Annual Financial Report
NEW INDIA INVESTMENT TRUST PLC
ANNUAL FINANCIAL REPORT
for the period ended 31 March 2009
1. Chairman's Statement
Over the year to 31 March 2009, the net asset value of your Company decreased by 19.7% on a fully diluted basis, with the share price of your Company falling by 19.1%. While disappointing in absolute terms, this performance is much better than the Company's benchmark, the MSCI India Index, which declined by 33.8%. Since the year end, at 26 May 2009, the net asset value has increased by 17.3% on the same basis, and the share price by 22.4%, while the benchmark has increased by 32.9%. Over the period from the inception of the Company's new investment mandate, in December 2004, to 31 March 2009, the net asset value of the Company increased by 43.4%, and the share price by 27.3%, while the benchmark increased by 77.7%, correcting most of the underperformance which occurred during the lowest point of the cycle. As in previous years, no dividend is proposed.
Such performance reflects your Manager's investment style, which focuses on conservatively-managed companies with strong balance sheets. It is these companies that tend to outperform in distressed or normal market conditions, whilst lagging in the final, liquidity-fuelled phase of bull markets. When an equity market bubble bursts, investors become painfully aware that they had been overpaying for stocks of questionable quality. As the economic downturn worsens, it exposes companies' weaknesses that were hidden during the good years. Investors then turn to firms with robust balance sheets, long-term competitive advantages and trustworthy management, the kind of businesses your Manager favours.
Indian equities started the reporting period on a grim note. By 1 April 2008, the index had already fallen some 30% from its January peak. Over the rest of the year, it tumbled further as the rapid breakdown of the Western financial system led to massive outflows from the Indian stock market. In India, investors feared that the upcoming election could produce a fragile coalition that would restrict effective policymaking, while the Satyam financial fraud raised concerns over corporate governance. Markets stabilised only towards the calendar year end, on hopes that both global and local economic rescue efforts would together prevent a more protracted slowdown.
Again, our lack of exposure to index heavyweight Reliance Industries weighed negatively on the portfolio, though to a lesser degree than in previous periods. Your Manager still does not like this company because of a lack of confidence in its strategy and because it does not have any confidence in its corporate governance.
Holding Satyam also proved costly. Its share price plunged 76% on 7 January, after the chairman confessed to a massive accounting fraud that involved inflating profits and suppressing liabilities for several years. Upon news of the fraud, your Manager immediately sold our holding in Satyam since there was no longer a basis upon which it could assess the company's worth. Your Board is considering what appropriate legal recourse might be available to the Company.
But outside of these two holdings, your Company's portfolio of well-managed businesses performed strongly relative to its benchmark. Hero Honda, for example, rose 73.3% over the year. Since the company was first introduced in 2005, Hero's share price has more than doubled as it steadily gained market share in a fast-growing market. The company's strategy of focusing on rural areas, low dependency on financing and development of new models has produced excellent returns over the longer term. Further information about performance can be found in the Manager's Review.
During the period under review, as stated in the Interim Board Report, the Company's wholly-owned subsidiary, New India Investment Company (Mauritius) Limited, entered into a one-year revolving credit facility of up to £10 million to take advantage of the long-term attractions of the Indian equities market. The money will be invested in Indian equities when the market presents suitable long-term opportunities to provide shareholders with capital appreciation. To date, the facility has not been drawn. Use of the gearing will be at the recommendation of the Manager and with the approval of the Board.
Continuation of Company and Manager
Your Board has carefully considered the reappointment of your Manager in light of the performance of your Company, not only in the year under review, but also previous periods. The Manager's recent performance, long-term track record and well-understood investment style make a good case for their continued appointment.
Accordingly, your Board recommends that shareholders vote in favour of the resolution to be proposed at the forthcoming Annual General Meeting, to allow the Company to continue as an investment trust.
Annual General Meeting
Ambassador Rozental will be offering himself for re-election, and Audley Twiston-Davies will be retiring by rotation at the Annual General Meeting to be held at One Bow Churchyard, Cheapside, London EC4M 9HH on Monday, 21 September 2009 at 11.00 a.m. Your Board, having reviewed their proposed re-elections, strongly recommends shareholders to vote in favour of their reappointment.
In addition to the ordinary business of the meeting, shareholders will be asked to approve the continuation of the Company as an investment trust; authorise the Board to buy back up to 14.99% of the Company's issued share capital; authorise the issue of new shares representing 5% of the present issued share capital; authorise the issue for cash of shares representing up to 5% of the present issued share capital otherwise than by a pro rata issue to existing shareholders (i.e., pre-emption); and to authorise the Board to sell shares held as treasury shares. In respect of the issue of shares from treasury, the Board's policy is kept under review but remains broadly unchanged from last year. The Board would only expect to sell shares from treasury at a maximum discount of 3% to the prevailing diluted NAV at the time of issue. Your Board recommends that shareholders vote in favour of these resolutions, and intends to do so in respect of its own shareholdings.
As at previous AGMs, there will be a presentation by the Managers and an opportunity to meet the Directors over coffee following the AGM.
VAT on Management Fees
It was noted in last year's annual report that HM Revenue & Customs had accepted the European Court of Justice ruling over the charging of VAT on the management fees incurred by UK investment trusts. Since the year end, the Company has agreed with its previous investment manager a repayment due to the Company of £33,251, representing the VAT charged on our management fees during the 12 months ended 31 March 2005 (and this has been reflected as a post-balance sheet event in the financial statements). The Company was not charged VAT after this period as, for the most part, VAT has not been paid by the Company on management fees, because it invests in non-EU securities. However, a non-material amount was paid in prior years, in respect of which the Company has protected its position. In due course, we will be able to recognise further, smaller sums, once there is greater certainty regarding any other VAT and interest recoverable by the former manager from HM Revenue and Customs.
Outlook
Predictions about stock market movements at this stage seem pointless. As we all have witnessed, the world has just suffered the most significant financial collapse in 70 years, which has been met by previously untried policy responses. All forecasts are likely to be misleading in these circumstances.
Within that context, India has elected a more stable governing coalition than anticipated, and is able to grow from its own internal dynamic, being unreliant on overseas demand. The portfolio has been constituted from companies that should be able to grow and that have strong balance sheets and sound management.
William Salomon
Chairman
28 May 2009
2. Manager's Review
Overview
During the review period, the change in diluted net asset value return was -19.7% in sterling terms, compared with a fall in its benchmark, the MSCI India index, of -33.8%. The outperformance came from both stock selection and sector allocation, reflecting the defensiveness of both the companies and industries in which your Company invests. During the period, the rupee appreciated 9.5% against sterling.
At the sector level, the overweight to consumer discretionary and information technology were the biggest contributors. In contrast, the lack of exposure to the energy sector detracted from relative performance.
In terms of stock selection, motorcycle maker Hero Honda was the best performer, with investor sentiment buoyed by the company's upbeat results. Other notable performers were Aventis Pharma and GlaxoSmithKline Pharmaceuticals, which proved defensive despite the weak economic environment.
Conversely, the Company was hurt by its exposure to Satyam Computer Services following the chairman's shocking admission of fraud. We subsequently sold the entire holding at just above Rs42 per share, compared with Rs178 a share the previous day. The chairman's confession was a huge disappointment; we had been long-term shareholders of Satyam, and had visited the company regularly, meeting its management and monitoring its performance, for well over 10 years. While the fund as a whole outperformed its benchmark significantly over the period, the impact of Satyam in isolation was severe. For the year as a whole, the fund's net asset value fell by 18.8p as a direct result of its holding in Satyam. Without Satyam, and assuming that the fund's exposure to the company was distributed pro rata across its other holdings, the net asset value of your Company would have been around 11% higher than it actually was at the end of the year. Official investigations by the authorities are ongoing, but the company's results and financial data had obviously been manipulated. We are in touch with US and Indian legal counsels on possible routes of redress. In light of the chairman's confession, the Securities and Exchange Board of India made it mandatory for promoters to reveal the amount of shares pledged with financiers to improve disclosure levels.
In addition, the lack of exposure to Reliance Industries, a stock that accounts for around 16% of the benchmark, continued to detract from relative performance, albeit to a lesser extent than in the previous period. We have a fundamental and disciplined investment process and remain uncomfortable with Reliance's aggressive expansion into new business activities as well as its lack of transparency.
All told, the year under review stood out as one in which the Indian stockmarket and economy faced extreme volatility and uncertainty. In particular, the global financial crisis deteriorated rapidly following the default by Lehman Brothers in September, resulting in an acute loss of confidence and massive deleveraging. Under these conditions, global markets, including India, came under exceptional pressure. Adding to the strain, the domestic economy faced major macroeconomic challenges - flagging private investment, dwindling capital inflows and waning exports - stemming from the financial turmoil. Nevertheless, India has been relatively resilient compared to its emerging market peers, though local sentiment will continue to be affected by developments in world financial markets.
Despite the current uncertainty, our stock specific, value-oriented investment strategy remains unchanged. Indeed, the current conditions are ones in which our investment style tends to produce good relative results.
Economic News
India began the period on a sound macroeconomic footing. The economy had continued to grow at a fast pace, even as authorities expressed concerns about overheating and the impact of rising commodity prices on domestic inflation, which hit a peak of 12.8% in August. Yet, growth slowed considerably over the period: GDP expanded by 5.3% year-on-year in the fourth quarter of 2008, easing from 8.8% earlier in the year.
The deceleration was precipitated by the financial turbulence and rapid cooling of global economic activity, which affected both capital flows and trade. On the one hand, the crisis prompted foreign institutional investors to reduce their exposure to emerging markets and undermined investment activity in India. On the other hand, the global slowdown, with synchronised recessions in the US, Eurozone and Japan, caused exports to slump, which in turn impacted domestic consumer and business sentiment. As firms scaled back production, job losses multiplied and private consumption declined, further inhibiting growth.
When the severity of the crisis became apparent, the Reserve Bank of India (RBI), led by new governor Duvvuri Subbarao, reversed its tight monetary policy stance that it had adopted earlier to curb accelerating domestic price pressures. Over the period, it lowered the repo rate by four percentage points from 9% to 5%; cut the reserve ratio; and provided banks with additional liquidity support. The RBI also eased access to overseas funds and extended the interest subsidy on export-related loans.
At the same time, the government ramped up its spending programmes, unveiling its first fiscal stimulus package - worth US$4 billion - in December, which increased spending on infrastructure and social security programmes, improved access to credit and reduced the value-added tax. Later, the government, mindful of upcoming elections, announced two more fiscal packages. In all, the stimulus plans amounted to about 1.5% of GDP and brought the overall fiscal deficit to 7.8% of GDP, leading Standard & Poor's to downgrade the country's outlook to negative from stable.
