JP Morgan Fleming Indian Investment Trust

We have believed for sometime that shares in India would benefit from the country's rapid growth, economic liberalisation and improving investment climate. Lending credence to this belief early last week was the all-time high reached by the country's Sensex stock market index. By investing in the JPMorgan Fleming Indian Investment Trust (JII), we believe investors can gain leverage to the exciting opportunities offered by the Indian sub-continent.

For the year ending September 30, the Trust had produced a 24 percent return on net assets, easily outperforming the benchmark MSCI India index which returned 15 percent. Improving shareholder returns further was a reduction in the Trust's discount from 14 to 2 percent. As a result the shares returned 41 percent over the period.

The out-performance of the fund can be attributed to the investment manager's superior sector and stock selection. As strong believers in an active management style, Fat Prophets applaud the strong results achieved to date. In addition, we concur with the Manager's view that the medium to long-term growth prospects within India remain excellent.

Supporting this position is the recent upward revision to India's GDP forecast for 2005 from between 6.0-6.5 percent to 6.9 percent. We have been encouraged that the economy has been able to maintain momentum following stellar growth last year of 8.5 percent. Additionally, there are signs that healthy growth rates such as these are becoming less dependent on the monsoon season and its effect on farming. The robust expansion of the service and manufacturing sectors is now better able to offset slower growth rates in agriculture.

JII's sector holdings are dominated by heavy weightings in Information Technology and Industrials. The Trust also has significant holdings of around 10 percent in the Energy, Health Care, Consumer Discretionary, Materials and Financial Services sectors. The portfolio's three largest holdings are Infosys, Reliance Industries and Bharat Heavy Electricals.

Last year the election of the Congress Party initially hurt Indian stocks however the market has since fully recovered. While the realities of ruling by coalition will moderate the extent of policy changes, we are encouraged that the upcoming Budget (February 28) may include additional market friendly initiatives such as higher foreign direct investment ceilings in select sectors. We believe such second generation economic reforms will further enhance the investment climate in India, and provide additional support for equities.

The Trust's strong performance has seen its net asset value per share rise to 153.5p and the stock's discount fall to 3.7 percent. JII has been a solid performer over the past six months and we believe further share price gains are achievable over the medium to longer-term.

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