Interim Results
New India Investment Trust PLC
09 November 2005
NEW INDIA INVESTMENT TRUST PLC
UNAUDITED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 AUGUST 2005
CHAIRMAN'S STATEMENT
In absolute terms, growth during the period has been strong with the net asset
value ('NAV') of the Group increasing by 18.14% from 93.70p (restated)
(undiluted) on 28 February 2005 to 110.70p (diluted) on 31 August 2005. During
the period the share price rose by 16.45% from 94.25p to 109.75p and on 31
August 2005 the shares were trading at a slight discount to diluted NAV of 0.8%.
However, in relative terms, the Group lagged its benchmark, the MSCI India
Index (sterling adjusted) which rose by 21.41% in the six month period.
After the strong stock market rally during the second half of 2004, the Indian
stock market corrected in early 2005 and saw profit-taking followed by a
subsequent sharp rise which was characterised by a certain amount of short term
speculative activity and possibly over exuberance. Your Board has great
confidence that the Manager has created a portfolio of companies which have
fundamental strengths and qualities consistent with his long term investment
philosophy.
In accordance with the Company's stated investment objective, the Board is not
proposing to pay an interim dividend in respect of the period ending 31 March
2006. Instead the Directors will review the Company's net income post 31 March
2006 and will consider recommending to shareholders the payment of a final
dividend if it is justified by the revenue earned.
Portfolio activity
Over the six months, your Manager introduced Infosys Technologies to the
portfolio and took advantage of the weak share price to build a holding in that
company. This Indian software engineering giant has consistently been one of
the leaders in the field with a strong management team, a consistent earnings
record and a strong balance sheet. Its quarterly results continued to
demonstrate the company's strengths. Your Manager also reduced GlaxoSmithKline
India and Nicholas Piramal, two of the Group's holdings in the pharmaceutical
sector, following strong share price surges and resultant expensive valuations.
The Group's exposure to ABB and Satyam Computer Services was reduced on the back
of expensive valuations. Satyam Computer Services had rallied strongly and the
position was sold down to approximately 10% of the group's portfolio value.
However, Satyam Computer Services remains the Group's largest holding. The
proceeds from these sales were used to build up selective positions in Motor
Industries and ICICI Bank at reasonable levels.
Major contributors to the increase in NAV from 93.70p (restated undiluted) to
110.70p (diluted) included Satyam Computers 3.23p, ICICI 2.4p, Hero Honda 2.19p
and Housing Development Finance 1.77p.
International Accounting Standards
The group has adopted International Financial Reporting Standards ('IFRS') in
respect of the six months ended 31 August 2005. Figures for the six months
ended 31 August 2004 and the year ended 28 February 2005 have been restated
accordingly. The main changes have been presentational, although shareholders
should note that the investment portfolio is now valued by reference to bid
prices and dividends declared by your Company after the balance sheet date are
now shown in the payment period rather than in the reporting period. Further
details of the changes are provided in the notes that accompany the financial
statements.
During the period, the Group changed its accounting reference date from 28
February to 31 March in order to align the Group's year end more conveniently
with quarter ends for reporting purposes. Accordingly the current accounting
reference period for the group will be thirteen months long and will end on 31
March 2006.
Gearing
The group is currently ungeared. As indicated in the reorganisation circular of
November 2004, the Directors' policy is to allow borrowings of up to 25% of the
group's net assets in order to gear the group's returns. The Directors are
currently negotiating a new bank facility and will consider utilising it when
the Manager believes that it is in shareholders' interests to do so. The Board
is responsible for the gearing policy of the group and will review any future
gearing levels with the Manager on a regular basis.
Outlook
The Indian economy's growth dynamics are still strong: production and
consumption are driving underlying activity and services and manufacturing
sectors are taking an increasing share with a corresponding decrease in
agriculture. The Reserve Bank of India expects the economy to grow by 7% for
the full 2006 financial year, while inflation is projected at 5%. However,
after the recent strong run in share prices, valuations are no longer cheap. In
this environment, finding good quality companies will be even more important in
the coming 12 months. There are great stock-picking opportunities with a large
pool of listed companies, hidden domestic stories and poor coverage from
independent research. India has an abundance of strong management teams that
are competing globally and is still 'under-owned' relative to East Asia's more
established markets. As a result your Board shares the Manager's view that the
long term outlook for India remains positive.
