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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Abrdn New India Investment Trust Plc | LSE:ANII | London | Ordinary Share | GB0006048770 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 8.00 | 1.07% | 758.00 | 748.00 | 758.00 | 762.00 | 760.00 | 760.00 | 60,724 | 16:35:07 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Trust,ex Ed,religious,charty | -29.55M | -34.27M | -0.5892 | -12.93 | 443.16M |
From May 2019 to May 2024
TIDMANII
RNS Number : 0254C
Aberdeen New India Invest Trust PLC
13 June 2019
ABERDEEN NEW INDIA INVESTMENT TRUST PLC
LEI - 549300D2AW66WYEVKF02
ANNUAL FINANCIAL REPORT
For the year ended 31 March 2019
FINANCIAL HIGHLIGHTS
Hot Features
Premium
Net asset value total
Share price total return{AB} +8.2% return{AB} +8.6%
2018 -3.5% 2018 +0.4%
MSCI India Index total Discount to net asset
return{B} +14.9% value{A} 13.3%
2018 -1.7% 2018 13.1%
Ongoing charges ratio{A} 1.17%
2018 1.25%
{A} Alternative Performance Measure.
{B} Total return represents capital return plus dividends reinvested.
Overview
Aberdeen New India Investment Trust PLC (the "Company") is an approved investment trust with its Ordinary shares listed on the premium segment of the London Stock Exchange. The Company aims to provide shareholders with long-term capital appreciation by investment in companies which are incorporated in India, or which derive significant revenue or profit from India, with dividend yield from the Company being of secondary importance.
The Company is governed by a Board of Directors, all of whom are independent, and has no employees. Like other investment companies, it outsources its investment management and administration to an investment management company, the Standard Life Aberdeen Group of companies, and other third party providers.
The Company does not have a fixed life but an ordinary resolution to continue the Company is put to shareholders at each Annual General Meeting ("AGM").
Management
The Company has appointed Aberdeen Standard Fund Managers Limited ("ASFML", " Manager", or "AIFM") as its alternative investment fund manager, which has in turn delegated certain responsibilities, including investment management, to Aberdeen Standard Investments (Asia) Limited ("ASIAL" or "Investment Manager"). Both companies are wholly owned subsidiaries of Standard Life Aberdeen plc.
FINANCIAL CALAR
5 September Annual General Meeting (12.30pm), Bow Bells House, 1 Bread
2019 Street, London, EC4M 9HH
November 2019 Announcement of Half-Yearly Financial Report for the six
months ending 30 September 2019
June 2020 Announcement of Annual Financial Report for the year ending
31 March 2020
CHAIRMAN'S STATEMENT
Dear Shareholder,
Performance
For the year ended 31 March 2019, your Company's net asset value ("NAV") per share rose by 8.6% to 531.9p while the ordinary share price rose by 8.2% to 461.0p (both figures in sterling total return terms). It is pleasing that your Company's NAV continued to grow through the period, albeit the share price lagged. By comparison, the benchmark MSCI India Index (the "Index") rose by 14.9% in sterling terms. The primary reason for the Company's under-performance against the Index was its underweight position to the energy sector and to Reliance Industries in particular. The Investment Manager provides an explanation for this decision in their Report. Over the longer term, your Company continues to outperform the Index with the NAV per share increasing by 101.8% and 311.2% over five and ten years, respectively, as compared to a rise in the Index of 86.9% and 229.4% over the equivalent periods, all figures in total return terms.
Overview
Even though the Indian stock market rose almost 15% over the year, it remained volatile for much of the period. As a domestically-oriented economy, India is somewhat insulated from major global shocks and external trade pressures. The rupee, however, suffered from a strengthening US dollar, concerns over rising oil prices and a widening current account deficit. Meanwhile, debt defaults unnerved the financial sector. Nonetheless, India ended the year under review with improving sentiment supported by stabilising macroeconomic conditions and a more accommodative central bank governor. Prime Minister Narendra Modi and his party, Bharatiya Janata Party (BJP), won the Indian general election with a decisive majority. With such a strong mandate the continuation of reform initiatives is expected, which should augur well for the country in the long run.
Over this review period, three key themes are worth highlighting:
The first relates to signs of stress in the financial sector, sparked by debt defaults at IL&FS, a non-banking financial company ("NBFC") which provides infrastructure financing. While this could be viewed as an isolated episode, rather than indicative of a systemic problem, it triggered panic. This reflected the continuing concern over credit stress within the system. The ensuing liquidity crunch and heightened credit risk raised concerns over the broader banking sector, particularly other NBFCs. Consequently, the stock market fell sharply.
To its credit, the Reserve Bank of India ("RBI") acted swiftly. The RBI injected liquidity to alleviate the pressure within the financial system. Throughout the entire episode, your Manager's emphasis on quality stood out. The squeeze on liquidity exposed the range of quality within the sector with poorer standards and controls among most NBFCs, which resulted in a shake-out and consolidation. Well-capitalised and better-run private lenders, which your Manager favours, should capture market share at the expense of the NBFCs. As sentiment turned around, these holdings in quality private-sector banks and financial companies with good fundamentals and strong management were among the best performing stocks.
Inflation, meanwhile, a perennial issue for India, was a feature during the year under review. For the majority of 2018, the sharp rise in crude prices pushed up inflation, widened the current account deficit and weakened the rupee. Given its inflation-fighting mandate, the RBI responded by raising interest rates. This move, however, created a rift with the Modi government, which had been encouraging the central bank to enact policies which would boost economic growth, ahead of the general election. Subsequently, the RBI underwent a change at its helm, leading some to question the central bank's future independence. The new bank governor, Shaktikanta Das, was expected to be more receptive to dealing with the government's demands, being a former bureaucrat and a Modi favourite. As expected, the RBI cut rates later in the year after retreating oil prices brought inflation down to more manageable levels and the rupee strengthened. However, this series of events has called into questions the RBI's historical independence.
Finally, politics and policies featured prominently, especially in an election year. The government continued its reform efforts through measures such as the insolvency and bankruptcy code and the Goods and Service Tax (though not every initiative, such as demonetisation, turned out as intended). It also provided grants and tax breaks to the middle class and farmers to boost consumption.
