LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN INDIAN INVESTMENT TRUST PLC
(the ‘Company’)
FINAL RESULTS FOR THE YEAR ENDED 30TH SEPTEMBER 2023
Legal Entity Identifier: 549300OHW8R1C2WBYK02
Information disclosed in accordance with the DTR 4.1.3
CHAIRMAN’S STATEMENT
Performance
This will be my last Chairman’s Statement before I step down after the Annual General Meeting (AGM) in February next year. It has been a privilege to be a Director of the Company since 2013 and Chairman for the last three years and I am pleased to present the Company’s annual results for the year ended 30th September 2023.
I would like to begin this statement by thanking shareholders for their patience, in what has been an uncertain and volatile time for investors. An unusually large number of adverse influences conspired to undermine global financial market sentiment and generate volatility over the review period. Inflation remained stubbornly high in large parts of the world and geo-political tensions intensified. However, the Benchmark still managed to realise a small gain of 0.7% (in GBP terms) over the year.
It is pleasing to be able to report that the Company’s Portfolio Managers successfully navigated the volatility generated by these disparate forces to outperform the index over the year. The Company’s total return on net assets was 1.2% (in GBP terms), while the share price return of 2.2% reflected a small narrowing of the share price discount to net asset value from 20.1% at the end of the previous financial year to 19.3% as at 30th September 2023.
Given the long-term focus of the Company’s investment approach, it is important for shareholders to also consider performance over a longer timeframe. And on this basis, absolute returns have been strong. The Company has made an average annualised return of 11.3% on an NAV basis and 10.7% in share price terms over the ten years to end September 2023. This compares with a Benchmark return of 12.9%.
The Portfolio Managers’ report below provides a clear review of the market environment, the Company’s performance, portfolio adjustments and the outlook for the year ahead. The Portfolio Managers also outline the reasons for their optimism about India’s very favorable long-term prospects, and the positive implications this has for the Company’s portfolio.
Discount and Share Repurchases
At the AGM held in February 2023, shareholders gave approval for the Company to renew the Directors’ authority to repurchase up to 14.99% of the Company’s shares for cancellation or into Treasury on an ongoing basis.
Whilst the Board would like to see the Company’s shares trading at narrower discount levels, it recognises that in general, the investment trust sector as a whole, and single country funds in particular have been impacted by recent markets during which discounts have significantly widened and have also been more volatile. The discount at which the Company’s shares trade versus its NAV narrowed slightly to 19.3% over the review period (2022: 20.1%). The Board constantly weighs the merits of buying back shares, in line with the Company’s share buyback policy, to manage the absolute level and volatility of the discount. Pursuant to this policy, the Company repurchased 2,767,119 shares during the reporting period at a cost of £22,609,000 and since the financial year end, a further 694,512 shares have been bought back at a cost of £5,990,000 and an average discount of 18.8%. As shares are only re-purchased at a discount to the prevailing net asset value, share buybacks benefit shareholders as they increase the net asset value per share of remaining shares.
The Board believes that the share buyback 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 in February 2024. The Board is optimistic that the discount will narrow once the economic outlook and market sentiment improve.
Gearing
The Board regularly discusses gearing with the Portfolio Managers. The Company’s two-year, £30 million loan facility matured in August 2022, but as it was not being utilised, the Board did not deem it appropriate to renew or replace the facility. Therefore, the Company currently does not have a debt facility in place, although the Board will seek to arrange a facility as and when it considers it appropriate to do so. As at 30th September 2023, the Company’s portfolio held 0.6% net cash, i.e.it was 99.4% invested.
Board and Corporate Governance
The Board reviews its composition on a regular basis, taking into account the need to refresh its membership and maintain diversity, whilst also ensuring the necessary degree of continuity of Board experience. As previously announced, I will be stepping down as Chairman of the Company at the conclusion of the AGM in February 2024. I will be succeeded by Jeremy Whitley, the current Senior Independent Director. Vanessa Donegan will take over the role of Senior Independent Director from Jeremy Whitley at the conclusion of the 2024 AGM. The Board has asked Jasper Judd, the Chairman of the Audit and Risk Committee, who will have been on the Board for nine years by the 2024 AGM, to stay on till the conclusion of the 2025 AGM to ensure a smooth transition. With this in mind, as part of its succession planning, the Board, led by the Nomination Committee, has already commenced a formal recruitment search for a new Non-executive Director who would be able to take on the chairmanship of the Audit and Risk Committee after an appropriate handover period.