On a more optimistic note, the downturn in India has been somewhat muted. Its low export/GDP ratio - India is unusual for being highly domestic demand-led - shielded it from the worst of the global slowdown. Easing inflationary pressures, together with government cuts on petrol and diesel prices, have also helped lift disposable incomes and reduced pressure on profit margins. Robust consumer demand, particularly in rural areas, may help India's economy avoid a hard landing.
Market View
Indian equities fell markedly over the year under review, in line with other markets in Asia. The losses generally reflected the global financial market turmoil, reduced foreign investor interest and uncertainty about the economic outlook of India.
The stockmarket rose at the start of the period, as technology stocks gained on a weakening rupee and an extension of tax holidays for the sector. But investor confidence soon evaporated on fears that the continued escalation of raw material prices would hurt corporate earnings - the domestic stockmarket was Asia's worst performer in June. Still, share prices rebounded in July, after the government survived a no-confidence vote over the US nuclear deal.
By September, however, market movements became dictated by external events, specifically the collapse of Lehman Brothers and the subsequent spate of bank rescues in the US and Europe. Heightened risk aversion saw substantial portfolio capital outflows, exacerbating the depreciation of the Rupee.
As the financial crisis evolved into a broader global economic slump, weak earnings data and continued deterioration of its export markets exerted further downward pressure on share prices. As well, domestic concerns weighed on sentiment: investors feared that the Satyam financial fraud would threaten future foreign investment flows and that the elections would produce a shaky coalition unable to implement tough economic reforms. Increasing security concerns, particularly the shocking Mumbai terrorist attacks, also rattled markets.
There were intermittent rallies in the equity market, albeit short-lived ones, in December and March, as global and local policy responses to the crisis were viewed positively by investors. However, sentiment remained shaky, and markets continued to overreact to negative news.
Sector Views
Information Technology
We remain major investors in Infosys Technologies which has performed strongly. The company delivered buoyant December-quarter results, as margins remained firm. Separately, it opted to conserve cash, shunning a bidding war with rival HCL Technologies over UK-based Axon Group, a consultancy practice that has a sizeable European base. We took partial profits in the company, following the run-up in its share price.
In comparison, aggressive pricing hurt Tata Consulting Services. We also hold shares in software developer MphasiS, which has gained from the synergy with its parent EDS. Its third-quarter profits more than doubled on the back of higher revenue and improved margins.
In general, valuations of Indian software companies have become more attractive, owing to short-term uncertainty over their client base in the US financial sector. Nevertheless, they have continued to expand and diversify geographically, which should bode well in the longer term. Software and IT services are areas in which India has significant competitive advantage, given low labour costs, excellent English language proficiency and a strong scientific culture.
Energy
The ongoing challenge of providing the public with a reliable, reasonably-priced energy supply remains unfulfilled and politicised. The government increased prices for selected energy products and provided one-off relief to oil marketing companies that have to absorb rising energy prices, but the subsidy burden remains heavy on downstream companies such as Bharat Petroleum and Hindustan Petroleum. As well, the full implementation of the reformist Rangarajan Report - which promotes free-market pricing and supports targeted subsidies for the needy - will depend on the political strength of the new government.
In view of the industry challenges, we took advantage of the recent rallies to complete our divestment of Bharat Petroleum, followed our earlier exit of Oil and Natural Gas Corporation, thereby reducing our energy exposure to nil at 31 March 2009.
Our reluctance to hold index heavyweight Reliance Industries reflects our overriding concern with its ambitious expansion into non-core retail and industrial park activities - areas that, we feel, require extensive capital outlay and in which it does not have a competitive advantage.
Financials
We have a large exposure to the financial sector, as we see the banks playing a pivotal role in providing finance for consumer spending. Our core holdings are ICICI Bank, a leading privately-owned lender whose strength is in the urban retail segment, and Housing Development Finance Corporation (HDFC), the largest and most efficient domestic mortgage company. We also have a holding in Bank of Baroda, the country's second largest lender.
Prior to the global credit crunch, ICICI had raised US$5 billion through an equity placement. However, the lender made additional provisions in September, after disclosing its US$81 million exposure to Lehman Brothers' products. Although its capital adequacy ratio remains high, ICICI Bank has been preserving capital and tidying up its portfolio of overseas investments.
Likewise, HDFC had raised Rs31 billion via a preferential share issue, which it will use to invest in subsidiary HDFC Bank and its fast-growing insurance business. HDFC Bank had raised US$607 million in the ADR market and is currently integrating its acquisition of the Centurion Bank of Punjab, which will add to the lender's distribution and deposit-taking network, allowing it to benefit from economies of scale.
Overall, HDFC, as the more conservative of the two banks, has weathered the liquidity crunch better than ICICI Bank. Its balance sheet and capital base show little sign of stress. As such, we felt it prudent to reduce our exposure to ICICI Bank and use the cash to add to HDFC.
Against this, we sold property giant DLF, in view of funding concerns. The company is focused on strengthening its balance sheet and consolidating its cash flow but we have not seen adequate progress in either reinforcing its capital structure or reducing its inventory.
Consumer Discretionary
The consumer discretionary sector has huge growth potential, due to the country's expanding middle class, rising disposable incomes and relatively low interest rates. However, the automotive sector has been experiencing a fall in demand following a period of unprecedented expansion. Most companies also face tighter margins amid intense competition.
Even so, our biggest holding, Hero Honda, recorded its fifth consecutive quarter of solid growth in December, backed by its extensive distribution strength. We pared our holding in the company, given the strong outperformance.
We also acquired Bosch India during the year, which reiterated its commitment to invest Rs18 billion in its operations and whose parent announced its intention to buy back another 20% of its shares to add to its existing 60% stake. We took advantage of price weakness during the period to add to our position.
On the other hand, we exited fabric manufacturer and designer Himatsingka Seide. The company had increased its gearing as it acquired brands in Europe, built new factories and opened retail stores overseas. We had reservations about its aggressive expansion and were concerned about the financial risks inherent in overexpansion.
Consumer Staples
During the period, we took partial profits from ITC, an associate of British American Tobacco, following its relative outperformance. ITC has a strong core business in tobacco and a diversified portfolio of businesses, which includes packaged food and confectionery products as well as paper, packaging and hotels. ITC plans to establish 15 three-star hotels over the next three years, catering to business and leisure travellers in rural areas, where it already has a presence. It will also invest Rs3 billion to build a new food processing plant to expand its snack food operations. Meanwhile, the company stopped production of non-filtered cigarettes due to steep excise hikes.
We have two other holdings in this fast-moving consumer goods sector: Hindustan Unilever, the locally listed subsidiary of Unilever, which makes and distributes brands such as Lux, Fair & Lovely, Pepsodent and Lifebuoy, and Godrej Consumer Products, a leader in the personal, hair, household and fabric care segments.
Shares in our holdings have remained resilient, notwithstanding the general market weakness. Good December-quarter results bear testimony to the continued strength of their businesses.
Materials
Materials prices, notably those of viscose fibre, have fallen over the past three quarters, with most players now delaying capacity expansion plans.
Grasim Industries, the flagship company of the Birla Group, remains our core holding in this sector. The leading cement group in India and the world's eighth largest in terms of capacity, Grasim is well positioned to benefit from rising housing demand and infrastructure spending. To that end, we took advantage of price weakness to add to our holding.
Our other investments in this sector are ICI India, which produces and markets paints, and Kansai Nerolac Paints, a subsidiary of Japan's Kansai Paint.
Healthcare
We have a particular predisposition towards healthcare, reflecting our belief that India has a strong competitive advantage in the pharmaceutical sector, given its relatively low costs and availability of talented scientists and pharmaceutical experts. Our holdings include a mix of subsidiaries of multinationals (GlaxoSmithKline Pharmaceuticals, Aventis Pharma) that seek to sell to the local market, and domestic companies (Sun Pharmaceutical, Piramal Healthcare (the latter a new purchase during the year)) which leverage off their low-cost manufacturing strengths to penetrate overseas markets.
Sun Pharmaceutical's bid to acquire Israeli generic drug-maker Taro Pharmaceutical remains unresolved, given Taro's promoters' reluctance to proceed with an earlier agreement to sell the company.
Robust earnings continued to underpin the performance of our holdings: GlaxoSmithKline's full-year net earnings grew 10%, while Sun Pharmaceutical's net earnings for the nine months to end-December rose 86%.
Industrials
We hold ABB India and Container Corporation in this sector. ABB is the listed subsidiary of Swiss group Asea Brown Boveri and a beneficiary of the government's infrastructure plan. Its December results showed some signs of the economic slowdown; its order backlog contracted for the first time in over four years. On the upside, however, the company's strong management is committed to investing another US$100 million in its domestic operations. We added to ABB India during the period because of its leading edge technology and solid brand, and felt that its shares had been oversold.
Container Corporation, a near-monopolistic provider of rail freight and logistics, plans to invest Rs6.5-7.0 billion in creating infrastructure capacity.
Utilities
We are overweight this sector, largely due to our holding in Gas Authority of India (GAIL), the country's largest gas distribution company. GAIL has a sound balance sheet and is poised to benefit from the country's growing industrialisation and rising consumption. The company aims to achieve Rs450 billion in revenue by 2011. Not only did GAIL win government approval to lay 5,000km of new pipeline, it also plans to invest Rs5 billion in its gas business, partner Reliance Industries in overseas petrochemical projects, and build a 780km pipeline from Dabhol to Bangalore. We pared our holding GAIL during the period.
We are also investors in Tata Power, a power generator and distributor; and Gujarat Gas, a gas distributor in which British Gas holds a majority stake.
Healthy December-quarter results underscored the resilience of all three holdings.
Telecommunication Services
This growing sector continues to be characterised by fierce competition and a heavy capital expenditure burden. Regulatory changes, however, have allowed industry players to share tower infrastructure and reduce capex requirements.
The feud between the Ambani brothers boiled over after Reliance Industries started arbitration proceedings against spun-off arm Reliance Communications, whose merger talks with South Africa's MTN were then derailed. We do not hold Reliance Communications, preferring to invest in Bharti Airtel, a leading integrated telecom services provider with a dominant nationwide presence. Bharti has maintained impressive growth momentum and benefited from its strategic tie-ups with Singapore Telecommunications (now the largest shareholder) and Vodafone. We are confident that the company's focus on the growing rural segment and competent leadership will help it retain its strong position in the local cellular market.
Strategy
India's stockmarket is likely to remain volatile, with performance affected more by global and regional developments than India-specific news flow. However, the decisiveness of the victory for the Congress Party-led alliance in the recent national elections surprised markets, with Indian equities rising around 17% on 18 May. While the victory means that the support of the Communist Party will not be required to form a government, and thus that a major impediment to tabled reforms has been removed, many challenges lie ahead, not least of them the large budget deficit. Furthermore, the victory does not reflect a call for economic and political reform but for much needed support for the rural poor. Markets may therefore be disappointed with the pace of reform under the new government.