Since then, the incumbent government has won the elections and Prime Minister Modi continues in power with an increased majority. We are only just starting to see some of the fruits of the earlier reforms, such as the Goods and Services Tax ('GST'). With the BJP back in power, I would expect a continuation of its policy initiatives in affordable housing, health-care and infrastructure. It is also likely to continue privatisation in the public sector and simplify and strengthen the GST framework. I would expect the positive effects of these reforms to continue to flow through to the economy for some time to come. If implemented, these measures should add to the underlying attractiveness of the Indian economy.
Gearing
As I indicated last year, the Company explored the potential for a bank borrowing facility which could be drawn upon by the Manager as and when investment opportunities arise. This takes advantage of a particular attraction of a closed-end fund structure. Gearing can improve returns in rising stockmarkets, but also give rise to reduced returns in falling stockmarkets.
In July 2018, the Company entered into a two year, GBP30 million revolving credit facility with Natwest Markets Plc, of which GBP15 million had been drawn down as at 31 March 2019 resulting in net gearing of 3.1% (2018 - net cash of 1.5%).
Indian Capital Gains Tax
Changes to Indian tax law enacted during the year ended 31 March 2019 mean that the Company is now subject to both short-term and long-term Indian capital gains tax. Accordingly, although this tax would only become payable in the future if investments were sold, a potential liability of GBP2.4m has been recognised as a non-current liability in the Statement of Financial Position, as at 31 March 2019.
Discount and Share Buybacks
The Board continues to monitor actively the discount of the Ordinary share price to the NAV per Ordinary share (including income) and will pursue a policy of selective buybacks of shares where to do so, in the opinion of the Board, would be in the best interests of shareholders, whilst also having regard to the overall size of the Company. Since 31 March 2019, the discount has narrowed from 13.3% to 12.2%, as at the time of writing.
The Board believes that a combination of strong long-term performance and effective marketing should increase demand for the Company's shares and reduce the discount to NAV at which they trade, over time.
Continuation of the Company
Your Board considers that the Company's investment objective remains relevant and appropriate, and in view of its long term performance record, recommends that Shareholders vote in favour of Ordinary resolution 8 at the Annual General Meeting ("AGM"), to allow the Company to continue as an investment trust. Shareholders will be aware that they have had the opportunity to vote on this resolution annually since 2005.
Electronic Communications
The Board is proposing to take advantage of the ability, under the Company's Articles of Association, to communicate electronically with shareholders as well as making documents available on its website instead of sending out paper versions. Increased use of electronic communications will deliver savings to the Company in terms of administration, printing and postage costs, as well as accelerating the provision of information to shareholders. The reduced use of paper will also bring environmental benefits. The Company will therefore be writing to you later in the year seeking your consent to communicate with you electronically noting that shareholders are provided with regular opportunities to request a paper version.
Annual General Meeting
The Annual General Meeting ("AGM"), which will be held at Bow Bells House, 1 Bread Street, London EC4M 9HH on Thursday 5 September 2019 at 12.30pm, provides shareholders with an opportunity to ask any questions that they may have of either the Board or the Manager. I look forward to meeting as many of you as possible over a buffet lunch which will follow the AGM.
Action to be Taken
Shareholders will find enclosed with this Annual Report a Form of Proxy for use in relation to the AGM. Whether or not you propose to attend the AGM, you are encouraged to complete the Form of Proxy in accordance with the instructions printed on it. Please return it in the prepaid envelope as soon as possible but in any event so that it might be received no later than 12.30pm on 3 September 2019. Completion of a Form of Proxy does not prevent you from attending and voting in person at the AGM if you wish to do so.
If you hold your shares in the Company via a share plan or a platform and would like to attend and/or vote at the AGM, then you will need to make arrangements with the administrator of your share plan or platform. For this purpose, investors that hold their shares in the Company via the Aberdeen Standard Investments Children's Plan, Share Plan and/or ISA will find a Letter of Direction enclosed. Shareholders are encouraged to complete and return the Letter of Direction in accordance with the instructions printed thereon.
For holders of shares via share plans and platforms, the website of the Association of Investment Companies (theaic.co.uk/aic/shareholder-voting-consumer-platforms) contains details of how to attend and vote at Company Meetings.
Outlook
The mandate handed to the BJP government should allow Prime Minister Modi to quicken the pace of his structural reforms. With infrastructure being a key agenda of the BJP's election manifesto, I would expect Mr Modi to continue with his capital expenditure programmes. This should provide some cushion from the impact of a tougher external environment, including escalating US-China trade tensions, resurgent oil prices and more challenging domestic conditions, such as weaker consumption and sluggish investment activity. Potentially, the BJP's larger majority could renew efforts to introduce the land acquisition bill, which would strengthen property rights, and update archaic labour laws that hold back productivity in the manufacturing sector. Nationwide and statewide improvements in the ease of doing business, through a combination of digitalisation and better transparency, should also attract more foreign direct investment.
India remains a favoured market in Asia. Its young population and expanding middle class underpin the country's compelling growth prospects. Given the large domestic market, it is also less export dependent than many of its emerging market peers.
More importantly, the country is home to some of the best-quality companies across the region. It offers a diverse mix of well-managed domestic champions and offshoots of multinationals. This is supported by a culture of entrepreneurship and innovation. Your Manager remains invested in companies with pricing power and solid fundamentals that continue to benefit from India's long-term consumption trends. The Manager's preferred holdings also play to the strengths of what the country has to offer in IT services and engineering skills, given that it has the most engineering professionals in the world. This also feeds well into the digitalisation trend seen globally.
Under these circumstances, your Manager's investment approach should bode well for your Company. I am certain that the long-term focus on quality companies and the bottom-up active approach of identifying emerging prospects with good growth potential should continue to stand the Company in good stead. Given the strength of the business models and financials of the underlying holdings, your Manager is confident that the portfolio is able to withstand the inevitable gyrations of stock markets. Further information may be found in the Investment Manager's Report.
Hasan Askari
Chairman
12 June 2019
STRATEGIC REPORT - OVERVIEW OF STRATEGY
Business Model
The business of the Company is that of an investment company which continues to qualify as an investment trust for UK capital gains tax purposes. The Directors do not envisage any change either to this model or to the Company's activities in the foreseeable future.