William Salomon
Chairman
9 November 2005
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
Six months ended Six months ended
31 August 2005 31 August 2004
(restated)
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment income
Interest income 11 - 11 17 - 17
Dividend income 729 - 729 790 - 790
Stock dividends - - - 106 - 106
Gains on held-at-fair-value investments - 9,620 9,620 - (787) (787)
Currency losses - (11) (11) - - -
Total revenue 740 9,609 10,349 913 (787) 126
Expenses
Management fees (244) - (244) (158) - (158)
Transaction costs on fair value through
profit or loss assets - (21) (21) - (25) (25)
Other operating expenses (244) - (244) (172) - (172)
Total expenses (488) (21) (509) (330) (25) (355)
Profit before finance costs and 252 9,588 9,840 583 (812) (229)
taxation
Finance costs (1) - (1) (24) - (24)
Profit before taxation 251 9,588 9,839 559 (812) (253)
Taxation - - - (143) - (143)
Profit for the period 251 9,588 9,839 416 (812) (396)
Earnings per Ordinary share (pence):
Basic and diluted 20.57 (0.83)
The total column of this statement represents the Income Statement of the Group,
prepared in accordance with IFRS. The revenue and capital columns are
supplementary to this and are prepared under guidance published by the
Association of Investment Trust Companies.
The final dividend of 0.70p in respect of the year ended 28 February 2005 was
declared on 7 June 2005 and paid on 15 July 2005. Under IFRS dividends are not
recognised until they are paid. Previously dividends were recognised in the
period to which they related. Consequently the dividend is not reflected in the
Income Statement for the six months ended 31 August 2005, however it can be
found in the Statement of Changes in Equity.
All items in the above statement derive from continuing operations.
The figures for the period ended 31 August 2004 have been restated from the
Statement of Total Return
CONSOLIDATED BALANCE SHEET
At At At
31 August 31 August 28 February
2005 2004 2005
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
(restated) (restated)
Non-current assets
Investments designated as 54,273 39,265 42,754
held-at-fair-value
Current assets
Cash and cash equivalents 195 730 2,425
Other receivables 253 331 76
Total current assets 448 1,061 2,501
Total assets 54,721 40,326 45,255
Current liabilities
Other payables (398) (350) (455)
Total assets less current 54,323 39,976 44,800
liabilities
Non-current liabilities
Provision for deferred tax - (14) -
Net assets 54,323 39,962 44,800
Capital and reserves
Called up share capital 6 11,958 11,953 11,953
Share premium account 6 11,766 11,752 11,752
Special reserve 6 17,981 17,981 17,981
Warrant reserve 6 4,020 4,026 4,026
Warrant exercise reserve 6 9 3 3
Capital redemption reserve 6 4,089 4,089 4,089
Capital reserve 6 2,785 (11,656) (6,803)
Retained earnings 6 1,715 1,814 1,799
Equity Shareholders' funds 54,323 39,962 44,800
Net asset value per Ordinary share
(pence) 4
Basic 113.57 83.58 93.70
Diluted 110.70 n/a n/a
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
Six months ended 31 August 2005
Warrant Capital
Share Share Special Warrant exercise redemption Capital Retained
capital premium reserve reserve reserve reserve reserve earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 28 February 2005 11,953 11,752 17,981 4,026 3 4,089 (6,803) 1,799 44,800
(restated)
Dividends paid and declared - - - - - - - (335) (335)
Net profit on ordinary - - - - - - - 9,839 9,839
activities after taxation
Issue of share capital upon 5 14 - (6) 6 - - - 19
exercise of warrants
Transfer from retained - - - - - - 9,588 (9,588) -
earnings to capital reserve
Balance at 31 August 2005 11,958 11,766 17,981 4,020 9 4,089 2,785 1,715 54,323
Six months ended 31 August 2004
Warrant Capital
Share Share Special Warrant exercise redemption Capital Retained
capital premium reserve reserve reserve reserve reserve earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 29 February 2004 11,953 11,752 17,981 4,026 3 4,089 (10,844) 1,733 40,693
(restated)
Dividends paid and declared - - - - - - - (335) (335)
Net profit on ordinary - - - - - - - (396) (396)
activities after taxation
Transfer from retained - - - - - - (812) 812 -
earnings to capital reserve
Balance at 31 August 2004 11,953 11,752 17,981 4,026 0 3 4,089 (11,656) 1,814 39,962
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
Six months ended Six months ended
31 August 2005 31 August 2004
(restated)
£'000 £'000 £'000 £'000
Net cash inflow from operating activities 143 511
Cash flows from investing activities
Purchases of investments (4,448) (11,077)
Sales of investments 2,402 17,643
Net cash (outflow)/inflow from investing activities (2,046) 6,566
Cash flows from financing activities
Issue of share capital 19 -
Repayment of bank loan - (6,998)
Dividends paid on Ordinary Shares (335) (335)
