JP Morgan Fleming Indian Investment Trust

Earlier this month, the JP Morgan Fleming Indian Investment Trust (JII) announced half year results to March 31. Not surprisingly the Trust has benefited greatly from a buoyant local market. The outlook for the broader Indian indices remains encouraging in our opinion as economic growth and industrialisation speeds ahead. We are also confident that JII's focus on large caps with exposure to infrastructure and consumer spending will foster further out-performance.

During the first six months the benchmark MSCI India Index rose 16.8 percent as foreign investors injected US$2.7 billion into the market in the closing months of 2004. JII clearly out-performed the index with a return on assets of 19.3 percent.

The Trust's sector weightings are still dominated by Information Technology (21.0 percent) and Industrials (16.7 percent) while Financial Services and Energy represent about 11 percent each. We view these sector allocations positively, as each should benefit directly from the country's healthy growth rate.

Last week it was announced that Indian GDP surged ahead 7 percent in the January to March quarter. Full year growth was a healthy 6.9 percent while this year's forecast is for 7 percent.

We were also very encouraged by the continuing evidence that the economy is no longer so heavily dependent on agriculture. During the quarter this decoupling was illustrated by manufacturing growing by 8.6 percent and farming by only 1.8 percent. Two factors seem to be behind this beneficial development. The first is an expanding middle class, and second is increasing competitiveness as evidenced by the robust growth in exports.

We believe that the ongoing modernisation taking place within India will support above average growth in the foreseeable future. Prudent stock and sector selection should ensure that the Trust flourishes as the country industrialises further. Accordingly, we believe the shares have significant potential over the medium to longer-term.