On the economic front, resurgence in growth is contingent on economic recovery elsewhere and revival of consumer and business sentiment in India.
That said, the Indian stock universe remains attractive because of its great stock-picking potential. Despite the Satyam scandal, we believe that our investment approach and due diligence can continue to uncover great investment opportunities.
We remain confident in, but vigilant over, our holdings in the portfolio, which are skewed towards companies with proven managements and solid financial structures, and which are relatively well insulated from extreme margin pressures. As ever, we will continue to aim to identify and invest in high-quality, cash-rich companies that operate in growth industries.
Aberdeen Asset Management Asia Limited
28 May 2009
3. Business Review
A review of the Company's activities is given in the Chairman's Statement and the Manager's Review. This includes a review of the business of the Company and its principal activities and likely future developments of the business.
The major risks associated with the Company are detailed below and in Note 17 to the Financial Statements.
The Board is aware that, apart from those issues it can identify, there are likely to be matters about which it does not or cannot know which may also affect New India Investment Trust.
With that reservation, the Board believes that the factors which could have the most significant adverse impact on shareholders would be likely to include:
- falls in the prices of securities in Indian companies, which may be themselves determined by local and international economic, political and financial factors and management actions
- adverse movements in the exchange rate between sterling and the rupee as well as between other currencies affecting the fortunes of the companies in which we invest
- a lack of skill in New India's investment management team
- factors which affect the discount to net asset value at which the shares of New India trade. These may include the popularity of the investment objective of the company, the popularity of investment trust shares in general and the ease with which the shares and warrants of New India can be traded on the London Stock Exchange
- changes in or breaches of the complicated set of statutory, tax and regulatory rules within which New India seeks to conduct its business, as highlighted by the EU proposals regarding the regulation of Alternative Investment Funds (meaning any fund which is not regulated as a UCITS fund, and which, therefore, includes investment trusts)
- a challenge to the security of the assets of the Company.
Some of these risks can be mitigated or managed to a greater or lesser extent by the actions of the Board in appointing competent managers and custodians. In addition, the Board seeks to put in place, through its contractual arrangements and through various monitoring processes, controls which should avert (but do not guarantee the avoidance of) what might be regarded as operational mistakes. However, investment tends to involve both risk and opportunity regarding future prospects, and we cannot avoid either in our search for returns.
As the market value of the listed shares and warrants in investment companies is determined by demand and supply in the stock market for those shares, the respective market values of the shares and warrants can fluctuate and may not always reflect their respective underlying net asset values. It should be remembered that the respective prices of the shares and warrants and the income from the shares can go down as well as up, and investors may not realise the value of their initial investment. Quoted market prices of the Company's shares are normally approximate and you may not be able to buy or sell your shares at precisely the quoted price.
Investment in the shares and/or warrants may be relatively illiquid. There may be a limited number of shareholders and/or warrantholders and/or market makers and this fact may contribute to infrequent trading on the London Stock Exchange and volatile price movements. In the event of the winding-up of the Company prior to the exercise of subscription rights conferred by the Warrants, warrantholders may receive a payment out of the assets which would otherwise be available for distribution amongst Ordinary shareholders in order to compensate warrantholders for their loss of time value.
The Group's investments are subject to normal market fluctuations and the risks inherent in the purchase, holding or selling of equity securities and related instruments, and there can be no assurance that appreciation will occur. There can be no guarantee that the full value of the Group's investments will be realisable in the event of a sale.
Investment in Indian equities or those of companies that derive significant revenue or profit solely from India involves a greater degree of risk than that usually associated with investment in the securities in major securities markets or a range of emerging markets. The securities that the Group owns may be considered speculative because of this higher degree of risk. Risks include:
- Greater risk of expropriation, confiscation, taxation, nationalisation and social, political and economic instability;
- Certain national policies which may restrict the investment opportunities available in respect of a fund, including restrictions on investing in issuers or industries deemed sensitive to national interests;
- The absence of developed legal structures governing private or foreign investment and private property;
- Currency fluctuations, greater market volatility and high interest rates;
- Changes in taxation laws and/or rates which may affect the value of the Group's investments; and
- Changes in government which may have an adverse effect on economic reform.
4. Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable United Kingdom law and those International Financial Reporting Standards ('IFRS') as adopted by the European Union.
The Directors are required to prepare financial statements for each financial year which present fairly the financial position of the Company and of the Group and the financial performance and cash flows of the Company and of the Group for that period. In preparing those financial statements, the Directors are required to:
- select suitable accounting policies in accordance with IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors', and then apply them consistently;
- present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
- provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and
- state that the Company has complied with IFRS, subject to any material departures disclosed and explained in the financial statements.
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and of the Group and enable them to ensure that the financial statements comply with the Companies Act 1985 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
We confirm that to the best of our knowledge:
- the financial statements, prepared in accordance with the applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and Group; and
- the Directors' Report includes a fair review of the development and performance of the business and the position of the issuer, together with a description of the principal risks and uncertainties that they face.
Sarah Bates
Chairman of the Audit and Management Engagement Committee
28 May 2009
GROUP INCOME STATEMENT
|
|
|
Year ended |
Year ended |
||||
|
|
|
31 March 2009 |
31 March 2008 |
||||
|
|
|
Revenue |
Capital |
|
Revenue |
Capital |
|
|
|
|
return |
return |
Total |
return |
return |
Total |
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Investment income |
3 |
|
|
|
|
|
|
|
Dividend income |
|
1,322 |
- |
1,322 |
1,038 |
- |
1,038 |
|
Interest income |
|
25 |
- |
25 |
35 |
- |
35 |
|
|
|
________ |
__________ |
________ |
________ |
________ |
________ |
|
Total revenue |
|
1,347 |
- |
1,347 |
1,073 |
- |
1,073 |
|
|
|
________ |
__________ |
________ |
________ |
________ |
________ |
|
(Losses)/gains on investments held at fair value through profit or loss |
10(a) |
- |
(19,157) |
(19,157) |
- |
12,320 |
12,320 |
|
Currency losses |
|
- |
(61) |
(61) |
- |
(5) |
(5) |
|
|
|
________ |
__________ |
________ |
________ |
________ |
________ |
|
|
|
1,347 |
(19,218) |
(17,871) |
1,073 |
12,315 |
13,388 |
|
|
|
________ |
__________ |
________ |
________ |
________ |
________ |
|
Expenses |
|
|
|
|
|
|
|
|
Investment management fees |
4 |
(718) |
- |
(718) |
(903) |
- |
(903) |
|
VAT recoverable on investment management fees |
19 |
33 |
- |
33 |
- |
- |
- |
|
Other administrative expenses |
5 |
(563) |
(2) |
(565) |
(548) |
- |
(548) |
|
|
|
________ |
__________ |
________ |
________ |
________ |
________ |
|
Profit/(loss) before tax and finance charges |
|
99 |
(19,220) |
(19,121) |
(378) |
12,315 |
11,937 |
|
|
|
|
|
|
|
|
|
|
Finance costs |
6 |
(6) |
- |
(6) |
- |
- |
- |
|
|
|
________ |
__________ |
________ |
________ |
________ |
________ |
|
Profit/(loss) before tax |
|
93 |
(19,220) |
(19,127) |
(378) |
12,315 |
11,937 |
|
|
|
|
|
|
|
|
|
|
Taxation |
7 |
(8) |
- |
(8) |
(46) |
- |
(46) |
|
|
|
________ |
__________ |
________ |
________ |
________ |
________ |
|
Profit/(loss) for the year |
|
85 |
(19,220) |
(19,135) |
(424) |
12,315 |
11,891 |
|
|
|
________ |
__________ |
________ |
________ |
________ |
________ |
|
Return per Ordinary share (pence) |
9 |
|
|
|
|
|
|
|
Basic |
|
0.18 |
(41.21) |
(41.03) |
(0.89) |
25.74 |
24.85 |
|
|
|
________ |
__________ |
________ |
________ |
________ |
________ |
|
Diluted |
|
0.17 |
(39.18) |
(39.01) |
(0.82) |
23.70 |
22.88 |
|
|
|
________ |
__________ |
________ |
________ |
________ |
________ |
|
|
|
|
|
|
|
|
|
|
The total column of this statement represents the Profit & Loss Account of the Group, prepared in accordance with IFRS. The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations. All income is attributable to the equity holders of New India Investment Trust PLC. There are no minority interests. No operations were acquired or discontinued during the year. The accompanying notes are an integral part of the financial statements. |
|||||||
GROUP AND COMPANY BALANCE SHEET
|
|
|
Group |
Company |
Group |
Company |
|
|
|
As at |
As at |
As at |
As at |
|
|
|
31 March |
31 March |
31 March |
31 March |
|
|
|
2009 |
2009 |
2008 |
2008 |
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
|
Non-current assets |
|
|
|
|
|
|
Investments held at fair value through profit or loss |