Net cash outflow from financing activities (316) (7,333)
Net decrease in cash and cash equivalents (2,219) (256)
Cash and cash equivalents at the start of the period 2,425 739
Effect of foreign exchange rate changes (11) 247
Cash and cash equivalents at the period end 195 730
NOTES TO THE FINANCIAL STATEMENTS:
The interim financial statements of the New India Investment Trust PLC, and its
subsidiary (the Group) for the six months ended 31 August 2005 have been
prepared on the basis of all International Financial Reporting Standards (IFRSs)
and Standard Interpretations Committee (SIC) and International Financial
Reporting Interpretations Committee (IFRIC) interpretations issued by the
International Accounting Standards Board (IASB) effective for the Group's
reporting for the year ending 31 March 2006, on the assumption that they will
all be endorsed by the European Commission (EC). As the EC has not yet endorsed
some of these standards and interpretations in time for 2005 financial reporting
it could result in the need to change the basis of accounting or presentation of
certain financial information from that presented in this document. It is
possible therefore that further changes will be required to financial
information for the year ended 28 February 2005 before it is published as
comparative financial information in the 2006 Annual Report.
The accounts have been prepared on a historical cost basis, modified to include
the revaluation of non current asset investments.
The general principle that should be applied on the first-time adoption of IFRS
is that standards in force at the first reporting date (that is, for New India
Investment Trust PLC 31 March 2006) should be applied retrospectively.
The restatement information for the years ended 28 February 2005, 29 February
2004 and 31 August 2004 is based on IFRS. The information for the year ended 28
February 2005 has been extracted from the latest published audited financial
statements, as restated to comply with IFRS, which have been filed with the
Registrar of the 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.
These are the first financial statements prepared in accordance with IFRS.
Previously the financial statements were prepared in accordance with UK
Generally Accepted Accounting Principles (UK GAAP) including the Statement of
Recommended Practice 'Financial Statements of Investment Trust Companies.' UK
GAAP differs in certain respects from IFRS as described below. When preparing
the IFRS financial statements to 28 February 2005 the Directors have amended
certain accounting and valuation methods applied in the UK GAAP financial
statements to comply with IFRS.
Differences between UK GAAP and IFRS Presentation
Under UK GAAP the profit and loss account of the Group was the revenue column of
the Statement of Total Return. However, under IFRS the profit and loss account
is now the total column of the Income Statement. As a result, all of the items
in the capital column of the income statement form part of the profit and loss
of the Group.
Under UK GAAP the dividends declared by the Company were recognised in the
period to which they related. Under IFRS dividends declared by the Company are
only recognised when the shareholders right to receive the dividend has been
established.
Under UK GAAP investments were valued on the basis of quoted mid prices. Under
IFRS investments held at fair value through profit or loss are valued on the
basis of quoted bid prices.
Group financial statements
The Group financial statements comprise the unaudited results for the Company
and its fully owned subsidiary, New India Investment Company (Mauritius) Ltd,
for the six month period ended 31 August 2005, and are non-statutory accounts
within the meaning of Section 240 of the Companies Act 1985.
The financial statements of New India Investment Company (Mauritius) Ltd are
prepared for the same reporting periods as the parent company.
There are no inter-company balances.
The consolidated interim financial statements have been prepared in accordance
with IFRS 34 - 'Interim Financial Reporting'. The principal accounting policies
are set out below.
(a) Basis of preparation
The financial statements are prepared on a fair value basis for derivative
financial instruments and financial assets and liabilities held-at-fair-value.
Other financial assets and liabilities are stated at historical cost.
(b) Investments
All investments are designated upon initial recognition as held-at-fair-value.
Subsequent to initial recognition, at the trade date of the disposal, proceeds
are measured at fair value which is regarded as the proceeds of sale.
The fair value of the financial instruments is based on their Stock Exchange
quoted market bid price at the balance sheet date without deduction for the
estimated future selling costs.
