LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN INDIAN INVESTMENT TRUST PLC
(the ‘Company’)
FINAL RESULTS FOR THE YEAR ENDED 30TH SEPTEMBER 2022
Legal Entity Identifier : 549300OHW8R1C2WBYK02
Information disclosed in accordance with the DTR 4.1.3
CHAIRMAN’S STATEMENT
Performance
Indian markets were not immune to the economic and geopolitical events which unfolded during the financial period, nor to the volatility they generated. However, Indian equities proved remarkably resilient. While other major markets sustained double-digit losses, the benchmark MSCI India was up 8.8% for the year ended 30th September 2022 (in GBP terms). The Company also made outright gains, but underperformed the market, returning 6.3% in net asset value (NAV). The share price increased by 0.6%, resulting in a wider discount to NAV. This was seen to be a common theme for single country and emerging markets funds in general.
This underperformance, while disappointing, should be assessed in the context of past year’s extreme volatility, and the Company’s focus on long term investments. This year’s performance follows returns of over 40% in both NAV and share price terms in the previous financial year ended 30 September 2021, and the Company has made an average annualised return of 9.5% on an NAV basis and 8.4% in share price terms over the ten years to end September 2022.
In their report which follows, the Investment Managers discuss recent portfolio performance in more detail. They also outline the reasons for their optimism about India’s very favourable long term prospects, and the positive implications this has for the Company’s ability to rebuild its strong performance track record over time.
Manager Changes
In September 2022 the Manager informed the Board that Rajendra (“Raj”) Nair, the Company’s joint portfolio manager, would be leaving JPMAM after 24 years’ service. The Board has since worked closely with the Manager to determine the appropriate changes to the investment management team necessitated by Raj’s departure. It was agreed that Ayaz Ebrahim, who has co-managed the Company’s portfolio alongside Raj since June 2020 would continue managing the Company’s investments, and with effect from 30 September 2022, he would be joined by Amit Mehta and Sandip Patodia as co-managers. Both Amit and Sandip have extensive investment management experience, and, in the Board’s and the Manager’s view, possess the necessary skills and knowledge to successfully manage the Company’s investment portfolio. Amit is a London-based portfolio manager at JPMAM responsible for Global Emerging Markets portfolios. He has been a JPMAM employee since 2011, having previously worked at Prusik Investment Management and Atlantis Investment Management, where he was an Asian equities analyst and portfolio manager. Sandip is a country specialist, also based in JPMAM’s London office. He is responsible for the India portfolios within the Emerging Markets and Asia Pacific (EMAP) Equities team. Sandip joined JPMAM in September 2022 from Fundsmith, where he was an assistant portfolio manager for Fundsmith’s Emerging Markets fund, with primary responsibility for India.
I would like to assure shareholders that there has been no change to the Company’s investment objectives or its investment policy as a result of these changes, and the portfolio managers continue to work closely with JPMAM’s team of 40 highly experienced research analysts based around the world.
The Board would like to thank Raj for his long-standing contribution to the management of the Company’s portfolio and it looks forward to working with Ayaz, Amit, Sandip and the other members of the Company’s investment management team.
Discount and Share Repurchases
At the Annual General Meeting (‘AGM’) held in February 2022, 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.
The discount at which the Company’s shares trade versus its NAV widened to 20.1% over the review period (2021: 15.5%). The Board constantly weighs the merits of buying back shares in order to manage the level and volatility of the discount and will buy back shares, in line with the Company’s investment policy, if the discount is out of line with the peer group and markets are orderly. The Company repurchased 1,615,011 shares during the reporting period, and since the financial year end, a further 345,770 shares have been bought back at a cost of £ 2,845,822 and an average discount of 21.8 %. As shares are only re ‑ purchased at a discount to the prevailing net asset value, share buybacks increase the net asset value per share.
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 2023. 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 Investment Managers. At the beginning of the financial year, the Company had a fixed 2-year, £30m floating rate loan facility with ING Bank. This facility matured in August 2022 and the Board did not deem it appropriate to renew/replace the facility at this time given that the facility was not being utilised. As at 30th September 2022, the Company’s portfolio held 5.7% net cash, i.e. was 94.3% invested. At the time of writing, the Company’s portfolio is approximately 2.8 % net cash.
Board and Corporate Governance
The Board reviews its composition on a regular basis, taking into account the need to refresh its membership and diversity, whilst also ensuring the necessary degree of continuity of Board experience. As previously announced, Hugh Sandeman retired from the Board at the conclusion of the Company’s AGM held on 3rd February 2022 and Jeremy Whitley, who has served on the Board since 1st February 2020, succeeded him as the Senior Independent Director.
During the year, as part of its ongoing succession planning, and to fill the vacancy created by Hugh’s retirement, the Board engaged an independent external recruitment consultant to assist in the search for a new non-executive Director to be appointed to the Board. Following a rigorous recruitment process, the Board was delighted to welcome Khozem Merchant as a non-executive Director of the Company. Khozem joined the Board on 3rd February 2022 and brings over thirty years of experience in business and the media. He has worked in very senior roles in India and in the UK. He launched and leads Brunswick’s India practice, which specialises in Indian macro, corporate and public affairs, and provides advisory services to Indian businesses. I am confident that Khozem’s extensive experience and deep ties to the Indian market will be of great benefit to the Company.
After much consideration, the Board has decided on its succession plans. In acknowledgement of the length of my tenure on the Board in the roles of Director and then Chair, I am delighted to report that the Board has selected Jeremy Whitley, the current Senior Independent Director, as my successor when I retire. To facilitate orderly succession planning and continuity, it has been recommended by the Nomination Committee and accepted by the Board that I will remain as Chairman of the Board until the AGM in February 2024. As part of its long-term planning, the Board will commence a formal recruitment search in 2023 for further Board refreshment.
The Board supports the annual appointment/reappointment for all Directors, as recommended by the AIC Code of Corporate Governance, and therefore all of the Directors will stand for appointment/reappointment at the forthcoming AGM in February 2023.
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. In addition, 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 more correctly reflect the Investment Managers’ performance in calculating whether the tender offer has been triggered, the NAV per share will be adjusted to add back all such taxes paid or accrued. The NAV performance without the impact of these taxes stands at 2.47% at the time of writing, and will be, going forward, published on a monthly basis to the market.
Any tender offer will also be conditional on shareholders approving the Company’s continuation vote in 2024.
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. I am pleased to inform you that following the engagement of IQEQ (Mauritius) as liquidator, the Company’s Mauritian subsidiary was placed into liquidation on 31st August 2022. Further details are provided in Note 24 supplemental information and reconciliations to provide shareholders with a fuller picture.
Annual General Meeting
The Company’s twenty ninth AGM will be held at 60 Victoria Embankment, London EC4Y 0JP on 2nd February 2023 at 12.00 p.m.
We are delighted that this year we are once again able to invite shareholders to join us in person for the Company’s AGM, to hear directly from the Investment 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.
Shareholders who are unable to attend the AGM are strongly encouraged to submit their proxy votes in advance of the meeting, so they are registered and recorded at the AGM. 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 102 and 103 in the Annual Report .
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 – about inflation, rising interest rates, slower growth and geopolitical uncertainties – currently pervading global financial markets, the Board shares the Investment Managers’ conviction that the long term prospects for the Indian market remain strong, supported by the country’s demographics and huge potential for structural change and technological innovation.
Given this, and the 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 managers’ confidence in its ability to continue delivering attractive levels of capital growth to shareholders over the long term.
Rosemary Morgan
Chairman
21 December 2022