Final Results

RNS Number : 1456A

New India Investment Trust PLC

29 July 2008

 



NEW INDIA INVESTMENT TRUST PLC

PRELIMINARY ANNOUNCEMENT OF ANNUAL UNAUDITED CONSOLIDATED RESULTS

for the period ended 31 March 2008

Chairman's Statement

Over the year to 31 March 2008, the net asset value of your Company rose by 13.8% on a fully diluted basis. Whilst, in absolute terms, this is satisfactory, over the same period the return of the underlying portfolio was 18.3%, lagging its benchmark, the MSCI India Index, which rose by 29.1%. Share price total return performance saw an increase of 7.8% for the period. 

When I last wrote to you in the Interim Report, the Company reported strong absolute returns but had underperformed the benchmark for the first six months of the financial year. By contrast, the second half of the year saw a reversal of this trend as the Company reported negative absolute returns but outperformance of the benchmark; the net assets declined 6.4% compared to a fall in the MSCI India Index of 8.2%.

As the Indian market has continued to decline in a challenging financial market globally, this outperformance has continued since the year end. The MSCI India Index has fallen 20.3% during the three months to 30 June 2008, whilst the Company's Net Asset Value per share has significantly outperformed the benchmark, albeit with a negative return of 12.4%. In light of your Manager's long-term investment style and strategy, this performance is what the Board and Shareholders could reasonably have expected. A detailed analysis is set out in the Manager's Review.

As at 30 June 2008 the Company's fully diluted Net Asset Value (including income) was 142.61 pence and its share price 124 pence, corresponding to a discount of 13.0%.

Shareholders should be aware that, while the MSCI India Index is used as a reference point for performance comparison, it is not used by the Manager to construct your portfolio. It is therefore likely, as I have stated before, that there will be periods when its performance may vary significantly from the benchmark.  

In summary, the Manager's more conservative, value-orientated style has not suited the liquidity-driven rally in Indian equities over the last few years, resulting in meaningful underperformance relative to the benchmark as markets rose aggressively. The year under review can be viewed as two distinct periods. The strong appreciation that the Indian stock market had been experiencing for the last several years continued throughout 2007. But there were clear signs of it running out of steam towards the calendar year end. The focus of the stock market narrowed substantially, and the first quarter of 2008 witnessed a very sharp pullback, led by those stocks and sectors that had been the drivers in previous periods. As set out above, in this more discriminating environment, the first quarter of 2008 has seen the Manager's stockpicking investment style result in meaningful outperformance relative to the benchmark.  

The single largest contributor to the underperformance was the absence of index-heavyweight Reliance Industries in the portfolio (currently around 15% of the MSCI India Index). In terms of positive contributors to performance, the core holdings in the Information Technology sector continued to deliver strong results as they expanded and diversified geographically. 

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 compelling case for their continued appointment and, after consultation with the Company's larger Shareholders, we recommend the continuation of the Company and Manager.

Accordingly, your Board recommends that Shareholders vote in favour of Resolution No. 10 to allow the Company to continue as an investment trust. Shareholders should continue to be aware of the dilutive impact of the Warrants in the event of any early liquidation of the Company. Since the year end, the Company has bought back 1.575m or 3.3% of its own shares for cancellation at a discount of 12.8%.

Annual General Meeting

The Annual General Meeting will be held at One Bow Churchyard, Cheapside, London EC4 on Friday 19 September 2008 at 11.00 a.m.  

This year the Directors are proposing to make amendments to the Company's Articles of Association to reflect changes required as a result of the staged implementation of the Companies Act 2006. Details of the amendments are set out in the notes to the Notice of Annual General Meeting, which is on pages 52 to 55.

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

HM Revenue and Customs, on 5 November 2007, accepted the European Court of Justice ruling in the case brought by JP Morgan Claverhouse Investment Trust against them. It is probable that some of the VAT suffered in the past on its investment management fees will be recoverable. However, the amount is relatively insignificant, because, for the most part, VAT has not been paid by the Company on such fees because it invests in non-EU securities. Appropriate steps have been taken to protect the Company's position in this respect. Since a number of legal and procedural matters need to be resolved, no asset is, as yet, being recognised.

