Half Year Results

RNS Number : 5595M

JPMorgan Indian Invest Trust PLC

26 May 2010

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN INDIAN INVESTMENT TRUST PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED

31ST MARCH 2010

Chairman's Statement

Performance

The six months to 31st March 2010 have seen the Indian stockmarket continue the recovery it began in March 2009. Over this period, the Company saw an increase in diluted net assets of 19.0%, almost exactly in line with the performance of the Company's benchmark, the MSCI India Index (in sterling terms), which rose by 19.1%. The Company's share price total return was somewhat lower at 13.6%, reflecting the widening of the discount from 4.4% to 8.8%. At the portfolio level, and before fees and expenses, the investment managers outperformed by 0.8%. The background against which the Company performed is discussed in more detail in the Investment Managers' Report.

Gearing

The Company has a one year floating rate US$50 million loan facility with ING Bank to provide the investment managers with the flexibility to gear the portfolio should circumstances permit. As at the date of this report, the facility is undrawn.

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 1,979,788 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. No shares were bought back during the period.

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 I noted in my Chairman's Statement for the year ended 30th September 2009, the Company's Ordinary share price has remained comfortably above both the initial exercise price and the current exercise price of 247p per Subscription share since their issue. Between 1st October 2009 and 31st March 2010, applications were received to convert 7,118,647 Subscription shares into Ordinary shares, raising proceeds of £16.2 million. As at the date of this report, a further 315,596 Subscription shares have been converted, meaning that 49.9% of the Subscription shares originally issued have now been converted and £24.8 million raised for investment by the Company.

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 page 13 of the Report and on the Company's website at www.jpmindian.co.uk.

Outlook

The Managers remain positive about the prospects for Indian equities over the medium to long term and, indeed, the year since March 2009 has seen a sizeable improvement in stock prices. Over the short term however, returns are expected to remain volatile.

Hugh Bolland

Chairman       26th May 2010

Investment Managers' Report

During the six months ended March 2010, the Indian stock market appreciated, placing it within striking distance of the all time high achieved in early 2008. A combination of factors, including an acceleration of GDP growth, positive earnings revisions and strong foreign portfolio flows galvanised the market.

Economic growth has clearly recovered. Even the sedate Reserve Bank of India ('RBI'), in its quarterly review, used the description "fast recovering economy." GDP growth troughed at below 6%, then grew at 8% in the September 2009 quarter, decelerated to 6% again in the December quarter (due to the worst monsoon in 37 years) and is likely to register 7.2% growth for the year ending March 2010. More importantly, the stage is set for GDP growth to increase to 9% in the coming years.

During the period under review, the RBI commenced the withdrawal of some of the stimulus measures. The Cash Reserve Ratio ('CRR') was raised by 75 basis points, thereby draining some of the excess liquidity from the banking system. A few weeks later, the RBI further raised interest rates by 25 basis points, a decision that was fully expected by economists, although the timing caught a few by surprise. We expect interest rates to be increased by 100-150 basis points in calendar 2010, and the CRR could be raised again too.

Two points need to be emphasised with regard to this monetary tightening. Firstly, the RBI is acting counter cyclically. Inflation in India rose sharply in late 2009 and early 2010, driven by rising food prices. We expect an amelioration in the inflation rate during the summer due to tighter liquidity, a higher price base and better agricultural output. Secondly, tighter monetary policy does not necessarily signal the end of this bull market. The RBI commenced the last tightening cycle in autumn 2004 and the stock market rose for three more years.

Another key improvement worth noting is the beginning of a new credit cycle. Growth in bank lending troughed in late 2009 at 11% and now it is 16%. This is good news for banking stocks and for the economy. Investors will note that the portfolio is overweight the financial sector. We expect bank earnings to recover strongly as loan growth accelerates over the coming years to the 25-35% level.

In late February, the annual Budget was unveiled by the Finance Minister. The stock market reacted positively to the plan to reduce the fiscal deficit from 6.7% in 2010 to 4.1% in 2013. A few weeks later, S&P upgraded its outlook on India's long term credit rating.

Flows into the stock market were strong. Foreign institutional investors purchased nearly US$ 10 billion of Indian stocks, with local insurance companies buying nearly US$ 6 billion. Only domestic mutual funds, hit by changing industry rules, were material sellers. These foreign flows have been augmented by Exchange Traded Funds, indicating widening global interest in the India story. Gratifyingly, these flows easily offset the heavy new equity issuance as Indian companies strengthened their balance sheets and the Government stepped up its divestment programme.

The portfolio modestly outperformed the benchmark over the period. This performance is an obvious improvement when compared with the first 9 months of 2009, but there is a lot of work yet to be done to erase that underperformance.  The Company benefitted by being underweight in defensive sectors such as utilities and telecoms. On the other hand, performance was hindered by the overweighting of global cyclicals; the strength of the global economic recovery was surprising. The Company was overweight in two of the top five stock performers during the period - Hindalco and JSW Steel, and was zero or minimally exposed to the 5 worst performers.

