Half Yearly Financial Report

RNS Number : 7411T

New India Investment Trust PLC

22 November 2013

NEW INDIA INVESTMENT TRUST PLC

UNAUDITED HALF-YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013

HIGHLIGHTS

Financial Summary	30 September 2013	31 March 2013	% change

Total shareholders' funds (£'000)	135,836	158,726	- 14.4
Share price (mid-market)	195.00p	237.00p	- 17.7
Net asset value per share	229.96p	268.71p	- 14.4
Discount to net asset value	15.2%	11.8%
Rupee to Sterling exchange rate	101.4	82.5	- 22.9

Performance (total return)	Six months ended 30 September 2013 %	Year ended 31 March 2013 %
Share price	- 17.7	+ 6.8
Net asset value	- 14.4	+ 10.1
MSCI India Index (Sterling adjusted)	- 16.1	+ 7.6

INTERIM BOARD REPORT

Overview

During the six months to 30 September 2013, the Company's net asset value (NAV) fell by 14.4% to 230.0p. The ordinary share price fell 17.7% to 195.0p, compared with the benchmark, the MSCI India Index, which declined by 16.1% on a total return basis. This reflects a widening of the discount to NAV from 11.8% to 15.2%.

During the period under review, Indian equities were affected by both domestic and external headwinds. The global backdrop weakened, compelling major central banks to keep policy accommodative. Parts of Europe have been mired in recession, China's growth moderated and there were glimpses of recovery in the US. Domestically, long-standing capacity constraints and infrastructure bottlenecks hampered growth. Government initiatives to revive stalled investments yielded few concrete results. There was also little incentive for the private sector to participate in such projects, given higher funding costs. Inflation remained elevated. These factors, combined with continuing budget and current account deficits, depressed market sentiment.

External concerns came to the fore in the latter part of the review period. Expectations that the US would end its accommodative monetary policy triggered a sharp sell-off in global financial markets. Developing economies with structural weaknesses bore the brunt of the sell-down because they were deemed more susceptible to capital flight. The losses, however, were mitigated by a turnaround in September, when the Federal Reserve unexpectedly refrained from reducing stimulus. India was among the worst-hit markets, as capital outflows hurt the rupee, which fell to a record low against the US dollar. This magnified the market's decline in sterling terms. Policymakers scrambled to support the currency by announcing several liquidity-tightening measures in quick succession, such as curbs on gold imports and overseas payments.

Subsequently, there was a new helmsman at the central bank. Raghuram Rajan, a well-regarded former IMF chief economist, was appointed governor on 4 September 2013. He unveiled reform measures on his first day of office. This was followed by the unwinding of a series of tightening moves unveiled on an almost weekly basis by his predecessor. His actions boosted the central bank's policy credibility, and the market responded positively. However, an unexpected interest rate hike - the first increase in two years - which aimed to curb persistent price pressures, received a less than enthusiastic response from investors, initially.

Outlook

The outlook for India appears slightly more stable, as compared to a few months ago. The rupee has firmed over the short term, emboldening the central bank to hike interest rates again at the time of writing. Policymakers have also pledged that the current account deficit would be financed without depleting foreign exchange reserves this year. A good monsoon should boost agricultural output, while exports have picked up, which is a boon for the economy.

That said, optimism over recent policy and reform initiatives must be tempered with some caution. In India, the real test has always been about whether there is sufficient political will to make good on the proposed reforms. With five state polls before the year-end and national elections due before May next year, the government may adopt a populist agenda. The central bank also has a difficult balancing act of keeping inflation in check, while avoiding growth from being stifled by policy tightening. The broader global environment remains uncertain, with an inevitable Federal Reserve tapering likely to trigger renewed volatility across emerging markets. The business community appears to have lost confidence in the current administration.

Regulatory

The Alternative Investment Fund Managers Directive ("the Directive") came into force in the UK on 22 July 2013 with a transitional period prior to full implementation during July 2014. The Directors have taken the decision, in principle, to appoint a subsidiary of Aberdeen Asset Management PLC as the Company's Alternative Investment Fund Manager as required by the Directive. An AIFM will not be required to be appointed by the Company's wholly-owned subsidiary, New India Investment Company (Mauritius) Limited.