Investment Objectives

The FSA Listing Rules now require the Company to make clear to shareholders the investment policies of the Trust and how it hopes to meet its objective in a formal statement. This information, including the Company's policies relating to asset allocation, risk diversification and gearing, as well as a description of the investment process adopted by the Manager, is included in this Annual Report and Accounts. Previously, the same information was only disclosed in the Company prospectus.

Outlook

The short-term outlook for Indian equities is clouded by inflationary pressures. This uncertainty, combined with the complexities of the Indian democratic process and the lack of infrastructure, remains a drag on the stock market. Nevertheless, the solid legal system, favourable demographics and an emergent middle class together with management focused on shareholder returns present an attractive long term case for continued Indian equity investment, with the expectation that there will be periods of market turbulence. 

Risk

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.  

Emerging Market Risks

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.

William Salomon

Chairman

29 July 2008

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 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

29 July 2008

  GROUP INCOME STATEMENT 

		Year ended  31 March 2008			Year ended  31 March 2007
	Notes	Revenue   return   £'000	Capital   return   £'000	Total   £'000	Revenue   return   £'000	Capital   return   £'000	Total   £'000
Investment income	3
Dividend income		1,038	-	1,038	1,191	-	1,191
Interest income		35	-	35	21	-	21
		________	________	________	________	________	________
Total revenue		1,073	-	1,073	1,212	-	1,212
		________	________	________	________	________	________
Gains/(losses) on investments held at fair value through profit or loss	9(a)	-	12,320	12,320	-	(2,781)	(2,781)
Currency (losses)/gains		-	(5)	(5)	-	8	8
		________	________	________	________	________	________
		1,073	12,315	13,388	1,212	(2,773)	(1,561)
Expenses		________	________	________	________	________	________
Investment management fees	4	(903)	-	(903)	(689)	-	(689)
Other administrative expenses	5	(548)	-	(548)	(496)	-	(496)
		________	________	________	________	________	________
(Loss)/profit before tax		(378)	12,315	11,937	27	(2,773)	(2,746)
Taxation	6	(46)	-	(46)	(6)	-	(6)
		________	________	________	________	________	________
(Loss)/profit for the year		(424)	12,315	11,891	21	(2,773)	(2,752)
		________	________	________	________	________	________
Return per Ordinary share (pence)	8
Basic		(0.89)	25.74	24.85	0.04	(5.79)	(5.75)
		________	________	________	________	________	________
Diluted		(0.82)	23.70	22.88	0.04	(5.79)	(5.75)
		________	________	________	________	________	________

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.

  BALANCE SHEET

	Notes	Group  As at 31 March  2008 £'000	Company As at 31 March  2008 £'000	Group  As at 31 March  2007 £'000	Company As at 31 March  2007 £'000
Non-current assets
Investments held at fair value through profit or loss	9	84,826	84,776	72,459	72,995
		_________	_________	_________	_________
Current assets
Cash at bank		772	277	527	139
Other receivables	10	196	24	695	24
		_________	_________	_________	_________
Total current assets		968	301	1,222	163
		_________	_________	_________	_________
Total assets		85,794	85,077	73,681	73,158
Current liabilities
Other payables	11	(826)	(109)	(627)	(104)
		_________	_________	_________	_________
Net assets		84,968	84,968	73,054	73,054
		_________	_________	_________	_________
Share capital and reserves
Ordinary share capital	12	11,966	11,966	11,960	11,960
Share premium account		11,790	11,790	11,773	11,773
Special reserve		17,981	17,981	17,981	17,981
Warrant reserve		4,010	4,010	4,017	4,017
Warrant exercise reserve		19	19	12	12
Capital redemption reserve		4,089	4,089	4,089	4,089
Capital reserve	13	34,064	33,904	21,749	21,910
Revenue reserve		1,049	1,209	1,473	1,312
		_________	_________	_________	_________
Equity Shareholders funds		84,968	84,968	73,054	73,054
		_________	_________	_________	_________
Net asset value per Ordinary share (pence):	14
Basic		177.52	177.52	152.71	152.71
		_________	_________	_________	_________
Diluted		161.18	161.18	141.58	141.58
		_________	_________	_________	_________

