Interim Results

New India Investment Trust PLC 30 November 2007 NEW INDIA INVESTMENT TRUST PLC UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007 CHAIRMAN'S STATEMENT During the six-month period under review to 30 September 2007, Indian equities continued to rise to fresh highs. The period began with the market correcting sharply, as the prospect of a slowing US economy caused shares to tumble globally. However, as far as the Indian market is concerned, that proved short-lived, and the subsequent recovery was swift as investors refocused on domestic issues. A similar rebound in August, following the collapse in US subprime credits, led to a renewed wave of buying, which then gained further impetus after the US Federal Reserve cut interest rates by an unexpected 0.5% in September. During the period, the rupee rose around 7% against sterling, and has risen by about 4% since inception. Our net asset value per Ordinary share rose by 25.1% on an undiluted basis, or by 21.4% on a diluted basis, which in itself is a very satisfactory absolute return. Nevertheless, it is disappointing when compared to the company's benchmark, the MSCI India Index, which rose 39.8% in sterling terms. Since the Company's change of investment policy and the appointment of Aberdeen Asset Management Asia Limited as Manager, on 10 December 2004, our net asset value per Ordinary share has increased by 89.7% on a diluted basis (110.9% on an undiluted basis) compared to the MSCI India Index, which has risen by 164.2%. Shareholders and warrant holders have made substantial gains, and yet there is disappointment that the investment strategy pursued by the Manager, who were appointed by the Board because of their long and successful track record in India, has not been able to match or beat the benchmark. Over both the longer and shorter term, a large part of that underperformance has been, once again, due largely to the trust's lack of exposure to the larger industrial stocks, notably Reliance Industries, India's largest company. The Manager has made the decision not to hold this stock, primarily due to concerns over the group's corporate governance transparency and over-diversification. Not holding Larsen & Toubro - owing to its expensive valuation - also proved costly as the stock benefited from the infrastructure boom in India and the Middle East. Recent AGM At the Annual General Meeting of your Company held on 20 September 2007, all resolutions were passed by shareholders. However, a large shareholder voted some 3.9 million shares, representing 13% of those votes cast, against the continuation resolution. The Board is aware that certain shareholders are dissatisfied with the Company's relative performance, particularly when compared to the Index. However, the recent market has been driven by high-growth companies in a rapidly expanding market, which are trading on extremely high price/earnings multiples. The Manager's investment team consistently seek out companies with strong fundamentals that will enhance share prices over the longer term. Strong balance sheets, cash generation, evidence of growing dividend streams and effective corporate governance are all important to the investment strategy, that the Manager believes will lead to long-term outperformance. The Board is very aware of the recent levels of underperformance, and of their responsibility to look after shareholders' interests. Ultimately, we are guided by the views of shareholders. Nevertheless, extreme care is required before implementing a style shift at the wrong point in the cycle. Consequently, the Board is monitoring the performance of the Manager and the market. Portfolio Activity The portfolio is focused on well-run, more visible growth companies across a range of industries. A characteristic of many holdings is their balance sheet discipline, acquired in leaner times. During the period under review, new additions included DLF, the largest private real estate developer with a nationwide land bank. Your Manager also continued to build on the holdings in consumer stocks, Hindustan Unilever and ITC. In addition, the position in Himatsingka Seide was topped up, along with IT companies, Infosys and Tata Consultancy Services. The IT sector is the largest domestic exporter of products and services and, as one of the least regulated areas, continues to improve productivity, although it has underperformed recently. The Manager views currency strength as a temporary obstacle. Lastly, the Manager top-sliced holdings in HDFC and ICICI Bank after their strong share price performance. Outlook Although global economic growth is expected to slow marginally in the year ahead, India's boom shows no signs of deteriorating. The country remains relatively insulated from the global economy, with foreign trade accounting for only a modest proportion of GDP. This protection has been uppermost in foreign investors' minds following the subprime collapse. Indian banks have almost no exposure to securitisation in any form, with the RBI making it unattractive from an accounting standpoint. The vast inflow of liquidity has buoyed companies with exposure to the domestic market, such as banks, logistics, hospitality and energy, eclipsing those in information technology, outsourcing and export sectors. Stocks remain extremely sensitive to a change in foreign investor sentiment; and today's liquidity conditions are exceptional. Should risk aversion return, for whatever reason, the stock market would surely turn more volatile. Thus how much one pays for growth is now critical. Your portfolio