The outlook is positive. Most importantly, the earnings upcycle has undoubtedly commenced. After a few quarters of year-on-year earnings declines, corporate India is now recovering well. We believe that overall earnings can double over the next 3-4 years. We also believe that the earnings forecasts for the medium to longer term will be exceeded. Valuations are full at present, but look attractive in the medium to longer term.

The ascent of the Indian stock market through its previous all time high and to levels reflecting its structural economic and earnings potential should prove rewarding for long term investors. The twin drivers of growth - infrastructure investment and domestic consumption - have shifted into higher gear. The Company is well positioned to benefit from this growth.

Ted Pulling

Raj Nair

Rukhshad Shroff

Investment Managers          26th May 2010

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 six broad categories: market; investment and strategy; 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 2009.

Related Party 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.

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.

Hugh Bolland

Chairman        

For further information, please contact:

Andrew Norman

For and on behalf of

JPMorgan Asset Management (UK) Limited, Secretary

020 7742 6000

Please note that up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can be found at www.jpmindian.co.uk

Group Income Statement

for the six months ended 31st March 2010

		(Unaudited)				(Unaudited)			(Audited)
		Six months ended				Six months ended			Year ended
		31st March 2010				31st March 2009			30th September 2009
	Revenue		Capital	Total	Revenue		Capital	Total	Revenue	Capital	Total
	£'000		£'000	£'000	£'000		£'000	£'000	£'000	£'000	£'000
Investment income	1,128		-	1,128	945		-	945	3,681	-	3,681
Other income	8		-	8	262		-	262	274	-	274
	1,136		-	1,136	1,207		-	1,207	3,955	-	3,955
Gains/(losses) on investments
held at fair value through profit
or loss	-		90,238	90,238	-		(37,095)	(37,095)	-	121,460	121,460
Foreign exchange losses	-		(108)	(108)	-		(281)	(281)	-	(293)	(293)
Total income/(loss)	1,136		90,130	91,266	1,207		(37,376)	(36,169)	3,955	121,167	125,122
Management fee	(2,671)		-	(2,671)	(1,588)		-	(1,588)	(3,651)	-	(3,651)
Other administrative expenses	(754)		-	(754)	(940)		-	(940)	(1,106)	-	(1,106)
(Loss)/profit before finance
costs and taxation	(2,289)		90,130	87,841	(1,321)		(37,376)	(38,697)	(802)	121,167	120,365
Finance costs	(105)		-	(105)	-		-	-	(6)	-	(6)
(Loss)/profit before taxation	(2,394)		90,130	87,736	(1,321)		(37,376)	(38,697)	(808)	121,167	120,359
Taxation	(35)		-	(35)	-		-	-	-	-	-
Net (loss)/profit	(2,429)		90,130	87,701	(1,321)		(37,376)	(38,697)	(808)	121,167	120,359
(Loss)/earnings per Ordinary
share (note 4)
- undiluted	(2.21)p		81.83p	79.62p	(1.28)p		(36.24)p	(37.52)p	(0.78)p	116.50p	115.72p
- diluted	(2.13)p		79.14p	77.01p	(1.28)p		(36.24)p	(37.52)p	(0.75)p	112.88p	112.13p

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 2010	capital	Premium	reserve	reserve	reserves	reserve	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2009	27,195	57,007	41,929	5,886	304,291	6,362	(11,212)	431,458
Exercise of Subscription shares
into Ordinary shares	(71)	71	-	-	-	-	-	-
Issue of Ordinary shares on
conversion of Subscription
shares	1,779	14,417	-	-	-	-	-	16,196
Net profit/(loss) for the period	-	-	-	-	90,130	-	(2,429)	87,701
At 31st March 2010	28,903	71,495	41,929	5,886	394,421	6,362	(13,641)	535,355
	Called up			Exercised		Capital
Six months ended	share	Share	Other	warrant	Capital	redemption	Revenue
31st March 2009	capital	premium	reserve	reserve	reserves	reserve	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2008	26,188	50,914	41,929	5,886	183,124	6,362	(10,404)	303,999
Shares issued	201	1,628	-	-	-	-	-	1,829
Net loss for the period	-	-	-	-	(37,376)	-	(1,321)	(38,697)
At 31st March 2009	26,389	52,542	41,929	5,886	145,748	6,362	(11,725)	267,131
	Called up			Exercised		Capital
Year ended	share	Share	Other	warrant	Capital	redemption	Revenue
30th September 2009	capital	premium	reserve	reserve	reserves	reserve	reserve	Total
(Audited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2008	26,188	50,914	41,929	5,886	183,124	6,362	(10,404)	303,999
Shares issued	65	529	-	-	-	-	-	594
Bonus issue of Subscription
shares	210	(210)	-	-	-	-	-	-
Subscription shares' issue costs	-	(416)	-	-	-	-	-	(416)
Exercise of Subscription shares
into Ordinary shares	(30)	30	-	-	-	-	-	-
Issue of Ordinary shares on
conversions of Subscription
shares	762	6,160	-	-	-	-	-	6,922
Net profit/(loss) for the year	-	-	-	-	121,167	-	(808)	120,359
At 30th September 2009	27,195	57,007	41,929	5,886	304,291	6,362	(11,212)	431,458