The Board recognises the value and importance of diversity in the boardroom. The Board is pleased to report that it fulfils the recommendations of the Parker Review by having at least one Director from a minority ethnic background. It also meets the recommendations of the FTSE Women Leaders Review, which build on the work of the former Hampton-Alexander and Davies Reviews, in respect of female board representation. The Board, through the Nomination Committee, has a succession plan that aims to continue meeting these recommendations as the Board undergoes future refreshment.
The Board supports the annual re-election for all Directors, as recommended by the AIC Code of Corporate Governance, and therefore all of the Directors, except for me, will stand for re-election at the forthcoming AGM.
Shareholders who wish to contact the Chairman or other members of the Board may do so through the Company Secretary or the Company’s website, details of which appear below.
Continuation Vote and Conditional Tender Offer
The Company’s Articles require that at the AGM to be held in 2024, and at every fifth year thereafter, the Directors propose a resolution that the Company continues as an investment trust for a further five-year period. If the resolution is not passed, the Company’s articles of association require that the Directors shall, within four months of the AGM, convene a General Meeting of the Company at which a special resolution will be proposed, designed to result in the holders of shares in the Company receiving, in lieu of their shares, units in a unit trust scheme (or equivalent), or in the reorganisation of the Company’s share capital in some other manner, or which shall be a resolution requiring the Company to be wound up voluntarily.
The Board believes that the long-term outlook for India remains positive and that JPMAM has the resources and investment process to deliver returns for shareholders consistent with the Company’s investment objectives. Accordingly, the Board believes that the continuation of the Company is in the best interests of all shareholders and strongly recommends that shareholders vote in favour of the resolution, as they intend to do in respect of their own holdings.
As announced on 26th January 2021, a tender offer will be made to shareholders for up to 25% of the Company’s outstanding share capital, at NAV less costs if, over the five years from 1st October 2020, the Company’s NAV total return in sterling on a cum income basis does not exceed the total return of the benchmark index plus 0.5% per annum over the five-year period on a cumulative basis. If the tender offer is triggered, it will be subject to shareholder approval at the relevant time.
The Company’s Benchmark does not take any account of actual or potential tax on gains. In contrast, the Company is required to pay capital gains tax on long-term and short-term capital gains at the headline current rates of 10% and 15%, respectively, plus associated surcharges of approximately 1-1.5%. For the avoidance of doubt, in order to ensure that the terms of the conditional tender offer correctly reflects the Investment Manager’s performance in calculating whether the tender offer has been triggered, the NAV per share will be adjusted to add back all Indian capital gains tax paid or accrued, plus any surcharge and cess in respect of realised and unrealised gains made on investments. The NAV performance since 1 October 2020 without the impact of capital gains tax stood at 59.6% as at 30th November 2023, compared to 60.5% for the Benchmark.
Any tender offer will also be conditional on shareholders approving the Company’s continuation vote in 2024. Accordingly, the Board believes that the continuation of the Company is in the best interests of all shareholders and strongly recommends that shareholders vote in favour of the resolution at the AGM on 13th February 2024, as the Directors intend to do in respect of their own holdings.
Mauritius Subsidiary and Taxation
As reported during the last financial period, following the amendment to the India-Mauritius treaty, the Company had transferred its holdings from its Mauritius subsidiary to the parent company. A cash balance was maintained in the Mauritian subsidiary to fund its dissolution expenses. The Company’s Mauritian subsidiary was placed into liquidation on 31st August 2022, with IQEQ (Mauritius) engaged as the liquidator. For this reason, there are no longer any supplemental information or reconciliations to the statutory financial statements to include in the notes to the Financial Statements.