is conservatively managed as a matter of style, being focused on company fundamentals. The market is not cheap, trading on a price/earnings multiple of 24.3 times 2007 earnings, compared to the current price/earnings ratio for the portfolio of 22.8 times. At this juncture, the Manager continues to focus on the longer-term structural opportunity. VAT on management fees It now seems likely, following the European Court of Justice ruling in the case brought by JP Morgan Claverhouse Investment Trust against HMRC, that we may be able to recover part of the VAT paid on management fees to the Company's previous investment manager. (No VAT on management fees has been paid to the current Manager.) We are taking appropriate steps to protect the Company's position. Risks and Uncertainties The Board has identified a number of key risks that affect its business: Market risk: The Company is exposed to the effect of variations in share prices due to the nature of its business. Investment in a single emerging economy, such as India, involves a greater degree of risk than that usually associated with investment in the major securities markets. These include a greater risk of social, political and economic instability, including changes in government or government policy, which may restrict investment opportunities and have an adverse effect on economic reform. Changes in legal, regulatory and accounting policies can also affect the value of the Company's investments. Lower volumes of trading in certain securities of emerging markets may result in lack of liquidity and price volatility. In addition, currency fluctuations and high interest rates may affect the value of the Company's investments and the income derived from them. Investment risk: Both buying and selling either the shares or warrants in the Company may be difficult because of relatively restricted liquidity, and the prices of both may be volatile. If the Company were to be wound up 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. Regulatory risk: The Company, or the Company's shareholders, could be adversely affected by changes in the many rules and regulations within which the Company seeks to operate. These include, among other aspects, changes in taxation rules and policy, governmental policies, and companies and securities regulation. DIRECTORS' RESPONSIBILITY STATEMENT The Directors are responsible for preparing the half-yearly financial report, in accordance with applicable law and regulations. The Directors confirm that, to the best of their knowledge: - the condensed set of financial statements within the half-yearly financial report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting'; and - the Interim Management Report includes a fair review of the information required by 4.2.7R (indication of important events during the first six months of the year) and 4.2.8R (disclosure of related party transactions and changes therein) of the FSA's Disclosure and Transparency Rules. The half-yearly financial report for the six months to 30 September 2007 comprises the Interim Management Report in the form of the Chairman's Statement, the Directors' Responsibility Statement and a condensed set of financial statements, and has not been audited or reviewed by the auditors pursuant to the APG guidance on Review of Interim Financial Information. William Salomon Chairman 30 November 2007 GROUP INCOME STATEMENT Six months ended Six months ended 30 September 2007 30 September 2006 unaudited unaudited Revenue Capital Total Revenue Capital Total return return return return return return £'000 £'000 £'000 £'000 £'000 £'000 Investment income Dividend income 778 - 778 665 - 665 Interest income 18 - 18 10 - 10 ________ ________ ________ ________ _______ _______ Total revenue 796 - 796 675 - 675 Gains/(losses) on held-at-fair-value - 18,299 18,299 - (5,655) (5,655) investments Currency (losses)/gains - (10) (10) - (2) (2) ________ ________ ________ ________ _______ _______ 796 18,289 19,085 675 (5,657) (4,982) ________ ________ ________ ________ _______ _______ Expenses Management fees (425) - (425) (321) - (321) Other operating expenses (237) - (237) (230) - (230) ________ ________ ________ ________ _______ _______ Profit before taxation 134 18,289 18,423 124 (5,657) (5,533) Taxation (37) - (37) (6) - (6) ________ ________ ________ ________ _______ _______ Profit/(loss) for the period 97 18,289 18,386 118 (5,657) (5,539) ________ ________ ________ ________ _______ _______ Earnings/(loss) per Ordinary share (pence): Basic 0.20 38.22 38.42 0.25 (11.83) (11.58) ________ ________ ________ ________ _______ _______ Diluted 0.19 35.49 35.68 0.25 (11.83) (11.58) ________ ________ ________ ________ _______ _______ The total column of this statement represents the Income Statement of the Group, prepared in accordance with International Financial Reporting Standards ('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. GROUP INCOME STATEMENT (Cont'd) Year ended 31 March 2007 audited Revenue Capital Total return return return £'000 £'000 £'000 Investment income Dividend income 1,191 - 1,191 Interest income 21 - 21 ________ ________ ________ Total revenue 1,212 - 1,212 Gains/(losses) on held-at-fair-value investments - (2,781) (2,781) Currency (losses)/gains - 8 8 ________ ________ ________ 1,212 (2,773) (1,561) Expenses Management fees (689) - (689) Other operating expenses (496) - (496) ________ ________ ________ Profit before taxation 27 (2,773) (2,746) Taxation (6) - (6) ________ ________ ________ Profit/(loss) for the period 21 (2,773) (2,752) Earnings/(loss) per Ordinary