10 |
62,215 |
62,874 |
84,826 |
84,776 |
|
|
|
__________ |
__________ |
__________ |
__________ |
|
Current assets |
|
|
|
|
|
|
Cash at bank |
11 |
2,090 |
803 |
772 |
277 |
|
Other receivables |
12 |
190 |
42 |
196 |
24 |
|
|
|
__________ |
__________ |
__________ |
__________ |
|
Total current assets |
|
2,280 |
845 |
968 |
301 |
|
|
|
__________ |
__________ |
__________ |
__________ |
|
Total assets |
|
64,495 |
63,719 |
85,794 |
85,077 |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Bank overdraft |
11 |
(623) |
- |
- |
- |
|
Other payables |
13 |
(219) |
(66) |
(826) |
(109) |
|
|
|
__________ |
__________ |
__________ |
__________ |
|
Total current liabilities |
|
(842) |
(66) |
(826) |
(109) |
|
|
|
__________ |
__________ |
__________ |
__________ |
|
Net assets |
|
63,653 |
63,653 |
84,968 |
84,968 |
|
|
|
__________ |
__________ |
__________ |
__________ |
|
Share capital and reserves |
|
|
|
|
|
|
Ordinary share capital |
14 |
11,577 |
11,577 |
11,966 |
11,966 |
|
Share premium account |
|
11,807 |
11,807 |
11,790 |
11,790 |
|
Special reserve |
|
15,778 |
15,778 |
17,981 |
17,981 |
|
Warrant reserve |
|
4,003 |
4,003 |
4,010 |
4,010 |
|
Warrant exercise reserve |
|
26 |
26 |
19 |
19 |
|
Capital redemption reserve |
|
4,484 |
4,484 |
4,089 |
4,089 |
|
Capital reserve |
15 |
14,844 |
14,840 |
34,064 |
33,904 |
|
Revenue reserve |
|
1,134 |
1,138 |
1,049 |
1,209 |
|
|
|
__________ |
__________ |
__________ |
__________ |
|
Equity shareholders' funds |
|
63,653 |
63,653 |
84,968 |
84,968 |
|
|
|
__________ |
__________ |
__________ |
__________ |
|
Net asset value per Ordinary share (pence): |
16 |
|
|
|
|
|
Basic |
|
137.45 |
137.45 |
177.52 |
177.52 |
|
|
|
__________ |
__________ |
__________ |
__________ |
|
Diluted |
|
129.36 |
129.36 |
161.18 |
161.18 |
|
|
|
__________ |
__________ |
__________ |
__________ |
GROUP STATEMENT OF CHANGES IN EQUITY
|
Year ended 31 March 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
Share |
|
|
Warrant |
Capital |
|
|
|
|
|
Share |
Premium |
Special |
Warrant |
Exercise |
Redemption |
Capital |
Revenue |
|
|
|
Capital |
Account |
Reserve |
Reserve |
Reserve |
Reserve |
Reserve |
Reserve |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 31 March 2008 |
11,966 |
11,790 |
17,981 |
4,010 |
19 |
4,089 |
34,064 |
1,049 |
84,968 |
|
Net loss on ordinary activities after taxation |
- |
- |
- |
- |
- |
- |
(19,220) |
85 |
(19,135) |
|
Issue of share capital upon exercise of warrants |
6 |
17 |
- |
(7) |
7 |
- |
- |
- |
23 |
|
Purchase of own shares |
(395) |
- |
(2,192) |
- |
- |
395 |
- |
- |
(2,192) |
|
Expenses of repurchase |
- |
- |
(11) |
- |
- |
- |
- |
- |
(11) |
|
|
______ |
________ |
________ |
________ |
________ |
________ |
________ |
________ |
________ |
|
Balance at 31 March 2009 |
11,577 |
11,807 |
15,778 |
4,003 |
26 |
4,484 |
14,844 |
1,134 |
63,653 |
|
|
______ |
________ |
________ |
________ |
________ |
________ |
________ |
________ |
________ |
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 31 March 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
Share |
|
|
Warrant |
Capital |
|
|
|
|
|
Share |
premium |
Special |
Warrant |
exercise |
redemption |
Capital |
Revenue |
|
|
|
capital |
account |
reserve |
reserve |
reserve |
reserve |
reserve |
reserve |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 31 March 2007 |
11,960 |
11,773 |
17,981 |
4,017 |
12 |
4,089 |
21,749 |
1,473 |
73,054 |
|
Net profit on ordinary activities after taxation |
- |
- |
- |
- |
- |
- |
12,315 |
(424) |
11,891 |
|
Issue of share capital upon exercise of warrants |
6 |
17 |
- |
(7) |
7 |
- |
- |
- |
23 |
|
|
______ |
________ |
________ |
________ |
________ |
________ |
________ |
________ |
________ |
|
Balance at 31 March 2008 |
11,966 |
11,790 |
17,981 |
4,010 |
19 |
4,089 |
34,064 |
1,049 |
84,968 |
|
|
______ |
________ |
________ |
________ |
________ |
________ |
________ |
________ |
________ |
COMPANY STATEMENT OF CHANGES IN EQUITY
|
Year ended 31 March 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
Share |
|
|
Warrant |
Capital |
|
|
|
|
|
Share |
premium |
Special |
Warrant |
exercise |
redemption |
Capital |
Revenue |
|
|
|
capital |
account |
reserve |
reserve |
reserve |
reserve |
reserve |
reserve |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 31 March 2008 |
11,966 |
11,790 |
17,981 |
4,010 |
19 |
4,089 |
33,904 |
1,209 |
84,968 |
|
Net loss on ordinary activities after taxation |
- |
- |
- |
- |
- |
- |
(19,064) |
(71) |
(19,135) |
|
Issue of share capital upon exercise of warrants |
6 |
17 |
- |
(7) |
7 |
- |
- |
- |
23 |
|
Purchase of own shares |
(395) |
- |
(2,192) |
- |
- |
395 |
- |
- |
(2,192) |
|
Expenses of repurchase |
- |
- |
(11) |
- |
- |
- |
- |
- |
(11) |
|
|
______ |
________ |
________ |
________ |
________ |
________ |
________ |
________ |
________ |
|
Balance at 31 March 2009 |
11,577 |
11,807 |
15,778 |
4,003 |
26 |
4,484 |
14,840 |
1,138 |
63,653 |
|
|
______ |
________ |
________ |
________ |
________ |
________ |
________ |
________ |
________ |
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 31 March 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
Share |
|
|
Warrant |
Capital |
|
|
|
|
|
Share |
Premium |
Special |
Warrant |
Exercise |
Redemption |
Capital |
Revenue |
|
|
|
Capital |
Account |
Reserve |
Reserve |
Reserve |
Reserve |
Reserve |
Reserve |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 31 March 2007 |
11,960 |
11,773 |
17,981 |
4,017 |
12 |
4,089 |
21,910 |
1,312 |
73,054 |
|
Net profit on ordinary activities after taxation |
- |
- |
- |
- |
- |
- |
11,994 |
(103) |
11,891 |
|
Issue of share capital upon exercise of warrants |
6 |
17 |
- |
(7) |
7 |
- |
- |
- |
23 |
|
|
______ |
________ |
________ |
________ |
________ |
________ |
________ |
________ |
________ |
|
Balance at 31 March 2008 |
11,966 |
11,790 |
17,981 |
4,010 |
19 |
4,089 |
33,904 |
1,209 |
84,968 |
|
|
______ |
________ |
________ |
________ |
________ |
________ |
________ |
________ |
________ |
GROUP AND COMPANY CASH FLOW STATEMENTS
|
|
|
Year ended |
Year ended |
||
|
|
|
31 March 2009 |
31 March 2008 |
||
|
|
|
Group |
Company |
Group |
Company |
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
|
Operating activities |
|
|
|
|
|
|
(Loss)/profit before tax |
|
(19,127) |
(19,135) |
11,937 |
11,891 |
|
Losses/(gains) on investments held at fair value through profit or loss |
|
19,157 |
19,042 |
(12,320) |
(11,991) |
|
Net losses on foreign exchange |
|
61 |
20 |
5 |
3 |
|
Net sales/(purchases) of investments held at fair value through profit or loss |
|
3,454 |
2,860 |
(47) |
210 |
|
Decrease in amounts due from brokers |
|
113 |
- |
312 |
- |
|
(Increase)/decrease in other receivables |
|
(95) |
(18) |
187 |
- |
|
(Decrease)/increase in amounts due to brokers |
|
(446) |
- |
117 |
- |
|
(Decrease)/increase in other payables |
|
(135) |
(43) |
63 |
5 |
|
Finance costs |
|
6 |
6 |
- |
- |
|
|
|
____________ |
____________ |
____________ |
____________ |
|
Net cash inflow from operating activities before interest and corporation tax |
|
2,988 |
2,732 |
254 |
118 |
|
|
|
|
|
|
|
|
Corporation tax paid |
|
(46) |
- |
(27) |
- |
|
|
|
____________ |
____________ |
____________ |
____________ |
|
Net cash inflow from operating activities |
|
2,942 |
2,732 |
227 |
118 |
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
Exercise of warrants |
|
23 |
23 |
23 |
23 |
|
Purchase of own shares |
|
(2,203) |
(2,203) |
- |
- |
|
Finance costs |
|
(6) |
(6) |
- |
- |
|
|
|
____________ |
____________ |
____________ |
____________ |
|
Net increase in cash and cash equivalents |
|
756 |
546 |
250 |
141 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at the start of the year |
|
772 |
277 |
527 |
139 |
|
Effect of foreign exchange rate changes |
|
(61) |
(20) |
(5) |
(3) |
|
|
|
____________ |
____________ |
____________ |
____________ |
|
Cash and cash equivalents at the end of the year |
11 |
1,467 |
803 |
772 |
277 |
|
|
|
____________ |
____________ |
____________ |
____________ |
Notes to the Financial Statement:
|
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 and Corporation Taxes Act 1988 ('s842'). |
|
|
|
|
|
The principal activity of its foreign subsidiary is similar in all relevant respects to that of its United Kingdom parent. |
|
2. |
Accounting policies |
||
|
|
The Group and Company's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and in accordance with the provisions of the Companies Act 1985. The principal accounting policies adopted by the Group and by the Company are set out below. The Company has taken advantage of the exemption provided under Section 230 of the Companies Act 1985 not to publish its individual Income Statement and related notes. |
||
|
|
|
||
|
|
(a) |
Basis of preparation |
|
|
|
|
The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 31 March 2009. There are no differences between the accounting policies applied in the Group and the Company. |
|
|
|
|
|
|
|
|
|
The Group and Company financial statements are presented in Sterling, which is the currency of the primary environment in which the Group operates. All values are rounded to the nearest thousand pounds (£'000) except when otherwise indicated. |
|
|
|
|
|
|
|
|
|
Where presentational guidance set out in the Statement of Recommended Practice ('SORP') for investment trusts issued by the Association of Investment Companies ('AIC') in January 2009 is consistent with the requirements of IFRS, the financial statements have been prepared in accordance with the SORP. |
|
|
|
|
|
|
|
|
|
The Company has not adopted any new or amended IFRS and IFRIC interpretations during the year. |
|
|
|
|
|
|
|
|
|
At the date of authorisation of these financial statements, the following Standards and Interpretations were in issue but not yet effective: |
|
|
|
|
- |
Amendment to IAS 1 - Presentation of Financial Statements : comprehensive revision including requiring a statement of comprehensive income (effective for annual periods beginning on or after 1 January 2009) |
|
|
|
- |
Amendment to IAS1 - Presentation of Financial Statements : a Revised Presentation relating to disclosure of puttable instruments and obligations arising on liquidation (effective for annual periods beginning on or after 1 January 2009) |
|
|
|
- |
Amendment to IAS 7 - Statement of Cash Flows (effective for annual periods beginning on or after 1 January 2010) |
|
|
|
- |
Amendment to IAS 23 - Borrowing Costs (effective for annual periods beginning on or after 1 January 2009) |