Group Balance Sheet

at 31st March 2010

	(Unaudited)	(Unaudited)	(Audited)
	31st March 2010	31st March 2009	30th September 2009
	£'000	£'000	£'000
Non current assets
Investments held at fair value through profit or loss	532,410	261,287	430,375
Current assets
Other receivables	185	221	1,670
Cash and cash equivalents	3,131	7,271	1,607
	3,316	7,492	3,277
Current liabilities
Other payables	(371)	(1,648)	(2,194)
Net current assets	2,945	5,844	1,083
Net assets	535,355	267,131	431,458
Equity attributable to equity holders
Called up share capital	28,903	26,389	27,195
Share premium	71,495	52,542	57,007
Other reserve	41,929	41,929	41,929
Exercised warrant reserve	5,886	5,886	5,886
Capital reserves	394,421	145,748	304,291
Capital redemption reserve	6,362	6,362	6,362
Revenue reserve	(13,641)	(11,725)	(11,212)
Total equity	535,355	267,131	431,458
Net asset value per Ordinary share (note 5)
- undiluted	472.9p	257.9p	406.7p
- diluted	453.2p	252.8p	380.7p

Group Cash Flow Statement

for the six months ended 31st March 2010

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st March 2010	31st March 2009	30th September 2009
	£'000	£'000	£'000
Operating activities
Profit/(loss) before taxation	87,736	(38,697)	120,359
Add back interest paid	105	-	6
Add back (gains)/losses on investments held at fair
value through profit or loss	(90,238)	37,095	(121,460)
Unrealised foreign exchange losses/(gains)	9	-	(9)
Net purchases of investments held at fair value
through profit or loss	(11,798)	(8,176)	(21,016)
(Increase)/decrease in other receivables	(27)	738	798
Decrease in amounts due from brokers	1,504	-	496
Increase/(decrease) in other payables	78	37	(48)
(Decrease)/increase in amounts due to brokers	(1,900)	-	941
Net cash outflow from operating activities
before interest payable and taxation	(14,531)	(9,003)	(19,933)
Interest paid	(106)	-	(5)
Tax paid	(35)	-	-
Net cash outflow from operating activities	(14,672)	(9,003)	(19,938)
Financing activities
Net proceeds from the issue of shares	16,196	1,829	7,100
Net cash inflow from financing activities	16,196	1,829	7,100
Increase/(decrease) in cash and cash equivalents	1,524	(7,174)	(12,838)
Cash and cash equivalents at the start of the period	1,607	14,445	14,445
Cash and cash equivalents at the end of the period	3,131	7,271	1,607

Notes to the Group Accounts

for the six months ended 31st March 2010

1.         Principal activity

The principal activity of the Company is that of an investment trust company within the meaning of Section 842 of the Income & Corporation Taxes Act 1988.

2.         Financial statements

The financial information for the six months ended 31st March 2010 and 2009 has not been audited or reviewed by the Company's auditors.

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

The information for the year ended 30th September 2009 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) adopted by the International Accounting Standards Board (IASB) and interpretations issued by the International Reporting Interpretations Committee of the IASB (IFRIC).

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 2009.

4.         (Loss)/earnings per Ordinary share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st March 2010	31st March 2009	30th September 2009
	£'000	£'000	£'000
(Loss)/earnings per share is based on the following:
Revenue loss	(2,429)	(1,321)	(808)
Capital profit/(loss)	90,130	(37,376)	121,167
Total profit/(loss)	87,701	(38,697)	120,359
Weighted average number of Ordinary shares in issue during
the period used for the purpose of undiluted calculation	110,147,348	103,148,191	104,007,815
Weighted average number of Ordinary shares in issue during
the period used for the purpose of diluted calculation	113,887,734	103,148,191	107,343,556
Undiluted
Revenue loss per share	(2.21)p	(1.28)p	(0.78)p
Capital profit/(loss) per share	81.83p	(36.24)p	116.50p
Total profit/(loss) per share	79.62p	(37.52)p	115.72p
Diluted
Revenue loss per share	(2.13)p	(1.28)p	(0.75)p
Capital profit/(loss) per share	79.14p	(36.24)p	112.88p
Total profit/(loss) per share	77.01p	(37.52)p	112.13p

5.         Net asset value per Ordinary share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st March 2010	31st March 2009	30th September 2009
Undiluted
Ordinary shareholders' funds £'000	535,355	267,131	431,458
Number of Ordinary shares in issue	113,199,823	103,575,738	106,081,176
Net asset value per Ordinary share (pence)	472.9	257.9	406.7
Diluted
Ordinary shareholders' funds assuming exercise of
Subscription shares £'000	562,114	313,572	472,210
Number of potential Ordinary shares in issue	124,033,755	124,033,755	124,033,755
Net asset value per Ordinary share (pence)	453.2	252.8	380.7

JPMORGAN ASSET MANAGEMENT (UK) LIMITED

www.jpmindan.co.uk

 

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