The Directive may have significant consequences for the Company (and all similar investment companies) and could result in increased compliance and regulatory costs. The Board will continue to monitor the progress and likely implications for the Company of the Directive.

Board

Sarah Bates retired as a Director and left the Board at the conclusion of the Annual General Meeting on 20 September 2013.

During the period, an independent search consultancy was engaged to assist the Board with succession planning and Mrs Rachel Beagles and Mr Stephen White were appointed as independent non-executive Directors of the Company on 26 September 2013 after an appropriate process.

Rachel Beagles worked in financial markets, primarily in equity research and sales from 1990 until 2003. She was co-head of the Pan European Banks Equity Research and Sales Team and a Managing Director of Corporate and Investment Banking Group Division at Deutsche Bank AG from 2000 to 2003.

Stephen White is Head of European and US equities at British Steel Pension Fund, responsible for the day to day management of the Fund's Europe ex-UK and US equity portfolios. He is a Chartered Accountant and was formerly Director and Head of European Equities at Foreign & Colonial Investment Management, Manager of Foreign & Colonial Eurotrust PLC and Deputy Manager of the Foreign & Colonial Investment Trust Plc. Prior to joining Foreign & Colonial in 1985, he held positions at Hill Samuel Asset Management, Phillips & Drew and Price Waterhouse.

William Salomon

Chairman

22 November 2013

Principal Risks and Uncertainties

The Board seeks to set out below its view of the principal risks and uncertainties affecting its business. The Board is aware that, apart from those issues it can identify, there are likely to be matters about which it does not or cannot know which may also affect the Company.

With that reservation, the Board believes that the factors which could have the most significant adverse impact on shareholders would be likely to include:

• falls in the prices of securities in Indian companies, which may be themselves determined by local and international economic, political and financial factors and management actions;

• adverse movements in the exchange rate between sterling and the rupee as well as between other currencies affecting the overall value of the portfolio;

• a lack of skill by the Company's investment management team;

• factors which affect the discount to net asset value at which the Ordinary shares of the Company trade. These may include the popularity of the investment objective of the Company, the popularity of investment trust shares in general and the ease with which the Company's Ordinary shares can be traded on the London Stock Exchange;

• changes in or breaches of the complicated set of statutory, tax and regulatory rules within which the Company seeks to conduct its business; this includes the impact on the Company of the European Commission's Directive on Alternative Investment Fund Managers; and

• insolvency of a custodian or sub-custodian combined with a shortfall in the assets held by that custodian or sub-custodian arising from fraud, operational errors or settlement difficulties resulting in a loss of assets owned by the Company.

Some of these risks can be mitigated or managed to a greater or lesser extent by the actions of the Board in appointing competent Managers and custodians. In addition, the Board seeks to put in place, through its contractual arrangements and through various monitoring processes, controls which should avert (but do not guarantee the avoidance of) what might be regarded as operational mistakes. However, investment tends to involve both risk and opportunity regarding future prospects, and the Board cannot avoid either in the Company's search for returns.

Going Concern

In accordance with the Financial Reporting Council's guidance on Going Concern and Liquidity Risk, the Directors have undertaken a review of the Company's ability to continue as a going concern. The Company's assets consist of a diverse portfolio of listed equity shares which in most circumstances are realisable within a short timescale. The Directors are mindful of the principal risks and uncertainties disclosed above and have reviewed forecasts detailing revenue and liabilities; accordingly, the Directors believe that the Company has adequate financial resources to continue in operational existence for the foreseeable future and at least 12 months from the date of this Report.

This is also based on the assumption that the Ordinary resolution, that the Company continues as an investment trust, which will be proposed at the next Annual General Meeting of the Company, is passed as it has been in the years since it was put in place.

Statement of Directors' Responsibilities

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 ended 30 September 2013 comprises the Interim Management Report in the form of the Interim Board Report, the Statement of Directors' Responsibilities and a condensed set of financial statements, and has not been audited or reviewed by the Independent Auditor pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information. The Manager's Report is provided for information only, and is the responsibility of Aberdeen Asset Management Asia Limited.