|
|
|
- |
Amendment to IAS 27 - Consolidated and Separate Financial Statements : consequential amendments arising to IFRS 3 (effective for annual periods beginning on or after 1 July 2009) |
|
|
|
- |
Amendment to IAS 29 - Financial Reporting in Hyperinflationary Economies (effective for annual periods beginning on or after 1 January 2009) |
|
|
|
- |
Amendment to IAS 32 - Financial Instruments (effective for annual periods beginning on or after 1 January 2009) |
|
|
|
- |
Amendment to IAS 36 - Impairment of Assets : amendments resulting from May 2008 Annual Improvements to IFRSs (effective for annual periods beginning on or after 1 January 2009) |
|
|
|
- |
Amendment to IAS 36 - Impairment of Assets : amendments resulting from April 2009 Annual Improvements to IFRSs (effective for annual periods beginning on or after 1 January 2010) |
|
|
|
- |
Amendment to IAS 39 - Financial Instruments : amendments for eligible hedged items (effective for annual periods beginning on or after 1 July 2009) |
|
|
|
- |
Amendment to IAS 39 - Financial Instruments : amendments for embedded derivatives when reclassifying financial instruments (effective for annual periods beginning on or after 30 June 2009) |
|
|
|
- |
Amendment to IAS 39 - Financial Instruments : amendments resulting from April 2009 Annual Improvements to IFRSs (effective for annual periods beginning on or after 1 January 2010) |
|
|
|
- |
Revised IFRS 1 - First-time Adoption of International Financial Reporting Standards (effective for annual periods beginning on or after 1 January 2009) |
|
|
|
- |
Revised IFRS 7 - Financial Instruments (effective for annual periods beginning on or after 1 January 2009) |
|
|
|
- |
IFRS 8 - Operating Segments (effective for annual periods beginning on or after 1 January 2009) |
|
|
|
- |
Revised IFRS 8 - Operating Segments : amendments resulting from April 2009 Annual Improvements to IFRSs (effective for annual periods beginning on or after 1 January 2010) |
|
|
|
|
|
|
|
|
The Directors do not anticipate that the adoption of these Standards and Interpretations in future periods will materially impact the Company's financial results in the period of initial application although there will be revised presentations to the Primary Financial Statements and additional disclosures. The Company intends to adopt the standards in the reporting period when they become effective. |
|
|
|
|
|
|
|
|
(b) |
Group accounts |
|
|
|
|
The Group financial statements consolidate the financial statements of the Company and its subsidiary, New India Investment Company (Mauritius) Limited. |
|
|
|
|
|
|
|
|
|
Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. Control comprises the power to govern the financial and operating policies of the investee so as to obtain benefit from its activities and is achieved through direct or indirect ownership of voting rights, currently exercisable or convertible potential voting rights, or by way of contractual agreement. The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. |
|
|
|
|
|
|
|
|
(c) |
Presentation of Group Income Statement |
|
|
|
|
In order better to reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Group Income Statement between items of revenue and capital nature has been presented alongside the Group Income Statement. In accordance with the Company's status as a UK investment company under Section 833 of the Companies Act 2006, net capital returns may not be distributed by way of dividend. |
|
|
|
|
|
|
|
|
(d) |
Segmental reporting |
|
|
|
|
The Directors are of the opinion that the Group is engaged in a single segment of business, being investment business. |
|
|
|
|
|
|
|
|
(e) |
Income |
|
|
|
|
Dividends receivable on equity shares are recognised in the Group Income Statement on the ex-dividend date. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Group's right to receive payment is established. Where a Group company has elected to receive dividends in the form of additional shares rather than in cash, the amount of the cash dividend is recognised in the Group Income Statement. Provision is made for any dividends not expected to be received. Interest receivable from cash and short-term deposits is accrued to the end of the financial year. |
|
|
|
|
|
|
|
|
(f) |
Expenses and interest payable |
|
|
|
|
All expenses, with the exception of interest expenses, which would be recognised using the effective interest method, are accounted for on an accruals basis. Expenses are charged to the revenue column of the Group Income Statement except as follows: |
|
|
|
|
- |
expenses which are incidental to the acquisition or disposal of an investment are charged to the capital column of the Group Income Statement and separately identified and disclosed in note 10 (c); and |
|
|
|
- |
expenses are charged to the capital column of the Group Income Statement where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. |
|
|
|
|
|
|
|
(g) |
Taxation |
|
|
|
|
The charge for taxation is based on the revenue return for the financial year. |
|
|
|
|
|
|
|
|
|
Deferred tax |
|
|
|
|
Deferred tax is recognised in respect of all temporary differences at the Balance Sheet date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the Balance Sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the temporary differences can be deducted. Deferred tax assets and liabilities are measured at the rates applicable to the legal jurisdictions in which they arise. |
|
|
|
|
|
|
|
|
(h) |
Investments |
|
|
|
|
All investments have been designated upon initial recognition at fair value through profit or loss. This is done because all investments are considered to form part of a group of financial assets which is evaluated on a fair value basis, in accordance with the Group's documented investment strategy, and information about the grouping is provided internally on that basis. Purchases of investments are recognised on a trade date basis and designated upon initial recognition as held at fair value through profit or loss. Sales of assets are also recognised on a trade date basis. Proceeds as measured at fair value, which is regarded as the proceeds of sale less any transaction costs. |
|
|
|
|
|
|
|
|
|
The fair value of the financial instruments is based on their quoted bid price at the Balance Sheet date, without deduction for any estimated future selling costs. Any unquoted investments would be held at fair value, as measured by the Directors using appropriate valuation methodologies such as earnings multiples, recent transactions and net assets. In the case of the Company's investment in the subsidiary, of which the Company owns 100% of its ordinary share capital, this has been measured at fair value, which is deemed to be its net asset value. |
|
|
|
|
|
|
|
|
|
Changes in the value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Group Income Statement as 'Gains/(losses) on investments at fair value through profit or loss'. Also included within this caption are transaction costs in relation to the purchase or sale of investments, including the difference between the purchase price of an investment and its bid price at the date of purchase. |
|
|
|
|
|
|
|
|
(i) |
Cash and cash equivalents |
|
|
|
|
Cash comprises cash in hand and banks and short-term deposits. Cash equivalents are short-term, highly-liquid investments that are readily convertible to known amounts of cash, and that are subject to an insignificant risk of changes in value. |
|
|
|
|
|
|
|
|
(j) |
Other receivables and payables |
|
|
|
|
Other receivables do not carry any interest and are short-term in nature, and are, accordingly, stated at their nominal value. Other payables are non-interest bearing and are stated at their nominal value. |
|
|
|
|
|
|
|
|
(k) |
Dividends payable |
|
|
|
|
Final dividends are recognised from the date on which they are declared and approved by shareholders. |
|
|
|
|
|
|
|
|
(l) |
Foreign currency |
|
|
|
|
Overseas monetary assets and liabilities are converted into Sterling at the rate of exchange ruling at the Balance Sheet date. Transactions during the year involving foreign currencies are converted at the rate of exchange ruling at the transaction date. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss and recognised in the Group Income Statement. |
|
|
|
|
Year ended |
Year ended |
|
|
|
31 March 2009 |
31 March 2008 |
|
3. |
Income |
£'000 |
£'000 |
|
|
Income from investments |
|
|
|
|
Overseas dividends |
1,322 |
1,038 |
|
|
Bond interest |
2 |
- |
|
|
|
__________ |
__________ |
|
|
|
1,324 |
1,038 |
|
|
|
__________ |
__________ |
|
|
Other operating income |
|
|
|
|
Deposit interest |
23 |
35 |
|
|
|
__________ |
__________ |
|
|
Total income |
1,347 |
1,073 |
|
|
|
__________ |
__________ |
|
|
|
Year ended |
Year ended |
|
|
|
31 March 2009 |
31 March 2008 |
|
4. |
Investment management fees |
£'000 |
£'000 |
|
|
Investment management fees |
718 |
903 |
|
|
|
__________ |
__________ |
|
|
|
||
|
|
The Company has an agreement with AAM Asia for the provision of management services. |
||
|
|
|
||
|
|
During the year, the management fee was payable monthly in arrears and was based on an annual amount of 1% of the net asset value of the Group, valued monthly. The agreement is terminable on one year's notice. The balance due to AAM Asia at the year end was £100,000 (2008 - £147,000). All investment management fees are charged 100% to the revenue column of the Income Statement. |
||
|
|
|
||
|
|
There was no performance fee due to the Manager for the year (2008 - £nil). |
||
|
|
|
Year ended |
Year ended |
||||||
|
|
|
31 March 2009 |
31 March 2008 |
||||||
|
5. |
Other administrative expenses - revenue |
£'000 |
£'000 |
||||||
|
|
Directors' fees |
88 |
87 |
||||||
|
|
Marketing contribution |
58 |
58 |
||||||
|
|
Auditors' remuneration |
|
|
||||||
|
|
- |
fees payable to the Group's auditors for the audit of the Group's annual accounts |
25 |
23 |
|||||
|
|
- |
fees payable to the Group's auditors for the audit of the Company's subsidiary annual accounts |
5 |
3 |
|||||
|
|
- |
fees payable to the Group's auditors for the audit of the Group's prior year annual accounts under accrued |
4 |
- |
|||||
|
|
- |
fees payable to the Group's auditors for the audit of the Group's subsidiaries prior year annual accounts under accrued |
1 |
- |
|||||
|
|
- |
fees payable to the Group's auditors and its associates for other services |
|
|
|||||
|
|
- |
tax services |
- |
3 |
|||||
|
|
Legal and advisory fees |
35 |
66 |
||||||
|
|
Custodian and overseas agents' charges |