Investment Objective
The Company aims to provide shareholders with long-term capital appreciation by investment in companies which are incorporated in India, or which derive significant revenue or profit from India, with dividend yield from the Company being of secondary importance.
Investment Policy
The Company primarily invests in Indian equity securities.
Delivering the Investment Policy
Risk Diversification
The Company's investment policy is flexible, enabling it to invest in all types of securities, including equities, debt and convertible securities in companies listed on the Indian stock exchanges or which are listed on other international exchanges and which derive significant revenue or profit from India. The Company may also, where appropriate, invest in open-ended collective investment schemes and closed-end funds which invest in India and are listed on the Indian stock exchanges. The Company is free to invest in any particular market segment or geographical region of India or in small, mid or large capitalisation companies.
The Company's portfolio will typically comprise in the region of 25 to 50 holdings but with due consideration given to spreading investment risk.
Gearing
The Company is permitted to borrow up to 25% of its net assets (measured when new borrowings are incurred). It is intended that this power should be used to leverage the Company's portfolio in order to enhance returns when and to the extent that it is considered appropriate to do so. Gearing is used in relation to specific opportunities or circumstances. The Directors take care to ensure that borrowing covenants permit flexibility of investment policy.
Currency, Hedging Policy and Derivatives
The Company's financial statements are maintained in Sterling while, because of its investment focus, many of the Company's investments are denominated and quoted in currencies other than Sterling, including in particular, the Indian Rupee. Although it is not the Company's present intention to do so, the Company may, where appropriate and economic to do so, employ a policy of hedging against fluctuations in the rate of exchange between Sterling and other currencies in which its investments are denominated. Cash balances are held in such currency or currencies as the Manager considers appropriate, although it is expected that this would primarily be Sterling.
Although the Company does not employ derivatives presently, it may do so, if appropriate, to enhance portfolio returns (of a capital or income nature) and for efficient portfolio management, that is, to reduce, transfer or eliminate risk in its investments, including protection against currency risks, or to gain exposure to a specific market.
Investment Restrictions
It is the investment policy of the Company to invest no more than 15% of its gross assets in other listed investment companies (including listed investment trusts). The Company held no investments in other listed investment companies during the year ended 31 March 2019.
Benchmark
The Company's benchmark is the MSCI India Index (Sterling-adjusted).
Key Performance Indicators
At each Board meeting, the Directors consider a number of performance measures to assess the Company's success in achieving its objective. The main Key Performance Indicators ("KPIs") identified by the Board in relation to the Company, which are considered at each Board meeting, are as follows:
KPI Description
Performance of The Board considers the Company's NAV return and share
NAV and share price return, relative to the MSCI India Index (Sterling-adjusted),
price compared to be the best indicator of performance over time. The
to the MSCI India figures for this year and for the past three and five
Index return (Sterling-adjusted) years are set out in Results and a graph showing NAV total
return performance against the MSCI India Index over the
past five years is included in the published Annual Report.
Discount to NAV The discount at which the Company's share price trades
relative to the NAV per share is monitored by the Board.
A graph showing the discount over the last five years
is included in the published Annual Report
Ongoing charges The Board regularly monitors the operating costs of the
Company and the Ongoing charges for this year and the
previous year are disclosed in Results.
There are a number of risks which, if realised, could have a material adverse effect on the Company and its financial position, performance and prospects. The Board has carried out a robust assessment of these risks, which include those that would threaten its business model, future performance and solvency. The principal risks associated with an investment in the Company's shares are published monthly in the Company's factsheet or they can be found in the pre-investment disclosure document ("PIDD") published by the AIFM, both of which are available from the Company's website: aberdeen-newindia.co.uk.
The principal risks and uncertainties faced by the Company are reviewed annually by the Audit Committee in the form of a detailed risk matrix and heat map and they are described in the table below, together with any mitigating actions. Some of these risks can be mitigated or managed to a greater or lesser extent by the actions of the Board in appointing competent investment managers and depositaries. 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.
In addition to these risks, the outcome and potential impact on the Company of the UK Government's ongoing Brexit discussions with the European Union remain unclear at the time of writing. The Company's Indian investments are limited in their direct exposure to the UK market and a no-deal Brexit is not expected to pose a material risk. However, as the Company is priced in Sterling, sharp movements in the Indian Rupee/Sterling exchange rate, which may arise from Brexit, could affect the Company's net asset value. Separately, investor sentiment might lead to increased or reduced demand for the Company's shares, in light of Brexit uncertainty, which would be reflected in a narrowing or widening of the discount at which the Company's shares trade relative to their net asset value. Overall, the Board does not expect the Company's business model, over the longer term, to be affected by Brexit. In all other respects, the Company's principal risks and uncertainties have not changed materially since the date of the Annual Report and are not expected to change materially for the current financial year.
An explanation of other risks relating to the Company's investment activities, specifically market price, interest rate, liquidity and credit risk, and a note of how these risks are managed, is contained in note 17 to the financial statements.
Description Mitigating Action
Market risk - falls in the prices The Investment Manager seeks to reduce
of securities issued by Indian companies, market risk by investing in a wide variety
which may themselves be determined of companies with strong balance sheets
by local and international economic, and the earnings power to pay increasing
political and financial factors dividends. In addition, investments
and management actions. are made in diversified sectors in order
to reduce the risk of a single large
exposure; at present the Investment
Manager may not invest more than 10%
of the Company's net assets in any single
stock (measured when the investment
is made) unless a specific waiver is
sought from the Board. The Investment
Manager believes that diversification
should be looked at in absolute terms
rather than relative to the MSCI India
Index. The performance of the portfolio
relative to the MSCI India Index and
the underlying stock weightings in the
portfolio against their index weightings
are monitored closely by the Board.
Foreign exchange - adverse movements The Board monitors the Rupee/Sterling
in the exchange rate between Sterling exchange rate and reviews the currency
and the Rupee, as well as between impacts on both capital and income at
other currencies, affecting the each meeting although the Company did
overall value of the portfolio. not hedge its foreign currency exposure
during the year.
Discount - factors which affect The Board keeps under review the discount
the discount to NAV at which the and may consider selective buyback of
Ordinary shares of the Company trade. shares where to do so would be in the
These may include the popularity best interests of shareholders, balanced
of the investment objective of the against reducing overall size of the
Company, the popularity of investment Company. Any shares bought back would
trust shares in general and the be either cancelled or held in treasury.
ease with which the Company's Ordinary
shares can be traded on the London
Stock Exchange.
