)	473,717
Exercise of Subscription shares into
Ordinary shares	(23)	23	-	-	-	-	-	-
Issue of Ordinary shares on
conversion of Subscription shares	569	5,074	-	-	-	-	-	5,643
Repurchase of shares into Treasury	-	-	-	-	(11,565)	-	-	(11,565)
Net profit/(loss) for the year	-	-	-	-	21,177	-	(767)	20,410
At 30th September 2012	30,032	82,000	41,929	5,886	337,232	6,362	(15,236)	488,205

Group Balance Sheet

at 31st March 2013

	(Unaudited)	(Unaudited)	(Audited)
	31st March 2013	31st March 2012	30th September 2012
	£'000	£'000	£'000
Non current assets
Investments held at fair value through profit or loss	467,343	451,698	477,377
Investments in liquidity fund held at fair value through
profit or loss	-	-	10,000
Total investments	467,343	451,698	487,377
Current assets
Financial assets: Derivative financial instruments	57	-	-
Other receivables	523	1,579	2,377
Cash and cash equivalents	16,912	24,407	3,404
	17,492	25,986	5,781
Current liabilities
Other payables	(16,213)	(186)	(4,936)
Bank overdraft	(3)	-	(14)
Financial liability: Derivative financial instruments	-	-	(3)
Net current assets	1,276	25,800	828
Net assets	468,619	477,498	488,205
Equity attributable to equity holders
Called up share capital	30,051	30,026	30,032
Share premium	82,219	81,933	82,000
Other reserve	41,929	34,873	41,929
Exercised warrant reserve	5,886	5,886	5,886
Capital reserves	319,807	335,230	337,232
Capital redemption reserve	6,362	6,362	6,362
Revenue reserve	(17,635)	(16,812)	(15,236)
Total equity	468,619	477,498	488,205
Net asset value per Ordinary share (note 5)
- undiluted	443.1p	412.1p	426.0p
- diluted	434.9p	406.0p	419.1p

Group Cash Flow Statement

for the six months ended 31st March 2013

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st March 2013	31st March 2012	30th September 2012
	£'000	£'000	£'000
Operating activities
Profit before taxation	14,067	5,267	20,410
Add back interest	85	185	278
Add back gains on investments held at fair
value through profit or loss	(16,538)	(7,773)	(21,291)
Foreign exchange losses	(59)	-	-
Unrealised foreign exchange gains	-	-	2
Net sales of investments held at fair value
through profit or loss	36,570	16,398	(5,762)
(Increase)/decrease in prepayments, VAT and
other receivables	(405)	(207)	82
Decrease/(increase) in amounts due from brokers	2,259	574	(513)
(Decrease)/increase in other payables	(501)	(134)	364
(Decrease)/increase in amounts due to brokers	(2,209)	-	2,240
Net cash inflow/(outflow) from operating activities
before interest payable and taxation	33,269	14,310	(4,190)
Interest paid	(85)	(185)	(278)
Tax paid	-	-	-
Net cash inflow/(outflow) from operating activities	33,184	14,125	(4,468)
Financing activities
Net proceeds from the issue of Ordinary shares	238	5,570	5,643
Repurchase of shares	(35,903)	(7,056)	(9,553)
(Decrease)/increase in bank overdraft	(11)	-	14
Drawdown of short term loans	22,500	-	6,000
Net repayment of short term loans	(6,500)	-	(6,000)
Net cash outflow from financing activities	(19,676)	(1,486)	(3,896)
Increase/(decrease) in cash and cash equivalents	13,508	12,639	(8,364)
Cash and cash equivalents at the start of the period	3,404	11,768	11,768
Cash and cash equivalents at the end of the period	16,912	24,407	3,404

Notes

for the six months ended 31st March 2013

1.    Principal activity

      The principal activity of the Company is that of an investment trust company within the meaning of Section 1158 of the Corporation Tax Act 2010.

2.   Financial statements

The financial information for the six months ended 31st March 2013 and 2012 has not been audited or reviewed by the Company's auditors.

      The financial information contained in the half year report and accounts does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.

      The information for the year ended 30th September 2012 has been extracted from the latest published audited financial statements. Those accounts have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under either Section 498(2) or 498(3) of the Companies Act 2006.

3.   Accounting policies

      The financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS'), which comprise standards and interpretations approved by the International Accounting Standards Board to the extent that they have been adopted by the European Union.

      Where presentational guidance set out in the Statement of Recommended Practice (the 'SORP') for investment trusts issued by the Association of Investment Companies in January 2009 is consistent with the requirements of IFRS, the financial statements have been prepared on a basis compliant with the recommendations of the SORP.

      The accounting policies applied to these half year accounts are consistent with those applied in the accounts for the year ended 30th September 2012.

4.   (Loss)/earnings per Ordinary share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st March 2013	31st March 2012	30th September 2012
	£'000	£'000	£'000
(Loss)/earnings per Ordinary share is based on the following:
Revenue loss	(2,399)	(2,343)	(767)
Capital return	16,466	7,610	21,177
Total return	14,067	5,267	20,410
Weighted average number of Ordinary shares in issue during
the period used for the purpose of undiluted calculation	109,209,640	116,185,568	115,815,283
Weighted average number of Ordinary shares in issue during
the period used for the purpose of diluted calculation	110,615,487	117,350,741	116,793,906
Undiluted
Revenue loss per share	(2.20)p	(2.02)p	(0.66)p
Capital return per share	15.08p	6.55p	18.28p
Total return per share	12.88p	4.53p	17.62p
Diluted
Revenue loss per share	(2.17)p	(2.00)p	(0.65)p
Capital return per share	14.89p	6.49p	18.13p
Total return per share	12.72p	4.49p	17.48p

5.   Net asset value per Ordinary share

	(Unaudited)	(Unaudited)	(Audited)
	31st March 2013	31st March 2012	30th September 2012
Undiluted
Ordinary shareholders funds (£'000)	468,619	477,498	488,205
Number of Ordinary shares in issue excluding shares held
in Treasury	105,764,303	115,865,433	114,615,313
Net asset value per Ordinary share (pence)	443.1	412.1	426.0
Diluted
Ordinary shareholders funds assuming exercise of
Subscription shares (£'000)	486,223	495,414	506,048
Number of potential Ordinary shares in issue excluding
shares held in Treasury	111,813,755	122,021,755	120,746,755
Net asset value per Ordinary share (pence)	434.9	406.0	419.1

      The diluted net asset value per Ordinary share assumes that all outstanding Subscription shares were converted into Ordinary shares at the period end. The Company will only re-issue shares held in Treasury at a premium and therefore these shares have no dilutive potential.

JPMORGAN ASSET MANAGEMENT (UK) LIMITED

ENDS

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

The half year will also 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.

 

END

 

 

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