By order of the Board

William Salomon

Chairman

22 November 2013

MANAGER'S REPORT

Overview

Indian equities fell in sterling terms during the six months under review amid a turbulent period for global markets. At first, investors seemed relatively sanguine despite obstacles posed by softening global and domestic economies. The Reserve Bank of India's May interest rate cut aimed at boosting investment and consumption inspired further confidence that authorities had matters in hand. However, when the US Federal Reserve hinted it would begin to trim asset purchases because of an improving US economy, investors rushed to exit emerging markets. The exodus of capital exposed India's vulnerabilities and equity and currency markets tumbled. However, the Federal Reserve's subsequent deferral of plans to tighten monetary policy and the RBI's efforts to reinvigorate markets saw shares and the rupee regain some lost ground later in the period.

The Indian economy was largely lacklustre. GDP growth for the fiscal year ending in March fell to a decade low, while the outlook for the next full fiscal year deteriorated after the pace of growth continued to slow in the June quarter. That said, concerns over the beleaguered currency overshadowed all others for much of the period. The RBI raised funding costs for financial institutions, purchased long-dated government bonds, imposed restrictions on the import of non-essential items, most notably gold, and sold US dollars to local oil companies in a bid to revive the rupee. Elsewhere, the current account deficit widened, albeit by less than expected, and a jump in food prices saw wholesale inflation surge.

Highly-regarded economist Raghuram Rajan took over the reins of the central bank in September amid much anticipation. He wasted no time announcing a slew of reforms to open up the financial sector and encourage capital inflows, while scaling back several of the recently-imposed liquidity-tightening measures. While initially jubilant at his sense of urgency in addressing India's economic ills, investors were less enamoured of his surprise 25 basis point interest rate hike aimed at taming persistently high prices.

Elsewhere, progress on much-needed reforms was less than stellar. The prime minister was initially plagued by accusations of corruption over the government's past sales of coal-mining rights to private companies at massive losses, before being denounced over the passage of the potentially costly Food Security and Land Acquisition Bills. Critics lambasted the government for prioritising vote-buying policies over fiscal prudence ahead of imminent elections. However, the ruling party maintained that economic reforms were at the top of the agenda, including a long-awaited goods and services tax. Meanwhile, the business-friendly but controversial politician, Narendra Modi, was declared the main-opposition's prime ministerial candidate.

Performance

The portfolio's net asset value fell by 14.4%, compared to the benchmark MSCI India Index's 16.1% decline. Almost all sectors posted negative returns during the period as they battled significant economic headwinds. Only telecommunication services outperformed as the government loosened the sector's regulatory environment; hence our underweight position hurt the Company. We remain cautious given the Indian telecommunications market is one of the most competitive in the world and participants must fight hard for market share. Elsewhere, our stock selection in healthcare and information technology also detracted from performance. In comparison, our selection of holdings in the financial and industrial sectors contributed to returns.

While still posting small negative returns over the period, the consumer staples and health-care sectors emerged relatively unscathed as investors turned to more defensive stocks. As such, our holdings Nestle India and GlaxoSmithKline Pharmaceuticals proved advantageous - both companies have strong brands with healthy market positions. Conversely, not holding Sun Pharmaceuticals and Dr Reddy's Laboratories detracted the most from relative performance. While Sun Pharma's good results and a series of US regulatory approvals for its generic drugs also helped boost its share price, we believe it is expensive, given current valuations.

Elsewhere, our cement holdings had a tough period with weak demand and pricing, coupled with rising costs. Against this backdrop, Grasim Industries performed relatively poorly. Separately, the proposed restructuring of Holcim's Indian investments was criticised by the media, notably for the withdrawal of cash from Ambuja Cements. However, the money was only a portion of the total paid and both companies retained cash on their consolidated balance sheets post the transactions. More significantly, Holcim's proposal allows Ambuja Cements to acquire a substantial and high-quality business in ACC (another cement company), with complementary geographic coverage and at reasonable value. We continue to hold a sizable position in cement companies as we believe they are well-positioned to capitalise on India's long-term need to invest in infrastructure and real estate.

On a positive note, Hero MotoCorp was the top contributor to relative return as its share price rebounded on strengthening demand in the two-wheeler market. Since its split from Honda, the motorcycle manufacturer has also introduced its own range of two wheelers, which have been well received. Several IT companies fared well, with outsourcing services in particular supported by the weak rupee. Our holding Tata Consultancy Services lifted relative returns, delivering consistently robust results, with healthy growth in both its domestic and overseas markets. Conversely, not holding HCL Technologies weighed on performance.