Depositary risk - insolvency of The depositary, BNP Paribas Securities
the depositary or custodian or sub-custodian, Services, presents to the Board at least
or a shortfall in the assets held annually on the Company's compliance
by that depositary, custodian or with AIFMD. The Manager separately monitors
sub-custodian arising from fraud, the activities of the depositary and
operational errors or settlement reports to the Board on any exceptions
difficulties resulting in a loss arising.
of assets owned by the Company.
Financial and regulatory risk - The financial risks associated with
the financial risks associated with the Company include market risk, liquidity
the portfolio could result in losses risk and credit risk, all of which are
to the Company. In addition, failure mitigated by the Manager. Further details
to comply with relevant regulation of the steps taken to mitigate the financial
(including the Companies Act, the risks associated with the portfolio
Financial Services and Markets Act, are set out in note 17 to the financial
the Alternative Investment Fund statements.
Managers Directive, accounting standards,
investment trust regulations and The Board is responsible for ensuring
the Listing Rules, Disclosure Guidance the Company's compliance with applicable
and Transparency Rules and Prospectus regulations. Monitoring of this compliance,
Rules) may have an adverse impact and regular reporting to the Board thereon,
on the Company. has been delegated to the Manager. The
Board receives updates from the Manager
and AIC briefings concerning industry
changes. From time to time, the Company
also employs external advisers covering
specific areas of compliance.
In particular, the Board receives reports
from the Manager covering investment
movements, the level and type of forecast
income and expenditure and the amount
of proposed dividends with a view to
ensuring that the Company continues
to qualify as an investment trust under
Chapter 4 of Part 24 of the Corporation
Any change in the Company's tax Tax Act 2010. A breach of these regulations
status or in taxation legislation would mean that the Company is no longer
(including the tax treatment of exempt from UK capital gains tax on
dividends or other investment income profits realised from the sale of its
received by the Company) could affect investments.
the value of the investments held
by the Company and the Company's The Company may be liable to Indian
ability to provide returns to shareholders capital gains tax at rates of 10% and
or alter the post-tax returns to 15% for long term and short term gains,
shareholders. respectively, although this is likely
to be partly mitigated through the Manager's
investment process with its emphasis
on buy-and-hold.
Gearing - whilst the use of gearing The Board is responsible for determining
should enhance the total return the gearing strategy for the Company,
on the Ordinary shares where the with day-to-day gearing decisions being
return on the Company's underlying made by the Investment Manager. Borrowings
assets is rising and exceeds the are short term in nature and particular
cost of borrowing, it will have care is taken to ensure that any bank
the opposite effect where the underlying covenants permit maximum flexibility
return is less than the cost of of investment policy. The Board has
borrowing, further reducing the agreed certain gearing restrictions
total return on the Ordinary shares. with the Manager and reviews compliance
A significant fall in the value with these guidelines at each Board
of the Company's investment portfolio meeting. Loan agreements are entered
could result in a breach of bank into following review by the Company's
covenants and trigger demands for lawyers.
early repayment.
Promoting the Company
The Board recognises the importance of promoting the Company to prospective investors both for improving liquidity and enhancing the value and rating of the Company's shares. The Board believes an effective way to achieve this is through subscription to, and participation in, the promotional programme run by the Standard Life Aberdeen Group on behalf of a number of investment companies under its management. The Company's financial contribution to the programme is matched by the Standard Life Aberdeen Group. The Standard Life Aberdeen Group promotional activities team reports quarterly to the Board giving analysis of the promotional activities as well as updates on the shareholder register and any changes in the composition of that register.
The purpose of the programme is both to communicate effectively with existing shareholders and to gain new shareholders with the aim of improving liquidity and enhancing the value and rating of the Company's shares by reducing the discount at which they trade. Communicating the long-term attractions of the Company is key and therefore the Company also supports the Standard Life Aberdeen Group's investor relations programme which involves regional roadshows, promotional and public relations campaigns.
Board Diversity
The Board recognises the importance of having a range of skilled, experienced individuals with the right knowledge represented on the Board in order to allow the Board to fulfil its obligations. The Board also recognises the benefits, and is supportive, of the principle of diversity in its recruitment of new Board members. The Board will continue to ensure that all appointments are made on the basis of merit against the specification prepared for each appointment and will search widely when recruiting any new Director with a view to maximising diversity. Consequently, the Company does not consider it appropriate to set specific diversity targets. At 31 March 2019, there were three male Directors and one female Director on the Board.
Environmental, Social and Human Rights Issues
The Company has no employees as it is managed by Aberdeen Standard Fund Managers Limited and there are therefore no disclosures to be made in respect of employees. The Company's responsible investment policy is outlined in the Strategic Report.
Due to the nature of the Company's business, being a company that does not offer goods and services to customers, the Board considers that it is not within the scope of the Modern Slavery Act 2015 because it has no turnover. The Company is therefore not required to make a slavery and human trafficking statement.
Notwithstanding this, the Board considers the Company's supply chains, dealing predominantly with professional advisers and service providers in the financial services industry, to be low risk in relation to this matter.
Global Greenhouse Gas Emissions
The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.
Duration
The Company does not have a fixed life, but an ordinary resolution to continue the Company is put to shareholders at each AGM.
Viability Statement
The Company does not have a fixed period strategic plan, but the Board does formally consider risks and strategy on at least an annual basis. The Board regards the Company, with no fixed life, as a long term investment vehicle, but for the purposes of this viability statement has decided that a period of three years is an appropriate period over which to report. The Board considers that this period reflects a balance between looking out over a medium term horizon and the inherent uncertainties of looking out further than three years.
Accordingly, taking into account the Company's current position and the potential impact of its principal risks and uncertainties, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for a period of three years from the date of this Report.