Any unlisted investments would be valued by the Directors using primary
valuation technologies such as earnings multiples, recent transactions and net
assets. Where fair value cannot reliably be measured the investment is carried
at the previous reporting date value unless there is evidence that the
investment has since been impaired. In such a case the value will be reduced.
Changes in the fair value of all held-at-fair-value assets are taken to the
Consolidated Income Statement. On disposal, realised gains and losses are also
recognised in the Consolidated Income Statement.
(c) Dividends payable
Interim and final dividends are recognised in the period in which they are paid.
Previously they were recognised in the period in which they related.
(d) Income
Dividends receivable on equity shares are brought into account 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 the 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 period.
(e) Expenses
All expenses are accounted for on an accruals basis. Expenses are charged
through the Revenue Account other than expenses which are incidental to the
acquisition or disposal of an investment which are charged to capital.
(f) Deferred taxation
Deferred tax is recognised in respect of all temporary differences that have
originated but not reversed 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.
(g) Foreign currency translation
Overseas monetary assets 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 in the capital reserve or in the revenue account
depending on whether the gain or loss is of a capital or revenue nature
respectively.
2. Earnings per share
The return per Ordinary share is based on the net income after taxation of
£9,839,000 (31 August 2004 - loss of £396,000; 28 February 2005 - return of
£4,442,000), and on 47,816,217 (31 August 2004 and 28 February 2005 -
47,812,050) Ordinary shares, being the weighted number of Ordinary shares in
issue during the period.
The return per Ordinary share detailed above can be further analysed between
revenue and capital as follows:
Six months ended 31 August 2005 Six months ended 31 August 2004
Revenue Capital Total Revenue Capital Total
Net profit (£'000) 251 9,588 9,839 416 (812) (396)
Weighted average number of
Ordinary shares in issue 47,816,217 47,816,217 47,816,217 47,812,050 47,812,050 47,812,050
Return per share - pence 0.52 20.05 20.57 0.87 (1.70) (0.83)
3. Interim dividend
No interim dividend has been declared.
Ordinary dividends on equity shares deducted from reserves are analysed below:
Six months ended Six months ended
31 August 2005 31 August 2004
£'000 £'000
Interim dividend for the year ended 29 February 2004 - 0.70p - 335
Final dividend for the year ended 28 February 2005 - 0.70p 335 -
335 335
4. Net asset value per share
The basic net asset value per Ordinary share is based on the net assets
attributable to Ordinary Shareholders of £54,323,000 (31 August 2004 -
£39,962,000 as restated; 29 February 2004 - £44,800,000 as restated) and on
47,830,750 (31 August 2004 and 28 February 2005 - 47,812,050) Ordinary shares,
being the number of Ordinary shares in issue at the period end.
The fully-diluted net asset value per Ordinary share as at 31 August 2005 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 12,814,390 Warrants as at 31 August 2005, were
fully exercised on the first day of the financial period at 100p per share,
giving a total of 60,645,140 Ordinary shares. No calculation has been shown as
at 31 August 2004 and 28 February 2005 as the exercise price of the Warrants,
being 100p, exceeded the value of the basic net asset value.
5. Interim Report
The Interim Report for the six months to 31 August 2005 will be posted to
Shareholders shortly. Copies will be available from the registered office of
the Company at One Bow Churchyard, Cheapside, London EC4M 9HH in due course.
Aberdeen Asset Management PLC
Secretaries
9 November 2005
Independent Review Report to the Members of New India Investment Trust PLC
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 31 August 2005 which comprises the Consolidated Income
Statement, Consolidated Statement of Changes in Equity, Consolidated Balance
Sheet, Consolidated Cash Flow Statement and the related notes. We have read the
other information contained in the Interim Report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.
This report is made solely to the Company in accordance with guidance contained
in Bulletin 1999/4 'Review of interim financial information' issued by the
Auditing Practices Board. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company, for our work,
for this report, or for the conclusions we have formed.
Directors 'responsibilities
The Interim Report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Directors
are responsible for preparing the Interim Report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of interim financial information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making enquiries
of management and applying analytical procedures to the financial information
and underlying financial data, and based thereon, assessing whether the
accounting policies and presentation have been consistently applied, unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with United
Kingdom Auditing Standards and therefore provides a lower level of assurance
than an audit. Accordingly we do not express an audit opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 August 2005.
Ernst &Young LLP
London
9 November 2005
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