  GROUP AND COMPANY STATEMENTS OF CHANGES IN EQUITY

Year ended 31 March 2008
	Share   capital   £'000	Share    premium   account   £'000	Special  reserve   £'000	Warrant   reserve   £'000	Warrant   exercise   reserve   £'000	Capital  redemption   reserve   £'000	Capital  reserve   £'000	Revenue   reserve   £'000	Total   £'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
	_________	________	________	________	________	________	________	_______	_______
Year ended 31 March 2007
	Share   capital   £'000	Share    premium   account   £'000	Special  reserve   £'000	Warrant   reserve   £'000	Warrant   exercise   reserve   £'000	Capital  redemption   reserve   £'000	Capital  reserve   £'000	Revenue   reserve   £'000	Total   £'000
Balance at 31 March 2006	11,958	11,766	17,981	4,020	9	4,089	24,522	1,452	75,797
Net loss on ordinary activities after taxation	-	-	-	-	-	-	(2,773)	21	(2,752)
Issue of share capital upon exercise of warrants	2	7	-	(3)	3	-	-	-	9
	_________	________	________	________	________	________	________	_______	_______
Balance at 31 March 2007	11,960	11,773	17,981	4,017	12	4,089	21,749	1,473	73,054
	_________	________	________	________	________	________	________	_______	_______
Year ended 31 March 2008
	Share   capital   £'000	Share    premium   account   £'000	Special  reserve   £'000	Warrant   reserve   £'000	Warrant   exercise   reserve   £'000	Capital  redemption   reserve   £'000	Capital  reserve   £'000	Revenue   reserve   £'000	Total   £'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
	_________	________	________	________	________	________	________	_______	_______
Year ended 31 March 2007
	Share   capital   £'000	Share    premium   account   £'000	Special  reserve   £'000	Warrant   reserve   £'000	Warrant   exercise   reserve   £'000	Capital  redemption   reserve   £'000	Capital  reserve   £'000	Revenue   reserve   £'000	Total   £'000
Balance at 31 March 2006	11,958	11,766	17,981	4,020	9	4,089	24,459	1,515	75,797
Net loss on ordinary activities after taxation	-	-	-	-	-	-	(2,549)	(203)	(2,752)
Issue of share capital upon exercise of warrants	2	7	-	(3)	3	-	-	-	9
	_________	________	________	________	________	________	________	_______	_______
Balance at 31 March 2007	11,960	11,773	17,981	4,017	12	4,089	21,910	1,312	73,054
	_________	________	________	________	________	________	________	_______	_______

  CASH FLOW STATEMENTS

	Year ended            31 March 2008		Year ended 31 March 2007
	Group	Company	Group	Company
	£'000	£'000	£'000	£'000
Operating activities
Profit/(loss) before tax	11,937	11,891	(2,746)	(2,752)
(Gains)/losses on investments held at fair value through profit or loss	(12,320)	(11,991)	2,781	2,548
Net losses/(gains) on foreign exchange	5	3	(8)	1
Net (purchases)/sales of investments held at fair value through profit or loss	(47)	210	472	190
Decrease/(increase) in amounts due from brokers	312	-	(425)	-
Decrease/(increase) in other receivables	187	-	(188)	(23)
Increase in amounts due to brokers	117	-	340	-
Increase/(decrease) in other payables	63	5	(103)	(24)
	___________	___________	___________	___________
Net cash inflow/(outflow) from operating activities before interest and corporation tax	254	118	123	(60)
Corporation tax paid	(27)	-	(5)	(1)
	___________	___________	___________	___________
Net cash inflow/(outflow) from operating activities	227	118	118	(61)
Financing activities
Exercise of Warrants	23	23	9	9
	___________	___________	___________	___________
Net increase/(decrease) in cash and cash equivalents	250	141	127	(52)
Cash and cash equivalents at the start of the year	527	139	392	192
Effect of foreign exchange rate changes	(5)	(3)	8	(1)
	___________	___________	___________	___________
Cash and cash equivalents at the end of the year	772	277	527	139
	___________	___________	___________	___________

  Notes:

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's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The Company's financial statements have been prepared in accordance with IFRS as adopted by the European Union and as applied 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 2008. 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 December 2005 is consistent with the requirements of IFRS, the financial statements have been prepared in accordance with the SORP.

