Interim Results

New India Investment Trust PLC 18 December 2006 NEW INDIA INVESTMENT TRUST PLC UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006 CHAIRMAN'S STATEMENT The six months to 30 September 2006 was a volatile period for the Indian stock market as it saw the long-sustained rise halted by substantial profit-taking in May and June, only to witness a resumption of the upward trend from July to the end of the period under review. The net effect for the six months was a 0.5% fall in sterling terms of the MSCI India Index. Our net asset value per Ordinary share over the same period fell by 7.3% on an undiluted basis, or by 6.2% on a diluted basis. The underperformance was substantially due to one stock, Reliance Industries, which is not in your portfolio but which is the largest stock in the index and which rose 32.8%. Not holding Reliance Industries cost the fund 4.0% in underperformance against the index. Although the split up of the Reliance group makes for greater levels of transparency, we do not hold the stock as our Manager has not been comfortable with the aggressive expansion plans into areas where it has no track record such as retail. Economic growth has remained robust, with GDP rising by 9.2% year-on-year in the second quarter of fiscal year ending March 2007 (the September 2006 quarter), following an 8.9% rise in the first quarter and an 8.4% expansion in the fiscal year to March 2006. Economic data have continued to highlight strong domestic consumption, backed by rapid expansion in both manufacturing and services activities, together with a renewed commitment by prime minister Manmohan Singh to raise infrastructure spending. The fast pace of economic activity and the impact of record-high fuel prices have compelled the central bank to further tighten monetary policy. The government has also warned that consumers may still have to pay more for fuel, currently heavily subsidised by state-owned oil companies, which has exacted a heavy toll on several of our holdings in the oil and gas sector such as Bharat Petroleum and Oil & Natural Gas Corp. A negative within a generally healthy investment climate has been on the divestment front, where the government's privatisation programme suffered yet another setback in the face of increased opposition from coalition members. All divestments have been halted indefinitely. Against this, merger and acquisition activity has been brisk as Indian corporates exercise their financial strength outside the country: the latest deal to make global headlines was the takeover bid by Tata Steel for UK steelmaker Corus for around US$8bn, following closely after the merger of Mittal Steel and Arcelor to create the world's biggest steel company. The country has also continued to attract sizeable foreign direct investment, with notable commitments announced by SAP, Dell, ICI and Citibank. In line with the strength in the economy, corporate earnings for both the June and September quarters have surprised on the upside, notably in the financial and information technology sectors, where Housing Development Finance Corporation (HDFC), ICICI Bank, Satyam Computer Services, Tata Consultancy Services and Infosys Technologies were among those posting healthy profit growth. Elsewhere, firm domestic demand continued to benefit consumer-orientated companies such as cement maker Grasim Industries, Godrej Consumer Products and Kansai Nerolac (previously named Goodlass Nerolac). Portfolio Activity During the period, we have taken advantage of market volatility to top-slice existing holdings where valuations have run-up and then use the proceeds to top-up on holdings that were comparatively well-priced. We top-sliced positions in Grasim, ABB India and Tata Consulting Services; and then added to our positions in HDFC, ICICI Bank and Infosys Technologies. We also initiated positions in Himatsingka Seide and MphasiS BFL. Himatsingka is a specialised textile manufacturer and distributor. It has a series of specialist fabric shops in India and exports to leading European fashion houses. MphasiS is a well-run information technology software services company that has attracted the attention of Electronic Data Systems Corporation (EDS) of the United States. EDS had, through a tender offer, acquired a controlling stake in the company, merged the business with its 100%-owned private subsidiary and now intend to leverage off MphasiS to maximise India's potential to EDS. We have been following the two stocks since the inception of the Fund, but only initiated positions when pricing was attractive after the period of market weakness. Outlook After scaling record highs and tripling in value over the past three years, valuations are no longer cheap. The justification of that rise, however, is the continued strong earnings posted by our holdings across both domestic and export sectors, which have generally exceeded our expectations. It is important that earnings remain strong to justify current stock