Financial stocks came under pressure from liquidity tightening measures imposed to defend the beleaguered currency, while the economic slowdown also hit balance sheets and pockets of the credit market. As such, while holding ICICI detracted from performance, a lack of exposure to Axis Bank, State Bank of India, IDFC and real-estate firm DLF benefitted the portfolio.

Portfolio Activity

During the half year, we introduced drug maker Lupin for its robust product pipeline and strength in the domestic market, as well as in the US and Japan. We initiated a position in industrial gases supplier Linde India through a placement by its parent company under the regulator's new free-float limits. The company has a well-established customer base, which generates steady cash flow and allows it to invest in long-term growth. We also introduced Gruh Finance given its pedigree as a unit of HDFC, its exposure to the rural and semi-urban markets, and conservative lending policies, all of which have enabled it to expand its loan book while maintaining asset quality. Finally, we also introduced ING Vysya, a lender to small companies, with scope to improve profitability by expanding its branch network.

Outlook

While it is too soon to say the tide is turning for India, there has been a respite in persistently downbeat news recently. The rupee has rebounded from historic lows, investor interest has returned and the trade deficit was at its narrowest in over two years in September. Measures to curb the nation's enormous appetite for gold imports in particular appear to have borne fruit. Good monsoons should generate a healthy harvest which, in turn, should dampen mounting food prices that have driven wholesale inflation to uncomfortable levels. Meanwhile, the government's resurrection of a host of stalled projects should help boost stagnant economic growth. Against this, industrial production, along with manufacturing and service sector activity remain weak. In fact, the International Monetary Fund was sufficiently discouraged by India's short-term prospects that it sliced its 2013 growth forecast to 3.8%. Yet, it is difficult to envisage a shift in government focus from populist policies to much-needed fiscal prudence, given looming elections. Investors are likely to remain wary until it is clear who will govern India next.

It would also be remiss to ignore India's sensitivity to the whims of global markets. Political wrangling in the US will likely keep investors fixated into the new year, while any hint that the Federal Reserve is poised to tighten its purse strings is likely to unsettle emerging markets once again. Amid the ups and downs, we will do as we have always done: closely monitor our holdings and seek out other well-run, fundamentally-sound companies. We are confident that, over time, such a portfolio will withstand the unavoidable short-term vagaries of financial markets.

Aberdeen Asset Management Asia Limited

Manager

22 November 2013

INVESTMENT PORTFOLIO - CONSOLIDATED

		Valuation	Net assets
Company	Sector	£'000	%
Infosys{A}	Information Technology	12,604	9.3
Tata Consultancy Services	Information Technology	11,786	8.7
Housing Development Finance Corporation	Financials	11,366	8.4
ICICI Bank	Financials	7,857	5.8
ITC	Consumer Staples	5,967	4.4
Hero MotoCorp	Consumer Discretionary	5,566	4.1
Godrej Consumer Products	Consumer Staples	5,254	3.8
Hindustan Unilever	Consumer Staples	5,135	3.8
Ambuja Cements{A}	Materials	4,943	3.6
MphasiS	Information Technology	4,623	3.4
Top ten investments		75,101	55.3
Bosch	Consumer Discretionary	4,621	3.4
GlaxoSmithKline Pharmaceuticals	Healthcare	4,315	3.2
HDFC Bank	Financials	4,270	3.1
Grasim Industries{A}	Materials	4,190	3.1
Nestlé India	Consumer Staples	4,057	3.0
Container Corporation of India	Industrials	3,282	2.4
Kansai Nerolac Paints	Materials	3,280	2.4
Piramal Enterprises	Healthcare	3,237	2.4
Gujarat Gas	Utilities	2,552	1.9
Sanofi India	Healthcare	2,474	1.8
Top twenty investments		111,379	82.0
Ultratech Cement{A}	Materials	2,431	1.8
Bharti Airtel	Telecommunication Services	2,262	1.7
Jammu & Kashmir Bank	Financials	2,261	1.7
GAIL (India) GDR	Utilities	2,167	1.6
Lupin	Healthcare	2,110	1.5
Linde India	Materials	2,020	1.5
ACC	Materials	1,863	1.4
Tata Power	Utilities	1,552	1.1
CMC	Information Technology	1,503	1.1
ING Vysya Bank	Financials	1,494	1.1
Top thirty investments		131,042	96.5
ABB	Industrials	1,478	1.1
Gruh Finance	Financials	1,203	0.9
Castrol India	Materials	1,183	0.8
Total investments		134,906	99.3
Net current assets		930	0.7
Net assets		135,836	100.0