The Company has adopted the following new and amended IFRS and IFRIC interpretations during the year. Adoption of these revised standards and interpretations did not have any effect on the financial statements of the Company. They did however give rise to additional disclosures:

-    IFRS 7 Financial Instruments: Disclosures

     This standard requires disclosures that enable users to evaluate the significance of the Company's financial instruments
     and the nature and extent of risks arising from those financial instruments. The new disclosures are included throughout

     the financial statements.

-    IAS 1 Amendment - Presentation of Financial Statements

     This amendment requires the Company to make new disclosures to enable users of the financial statements to evaluate
     the Company's objectives, policies and processes for managing capital. These new disclosures are shown in note 15.

At the date of authorisation of these financial statements, the following Standards and Interpretations were in issue but not yet effective:

-     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 2008)

-     IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (effective for
      annual periods beginning on or after 1 January 2008)

-     IFRS 8 Operating Segments (effective for annual periods beginning on or after 1 January 2009)

-     IAS 27 Consolidated and Separate Financil Statements - Consequential amendments arising to IFRS 3 (effective for
      annual periods beginning on or after 1 July 2010)

-     IFRS 2 Share Based Payments - amendments relating to vesting conditions and cancellations (effective for annual
      periods beginning on or after 1 January 2009)

-     IFRS 3 Business Combinations - Comprehensive revision on applying the acquisition method (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. Any future business combinations will be affected. 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 to better 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 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 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 9 (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

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 31 March 2008	Year ended  31 March 2007
3.	Income	£'000	£'000
	Income from investments
	Overseas dividends	1,038	1,191
	Other operating income
	Deposit interest	35	21
		____________	____________
	Total income	1,073	1,212

		Year ended 31 March 2008	Year ended 31 March 2007
4.	Investment management fees	£'000	£'000
	Investment management fees	903	689
		____________	____________

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 £147,000 (2007 - £116,000). 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 (2007 - £nil).

				Year ended 31 March 2008	Year ended  31 March 2007
5.	Other administrative expenses			£'000	£'000
	Directors' fees			87	87
	Marketing contribution			58	38
	Auditors' remuneration
	-	fees payable to the Group's auditors for the audit of the Group's annual accounts		23	23
	-	fees payable to the Group's auditors for the audit of the Group's subsidiaries annual accounts		3	5
	-	fees payable to the Group's auditors for the review of the Group's interim accounts		-	5
	-	fees payable to the Group's auditors and its associates for other services:
		-	tax services	3	5
	Legal and Advisory fees			66	53
	Custodian and overseas agents' charges			210	177
	Other			98	103
				__________	__________
				548	496
				__________	__________

The Directors' fees include £4,000 (2007 - £4,000) 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 (2008 - £3,000; 2007 - £4,500) and for the interim review (2008 - £nil; 2007 - £5,000).

The Company has an agreement with AAM 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 (2007 - £38,000) and no amount was due to AAM at the year end (2007 - £nil).

			Year ended 31 March 2008	Year ended 31 March 2007
6.	(a)	Tax on ordinary activities	£'000	£'000
		Current tax:
		Overseas taxation	46	6
			__________	__________
	(b)	Factors affecting the tax charge for the year
		The tax charged for the year can be reconciled to the profit/(loss) per the Group Income Statement as follows:

			Year ended 31 March 2008	Year ended 31 March 2007
			£'000	£'000
		Profit/(loss) before tax	11,937	(2,746)
			__________	__________
		Corporation tax on profit at the standard rate of 30% (2007 - 30%)	3,581	(824)
		Effects of:
		Gains/(losses) on investments held at fair value through profit or loss not taxable (see note below)	(3,696)	830
		Effect on subsidiary of different tax rate levied in another jurisdiction	161	-
			__________	__________
		Total tax charge	46	6
			__________	__________

The Company is exempt from corporation tax on capital gains provided it obtains agreement from HM Revenue & Customs that the tests within Section 842 (s842) of the Income & Corporation Taxes Act 1988 have been met. Under Mauritian taxation laws no Mauritian capital gains tax is payable on profits arising from the sale of securities.