168 |
210 |
||||||
|
|
Other |
179 |
98 |
||||||
|
|
|
__________ |
__________ |
||||||
|
|
|
563 |
548 |
||||||
|
|
|
__________ |
__________ |
||||||
|
|
Directors' fees include US$7,875 (2008 - US$7,875) paid in respect of the Directors of New India Investment Company (Mauritius) Limited. |
||||||||
|
|
|
||||||||
|
|
Non-audit fees relate to work carried out by Ernst & Young LLP and its international associates on tax compliance (2009 - £nil; 2008 - £3,000). |
||||||||
|
|
|
||||||||
|
|
The Company has an agreement with Aberdeen Asset Management PLC ('AAM PLC') for the provision of marketing services in relation to the Company's participation in the Aberdeen Investment Trust Share Plan and ISA. The total fees paid and payable under the agreement during the year were £58,000 (2008 - £58,000) and no amount was due to AAM PLC at the year end (2008 - £nil). |
||||||||
|
|
|
Year ended |
Year ended |
||||||
|
|
|
31 March 2009 |
31 March 2008 |
||||||
|
|
Other administrative expenses - capital |
£'000 |
£'000 |
||||||
|
|
Issuance fee relating to a bonus issue on holding in Gail (India) GDR |
2 |
- |
||||||
|
|
|
__________ |
__________ |
||||||
|
|
|
Year ended |
Year ended |
|
|
|
31 March 2009 |
31 March 2008 |
|
6. |
Finance costs |
£'000 |
£'000 |
|
|
Bank overdraft interest |
6 |
- |
|
|
|
__________ |
__________ |
|
|
|
|
Year ended |
Year ended |
|
|
|
|
31 March 2009 |
31 March 2008 |
|
7. |
(a) |
Tax on ordinary activities |
£'000 |
£'000 |
|
|
|
Current tax: |
|
|
|
|
|
Overseas taxation |
8 |
46 |
|
|
|
|
__________ |
__________ |
|
|
(b) |
Factors affecting the tax charge for the year |
|
|
|
|
|
The tax charged for the year can be reconciled to the (loss)/profit per the Group Income Statement as follows: |
||
|
|
|
|
|
|
|
|
|
|
Year ended |
Year ended |
|
|
|
|
31 March 2009 |
31 March 2008 |
|
|
|
|
£'000 |
£'000 |
|
|
|
(Loss)/profit before tax |
(19,127) |
11,937 |
|
|
|
|
__________ |
__________ |
|
|
|
Corporation tax on (loss)/profit at the standard rate of 28% (2008 - 30%) |
(5,356) |
3,581 |
|
|
|
Effects of: |
|
|
|
|
|
Losses/(gains) on investments held at fair value through profit or loss not taxable (see note below) |
5,365 |
(3,696) |
|
|
|
Currency losses not taxable |
17 |
- |
|
|
|
Effect on subsidiary of different tax rate levied in another jurisdiction |
(18) |
161 |
|
|
|
|
__________ |
__________ |
|
|
|
Total tax charge |
8 |
46 |
|
|
|
|
__________ |
__________ |
|
|
|
The Company is exempt from corporation tax on capital gains provided it obtains agreement from HM Revenue & Customs that the tests within Section 842 of the Income & Corporation Taxes Act 1988 ('s842') have been met. Under Mauritian taxation laws, no Mauritian capital gains tax is payable on profits arising from the sale of securities. |
||
|
8. |
Dividends on equity shares |
|
|
No final dividend is being proposed for the year ended 31 March 2009 (2008 - £nil) because no distributable profit was generated by the Parent Company. |
|
|
|
|
|
During the year, the subsidiary Company paid a dividend of £135,000 (2008 - £160,000) to the parent Company, and the net amount due to the parent Company at the year end was £nil (2008 - £nil). |
|
9. |
Return per Ordinary share |
|
|
The basic earnings per Ordinary share is based on the net loss after taxation of £19,135,000 (2008 - net profit after taxation of £11,891,000) and on 46,640,119 (2008 - 47,854,303) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year. |
|
|
|
|
|
The calculation of the diluted returns per Ordinary share is carried out in accordance with IAS 33, 'Earnings per Share'. For the purposes of calculating diluted returns per Ordinary share, the number of Ordinary shares is the weighted average used in the basic calculation plus the number of Ordinary shares deemed to be issued for no consideration on exercise of all Warrants by reference to the average share price of the Ordinary shares during the year. The calculations indicate that the exercise of Warrants would result in an increase in the weighted average number of Ordinary shares of 2,417,518 (2008 - 4,098,457), to a total of 49,057,637 (2008 - 51,952,760) Ordinary shares. |
|
|
|
|
|
The basic and diluted earnings per Ordinary share detailed above can be further analysed between revenue return and capital return as follows: |
|
|
|
Year ended |
Year ended |
|||||
|
|
|
31 March 2009 |
31 March 2008 |
|||||
|
|
Basic |
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
|
Net profit/(loss) (£'000) |
85 |
(19,220) |
(19,135) |
(424) |
12,315 |
11,891 |
|
|
|
Weighted average number of Ordinary shares in issue |
|
|
46,640,119 |
|
|
47,854,303 |
|
|
|
Return per Ordinary share (pence) |
0.18 |
(41.21) |
(41.03) |
(0.89) |
25.74 |
24.85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended |
Year ended |
|||||
|
|
|
31 March 2009 |
31 March 2008 |
|||||
|
|
Diluted |
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
|
Net profit/(loss) (£'000) |
85 |
(19,220) |
(19,135) |
(424) |
12,315 |
11,891 |
|
|
|
Weighted average number of Ordinary shares in issue |
|
|
49,057,637 |
|
|
51,952,760 |
|
|
|
Return per Ordinary share (pence) |
0.17 |
(39.18) |
(39.01) |
(0.82) |
23.70 |
22.88 |
|
|
|
|
Year ended |
Year ended |
|||||||||||
|
|
|
31 March 2009 |
31 March 2008 |
|||||||||||
|
10. |
Investments held at fair value through profit or loss |
£'000 |
£'000 |
|||||||||||
|
|
(a) |
Group |
|
|
||||||||||
|
|
|
Opening book cost |
57,850 |
48,050 |
||||||||||
|
|
|
Opening investment holdings fair value gains |
26,976 |
24,409 |
||||||||||
|
|
|
|
__________ |
__________ |
||||||||||
|
|
|
Opening valuation |
84,826 |
72,459 |
||||||||||
|
|
|
Movements in the year: |
|
|
||||||||||
|
|
|
Purchases at cost (see section (c) below) |
12,632 |
16,635 |
||||||||||
|
|
|
Sales |
- |
proceeds |
(16,086) |
(16,588) |
||||||||
|
|
|
|
- |
realised net (losses)/gains |
(3,881) |
9,753 |
||||||||
|
|
|
(Decrease)/increase in investment holdings fair value gains |
(15,276) |
2,567 |
||||||||||
|
|
|
|
__________ |
__________ |
||||||||||
|
|
|
Closing valuation |
62,215 |
84,826 |
||||||||||
|
|
|
|
__________ |
__________ |
||||||||||
|
|
|
|
|
|
||||||||||
|
|
|
|
£'000 |
£'000 |
||||||||||
|
|
|
Closing book cost |
50,515 |
57,850 |
||||||||||
|
|
|
Closing investment holdings fair value gains |
11,700 |
26,976 |
||||||||||
|
|
|
|
__________ |
__________ |
||||||||||
|
|
|
Closing valuation |
62,215 |
84,826 |
||||||||||
|
|
|
|
__________ |
__________ |
||||||||||
|
|
|
|
|
|
||||||||||
|
|
|
(Losses)/gains on held-at-fair-value investments |
£'000 |
£'000 |
||||||||||
|
|
|
Realised (losses)/gains on sales of investments |
(3,881) |
9,753 |
||||||||||
|
|
|
(Decrease)/increase in investment holdings gains |
(15,276) |
2,567 |
||||||||||
|
|
|
|
__________ |
__________ |
||||||||||
|
|
|
|
(19,157) |
12,320 |
||||||||||
|
|
|
|
__________ |
__________ |
||||||||||
|
|
|
|
|
|
||||||||||
|
|
|
|
Year ended 31 March 2009 |
Year ended 31 March 2008 |
||||||||||
|
|
|
|
Investment |
Listed |
|
Investment |
Listed |
|
||||||
|
|
|
|
in subsidiary |
overseas |
Total |
in subsidiary |
overseas |
Total |
||||||
|
|
(b) |
Company |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||||||
|
|
|
Opening book cost |
41,545 |
1,714 |
43,259 |
41,545 |
1,792 |
43,337 |
||||||
|
|
|
Opening investment holdings fair value gains |
39,948 |
1,569 |
41,517 |
29,374 |
284 |
29,658 |
||||||
|
|
|
|
__________ |
_______ |
_______ |
__________ |
_______ |
______ |
||||||
|
|
|
Opening valuation |
81,493 |
3,283 |
84,776 |
70,919 |
2,076 |
72,995 |
||||||
|
|
|
Movements in the year: |
|
|
|
|
|
|
||||||
|
|
|
Purchases |
- |
2,932 |
2,932 |
- |
- |
- |
||||||
|
|
|
Sales |
- |
proceeds |
(3,004) |
(2,788) |
(5,792) |
- |
(210) |
(210) |
||||
|
|
|
|
- |
realised net gains |
2,609 |
311 |
2,920 |
- |
132 |
132 |
||||
|
|
|
(Decrease)/increase in investment holdings fair value gains |
(21,365) |
(597) |
(21,962) |
10,574 |
1,285 |
11,859 |
||||||
|
|
|
|
__________ |
_______ |
_______ |
__________ |
_______ |
______ |
||||||
|
|
|
Closing valuation |
59,733 |
3,141 |
62,874 |
81,493 |
3,283 |
84,776 |
||||||
|
|
|
|
__________ |
_______ |
_______ |
__________ |
_______ |
______ |
||||||
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
Year ended 31 March 2009 |
Year ended 31 March 2008 |
||||||||||
|
|
|
|
Investment |
Listed |
|
Investment |
Listed |
|
||||||
|
|
|
|
in subsidiary |
overseas |
Total |
in subsidiary |
overseas |
Total |
||||||
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||||||
|
|
|
Closing book cost |
41,150 |
2,169 |
43,319 |
41,545 |
1,714 |
43,259 |
||||||
|
|
|
Closing investment holdings fair value gains |
18,583 |
972 |
19,555 |
39,948 |
1,569 |
41,517 |
||||||
|
|
|
|
__________ |
_______ |
_______ |
__________ |
_______ |
______ |
||||||
|
|
|
Closing valuation |
59,733 |
3,141 |
62,874 |
81,493 |
3,283 |
84,776 |
||||||
|
|
|
|
__________ |
_______ |
_______ |
__________ |
_______ |
______ |
||||||
|
|
|
|
||||||||||||
|
|
|
|
As at |
As at |
||||||||||
|
|
|
|
31 March 2009 |
31 March 2008 |
||||||||||
|
|
|
Gains/(losses) on held-at-fair-value investments |
£'000 |
£'000 |
||||||||||
|
|
|
Realised gains on sales of investments |
2,920 |
132 |
||||||||||
|
|
|
(Decrease)/increase in investment holdings gains |
(21,962) |
11,859 |
||||||||||
|
|
|
|
_______________ |
_______________ |
||||||||||
|
|
|
|
(19,042) |
11,991 |
||||||||||
|
|
|
|
_______________ |
_______________ |
||||||||||
|
|
|
|
||||||||||||
|
|
|
The Company owns 100% of the Ordinary share capital of its subsidiary, New India Investment Company (Mauritius) Limited, an investment holding company registered in Mauritius. |
||||||||||||
|
|
|
|
||||||||||||
|
|
|
The investment in the subsidiary is valued at fair value, which is deemed to be its underlying net asset value. |
||||||||||||
|
|
|
|
||||||||||||
|
|
|
All investments are categorised at held at fair value through profit or loss, and were designated as such upon initial recognition. |
||||||||||||
|
|
|
|
||||||||||||
|
|
(c) |
Transaction costs |
||||||||||||
|
|
|
During the year, expenses were incurred in acquiring or disposing of investments classified as fair value though profit or loss. These have been expensed through the capital column of the Income Statement, and are included within gains/(losses) on investments at fair value through profit or loss in the Income Statement. The total costs were as follows: |
||||||||||||
|
|
|
|
||||||||||||
|
|
|
|
Year ended |
Year ended |
||||||||||
|
|