{A} Comprises equity and listed or tradeable ADR and GDR holdings.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		Six months ended			Six months ended
		30 September 2013			30 September 2012
		(unaudited)			(unaudited)
		Revenue	Capital		Revenue	Capital
		return	return	Total	return	return	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Total revenue	3	1,793	-	1,793	1,645	-	1,645
(Losses)/gains on investments held at fair value		-	(23,510)	(23,510)	-	4,151	4,151
Currency (losses)/gains		-	(3)	(3)	-	5	5
		_______	_______	_______	_______	_______	_______
		1,793	(23,513)	(21,720)	1,645	4,156	5,801
		_______	_______	_______	_______	_______	_______

Expenses
Investment management fees		(732)	-	(732)	(685)	-	(685)
Other administrative expenses		(393)	-	(393)	(381)	-	(381)
		_______	_______	_______	_______	_______	_______
Profit/(loss) before taxation		668	(23,513)	(22,845)	579	4,156	4,735
Taxation	4	(45)	-	(45)	(32)	-	(32)
		_______	_______	_______	_______	_______	_______
Profit/(loss) for the period		623	(23,513)	(22,890)	547	4,156	4,703
		_______	_______	_______	_______	_______	_______

Return per Ordinary share (pence)	5	1.05	(39.80)	(38.75)	0.93	7.03	7.96
		_______	_______	_______	_______	_______	_______

The Group does not have any income or expense that is not included in profit/(loss) for the period, and therefore the "Profit/(loss) for the period" is also the "Total comprehensive income for the period", as defined in International Accounting Standard 1 (revised).

The total column of this statement represents the Statement of Comprehensive Income 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.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Cont'd)

		Year ended
		31 March 2013
		(audited)
		Revenue	Capital
		return	return	Total
	Notes	£'000	£'000	£'000
Total revenue	3	2,414	-	2,414
(Losses)/gains on investments held at fair value		-	14,494	14,494
Currency (losses)/gains		-	10	10
		_______	_______	_______
		2,414	14,504	16,918
		_______	_______	_______

Expenses
Investment management fees		(1,446)	-	(1,446)
Other administrative expenses		(791)	-	(791)
		_______	_______	_______
Profit/(loss) before taxation		177	14,504	14,681
Taxation	4	(60)	-	(60)
		_______	_______	_______
Profit/(loss) for the period		117	14,504	14,621
		_______	_______	_______

Return per Ordinary share (pence)	5	0.20	24.55	24.75
		_______	_______	_______

All items in the above statement derive from continuing operations.

CONSOLIDATED BALANCE SHEET

		As at	As at	As at
		30 September	30 September	31 March
		2013	2012	2013
		(unaudited)	(unaudited)	(audited)
	Notes	£'000	£'000	£'000
Non-current assets
Investments held at fair value through profit or loss		134,906	148,441	157,596
		_______	_______	_______

Current assets
Cash at bank		795	716	1,183
Other receivables		540	109	612
		_______	_______	_______
Total current assets		1,335	825	1,795
		_______	_______	_______
Total assets		136,241	149,266	159,391

Current liabilities
Other payables		(405)	(458)	(665)
		_______	_______	_______
Total current liabilities		(405)	(458)	(665)
		_______	_______	_______
Net assets		135,836	148,808	158,726
		_______	_______	_______

Capital and reserves
Ordinary share capital	8	14,768	14,768	14,768
Share premium account		25,406	25,406	25,406
Special reserve		15,778	15,778	15,778
Capital redemption reserve		4,484	4,484	4,484
Capital reserve	9	73,375	86,540	96,888
Revenue reserve		2,025	1,832	1,402
		_______	_______	_______
Equity shareholders' funds		135,836	148,808	158,726
		_______	_______	_______

Net asset value per Ordinary share (pence)	10	229.96	251.92	268.71
		_______	_______	_______