7.    Dividends on equity shares

There was no requirement under s842 to propose a dividend in either period. Therefore, no final dividend is being proposed for the year ended 31 March 2008 (2007 - £nil).

During the year, the subsidiary company paid dividends of £160,000 to the parent company (2007 - £nil) and the net amount due to the parent company at the year end was £nil (2007 - £nil).

8.    Return per Ordinary share

          The basic earnings per Ordinary share is based on the net profit after taxation of £11,891,000 (2007 - net loss after taxation of
          £2,752,000)  and on 47,854,303 (2007 - 47,836,624) 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 4,098,457 to 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 31 March 2008			Year ended 31 March 2007
	Basic	Revenue	Capital	Total	Revenue	Capital	Total
	Net (loss)/profit (£'000)	(424)	12,315	11,891	21	(2,773)	(2,752)
	Weighted average number of Ordinary shares in issue			47,854,303			47,836,624
	Return per Ordinary share (pence)	(0.89)	25.74	24.85	0.04	(5.79)	(5.75)

		Year ended 31 March 2008			Year ended 31 March 2007
	Diluted	Revenue	Capital	Total	Revenue	Capital	Total
	Net (loss)/profit (£'000)	(424)	12,315	11,891	21	(2,773)	(2,752)
	Weighted average number of Ordinary shares in issue			51,952,760			50,676,648
	Return per Ordinary share (pence)	(0.82)	23.70	22.88	0.04	(5.79)	(5.75)

The basic and diluted return per share for 2007 are the same as the exercising of warrants would have resulted in an anti-dilutive effect.

					Year ended 31 March 2008	Year ended 31 March 2007
9.	Investments held at fair value through profit or loss				£'000	£'000
	(a)	Group
		Opening book cost			48,050	44,956
		Opening unrealised fair value gains			24,409	30,756
					__________	__________
		Opening valuation			72,459	75,712
		Movements in the year:
		Purchases at cost (see section (c) below)			16,635	7,631
		Sales	-	proceeds	(16,588)	(8,103)
			-	realised net gains	9,753	3,566
		Increase/(decrease) in unrealised fair value gains			2,567	(6,347)
					__________	__________
		Closing valuation			84,826	72,459
					__________	__________
					£'000	£'000
		Closing book cost			57,850	48,050
		Closing unrealised fair value gains			26,976	24,409
					__________	__________
		Closing valuation			84,826	72,459
					__________	__________
		Gains/(losses) on held-at-fair-value investments			£'000	£'000
		Realised gains on sales of investments			9,753	3,566
		Increase/(decrease) in unrealised appreciation			2,567	(6,347)
					__________	__________
					12,320	(2,781)
					__________	__________

					Year ended 31 March 2008			Year ended 31 March 2007
					Investment in subsidiary	Listed overseas	Total	Investment in subsidiary	Listed overseas	Total
	(b)	Company			£'000	£'000	£'000	£'000	£'000	£'000
		Opening book cost			41,545	1,792	43,337	41,545	1,956	43,501
		Opening unrealised fair value gains			29,374	284	29,658	31,282	950	32,232
					________	________	________	________	_______	_______
		Opening valuation			70,919	2,076	72,995	72,827	2,906	75,733
		Movements in the year:
		Sales	-	proceeds	-	(210)	(210)	-	(190)	(190)
			-	realised net gains	-	132	132	-	26	26
		Increase/(decrease) in unrealised fair value gains			10,574	1,285	11,859	(1,908)	(666)	(2,574)
					________	________	________	________	_______	_______
		Closing valuation			81,493	3,283	84,776	70,919	2,076	72,995
					________	________	________	________	_______	_______
					Year ended 31 March 2008			Year ended 31 March 2007
					Investment in subsidiary	Listed overseas	Total	Investment in subsidiary	Listed overseas	Total
					£'000	£'000	£'000	£'000	£'000	£'000
		Closing book cost			41,545	1,714	43,259	41,545	1,792	43,337
		Closing unrealised fair value gains			39,948	1,569	41,517	29,374	284	29,658
					________	________	________	________	_______	_______
		Closing valuation			81,493	3,283	84,776	70,919	2,076	72,995
					________	________	________	________	_______	_______
									As at 31 March 2008	As at 31 March 2007
		Gains/(losses) on held-at-fair-value investments							£'000	£'000
		Realised gains on sales of investments							132	26
		Increase/(decrease) in unrealised appreciation							11,859	(2,574)
									_______	_______
									11,991	(2,548)
									_______	_______