|
|
31 March 2009 |
31 March 2008 |
||||||||||
|
|
|
|
Group |
Company |
Group |
Company |
||||||||
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
||||||||
|
|
|
Purchases |
40 |
3 |
62 |
- |
||||||||
|
|
|
Sales |
51 |
1 |
64 |
- |
||||||||
|
|
|
|
_______________ |
_______________ |
_______________ |
_______________ |
||||||||
|
|
|
|
91 |
4 |
126 |
- |
||||||||
|
|
|
|
_______________ |
_______________ |
_______________ |
_______________ |
||||||||
|
|
|
Group |
Company |
Group |
Company |
|
|
|
2009 |
2009 |
2008 |
2008 |
|
11. |
Cash and cash equivalents |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Cash at bank |
2,090 |
803 |
772 |
277 |
|
|
Bank overdraft |
(623) |
- |
- |
- |
|
|
|
_______________ |
_______________ |
_______________ |
_______________ |
|
|
|
1,467 |
803 |
772 |
277 |
|
|
|
_______________ |
_______________ |
_______________ |
_______________ |
|
|
|
Group |
Company |
Group |
Company |
|
|
|
2009 |
2009 |
2008 |
2008 |
|
12. |
Other receivables |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Amounts due from brokers |
- |
- |
113 |
- |
|
|
Prepayments and accrued income |
145 |
9 |
83 |
24 |
|
|
VAT recoverable on investment management fees |
33 |
33 |
- |
- |
|
|
Current tax recoverable |
12 |
- |
- |
- |
|
|
|
_______________ |
_______________ |
_______________ |
_______________ |
|
|
|
190 |
42 |
196 |
24 |
|
|
|
_______________ |
_______________ |
_______________ |
_______________ |
|
|
|
|
|
|
|
|
|
None of the above amounts are past their due date or impaired. |
||||
|
|
|
Group |
Company |
Group |
Company |
|
|
|
2009 |
2009 |
2008 |
2008 |
|
13. |
Other payables |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Amounts due to brokers |
11 |
- |
457 |
- |
|
|
Other payables |
208 |
66 |
343 |
109 |
|
|
Current tax |
- |
- |
26 |
- |
|
|
|
_______________ |
_______________ |
_______________ |
_______________ |
|
|
|
219 |
66 |
826 |
109 |
|
|
|
_______________ |
_______________ |
_______________ |
_______________ |
|
|
|
2009 |
2008 |
||
|
14. |
Ordinary share capital |
Number |
£'000 |
Number |
£'000 |
|
|
Authorised |
|
|
|
|
|
|
Ordinary shares of 25p each |
200,000,000 |
50,000 |
200,000,000 |
50,000 |
|
|
|
_______________ |
_______________ |
_______________ |
_______________ |
|
|
Issued and fully paid |
|
|
|
|
|
|
Ordinary shares of 25p each : |
|
|
|
|
|
|
Balance brought forward |
47,862,750 |
11,966 |
47,839,850 |
11,960 |
|
|
Warrants exercised during the year |
21,708 |
6 |
22,900 |
6 |
|
|
Purchase of own shares |
(1,575,000) |
(395) |
- |
- |
|
|
|
_______________ |
_______________ |
_______________ |
_______________ |
|
|
Balance carried forward |
46,309,458 |
11,577 |
47,862,750 |
11,966 |
|
|
|
_______________ |
_______________ |
_______________ |
_______________ |
|
|
The Ordinary shares give shareholders the entitlement to all of the capital growth in the Group's assets, and to all the income from the Group that is resolved to be distributed. |
||||
|
|
|
||||
|
|
As at 31 March 2009, there were 12,760,682 Warrants in issue (31 March 2008 - 12,782,390), each Warrant carrying the right to subscribe for one new Ordinary share of 25p in the Company on 31 July 2008 to 2010 inclusive or, if later, the date in any such year 30 days after the date on which copies of the audited accounts of the Company for its then immediately preceding financial year are dispatched to shareholders. |
||||
|
|
|
||||
|
|
During the year, 21,708 (2008 - 22,900) Warrants were exercised at a price of 100p each, creating 21,708 (2008 - 22,900) new Ordinary shares which were issued for a total consideration of £21,708 (2008 - £22,900). As a result of this, £6,810 (2008 - £7,184) was transferred from the Warrant Reserve to the Warrant Exercise Reserve. |
||||
|
|
|
||||
|
|
On 18 June 2008, New India Investment Trust PLC purchased 1,575,000 of its own 25p Ordinary shares at 139 pence per share for cancellation. Following the buy back, there were 46,287,750 Ordinary shares in issue. The share buy-back was financed out of the capital reserve. |
||||
|
|
|
||||
|
|
Ownership of Subsidiary |
||||
|
|
At the year end, the Company's wholly-owned subsidiary, New India Investment Company (Mauritius) Limited ('the subsidiary') had share capital of 4,275,000 Redeemable Participating Preference shares of £0.10 each ('Preference shares') and 50 Management shares of £1 each. The Company holds 100% of the share capital of the subsidiary |
||||
|
|
|
||||
|
|
In January 2005 the subsidiary issued a warrant instrument to the Company, giving the Company the right to purchase up 38,350,900 Preference shares, at an exercise price per share of £20 per share ('the Warrant'). The Warrant is exercisable for 10 years from 14 January 2005. The subsidiary also has the right to purchase the Warrant in part or in whole. |
||||
|
|
|
||||
|
|
Partial redemption of Subsidiary Warrant |
||||
|
|
On 15 May 2008, the subsidiary purchased part of the Warrant, in relation to 405,900 Preference shares, at a valuation based on the subscription price of £20. In aggregate, proceeds of £3,004,000 were received by the Company in the form of a partial capital redemption. These proceeds have been credited to the capital reserve of the Company. |
||||
|
|
|
||||
|
|
As at 31 March 2009, there was one warrant in issue (2008 - 1) carrying the right to subscribe for 37,945,000 (2008 - 38,350,900) new ordinary shares of 10p in the Company at £20 per share |
||||
|
|
|
||||
|
|
Capital management |
||||
|
|
The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders. |
||||
|
|
|
||||
|
|
The capital structure of the Company consists of cash, cash equivalents and equity, comprising issued capital, reserves and retained earnings. |
||||
|
|
|
||||
|
|
The Group's overall strategy remains unchanged from 2008. |
||||
|
|
|
2009 |
2008 |
|
15. |
Capital reserves |
£'000 |
£'000 |
|
|
Group |
|
|
|
|
At 1 April 2008 |
34,064 |
21,749 |
|
|
Currency loss |
(61) |
(5) |
|
|
Movement in investment holdings fair value gains |
(15,276) |
2,567 |
|
|
(Loss)/gain on sales of investments |
(3,881) |
9,753 |
|
|
Issuance fee relating to a bonus issue |
(2) |
- |
|
|
|
_______________ |
_______________ |
|
|
At 31 March 2009 |
14,844 |
34,064 |
|
|
|
_______________ |
_______________ |
|
|
|
|
|
|
|
|
2009 |
2008 |
|
|
Company |
£'000 |
£'000 |
|
|
At 1 April 2008 |
33,904 |
21,910 |
|
|
Currency (loss)/gain |
(20) |
3 |
|
|
Movement in investment holdings fair value gains |
(21,962) |
11,859 |
|
|
Gain on sales of investments |
311 |
132 |
|
|
Gain on redemption of warrant |
2,609 |
- |
|
|
Issuance fee relating to a bonus issue |
(2) |
- |
|
|
|
_______________ |
_______________ |
|
|
At 31 March 2009 |
14,840 |
33,904 |
|
|
|
_______________ |
_______________ |
|
16. |
Net asset value per Ordinary share |
|
|
The basic net asset value per Ordinary share is based on a net asset value of £63,653,000 (2008 - £84,968,000) and on 46,309,458 (2008 - 47,862,750) Ordinary shares, being the number of Ordinary shares in issue at the year end. |
|
|
|
|
|
The diluted net asset value per Ordinary share has been calculated by reference to the total number of Ordinary shares in issue at the year end and on the assumption that those Warrants which are not exercised at the year end, amounting to 12,760,682 (2008 - 12,782,390) Warrants, were exercised on the first day of the financial year at 100p per share, giving a total of 59,070,140 (2008 - 60,645,140) Ordinary shares. |
|
17. |
Financial instruments |
||||||||||||
|
|
The Group's financial instruments comprise securities and other investments, cash balances and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement and debtors for accrued income, short-term debtors and creditors. |
||||||||||||
|
|
|
||||||||||||
|
|
The Manager has a dedicated investment management process, which ensures that the Company's investment policy is followed. Stock selection procedures are in place based on the active portfolio management and identification of stocks. The portfolio is reviewed on a periodic basis by a senior investment manager and also by the Manager's Investment Committee. |
||||||||||||
|
|
|
||||||||||||
|
|
The Manager has an independent Investment Risk department for reviewing the investment risk parameters of the Group's portfolio on a regular basis. The department reports to the Manager's Performance Review Committee which is chaired by the Manager's Chief Investment Officer. The department's responsibility is to review and monitor predicted portfolio risk and style characteristics using best practice, industry standard multi-factor models. |
||||||||||||
|
|
|
||||||||||||
|
|
Additionally, the Manager's Compliance department continually monitors the Group's investment and borrowing powers and reports to the Manager's Risk Management Committee. |
||||||||||||
|
|
|
||||||||||||
|
|
The main risks arising from the Group's financial instruments are: (i) market price risk; (ii) liquidity risk; and (iii) credit risk. |
||||||||||||
|
|
|
||||||||||||
|
|
The Board regularly reviews and agrees policies for managing each of these risks, and these are summarised below. These policies have remained unchanged since the inception of the Group. |
||||||||||||
|
|
|
||||||||||||
|
|
The Board considers that the carrying amount of all disclosed receivables approximates to their fair values. |
||||||||||||
|
|
|
|
|||||||||||
|
|
(i) |
Market price risk |
|||||||||||
|
|
|
The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, foreign currency risk and other price risk. |
|||||||||||
|
|
|
|
|||||||||||
|
|
|
Interest rate risk |
|||||||||||
|
|
|
Interest rate movements may affect the level of income receivable on cash deposits. |
|||||||||||
|
|
|
|
|||||||||||
|
|
|
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions. |
|||||||||||
|
|
|
|
|||||||||||
|
|
|
Financial assets |
|||||||||||
|
|
|
The interest rate risk profile of the Group's financial assets, excluding equity shares which are non-interest bearing and short-term debtors, as at 31 March 2009 and 31 March 2008 was as follows: |
|||||||||||
|
|
|
|
Total |
|
|||||||||
|
|
|
|
(per Balance Sheet) |
Floating rate |
|||||||||
|
|
|
|
2009 |
2008 |
2009 |
2008 |
|||||||
|
|
|
Type |
£'000 |
£'000 |
£'000 |
£'000 |
|||||||
|
|
|
Cash at bank - Sterling |
314 |
465 |
314 |
465 |
|||||||
|
|
|
Cash at bank - US Dollar |
489 |
215 |
489 |
215 |
|||||||
|
|
|
Cash at bank - Indian Rupee |
1,287 |
92 |
1,287 |
92 |
|||||||
|
|
|
|
_______________ |
_______________ |
_______________ |
______________ |
|||||||