share (pence): Basic 0.04 (5.79) (5.75) ________ ________ ________ Diluted 0.04 (5.79) (5.75) ________ ________ ________ The total column of this statement represents the Income Statement of the Group, prepared in accordance with International Financial Reporting Standards ('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. GROUP BALANCE SHEET As at As at As at 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Non-current assets Investments held at fair value through profit or loss 91,296 70,022 72,459 ________ ________ ________ Current assets Cash and cash equivalents 311 390 527 Other receivables 168 143 695 ________ ________ ________ Total current assets 479 533 1,222 ________ ________ ________ Total assets 91,775 70,555 73,681 Current liabilities Other payables (313) (288) (627) ________ ________ ________ Net assets 91,462 70,267 73,054 ________ ________ ________ Capital and reserves Ordinary share capital 11,965 11,960 11,960 Share premium account 11,790 11,773 11,773 Special reserve 17,981 17,981 17,981 Warrant reserve 4,010 4,017 4,017 Warrant exercise reserve 19 12 12 Capital redemption reserve 4,089 4,089 4,089 Capital reserve 40,038 18,865 21,749 Revenue reserve 1,570 1,570 1,473 91,462 70,267 73,054 Net asset value per Ordinary share (pence) Basic 191.09 146.88 152.71 Diluted 171.89 136.98 141.58 GROUP STATEMENT OF CHANGES IN EQUITY Six months ended 30 September 2007 (unaudited) Share Warrant Capital Share premium Special Warrant exercise redemption Revenue Retained Capital capital account reserve reserve reserve reserve reserve reserve earnings Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 March 11,960 11,773 17,981 4,017 12 4,089 21,749 1,473 - 73,054 2007 Net profit on ordinary - - - - - - - - 18,386 18,386 activities after taxation Issue of share capital 5 17 - (7) 7 - - - - 22 upon exercise of Warrants Transfer to capital - - - - - - 18,289 - (18,289) - reserve from retained earnings Transfer from retained - - - - - - - 97 (97) - earnings to revenue reserve _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ Balance at 30 Sept 11,965 11,790 17,981 4,010 19 4,089 40,038 1,570 - 91,462 2007 _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ Six months ended 30 September 2006 (unaudited) Share Warrant Capital Share premium Special Warrant exercise redemption Capital Revenue Retained capital account reserve reserve reserve reserve reserve reserve earnings Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 March 11,958 11,766 17,981 4,020 9 4,089 24,522 1,452 - 75,797 2006 Net loss on ordinary - - - - - - - - (5,539) (5,539) activities after taxation Issue of share capital 2 7 - (3) 3 - - - - 9 upon exercise of Warrants Transfer from capital - - - - - - - 5,657 - reserve to retained (5,657) earnings Transfer from retained - - - - - - - 118 (118) - earnings to revenue reserve _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ Balance at 30 Sept 11,960 11,773 17,981 4,017 12 4,089 18,865 1,570 - 70,267 2006 _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ Year ended 31 March 2007 (audited) Share Warrant Capital Share premium Special Warrant exercise redemption Capital Revenue Retained capital account reserve reserve reserve reserve reserve reserve earnings Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 March 11,958 11,766 17,981 4,020 9 4,089 24,522 1,452 - 75,797 2006 Net loss on ordinary - - - - - - - - (2,752) (2,752) activities after taxation Issue of share capital 2 7 - (3) 3 - - - - upon exercise of Warrants 9 Transfer from capital - - - - - - (2,773) - 2,773 - reserve to retained earnings Transfer from retained - - - - - - - 21 (21) - earnings to revenue reserve _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ Balance at 31 March 11,960 11,773 17,981 4,017 12 4,089 21,749 1,473 - 73,054 2007 _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ GROUP CASH FLOW STATEMENT Six months Six months ended Year ended ended 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Net cash (outflow)/inflow from operating activities before interest (202) (5) 123 and corporation tax Corporation tax paid (26) (4) (5) _________ _________ _________ Net cash (outflow)/inflow from operating activities (228) (9) 118 Financing activities Exercise of Warrants 22 9 9 Dividends paid - - - _________ _________ _________ Net cash inflow from financing activities 22 9 9 _________ _________ _________ Net (decrease)/increase in cash and cash equivalents (206) - 127 Effect of foreign exchange rate changes (10) (2) 8 _________ _________ _________ Change in cash and cash equivalents (216) (2) 135 Cash and cash equivalents at the start of the period 527 392 392 _________ _________ _________ Cash and cash equivalents at the end of the period 311 390 527 _________ _________ _________ Notes to the Interim Report 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. 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's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) 34 - 'Interim Financial Reporting', as adopted by the International Accounting Standards Board (IASB), and interpretations issued by the International Reporting Interpretations Committee of the IASB (IFRIC). They have also been prepared using the same accounting policies applied for the year ended 31 March 2007 financial statements, which received an unqualified audit report. (a) Basis of preparation The Group's interim 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') and revised in December 2005 is consistent with the requirements of IFRS, the financial statements have been prepared in accordance with the SORP. (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 a 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 266 of the Companies Act 1985, 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 as income. 