market ratings. Economic growth is expected to stay strong, backed by domestic spending, while demand for houses and government spending on roads, ports and other infrastructure projects are also helping industrial production. Meanwhile, business confidence has remained high and foreign investors continue to flock to the country. Notwithstanding the many fiscal and political roadblocks in its path, India continues to offer tremendous investment potential given its large market and talented workforce. High quality companies operating in growth industries such as software, pharmaceuticals and consumer-oriented businesses are the country's biggest draws. Furthermore, an abundance of stock-specific themes make India an attractive long-term bet. In addition, the enormous size of its consumer market, a relatively inexpensive labour force and continuous socio-economic developments make for a compelling story, and my optimism is predicated on these factors. William Salomon Chairman 18 December 2006 GROUP INCOME STATEMENT (UNAUDITED) Six months ended Six months ended 30 September 2006 30 September 2005 Revenue Capital Total Revenue Capital Total return return return return return return £'000 £'000 £'000 £'000 £'000 £'000 Investment income Interest income 10 - 10 7 - 7 Dividend income 665 - 665 764 - 764 ________ ________ ________ _______ _______ ________ Total revenue 675 - 675 771 - 771 (Losses)/gains on held-at-fair-value - (5,655) (5,655) - 16,362 16,362 investments Currency losses - (2) (2) - 2 2 ________ ________ ________ _______ _______ ________ 675 (5,657) (4,982) 771 16,364 17,135 Expenses ________ ________ ________ _______ _______ ________ Management fees (321) - (321) (257) - (257) Other operating expenses (230) - (230) (265) - (265) ________ ________ ________ _______ _______ ________ Profit before taxation 124 (5,657) (5,533) 249 16,364 16,613 Taxation (6) - (6) (10) - (10) ________ ________ ________ _______ _______ ________ Profit/(loss) for the period 118 (5,657) (5,539) 239 16,364 16,603 ________ ________ ________ _______ _______ ________ Earnings per Ordinary share (pence) Basic 0.2 (11.8) (11.6) 0.5 34.2 34.7 ________ ________ ________ _______ _______ ________ Diluted 0.2 (11.6) (11.3) 0.5 33.9 34.4 ________ ________ ________ _______ _______ ________ The total column of this statement represents the Income Statement of the Group, prepared in accordance with International Financial Reporting Standards ('IFRS'). The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations. All income is attributable to the equity holders of New India Investment Trust PLC. There are no minority interests. GROUP BALANCE SHEET As at As at As at 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Non-current assets Investments held at fair value through profit or loss 70,022 59,219 75,712 ___________ ___________ ___________ Current assets Cash and cash equivalents 390 1,320 392 Other receivables 143 219 82 ___________ ___________ ___________ Total current assets 533 1,539 474 ___________ ___________ ___________ Total assets 70,555 60,758 76,186 Current liabilities Other payables (288) (682) (389) ___________ ___________ ___________ Net assets 70,267 60,076 75,797 ___________ ___________ ___________ Capital and reserves Ordinary share capital 11,960 11,958 11,958 Share premium account 11,773 11,766 11,766 Special reserve 17,981 17,981 17,981 Warrant reserve 4,017 4,020 4,020 Warrant exercise reserve 12 9 9 Capital redemption reserve 4,089 4,089 4,089 Capital reserve 18,865 8,524 24,522 Revenue reserve 1,570 1,729 1,452 ___________ ___________ ___________ Net assets attributable to Ordinary Shareholders 70,267 60,076 75,797 ___________ ___________ ___________ Net asset value per Ordinary share (pence) Basic 146.9 125.6 158.5 ___________ ___________ ___________ Diluted 137.0 120.2 146.1 ___________ ___________ ___________ GROUP STATEMENT OF CHANGES IN EQUITY Six months ended 30 September 2006 (unaudited) Share Warrant Share premium Special Warrant exercise capital account reserve reserve reserve £'000 £'000 £'000 £'000 £'000 Balance at 31 March 2006 11,958 11,766 17,981 4,020 9 Net loss on ordinary activities after taxation - - - - - Issue of share capital upon exercise of Warrants 2 7 - (3) 3 Transfer from retained earnings to capital reserve - - - - - Transfer from retained earnings to revenue reserve - - - - - _______ _______ _______ _______ _______ Balance at 30 September 2006 11,960 11,773 17,981 4,017 12 _______ _______ _______ _______ _______ Six months ended 30 September 2005 (unaudited) Share Warrant Share Premium Special Warrant Exercise Capital Account Reserve Reserve Reserve £'000 £'000 £'000 £'000 £'000 Balance at 31 March 2005 11,953 11,752 17,981 4,026 3 Dividends paid and declared - - - - - Net profit on ordinary activities after taxation - - - - - Issue of share capital upon exercise of warrants 5 14 - (6) 6 Transfer from retained earnings to capital reserve - - - - - Transfer from retained earnings to revenue reserve - - - - - _______ _______ _______ _______ _______ Balance at 30 September 2005 11,958 11,766 17,981 4,020 9 _______ _______ _______ _______ _______ Period from 1 March 2005 to 31 March 2006 (audited) Share Warrant Share Premium Special Warrant Exercise Capital Account Reserve Reserve Reserve £'000 £'000 £'000 £'000 £'000 Balance at 28 February 2005 11,953 11,752 17,981 4,026 3 Dividends paid and declared - - - - - Net profit on ordinary activities after taxation - - - - - Issue of share capital upon exercise of Warrants 5 14 - (6) 6 Transfer from retained earnings to capital reserve - - - - - Transfer from revenue reserve to retained earnings - - - - - _______ _______ _______ _______ _______ Balance at 31 March 2006 11,958 11,766 17,981 4,020 9 _______ _______ _______ _______ _______ GROUP STATEMENT OF CHANGES IN EQUITY Six months ended 30 September 2006 (unaudited) Capital Redemption Capital Revenue Retained Reserve Reserve Reserve Earnings Total £'000 £'000 £'000 £'000 £'000 Balance at 31 March 2006 4,089 24,522 1,452 - 75,797 Net loss on ordinary activities after taxation - - - (5,539) (5,539) Issue of share capital upon exercise of Warrants - - - - 9 Transfer from retained earnings to capital reserve - (5,657) - 5,657 - Transfer from retained earnings to revenue reserve - - 118 (118) - _______ _______ _______ _______ _______ Balance at 30 September 2006 4,089 18,865 1,570 - 70,267 _______ _______ _______ _______ _______ Six months ended 30 September 2005 (unaudited) Capital Redemption Capital Revenue Retained Reserve Reserve Reserve Earnings Total £'000 £'000 £'000 £'000 £'000 Balance at 31 March 2005 4,089 (7,840) 1,825 - 43,789 Dividends paid and declared - - (335) - (335) Net profit on ordinary activities after taxation - - - 16,603 16,603 Issue of share capital upon exercise of warrants - - - - 19 Transfer from retained earnings to capital reserve - 16,364 - (16,364) - Transfer from retained earnings to revenue reserve - - 239 (239) - _______ _______ _______ _______ _______ Balance at 30 September 2005 4,089 8,524 1,729 - 60,076 _______ _______ _______ _______ _______ Period from 1 March 2005 to 31 March 2006 (audited) Capital Redemption Capital Revenue Retained Reserve Reserve Reserve Earnings Total £'000 £'000 £'000 £'000 £'000 Balance at 28 February 2005 4,089 (6,803) 1,799 - 44,800 Dividends paid and declared - - (335) - (335) Net profit on ordinary activities after taxation - - - 31,313 31,313 Issue of share capital upon exercise of Warrants - - - - 19 Transfer from retained earnings to capital reserve - 31,325 - (31,325) - Transfer from revenue reserve to retained earnings - - (12) 12 - _______ _______ _______ _______ _______ Balance at 31 March 2006 4,089 24,522 1,452 - 75,797 _______ _______ _______ _______ _______ GROUP CASH FLOW STATEMENT Six months ended Period from 1 30 30 March 2005 September September to 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Net cash outflow from operating activities before interest and (5) 914 (1,575) corporation tax Interest paid - - (1) Corporation tax paid (4) - (134) __________ __________ __________ Net cash outflow from operating activities (9) 914 (1,710) Financing activities Exercise of Warrants 9 19 19 Dividends paid - (335) (335) __________ __________ __________ Net cash inflow/(outflow) from financing activities 9 (316) (316) __________ __________ __________ Net increase/(decrease) in cash and cash equivalents - 598 (2,026) Effect of foreign exchange rate changes (2) 2 (7) __________ __________ __________ Change in cash and cash equivalents (2) 600 (2,033) Cash and cash equivalents at the start of the period 392 720 2,425 __________ __________ __________ Cash and cash equivalents at the end of the period 390 1,320 392 __________ __________ __________ Notes to the Interim Report 1. Principal Activity The principal activity of the Company is that of an investment trust company within the meaning of Section 842 of the Income and Corporation Taxes Act 1988. The principal activity of its foreign subsidiary is similar to that of its United Kingdom parent. 2. Accounting policies The Group's interim financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union ('EU'). The principal accounting policies adopted by the Group are set out below, and are the same as used in the preceding annual financial statements. (a) Basis of preparation The Group's interim financial statements are presented in Sterling, which is the currency of the primary environment in which the Group operates. All values are rounded to the nearest thousand pounds (£'000) except when otherwise indicated. Where presentational guidance set out in the Statement of Recommended Practice ('SORP') for investment trusts issued by the Association of Investment Companies ('AIC') and revised in December 2005 is consistent with the requirements of IFRS, the financial statements have been prepared in accordance with the SORP. (b) Group accounts The Group financial statements consolidate the financial statements of the Company and its subsidiary, New India Investment Company (Mauritius) Limited. Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. Control comprises the power to govern the financial and operating policies of the investee so as to obtain benefit from its activities and is achieved through direct or indirect ownership of voting rights, currently exercisable or convertible potential voting rights, or by way of contractual agreement. The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. (c) Presentation of Group Income Statement In order 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 a revenue and capital nature has been presented alongside the Group Income Statement. In accordance with the Company's status as a UK investment company under Section 266 of the Companies Act 1985, net capital returns may not be distributed by way of dividend. (d) Segmental reporting The Directors are of the opinion that the Group is engaged in a single segment of business being investment business. (e) Income Dividends receivable on equity shares are recognised in the Group Income Statement on the ex-dividend date. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Group's right to receive payment is established. Where a Group company has elected to receive dividends in the form of additional shares rather than in cash, the amount of the cash dividend is recognised as income. Provision is made for any dividends not expected to be received. Interest receivable from cash and short-term deposits is accrued to the end of the financial period. (f) Expenses and interest payable All expenses, including interest expenses, are accounted for on an accruals basis. Expenses are charged to the revenue column of the Group Income Statement except as follows: - expenses which are incidental to the acquisition or disposal of an investment are charged to the capital column of the Group Income Statement and separately identified and disclosed in note 6; and - expenses are charged to the capital column of the Group Income Statement where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. (g) Taxation The charge for taxation is based on the profit for the financial period. Deferred tax Deferred tax is recognised in respect of all temporary differences at the balance sheet, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the balance sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the temporary differences can be deducted. Deferred tax assets and liabilities are measured at the rates applicable to the legal jurisdictions in which they arise. (h) Investments designated as held at fair value through profit or loss Purchases of investments are recognised on a trade date basis and designated upon initial recognition as held at fair value through profit or loss. Sales of assets are also recognised on a trade date basis. The fair value of the financial statements is based on their quoted bid price at the balance sheet date, without deduction for any estimated future selling costs. Unquoted investments are held at fair value, as measured by the Directors using appropriate valuation methodologies such as earnings multiples, recent transactions and net assets. Changes in the value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Group Income Statement as '(Losses)/gains on held-at-fair-value investments'. Also included within this caption are transaction costs in relation to the purchase or sale of investments. (i) Cash and cash equivalents Cash comprises cash in hand and banks and short-term deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value. (j) Other receivables and payables Other receivables do not carry any interest and are short-term in nature and are accordingly stated at their nominal value. Other payables are non interest bearing and are stated at their nominal value. (k) Dividend payable Final dividends are recognised from the date on which they are declared and approved by Shareholders. (l) Foreign currency Overseas monetary assets and liabilities are converted into Sterling at the rate of exchange ruling at the balance sheet date. Transactions during the period involving foreign currencies are converted at the rate of exchange ruling at the transaction date. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss and recognised in the Group Income Statement. 