In forming this expectation, the Directors looked to the following:
- the Company's assets consist, substantially, of a portfolio of readily realisable quoted securities, where the Directors monitor the liquidity of each holding as well as review the outcome of testing undertaken by the Manager in which the portfolio is subject to adverse market scenarios;
- the principal risks and uncertainties and the steps taken to mitigate these;
- a significant proportion of the expenses are proportional to the Company's NAV and will reduce if the NAV falls; and
- in advance of expiry in July 2020 of the Company's borrowings of GBP15m at 31 March 2019, the Company will enter into negotiations with its bankers. If acceptable terms are available from the existing bankers, or any alternative, the Company would expect to continue to access borrowings. However, should these terms not be forthcoming, any outstanding borrowing would be repaid through the proceeds of equity sales.
In particular the Board recognises that this assessment makes the assumption that the resolution to continue the Company, which is put to shareholders at each AGM, is passed at the next AGM on 5 September 2019, and at the two subsequent AGMs, as it has been previously.
In making this assessment, the Board has also considered that matters such as a large economic shock, a period of significant stock market volatility, a significant reduction in the liquidity of the portfolio, or changes in regulations and investor sentiment, could have an impact on its assessment of the Company's prospects and viability in the future.
Likely Future Developments
The Board expects the Company to continue to pursue its investment objective and accepts that this may involve divergence from the benchmark. The companies which make up the investment portfolio are considered by the Investment Manager to demonstrate resilience and to offer opportunities for investors to benefit from the development of the broader Indian economy. Further information on the outlook and future developments of the Company may be found in the Chairman's Statement and in the Investment Manager's Report.
Hasan Askari
Chairman
12 June 2019
STRATEGIC REPORT - INVESTMENT MANAGER'S REPORT
Performance
The net asset value of the Company increased by 8.6% in sterling terms in the year ended 31 March 2019, while the share price was up by 8.2%. This compared to a 14.9% rise in the benchmark, the MSCI India Index. The underperformance was driven by stock selection, particularly due to the portfolio's lack of exposure to several index heavyweights which performed well.
Economic News
It was an eventful twelve months for Indian equities, with steady rises punctuated by bouts of selling pressure. Stocks were initially on the back foot due to oil-linked inflation worries and a weakening rupee. These factors compelled the Reserve Bank of India (RBI) to raise its policy rate twice. Broader concerns of increasing trade protectionism and tightening liquidity globally also hurt risk appetite. However, markets rebounded in late 2018 as the RBI cut interest rates and oil prices corrected from their multi-year peaks.
Financial shares were frequently in the limelight. At the start of the period, they were still under pressure from the fallout of the Punjab National Bank fraud. Later, the debt default of major infrastructure lender IL&FS again affected sentiment as it raised the spectre of a liquidity crunch among non-bank financial companies (NBFCs). While stress in India's credit system was not a new problem, we think it was another reminder that controls at many public-sector banks and NBFCs remain below par. By contrast, better-managed and private-sector lenders, including the Company"s holdings, Housing Development Finance Corp (HDFC) and Kotak Mahindra Bank, were more resilient as investors flocked to quality.
Although the central bank's moves to relax lending norms helped the sector regain its stability, the episode amplified the discord between the RBI and the Modi government. This culminated in the resignation of governor Urjit Patel, who was replaced by bureaucrat Shaktikanta Das. Markets took the appointment well due to expectations of a looser policy stance. As expected, the RBI subsequently lowered policy rates in 2019 amid more benign inflation, coming in-line with a dovish stance from most other major central banks.
Meanwhile, political concerns moved to the forefront of investors' thoughts as the general election drew near. In December, the ruling Bharatiya Janata Party (BJP) lost several key state elections. This prompted growing worries that a coalition of rival opposition parties could dislodge it. However, a military confrontation with Pakistan cemented support for Prime Minister Narendra Modi as the 'strong-man' choice. Markets advanced on optimism that the BJP would be returned to power. Subsequently, the BJP won the election with a larger than expected mandate. The interim Budget provided a further boost, with the government unsurprisingly targeting farmers and the middle class via direct transfers and tax rebates. These efforts should boost rural demand and bode well for consumer holdings. While the strain on the fiscal deficit is a worry, we take comfort from the administration's commitment to its long-term target.
Portfolio Overview
The Company posted positive returns but still lagged the benchmark during the year under review. A difficult first quarter of calendar 2019 reversed relative gains made earlier in the period.
The energy sector was a key detractor, particularly given the Company's lack of exposure to upstream and oil-marketing companies. In particular, not holding conglomerate Reliance Industries was the biggest source of the weaker performance. It rallied amid positive contributions from its petrochemicals business, while its telecoms unit, Jio, made significant market-share gains and will deleverage its balance sheet by monetising its fibre and tower assets. We regularly review our case for not holding Reliance and continue to be circumspect about various issues, including poor standards of governance. Reliance Jio's goal of becoming the top telecommunications operator has also come at a high price.
Also dragging on your Company's returns was the choice of holdings in the banking sector. The lack of exposure to Axis Bank and ICICI Bank proved costly as optimism over leadership changes at both lenders triggered robust share price recoveries. We do not hold these lenders due to governance and quality concerns, with both recently plagued by bad-debt issues. That said, we are monitoring developments to assess if the recent changes truly signify that they have turned a corner. We also feel comfortable with the Company's current exposure to better-run and well-capitalised private-sector lenders. Kotak Mahindra Bank was among the top contributors to performance. It delivered good December-quarter earnings, driven by healthy deposit growth and higher net-interest margins.
Another holding in the financial sector, affordable-housing finance company Gruh Finance was among the laggards following news of Bandhan Bank acquiring HDFC's stake in the company. Amid concern about the true intention of the deal and the possible loss of Gruh's credit rating without HDFC's backing, we held onto our conviction in both companies. The merger brings higher growth opportunities for Gruh outside of its core Western Indian market and improves its funding mix. We also believe that the combined entity, with strengths in both affordable housing and microfinancing, will become a very interesting play on India's bottom-of-the-pyramid segment.
More positively, the Company's selective exposure to automotive names in the consumer discretionary sector lifted performance. Worries that slower financing and stricter regulations would dampen auto demand pressured the segment. As a result, not holding Tata Motors boosted performance, as did our lower exposure to Maruti Suzuki, which we introduced during the year under review. We took advantage of weakness to continue building the Company's position in Maruti. It is a market leader, combining Japanese technological expertise with local know-how. It is also confident about maintaining its current 50% share in the four-wheeler segment given low penetration levels and overall improvements in the road network.