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 period. (f) Expenses and interest payable All expenses, including interest expenses, 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 6; 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 profit for the financial period. Deferred tax Deferred tax is recognised in respect of all temporary differences at the balance sheet, 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 designated as held at fair value through profit or loss 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. 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 '(Losses)/gains on investments'. 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) Dividend 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 period 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. 3. Return per Ordinary share The basic earnings per Ordinary share are based on the net profit after taxation of £18,386,000 (30 September 2006 - net loss of £5,539,000; 31 March 2007- net loss of £2,752,000), and on 47,845,857 (30 September 2006 - 47,833,416; 31 March 2007 - 47,836,624) Ordinary shares, being the weighted average number of Ordinary shares in issue during the period. The diluted earnings per Ordinary share are based on the net profit after taxation of £18,386,000 (30 September 2006 - net loss of £5,539,000; 31 March 2007- net loss of £2,752,000), and on 51,534,682 (30 September 2006 - 50,035,887; 31 March 2007- 50,676,648) Ordinary shares, being the weighted average number of Ordinary shares in issue during the period calculated in accordance with IAS 33. The basic and diluted earnings per Ordinary share detailed above can be further analysed between revenue and capital as follows: Six months ended 30 September Six months ended Year ended 2007 30 September 2006 31 March 2007 Basic Revenue Capital Total Revenue Capital Total Revenue Capital Total Net profit/(loss) 97 18,289 18,386 118 (5,657) (5,539) 21 (2,773) (2,752) (£'000) Weighted average 47,845,857 7,833,416 47,836,624 number of Ordinary shares in issue Return per Ordinary 0.20 38.22 38.42 0.25 (11.83) (11.58) 0.04 (5.79) (5.75) share (pence)(A) Six months ended 30 September Six months ended Year ended 2007 30 September 2006 31 March 2007 Diluted Revenue Capital Total Revenue Capital Total Revenue Capital Total Net profit/(loss) 97 18,289 18,386 118 (5,657) (5,539) 21 (2,773) (2,752) (£'000) Weighted average 51,534,682 50,035,887 50,676,648 number of Ordinary shares in issue Return per Ordinary 0.19 35.49 35.68 0.25 (11.83) (11.58) 0.04 (5.79) (5.75) share (pence)(A) (A) The basic and diluted return per share for the six month period ended 30 September 2006 and year ended 31 March 2007 are the same as the exercising of warrants would have resulted in an anti-dilutive effect. 4. Dividends on equity shares No interim dividend has been declared in respect of either the six months ended 30 September 2007 or 30 September 2006, nor in respect of the year ended 31 March 2007. 5. Net asset value per Ordinary share The basic net asset value per Ordinary share is based on a net asset value of £91,462,000 (30 September 2006 - £70,267,000; 31 March 2007 - £73,054,000) and on 47,862,750 (30 September 2006 and 31 March 2007- 47,839,850) Ordinary shares, being the number of Ordinary shares in issue at the period 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 period end and on the assumption that those Warrants which are not exercised at the period end, amounting to 12,782,390 Warrants as at 30 September 2007 (30 September 2006 and 31 March 2007 - 12,805,290), were exercised on the first day of the financial period at 100p per share, giving a total of 60,645,140 Ordinary shares (30 September 2006 and 31 March 2007 - 60,645,140). 6. Transaction costs During the period expenses were incurred in acquiring or disposing of investments classified as fair value though profit or loss. These have been expensed through capital and are included within gains/(losses) on investments in the Group Income Statement. The total costs were as follows: Six months ended Six months ended Year ended 30 September 2007 30 September 2006 31 March 2007 £'000 £'000 £'000 Purchases 11 14 29 Sales 12 15 35 _________ _________ _________ 23 29 64 As at As at As at 30 September 2007 30 September 2006 31 March 2007 7. Analysis of Group capital reserve £'000 £'000 £'000 Capital reserve - realised (952) (4,807) (2,660) Capital reserve - unrealised 40,990 23,672 24,409 _________ _________ _________ 40,038 18,865 21,749 8. Publication of non-statutory accounts The financial information contained in this half-yearly financial report does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The financial information for the six months ended 30 September 2007 and 30 September 2006 have not been audited. The information for the year ended 31 March 2007 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under Section 237 (2) or (3) of the Companies Act 1985. 9. The half-yearly financial report is available on the Company's website, www.newindia-trust.co.uk. The Interim Report will be posted to shareholders in December 2007, and copies will be available from the Secretaries. Aberdeen Asset Management PLC Secretaries 30 November 2007 This information is provided by RNS The company news service from the London Stock Exchange

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