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Six months ended 30 September 2013 (unaudited)
		Share		Capital
	Share	premium	Special	redemption	Capital	Revenue
	capital	account	reserve	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 March 2013	14,768	25,406	15,778	4,484	96,888	1,402	158,726
Net (loss)/gain on ordinary activities after taxation	-	-	-	-	(23,513)	623	(22,890)
	_______	_______	_______	_______	_______	_______	_______
Balance at 30 September 2013	14,768	25,406	15,778	4,484	73,375	2,025	135,836
	_______	_______	_______	_______	_______	_______	_______

Six months ended 30 September 2012 (unaudited)
		Share		Capital
	Share	premium	Special	redemption	Capital	Revenue
	capital	account	reserve	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 March 2012	14,768	25,406	15,778	4,484	82,384	1,285	144,105
Net gain on ordinary activities after taxation	-	-	-	-	4,156	547	4,703
	_______	_______	_______	_______	_______	_______	_______
Balance at 30 September 2012	14,768	25,406	15,778	4,484	86,540	1,832	148,808
	_______	_______	_______	_______	_______	_______	_______

Year ended 31 March 2012 (audited)
		Share		Capital
	Share	premium	Special	redemption	Capital	Revenue
	capital	account	reserve	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 March 2012	14,768	25,406	15,778	4,484	82,384	1,285	144,105
Net gain on ordinary activities after taxation	-	-	-	-	14,504	117	14,621
	_______	_______	_______	_______	_______	_______	_______
Balance at 31 March 2013	14,768	25,406	15,778	4,484	96,888	1,402	158,726
	_______	_______	_______	_______	_______	_______	_______

CONSOLIDATED CASH FLOW STATEMENT

	Six months ended	Six months ended	Year ended
	30 September	30 September	31 March
	2013	2012	2013
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Operating activities
(Loss)/profit before taxation	(22,845)	4,735	14,681
Losses/(gains) on investments held at fair value through profit or loss	23,510	(4,151)	(14,494)
Net losses/(gains) on foreign exchange	3	(5)	(10)
Net purchases of investments held at fair value through profit or loss	(977)	(1,626)	(963)
Decrease in other receivables	78	221	233
Decrease in amounts due to brokers	-	(167)	-
(Decrease)/increase in other payables	(112)	198	240
	__________	__________	__________
Net cash outflow from operating activities	(343)	(795)	(313)

Taxation paid	(42)	(69)	(89)
	__________	__________	__________
Net decrease in cash and cash equivalents	(385)	(864)	(402)

Cash and cash equivalents at the start of the period	1,183	1,575	1,575
Effect of foreign exchange rate changes	(3)	5	10
	__________	__________	__________
Cash and cash equivalents at the end of the period	795	716	1,183
	__________	__________	__________

Notes to the Half-Yearly Financial Report

1.	Principal activity
	The principal activity of the Company is that of an investment trust company within the meaning of Section 1158 of the Corporation Tax Act 2010.

	The principal activity of its foreign subsidiary is similar in all relevant respects to that of its United Kingdom parent.

Accounting policies

The Group's financial statements have been prepared in accordance with International Accounting Standard ('IAS') 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). The Group's financial statements have been prepared using the same accounting policies applied for the year ended 31 March 2013 financial statements, which received an unqualified audit report.

		Six months ended	Six months ended	Year ended
		30 September 2013	30 September 2012	31 March 2013
3.	Income	£'000	£'000	£'000
	Income from investments
	Overseas dividends	1,792	1,644	2,412

	Other operating income
	Deposit & other interest	1	1	2
		__________	__________	__________
	Total income	1,793	1,645	2,414
		__________	__________	__________

			Six months ended	Six months ended	Year ended
			30 September 2013	30 September 2012	31 March 2013
4.	Tax on ordinary activities		£'000	£'000	£'000
	(a)	Current tax:
		Overseas tax	45	32	60
			__________	__________	__________