Portfolio Changes
Over the year, we exited several positions that showed signs of deterioration, whether in quality or due to governance-related concerns. One such stock was consumer goods conglomerate Emami. Even though its product portfolio still enjoys solid brand recognition, the company lacks the supply-chain control of its larger peers, such as Hindustan Unilever, given its reliance on wholesale distribution. This hurt Emami in the aftermath of the Goods and Services Tax reforms and dented its earnings growth. Adding to our concerns was the pledging of Emami's shares against its owner's loss-making cement business, which infringes on minority-shareholder interests. We were also disappointed that it continued to pursue an inorganic growth strategy via costly acquisitions.
Elsewhere, we divested stakes in drugmakers Sun Pharmaceutical and Lupin. Sun Pharma was a longstanding favoured pick in the segment, given its firm domestic brand portfolio and specialty-drug focus in the US. Earlier in the year, it rallied as a weakening rupee amplified foreign-denominated revenues. US regulatory clearance to launch products from its key Halol plant gave its shares a further fillip. But later, governance red flags around issues of related-party distribution and aggressive tax restructuring resurfaced. Our engagement with management failed to give us the confidence that it treated these allegations with sufficient importance. Given our concerns that the situation could escalate, we sold the position. Lupin, meanwhile, was a position we had already scaled back. Similar to Sun Pharma, it faced higher regulatory risks following warnings for two of its plants. With its earnings also dampened by declines from its US generics business, we capitalised on share-price strength to exit your Company's holding.
In their place, we introduced several companies with good earnings drivers and promising prospects. Apart from introducing Maruti, mentioned above, a key focus this year was on real estate. While we have historically avoided this sector, our views have evolved, aided by reforms such as the Real Estate Regulation Act. The new law, coupled with tighter liquidity following the NBFC crisis, is likely to drive consolidation within the industry. This will favour developers with healthier balance sheets and good assets. To this end, we established positions in two well-managed developers, Godrej Properties and Prestige Estates. Godrej Properties has a good reputation and track record in key parts of the domestic property market. The company is also well-diversified geographically, with a focus on its four core markets of Bangalore, Mumbai, Pune and the Delhi area. Its asset-light model also supports faster growth. Prestige Estates, meanwhile, is a leading South Indian developer. While most of its projects are residential, it has also built up a decent investment portfolio by diversifying into offices, retail space and hotels. Its earnings are also less volatile due to a higher proportion of recurring income.
In addition, we identified several interesting opportunities in the small-cap segment that met our quality and value criteria, while also giving the underlying portfolio more varied exposure to certain sectors. In the technology space, we initiated Cyient, an engineering, research and design (ERD) outsourcing company known for its quality of service. Its clients are mostly high-tech, high value engineering companies in Europe, the US and Australia. It has been consistent in maintaining profitability, underpinned by decent cash flows and healthy balance sheet. We also added exposure to the insurance sector by introducing SBI Life. One of India's top three life-insurance companies, it is well-capitalised, has an established brand and enjoys economies of scale. Structural positives of a growing middle class and stabilising regulatory environment also bolster its prospects for growth in a sector that remains under-penetrated.
Strategy
Higher oil prices and corporate earnings disappointments capped Indian shares' gains earlier in 2019, but the BJP government's decisive general election victory is likely to spell good news for markets. The stronger mandate will likely ensure that momentum for Prime Minister Narendra Modi's reform agenda is maintained. In particular, we expect New Delhi to continue its affordable housing and transport infrastructure initiatives. This augurs well for the cement and real estate sectors, with rural consumption also potentially getting a lift. Moreover, changes implemented previously, such as the bankruptcy code and the Goods and Services Tax, will remain long-term positives for the Indian economy.
Ultimately, our primary focus remains on investing in quality companies with high barriers to entry, clear pricing power and solid balance sheets. These traits imbue the portfolio's holdings with resilience irrespective of market cycles. It also positions them well to tap into compelling long-term structural drivers. A huge domestic market benefits consumer companies, while a young population with rising income levels will drive demand for financial services, insurance and healthcare. The need for rapid infrastructure development and affordable housing initiatives bodes well for cement, logistics and property-related firms. The Company has exposure to all these areas. Companies in the underlying portfolio also have experienced management with solid track records of delivering consistent growth and profits, which gives us additional confidence.
Kristy Fong
James Thom
Aberdeen Standard Investments (Asia) Limited
Investment Manager
12 June 2019
STRATEGIC REPORT - RESULTS
Financial Highlights
31 March 2019 31 March 2018 % change
Equity shareholders' funds (net
assets) GBP314,196,000 GBP289,444,000 +8.6
Market capitalisation GBP272,313,000 GBP251,639,000 +8.2
Share price (mid market) 461.00p 426.00p +8.2
Net asset value per Ordinary
share 531.90p 490.00p +8.6
Discount to net asset value{A} 13.3% 13.1%
Net (gearing)/cash{A} (3.1%) 1.5%
Total return per share 41.90p 2.12p
Revenue loss per share (0.35p) (0.71p)
Revenue reserves per share (1.86p) (1.50p)
Gross portfolio yield{B} 1.1% 1.1%
MSCI India yield{B} 1.2% 1.4%
Prospective portfolio P/E ratio{C} 30.9x 29.8x
Operating costs
Ongoing charges ratio{A} 1.17% 1.25%
{A} Considered to be an Alternative Performance Measure.
{B} Source - Aberdeen Standard Investments (Asia) Limited (estimated
information)/Factset.
{C} Consensus broker views.
Performance (total return in Sterling terms)
1 year 3 year 5 year
% return % return % return
Share price{A} +8.2 +47.2 +104.9
Net asset value per Ordinary
share{A} +8.6 +46.9 +101.8
MSCI India Index (sterling adjusted) +14.9 +53.7 +86.9
{A} Considered to be an Alternative Performance Measure.
Source: Aberdeen Standard Fund Managers Limited, Morningstar
& Lipper.