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 31 March 2008		Year ended  31 March 2007
			Group	Company	Group	Company
			£'000	£'000	£'000	£'000
		Purchases	62	-	29	-
		Sales	64	-	35	-
			126	-	64	-

		Group	Company	Group	Company
		2008	2008	2007	2007
10.	Other receivables	£'000	£'000	£'000	£'000
	Amounts due from brokers	113	-	425	-
	Prepayments and accrued income	83	24	270	24
		__________	__________	__________	__________
		196	24	695	24
		__________	__________	__________	__________

None of the above amounts are passed their due date or impaired.

		Group	Company	Group	Company
		2008	2008	2007	2007
11.	Other payables	£'000	£'000	£'000	£'000
	Amounts due to brokers	457	-	340	-
	Other payables	343	109	280	104
	Current tax	26	-	7	-
		__________	__________	__________	__________
		826	109	627	104

		2008		2007
12.	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	47,839,850	11,960	47,830,750	11,958
	Warrants exercised during the year	22,900	6	9,100	2
		__________	__________	__________	__________
	Balance carried forward	47,862,750	11,966	47,839,850	11,960
		__________	__________	__________	__________

The Ordinary shares give Shareholders the entitlement to all of its 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 2008 there were 12,782,390 Warrants in issue (31 March 2007 - 12,805,290), 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 22,900 (2007 - 9,100) Warrants were exercised at a price of 100p each, creating 22,900 (2007 - 9,100) new Ordinary shares which were issued for a total consideration of £22,900 (2007 - £9,100). As a result of this, £7,184 (2007 - £2,855) was transferred from the Warrant Reserve to the Warrant Exercise Reserve.

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 and cash equivalents and equity, comprising issued capital, reserves and retained earnings.

The Group's overall strategy remains unchanged from 2007.

		Capital reserve - realised	Capital reserve - unrealised	Total  capital reserve
13.	Analysis of capital reserves	£'000	£'000	£'000
	Group
	Year ended 31 March 2008
	At 1 April 2007	(2,660)	24,409	21,749
	Currency loss	(5)	-	(5)
	Movement in unrealised fair value gains	-	2,567	2,567
	Gain on realisation of investments	9,753	-	9,753
		__________	__________	__________
	At 31 March 2008	7,088	26,976	34,064
		__________	__________	__________
	Year ended 31 March 2007
	At 1 April 2006	(6,234)	30,756	24,522
	Currency gain	8	-	8
	Movement in unrealised fair value gains	-	(6,347)	(6,347)
	Gain on realisation of investments	3,566	-	3,566
		__________	__________	__________
	At 31 March 2007	(2,660)	24,409	21,749
		__________	__________	__________
	Company
	Year ended 31 March 2008
	At 1 April 2007	(7,748)	29,658	21,910
	Currency gains	3	-	3
	Movement in unrealised fair value gains	-	11,859	11,859
	Gain on realisation of investments	132		132
		__________	__________	__________
	At 31 March 2008	(7,613)	41,517	33,904
		__________	__________	__________
	Year ended 31 March 2007
	At 1 April 2006	(7,773)	32,232	24,459
	Currency loss	(1)	-	(1)
	Movement in unrealised fair value gains	-	(2,574)	(2,574)
	Gain on realisation of investments	26	-	26
		__________	__________	__________
	At 31 March 2007	(7,748)	29,658	21,910

14.    Net asset value per Ordinary share

The basic net asset value per Ordinary share is based on a net asset value of £84,968,000 (2007 - £73,054,000) and on 47,862,750 (2007 - 47,839,850) 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 12,782,390 (2007 - 12,805,290) Warrants, were exercised on the first day of the financial year at 100p per share, giving a total of 60,645,140 (2007 - 60,645,140) Ordinary shares.