Environmental, Social and Governance Considerations
Whilst the Portfolio Managers select stocks based primarily on company fundamentals, they also consider the potential impact of financially material ESG factors on a company’s ability to deliver shareholder value.
Throughout the investment process, a company’s strategy is assessed according to its ability to deal with these important factors and the consequent risks they may generate. The analysis helps determine whether relevant ESG factors are financially material and, if so, whether they are reflected in the valuation of the company. Such analysis may influence not only the Portfolio Managers’ decision to own a stock, but also, if they do, the size of that position within the portfolio. Further information on the Manager’s ESG process and engagement is set out in the ESG section on pages 18 to 23 of the Annual Report and Financial Statements.
Task Force on Climate-related Financial Disclosures
As a regulatory requirement for the Company’s Manager, on 30th June 2023, JPMAM published its first UK Task Force on Climate-related Financial Disclosures (‘TCFD’) Report for the Company in respect of the year ended 31st December 2022. The report discloses estimates of the Company’s portfolio climate-related risks and opportunities according to the Financial Conduct Authority (‘FCA’) Environmental, ESG Sourcebook and the TCFD. The report is available on the Company’s website under the ESG documents section: UK TCFD Product Report and ESG Fund Report.
This is the first report under the new guidelines and disclosure requirements. The Board is aware that best practice reporting under TCFDs is still evolving in regard to metrics and input data quality, as well as the interpretation and implications of the outputs produced, and will continue to monitor developments as they occur.
Stay Informed
The Company delivers email updates on the Company’s progress with regular news and views, as well
as the latest performance. If you have not already signed up to receive these communications and you
wish to do so you can opt in via https://tinyurl.com/d95jkrzx or by scanning the QR code on this page of the Chairman’s Statement in the Annual Report and Financial Statements.
Annual General Meeting
The Company’s thirtieth AGM will be held at 60 Victoria Embankment, London EC4Y 0JP on 13th February 2024 at 2.00 p.m.
We are delighted to invite shareholders to join us in person for the Company’s AGM, to hear directly from the Portfolio Managers. Their presentation will be followed by a question-and-answer session. Shareholders wishing to follow the AGM proceedings but choosing not to attend in person will be able to view proceedings live and ask questions (but not vote) through conferencing software. Details on how to register, together with access details, will be available shortly on the Company’s website at www.jpmindian.co.uk or by contacting the Company Secretary at invtrusts.cosec@jpmorgan.com
My fellow Board members, representatives of JPMorgan and I look forward to the opportunity to meet and speak with shareholders after the formalities of the meeting have been concluded.
As is best practice, all voting on the resolutions will be conducted on a poll. Your Board encourages all shareholders to support the resolutions proposed. Please note that shareholders viewing the meeting via conferencing software will not be able to vote on the poll and we therefore encourage all shareholders, and particularly those who cannot attend physically, to exercise their votes in advance of the meeting by completing and submitting their proxy. Proxy votes can be lodged in advance of the AGM either by post or electronically: detailed instructions are included in the Notes to the Notice of Annual General Meeting on pages 100 to 102 of the Annual Report and Financial Statements.
If there are any changes to the above AGM arrangements, the Company will update shareholders through an announcement to the London Stock Exchange, and on the Company’s website.
Outlook
Despite the numerous concerns – inflation, high interest rates, slowing growth and geopolitical uncertainties – currently pervading global financial markets, the Board shares the Portfolio Managers’ conviction that the long-term prospects for the Indian market continue to improve, supported by the country’s demographics, increased capital expenditure, government reforms and the huge potential for structural change and technological advancement.
Given this, and the Portfolio Managers’ focus on good quality companies capable of benefiting most from India’s promising future and thus outperforming over the long run, the Board is optimistic about the Company’s prospects, and we share the Portfolio Managers’ confidence in their ability to continue delivering attractive levels of capital growth to shareholders over the long-term.
I would like to conclude by thanking my fellow Directors and the team at JPMorgan for their support and contribution during my time on the Board, and I would also like to extend my thanks to our shareholders for their ongoing support. I wish the Company well for the future.
Rosemary Morgan
Chairman
12 December 2023