Ten Year Financial Record
Year to 31 March 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Total income
(GBP'000){A} 1,335 2,338 2,702 2,414 376 341 374 3,104 3,318 3,602
Per share (p)
Net revenue
return (0.63) 0.15 0.61 0.20 (0.36) (0.39) (1.06) (0.28) (0.71) (0.35)
Total return 139.19 31.71 (24.95) 24.75 (5.16) 121.94 (23.42) 125.81 2.12 41.90
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Net asset value
per share (p)
Basic 275.42 268.90 243.96 268.71 263.55 385.49 362.07 487.88 490.00 531.90
Diluted 239.44 n/a n/a n/a n/a n/a n/a n/a n/a n/a
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Shareholders'
funds (GBP'000) 129,320 158,842 144,105 158,726 155,680 227,708 213,874 288,190 289,444 314,196
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
{A} Years 2010 to 2013 reflect the consolidated amounts of the Company
and its Subsidiary, years 2014 to 2019 reflects amounts relating to
the Company only following the application of IFRS 10 'Consolidated
Financial Statements' including the Amendments, 'Investment Entities
(Amendments to IFRS 10, IFRS 12 and IAS 27)(Investment Entity Amendments).
2017 reflects the transfer of securities to the Company from its Subsidiary.
Investment Portfolio - Ten Largest Investments
As at 31 March 2019
Valuation Net assets Valuation
2019 2019 2018
Company Sector GBP'000 % GBP'000
Housing Development Finance
Corporation
Domestic mortgage provider
with a leading distribution
network, cost structure and
balance sheet quality. Financials 30,356 9.2 27,775
Tata Consultancy Services
A global provider of information
services, consulting and
digital and business solutions
to large enterprises. Information Technology 24,448 7.4 21,016
Infosys
A multinational corporation
that provides business consulting,
information technology and
outsourcing services globally. Information Technology 18,715 5.7 8,424
ITC
The leading manufacturer
and distributor of cigarettes
in India. It supplements
this by selling other consumer
products through its extensive
distribution network. An
associate of British American
Tobacco. Consumer Staples 17,333 5.3 13,025
Piramal Enterprises
The diversified conglomerate
is in the process of streamlining
operations by splitting its
core segments - financial
services and pharmaceutical,
into two listed companies.
This is expected to unlock
value and unwind the conglomerate's
discount by separating its
distinct and unrelated businesses. Healthcare 16,724 5.1 12,393
Kotak Mahindra Bank
A privately-owned full-service
commercial lender in India.
The company has a good geographic
profile following its merger
with Vysya Bank, and is able
to cross-sell products across
an enlarged branch network. Financials 16,361 5.0 13,080
Hindustan Unilever
The largest fast-moving consumer
goods company (FMCG) in India,
with a solid domestic franchise
in personal care and home
care products. Consumer Staples 15,607 4.7 11,869
Container Corporation of
India
A carrier and operator of
terminals and warehouses,
it provides logistics services
across ports, air, railways
and road networks. The company
has a robust balance sheet
and stands to benefit from
India's need for large-scale
infrastructure investment. Industrials 12,107 3.7 10,242
Ultratech Cement{A}
The leading cement and cement-related
products manufacturer in
India. Materials 11,735 3.6 7,871
HDFC Bank
The largest private-sector
bank by market capitalisation
with a pan-India presence.
It offers all banking and
financial services. Financials 11,659 3.5 9,486
Top ten investments 175,045 53.2
{A} Comprises equity and listed or tradeable Global Depositary Receipt
("GDR") holdings.
Investment Portfolio - Other Investments
As at 31 March 2019
Valuation Net assets Valuation
2019 2019 2018
Company Sector GBP'000 % GBP'000
Nestlé India Consumer Staples 11,095 3.4 8,194
MphasiS Information Technology 10,185 3.1 9,795
Godrej Consumer Products Consumer Staples 8,478 2.6 10,496
Asian Paints Materials 7,833 2.4 1,470
Hero MotoCorp Consumer Discretionary 7,662 2.3 9,266
Bosch Consumer Discretionary 7,275 2.2 7,129
Grasim Industries{A} Materials 6,968 2.1 9,939
Gruh Finance Financials 6,966 2.1 7,107
SBI Life Insurance Financials 5,900 1.8 -
Maruti Suzuki India Consumer Discretionary 5,852 1.8 -
Top twenty investments 253,259 77.0
Kansai Nerolac Paints Materials 5,553 1.7 9,535
Shree Cement Materials 5,386 1.6 2,639
Sanofi India Healthcare 5,098 1.5 4,807
Bandhan Bank Financials 4,983 1.5 133
Godrej Properties Real Estate 4,840 1.5 -
Jyothy Laboratories Consumer Staples 4,780 1.5 4,543
Aegis Logistics Energy 4,655 1.4 2,931
Cognizant Technology Solutions Information Technology 4,280 1.3 4,939
Biocon Healthcare 3,695 1.1 4,672
Telecommunication
Bharti Infratel Services 3,360 1.0 2,865
Top thirty investments 299,889 91.1
Gujarat Gas Utilities 3,285 1.0 4,463
Prestige Estates Projects Real Estate 3,262 1.0 -
Godrej Agrovet Consumer Staples 3,160 1.0 3,112
ABB India Industrials 3,015 0.9 3,628
Ambuja Cements GDR Materials 2,792 0.8 6,995
Max Financial Services Financials 2,545 0.8 2,622
Thermax Industrials 2,038 0.6 1,808
GlaxoSmithKline Pharmaceuticals Healthcare 1,979 0.6 1,585
Castrol India Materials 1,946 0.6 2,369
Cyient Information Technology 1,900 0.6 -
Aditya Birla Capital Financials 815 0.2 1,863
Total portfolio investments 326,626 99.2
Other net current assets 43 -
held in subsidiaries
Total investments 326,669 99.2
Net current assets (before deducting prior
charges){B} 2,527 0.8
Total assets{B} 329,196 100.0
{A} Comprises equity and listed or tradeable Global Depositary Receipt
("GDR") holdings.
{B} Excluding loan balances.
Unless otherwise stated, investments are in common stock. Purchases
and/or sales effected during the year will result in 2019 and 2018 values
not being directly comparable. Where 2018 valuation is "-" this indicates
the company was not held at the previous year-end.
DIRECTORS' REPORT
The Directors present their Report and the audited Financial Statements of the Company for the year ended 31 March 2019, taking account of any events between the year end and the date of approval of this Report.
Results
The Company's results, including its performance for the year against its Key Performance Indicators ("KPIs"), may be found in Results. The Company is not declaring a dividend for the year ended 31 March 2019 (2018 - nil).