	(b)	Factors affecting the tax charge for the year or period
		The tax charged for the period can be reconciled to the profit per the Consolidated Statement of Comprehensive Income as follows:
			Six months ended	Six months ended	Year ended
			30 September 2013	30 September 2012	31 March 2013
			£'000	£'000	£'000
		(Loss)/profit before tax	(22,845)	4,735	14,681
			__________	__________	__________
		Corporation tax on (loss)/profit at the standard rate of 23% (30 September 2012 and 31 March 2013 - 24%)	(5,254)	1,136	3,523
		Effects of:
		Losses/(gains) on investments held at fair value through profit or loss not taxable	5,407	(996)	(3,479)
		Currency losses/(gains) not taxable	1	(1)	(2)
		Movement in excess expenses	258	256	537
		Non-taxable dividend income	(412)	(395)	(579)
		Overseas tax	45	32	46
		Prior year adjustment	-	-	14
			__________	__________	__________
		Current tax charge	45	32	60
			__________	__________	__________

		The Company is exempt from corporation tax on capital gains provided it obtains agreement from HM Revenue & Customs that the tests within Sections 1158-1159 of the Corporation Tax Act 2010 have been met. Under Mauritian taxation laws, no Mauritian capital gains tax is payable on profits arising from the sale of securities.

5.	Return per Ordinary share
	The basic earnings per Ordinary share is based on the net loss after taxation of £22,890,000 (30 September 2012 - net profit of £4,703,000; 31 March 2013 - net profit of £14,621,000), and on 59,070,140 (30 September 2012 - 59,070,140; 31 March 2013 - 59,070,140) Ordinary shares, being the weighted average number of Ordinary shares in issue during the period.

	The earnings per Ordinary share can be further analysed between revenue and capital as follows:

		Six months ended	Six months ended	Year ended
		30 September 2013	30 September 2012	31 March 2013
		p	p	p
	Revenue return per share	1.05	0.93	0.20
	Capital return per share	(39.80)	7.03	24.55
		__________	__________	__________
	Total	(38.75)	7.96	24.75
		__________	__________	__________

		Six months ended	Six months ended	Year ended
		30 September 2013	30 September 2012	31 March 2013
		£'000	£'000	£'000
	Revenue return total	623	547	117
	Capital return total	(23,513)	4,156	14,504
		__________	__________	__________
	Total	(22,890)	4,703	14,621
		__________	__________	__________
	Weighted average number of Ordinary shares in issue	59,070,140	59,070,140	59,070,140
		__________	__________	__________

6.	Dividends on equity shares
	No interim dividend has been declared in respect of either the six months ended 30 September 2013 or 30 September 2012.

	During the year ended 31 March 2013, a dividend of £400,000 (2012 - £345,000) was paid up from the subsidiary company to the parent company.

7.	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 (losses)/gains on investments in the Consolidated Statement of Comprehensive Income. The total costs were as follows:

		Six months ended	Six months ended	Year ended
		30 September 2013	30 September 2012	31 March 2013
		£'000	£'000	£'000
	Purchases	20	13	21
	Sales	23	7	16
		__________	__________	__________
		43	20	37
		__________	__________	__________

8.	Ordinary share capital
	As at 30 September 2013 there were 59,070,140 (30 September 2012 and 31 March 2013 - 59,070,140) Ordinary shares in issue.

9.	Capital reserve
	The capital reserve reflected in the Consolidated Balance Sheet at 30 September 2013 includes gains of £43,169,000 (30 September 2012 - gains of £64,386,000; 31 March 2013 - gains of £72,574,000) which relate to the revaluation of investments held at the reporting date.

10.	Net asset value per Ordinary share
	The basic net asset value per Ordinary share is based on a net asset value of £135,836,000 (30 September 2012 - £148,808,000; 31 March 2013 - £158,726,000) and on 59,070,140 (30 September 2012 and 31 March 2013 - 59,070,140) Ordinary shares, being the number of Ordinary shares in issue at the period end.

11.	Related party disclosures
	There were no related party transactions during the period.

12.	Half-Yearly Report
	The financial information contained in this Half-Yearly Report does not constitute statutory accounts as defined in Sections 434 - 436 of the Companies Act 2006. The financial information for the six months ended 30 September 2013 and 30 September 2012 has not been audited.

	The information for the year ended 31 March 2013 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the Independent Auditor on those accounts contained no qualification or statement under Section 237 (2), (3) or (4) of the Companies Act 2006.

	The Half-Yearly Report has not been reviewed or audited by the Company's Independent Auditor.