3. Return per Ordinary share The basic earnings per Ordinary share are based on the net loss after taxation of £5,539,000 (30 September 2005 - net income of £16,603,000), and on 47,833,416 (30 September 2005 - 47,820,020) Ordinary shares, being the weighted average number of Ordinary shares in issue during the period. The diluted earnings per Ordinary share are based on the net loss after taxation of £5,539,000 (30 September 2005 - net income of £16,603,000), and on 48,962,724 (30 September 2005 - 48,270,082) Ordinary shares, being the weighted average number of Ordinary shares in issue during the period. The basic and diluted earnings per Ordinary share detailed above can be further analysed between revenue and capital as follows : Six months ended 30 September 2006 Six months ended 30 September 2005 Basic Revenue Capital Total Revenue Capital Total Net profit/(loss) (£'000) 118 (5,657) (5,539) 239 16,364 16,603 Weighted average number of Ordinary 47,833,416 47,833,416 47,820,020 47,820,020 47,820,020 shares in issue 47,833,416 Return per Ordinary share (pence) 0.2 (11.8) (11.6) 0.5 34.2 34.7 Six months ended 30 September 2006 Six months ended 30 September 2005 Diluted Revenue Capital Total Revenue Capital Total Net profit/(loss) (£'000) 118 (5,657) (5,539) 239 16,364 16,603 Weighted average number of Ordinary 48,962,724 48,270,082 48,270,082 48,270,082 shares in issue 48,962,724 48,962,724 Return per Ordinary share (pence) 0.2 (11.6) (11.3) 0.5 33.9 34.4 4. Dividends on equity shares Ordinary dividends on equity shares deducted from reserves are analysed below: Six months ended Six months ended 30 September 30 September 2006 2005 £'000 £'000 Final dividend for the year ended 28 February 2005 - 0.70p - 335 No interim dividend has been declared in respect of the six months ended 30 September 2006. The final dividend of 0.70p in respect of the accounting year ended 28 February 2005 was declared on 7 June 2005 and paid on 15 July 2005. No dividend was paid in respect of the accounting period ended 31 March 2006. 5. Net asset value per Ordinary share The basic net asset value per Ordinary share is based on a net asset value of £70,267,000 (31 March 2006 - £75,797,000; 30 September 2005 - £60,076,000) and on 47,839,850 (31 March 2006 and 30 September 2005 - 47,830,750) Ordinary shares, being the number of Ordinary shares in issue at the period end. The diluted net asset value per Ordinary share has been calculated by reference to the total number of Ordinary shares in issue at the period end and on the assumption that those Warrants which are not exercised at the period end, amounting to 12,805,290 Warrants as at 30 September 2006 (31 March 2006 and 30 September 2005 - 12,814,390), were exercised on the first day of the financial period at 100p per share, giving a total of 60,645,140 Ordinary shares. 6. Transaction costs The following transaction costs incurred by the Group on the acquisition and disposal of investments are included within the group income statement: Period from Six months ended Six months ended 1 March 2005 to 30 September 2006 30 September 2005 31 March 2006 £'000 £'000 £'000 Purchases 14 16 24 Sales 15 19 23 29 35 47 As at As at As at 30 September 2006 30 September 2005 31 March 2006 7. Analysis of Group capital reserve £'000 £'000 £'000 Capital reserve - realised (4,807) (5,417) (6,234) Capital reserve - unrealised 23,672 13,941 30,756 18,865 8,524 24,522 8. Publication of non-statutory accounts The financial information contained in this Interim Report does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The financial information for the six months ended 30 September 2006 and 30 September 2005 have not been audited. The information for the period from 1 March 2005 to 31 March 2006 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under Section 237 (2) or (3) of the Companies Act 1985. Aberdeen Asset Management PLC Secretaries 18 December 2006 Independent Review Report to the Members of New India Investment Trust PLC Introduction We have been instructed by the Company to review the financial information for the six months ended 30 September 2006 which comprises the Group Income Statement, Group Balance Sheet, Group Statement of Changes in Equity, Group Cash Flow Statement and the related notes 1 to 8. We have read the other information contained in the Interim Report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report is made solely to the Company in accordance with guidance contained in Bulletin 1999/4 'Review of interim financial information' issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed. Directors' Responsibilities The Interim Report, including the financial information contained therein, is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Interim Report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review Work Performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 'Review of interim financial information' issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of management and applying analytical procedures to the financial information and underlying financial data, and based thereon, assessing whether the accounting policies and presentation have been consistently applied, unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with International Standards on Auditing (UK and Ireland) and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review Conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 September 2006. Ernst & Young LLP London 18 December 2006 This information is provided by RNS The company news service from the London Stock Exchange

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