|
|
|
Total |
2,090 |
772 |
2,090 |
772 |
|||||||
|
|
|
|
_______________ |
_______________ |
_______________ |
______________ |
|||||||
|
|
|
|
|||||||||||
|
|
|
The floating rate assets consist of cash deposits on call earning interest at prevailing market rates, and are classified as having maturity dates of less than one year. |
|||||||||||
|
|
|
|
|||||||||||
|
|
|
Financial liabilities |
|||||||||||
|
|
|
The interest rate risk profile of the Group's financial liabilities, excluding short-term creditors, as at 31 March 2009 and 31 March 2008 was as follows: |
|||||||||||
|
|
|
|
Total |
|
|||||||||
|
|
|
|
(per Balance Sheet) |
Floating rate |
|||||||||
|
|
|
|
2009 |
2008 |
2009 |
2008 |
|||||||
|
|
|
Type |
£'000 |
£'000 |
£'000 |
£'000 |
|||||||
|
|
|
Bank overdraft - Sterling |
(623) |
- |
(623) |
- |
|||||||
|
|
|
|
_______________ |
_______________ |
_______________ |
______________ |
|||||||
|
|
|
|
|
|
|
|
|||||||
|
|
|
The floating rate liabilities consist of cash overdraft paying interest at prevailing market rates, and are classified as having maturity dates of less than one year. |
|||||||||||
|
|
|
|
|||||||||||
|
|
|
Interest rate sensitivity |
|||||||||||
|
|
|
Movements in interest rates would not significantly affect net assets attributable to the Group's shareholders and total profit. |
|||||||||||
|
|
|
|
|||||||||||
|
|
|
Foreign currency risk |
|||||||||||
|
|
|
The Group's total return and net assets can be significantly affected by currency translation movements as the majority of the Group's assets and income are denominated in currencies other than Sterling, which is the Group's functional currency. It is not the Group's policy to hedge this risk but it reserves the right to do so, to the extent possible. |
|||||||||||
|
|
|
|
|||||||||||
|
|
|
Foreign currency exposure by currency of denomination: |
|||||||||||
|
|
|
|
|||||||||||
|
|
|
|
31 March 2009 |
31 March 2008 |
|||||||||
|
|
|
|
|
Net |
Total |
|
Net |
Total |
|||||
|
|
|
|
Overseas |
monetary |
currency |
Overseas |
monetary |
currency |
|||||
|
|
|
|
investments |
assets |
exposure |
investments |
assets |
exposure |
|||||
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|||||
|
|
|
US Dollar |
3,141 |
489 |
3,630 |
3,283 |
215 |
3,498 |
|||||
|
|
|
Indian Rupee |
59,074 |
1,407 |
60,481 |
81,543 |
(194) |
81,349 |
|||||
|
|
|
|
__________ |
__________ |
__________ |
__________ |
__________ |
_________ |
|||||
|
|
|
|
62,215 |
1,896 |
64,111 |
84,826 |
21 |
84,847 |
|||||
|
|
|
|
__________ |
__________ |
__________ |
__________ |
__________ |
_________ |
|||||
|
|
|
|
|||||||||||
|
|
|
At 31 March 2009, the exchange rate of the Indian Rupee against the reporting currency Sterling was £1: INR 72.721 compared with an exchange rate of £1: INR 79.7385 at 31 March 2008. Based on continuing to hold the same investments in the same quantities from 1 April 2008 to 31 March 2009, all other things being equal, the impact of the exchange rate movement over the year would be to increase the value of the investments by £7,869,000 (2008 - £4,865,000). |
|||||||||||
|
|
|
|
|||||||||||
|
|
|
Foreign currency sensitivity |
|||||||||||
|
|
|
There is no sensitivity analysis included, as the Group's significant foreign currency financial instruments are in the form of equity investments, which have been included within the other price risk sensitivity analysis so as to show the overall level of exposure. |
|||||||||||
|
|
|
|
|||||||||||
|
|
|
Other price risk |
|||||||||||
|
|
|
Other price risks (ie, changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments. |
|||||||||||
|
|
|
|
|||||||||||
|
|
|
It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a sector. Both the allocation of assets and the stock selection process act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. The investments held by the Group are all listed on the Bombay (Mumbai) Stock Exchange and/or The Indian National Stock Exchange, with the exception of the Gail (India) GDR and Grasim Industries GDR whose primary exchanges are London and Luxembourg respectively. |
|||||||||||
|
|
|
|
|||||||||||
|
|
|
Other price risk sensitivity |
|||||||||||
|
|
|
If market prices at the Balance Sheet date had been 25% higher or lower while all other variables remained constant, the return attributable to Ordinary shareholders for the year ended 31 March 2009 would have increased /(decreased) by £15,554,000 (2008 - increased/(decreased) by £21,206,000) and equity reserves would have increased /(decreased) by the same amount. |
|||||||||||
|
|
|
|
|||||||||||
|
|
(ii) |
Liquidity risk |
|||||||||||
|
|
|
This is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities. Liquidity risk is not considered to be significant, as the Group's assets mainly comprise readily realisable securities which can be sold to meet funding requirements, if necessary. |
|||||||||||
|
|
|
|
|||||||||||
|
|
(iii) |
Credit risk |
|||||||||||
|
|
|
This is failure of the counterparty to a transaction to discharge its obligations under that transaction, which could result in the Group suffering a loss. |
|||||||||||
|
|
|
|
|||||||||||
|
|
|
The risk is not significant, and is managed as follows: |
|||||||||||
|
|
|
- |
investment transactions are carried out with a large number of brokers, whose credit standing is reviewed periodically by the Manager, and limits are set on the amount that may be due from any one broker; |
||||||||||
|
|
|
- |
the risk of counterparty exposure due to failed trades causing a loss to the Group is mitigated by the review of failed trade reports on a monthly basis. In addition, the Custodian carries out a stock reconciliation to the Administrators' records on a monthly basis to ensure discrepancies are picked up on a timely basis. The Manager's Compliance department carries out periodic reviews of the Custodian's operations and reports its findings to the Manager's Risk Management Committee. This review will also include checks on the maintenance and security of investments held; |
||||||||||
|
|
|
- |
cash is held only with reputable banks whose credit ratings are monitored on a regular basis. |
||||||||||
|
|
|
|
|||||||||||
|
|
|
None of the Group's financial assets are secured by collateral or other credit enhancements. |
|||||||||||
|
|
|
|
|||||||||||
|
|
|
Fair values of financial assets and financial liabilities |
|||||||||||
|
|
|
Investments held at fair value through profit or loss are valued at their quoted bid prices which equate to their fair values. The Directors are of the opinion that the other financial assets and liabilities are stated at fair value in the Balance Sheet and considered that this is equal to the carrying amount. |
|||||||||||
|
18. |
Capital management policies and procedures |
|||
|
|
The Company's capital management objectives are: |
|||
|
|
- |
to ensure that the Company will be able to continue as a going concern, and |
||
|
|
- |
to maximise the income and capital return to its equity shareholders through an appropriate balance of equity capital and debt. The policy is that debt should not exceed 25% of net assets. |
||
|
|
|
|||
|
|
The Company's capital at 31 March comprised: |
|||
|
|
|
2009 |
2008 |
|
|
|
|
£'000 |
£'000 |
|
|
|
Debt |
|
|
|
|
|
Bank overdraft |
623 |
- |
|
|
|
|
_________ |
_________ |
|
|
|
Equity |
|
|
|
|
|
Equity share capital |
11,577 |
11,966 |
|
|
|
Retained earnings and other reserves |
52,076 |
73,002 |
|
|
|
|
_________ |
_________ |
|
|
|
|
63,653 |
84,968 |
|
|
|
|
_________ |
_________ |
|
|
|
Debt as a % of net assets |
1.0% |
n/a |
|
|
|
|
_________ |
_________ |
|
|
|
|
|||
|
|
The Board, with the assistance of the Manager monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes: |
|||
|
|
- |
the planned level of gearing, which takes account of the Manager's views on the market; |
||
|
|
- |
the need to buy back equity shares for cancellation, which takes account of the difference between the net asset value per share and the share price (ie the level of share price discount or premium); |
||
|
|
- |
the need for new issues of equity shares; and |
||
|
|
- |
the extent to which revenue in excess of that which is required to be distributed should be retained. |
||
|
|
|
|
||
|
|
The Company's objectives, policies and processes for managing capital are unchanged from the preceding accounting period. |
|||
|
|
|
|||
|
|
The Company had no loan gearing at the year end (2008 - nil). |
|||
|
19. |
Post Balance Sheet event |
|
|
On 5 November 2007, the European Court of Justice ruled that management fees on investment trusts should be exempt from VAT. HMRC has announced its intention not to appeal against this ruling to the UK VAT Tribunal and therefore protective claims which have been made in relation to the Company will be processed by HMRC in due course. The Company has not been charged VAT on its investment management fees from 9 December 2004. |
|
|
|
|
|
Since the year end the Company's former Manager, DWS Investment Trust Managers Limited, agreed to refund £33,251 to the Company for VAT charged on investment management fees for the period of their tenure and this has been included in these financial statements. This repayment has been allocated to revenue in line with the accounting policy of the Company for the periods in which the VAT was charged. The reclaim has now been received. |
20. The financial information set out above does not constitute the Company's statutory accounts for the period ended 31 March 2009. The financial information for 2008 is derived from the statutory accounts for 2008, which have been delivered to the Registrar of Companies. The auditors have reported on the 2008 accounts; their report was unqualified and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985. The statutory accounts for 2009 will be finalised on the basis of the financial information presented by the Directors in this annual financial report and will be delivered to the Registrar of Companies in due course.
21. The Annual Report will be posted to shareholders in due course. Further copies may be obtained from the registered office, One Bow Churchyard, Cheapside, London EC4M 9HH, and are on the Company's website, www.newindia-trust.co.uk.
22. The Annual General Meeting will be held at One Bow Churchyard, Cheapside, London EC4M 9HH at 11.00 a.m. on 21 September 2009.
By Order of the Board
Aberdeen Asset Management PLC
Secretaries
28 May 2009
This information is provided by RNS
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