15.    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 Investment Manager has a dedicated investment management process, which ensures that the investment policy explained on page 2 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 Company's Manager has an independent Investment Risk department for reviewing the investment risk parameters of the Company'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 Company'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 (comprising interest rate risk, foreign currency risk and other 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 2008 and 31 March 2007 was as follows:

			Total            (per Balance Sheet)		Floating  rate
			2008	2007	2008	2007
		Type	£'000	£000	£'000	£'000
		Cash at bank - Sterling	465	192	465	192
		Cash at bank - US Dollar	215	-	215	-
		Cash at bank - Indian Rupee	92	335	92	335
			__________	__________	__________	__________
		Total	772	527	772	527
			__________	__________	__________	__________

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 Group finances its operations through the use of equity and retained profits. At the year end, neither the Company nor the Group held any financial liabilities other than short term creditors, to which no interest rate risk is attached. 

Interest rate sensitivity 

Movements in interest rates would not significantly affect net assets attributable to the Company'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 2008			31 March 2007
			Overseas investments	Net monetary assets	Total currency exposure	Overseas investments	Net monetary assets	Total currency exposure
			£'000	£'000	£'000	£'000	£'000	£'000
		US Dollar	3,283	215	3,498	2,076	19	2,095
		Indian Rupee	81,543	(194)	81,349	70,383	666	71,049
			__________	__________	__________	__________	__________	__________
			84,826	21	84,847	72,459	685	73,144
			__________	__________	__________	__________	__________	__________

At 31 March 2008 the exchange rate of the Indian Rupee against the reporting currency Sterling was £1: INR 79.7385 compared with an exchange rate of £1: INR 85.2501 at 31 March 2007. Based on continuing to hold the same investments in the same quantities from 1 April 2007 to 31 March 2008, all other things being equal, the impact of the exchange rate movement over the year would be to increase the value of investments by £4,865,000. 

Foreign currency sensitivity

There is no sensitivity analysis included as the Company'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, as detailed on page 2, 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 Company are all listed on the Bombay (Mumbai) Stock Exchange and/or The Indian National Stock Exchange. 

Other price risk sensitivity

If market prices at the Balance Sheet date had been 10% higher or lower while all other variables remained constant, the return attributable to Ordinary Shareholders for the year ended 31 March 2008 would have increased /(decreased) by £8,483,000 (2007 - increased/(decreased) by £7,246,000) and equity reserves would have increased /(decreased) by the same amount.

(ii)    Liquidity risk 

This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. Liquidity risk is not considered to be significant as the Company'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 that 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 Investment 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 Company is mitigated by the review of failed trade reports on a monthly basis. In addition, the Custodian carries out a stock reconciliation to third party 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 with high quality external credit enhancements.

None of the Company'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. 

16.    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 comprises:
		2008	2007
		£'000	£'000
	Debt
	Borrowings	-	-
		__________	__________
	Equity
	Equity share capital	11,966	11,960
	Retained earnings and other reserves	73,002	61,094
		__________	__________
		84,968	73,054
		__________	__________
	Debt as a % of net assets	n/a	n/a
		__________	__________

The Board, with the assistance of the Investment 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.

17.    Contingent assets

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. It is likely that a repayment will be made by HMRC in respect of VAT which has been charged on investment management fees in past years and the Board is currently quantifying the potential repayment that should be due. The amount the Company will receive, the period to which it will refer, and the timescale for receipt are at present uncertain and the Company has taken no account in these financial statements of any such repayment. The Company has not been charged VAT on its investment management fees from 9 December 2004.

18.    Post Balance Sheet event

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 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 £20.00. 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.

19.     The financial information set out above does not constitute the Company's statutory accounts for the period ended 31 March 2008. The financial information for 2007 is derived from the statutory accounts for 2007, which have been delivered to the Registrar of Companies. The auditors have reported on the 2007 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 2008 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies in due course.

20.     The Annual Report will be posted to Shareholders in due course and further copies may be obtained from the registered office, One Bow Churchyard, Cheapside, London EC4M 9HH.

Aberdeen Asset Management PLC

Secretaries

29 July 2008

 

END

 

 

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