Investment Trust Status and ISA Compliance
The Company is registered as a public limited company in England & Wales under registration number 02902424 and has been accepted by HM Revenue & Customs as an investment trust for accounting periods beginning on or after 1 April 2012, subject to the Company continuing to meet the eligibility conditions of s1158 of the Corporation Tax Act 2010 (as amended) and S.I. 2011/2099. In the opinion of the Directors, the Company's affairs have been conducted in a manner to satisfy these conditions to enable it to continue to qualify as an investment trust for the year ended 31 March 2019. The Company intends to manage its affairs so that its shares will be qualifying investments for the stocks and shares component of an Individual Savings Account ("ISA").
Capital Structure
There have been no changes to the Company's issued share capital during the year. The issued Ordinary share capital at 31 March 2019, and at the date of approval of this Report, consisted of 59,070,140 Ordinary shares of 25p (2018 - 59,070,140 Ordinary shares).
Ordinary shareholders are entitled to vote on all resolutions which are proposed at general meetings of the Company. The Ordinary shares carry a right to receive dividends. On a winding up, after meeting the liabilities of the Company, the surplus assets will be paid to Ordinary shareholders in proportion to their shareholdings. There are no restrictions on the transfer of Ordinary shares in the Company other than certain restrictions which may from time to time be imposed by law and regulation (for example, the Market Abuse Regulation).
Manager and Company Secretaries
The Company has appointed Aberdeen Standard Fund Managers Limited ("ASFML"), a wholly owned subsidiary of Standard Life Aberdeen plc, as its alternative investment fund manager. ASFML has been appointed to provide investment management, risk management, administration and company secretarial services and promotional activities to the Company. The Company's portfolio is managed by Aberdeen Standard Investments (Asia) Limited ("ASIAL") by way of a group delegation agreement in place between ASFML and ASIAL. In addition, ASFML has sub-delegated administrative and secretarial services to Aberdeen Asset Management PLC and promotional activities to Aberdeen Asset Managers Limited ("AAML").
Under the terms of the management agreement ("MA"), investment management fees payable to the Manager have been calculated and charged on the following basis throughout the year ended 31 March 2019: a monthly fee, payable in arrears, calculated at an annual rate of 0.9% of the Company's total assets less current liabilities, up to GBP350m and 0.75% above GBP250m (2018 - 1.0% on the Company's total assets less current liabilities). There is a rebate for any fees received in respect of any investments by the Company in investment vehicles managed by the Standard Life Aberdeen Group. The MA is terminable by either party on not less than six months' notice (2018 - not less then 12 months' notice). In the event of termination on less than the agreed notice period, compensation is payable in lieu of the unexpired notice period.
The fees payable to Standard Life Aberdeen Group companies during the year ended 31 March 2019 are disclosed in Notes 4 and 5 to the Financial Statements. The investment management fees are chargeable 100% to revenue.
Corporate Governance
The Company is committed to the highest standards of corporate governance. The Board is accountable to the Company's shareholders for good governance and, as required by the Listing Rules of the UK Listing Authority, this statement describes how the Company applies the Main Principles identified in the UK Corporate Governance Code published in April 2016 (the "UK Code") and which is applicable for the Company's year ended 31 March 2019. The UK Code is available on the Financial Reporting Council's (the "FRC") website: frc.org.uk.
The Board has also considered the principles and recommendations of the AIC Code of Corporate Governance as published in July 2016 (the "AIC Code") by reference to the AIC Corporate Governance Guide for investment Companies (the "AIC Guide"). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to investment trusts. The AIC Code and AIC Guide are available on the AIC's website: theaic.co.uk
The Board considers that reporting against the principles and recommendations of the AIC Code, and by reference to the AIC Guide (which incorporates the UK Code), will provide better information to shareholders. The Board confirms that, during the year, the Company complied with the recommendations of the AIC Code and the relevant provisions of the UK Code, except as set out below.
The UK Code includes provisions relating to:
- the role of the chief executive (A.1.2); - executive directors' remuneration (D.1.1 and D.1.2); and - the need for an internal audit function (C.3.6).
For the reasons set out in the AIC Guide and UK Code, the Board considers that these provisions are not relevant to the position of the Company, being an externally managed investment company. In particular, all of the Company's day-to-day management and administrative functions are outsourced to third parties. As a result, the Company has no executive directors, employees or internal operations. The Company has therefore not reported further in respect of these provisions. The full text of the Company's Statement of Corporate Governance can be found on its website: aberdeen-newindia.co.uk.
The Board notes the content of the new UK Code of Corporate Governance published by the FRC in July 2018 (the "2018 UK Code"), which is applicable for accounting periods beginning on or after 1 January 2019, and the new AIC Code of Corporate Governance published in February 2019 (the "2019 AIC Code"). The Board expects the Company to be compliant with the relevant provisions of the 2018 UK Code and the 2019 AIC Code for the year ending 31 March 2020.
Directors
The Board consists of a non-executive Chairman and three non-executive Directors. The Senior Independent Director is Rachel Beagles.
The Directors attended scheduled Board and Committee meetings during the year ended 31 March 2019 as follows (with their eligibility to attend the relevant meeting in brackets):
Director Board Meetings Audit Committee Meetings Management Engagement
Committee Meetings
H. Askari 5 (5) 3 (3) 1 (1)
S. White 5 (5) 3 (3) 1 (1)
R. Beagles 5 (5) 3 (3) 1 (1)
M. Hughes 5 (5) 3 (3) 1 (1)
The names and biographies of each of the Directors are included on the Company's website and indicate their range of experience as well as length of service. Each Director has the requisite high level and range of business and financial experience which enables the Board to provide clear and effective leadership and proper stewardship of the Company.
The Board has adopted a policy that all Directors will normally retire at each AGM and stand for re-election and, accordingly, all of the Directors will retire at the AGM.
Hasan Askari, Rachel Beagles, Stephen White and Michael Hughes, each being eligible, offer themselves for re-election as Directors of the Company. The Board as a whole believes that each Director remains independent of the AIFM and free of any relationship which could materially interfere with the exercise of his or her independent judgement on issues of strategy, performance, resources and standards of conduct and confirms that, following formal performance evaluations, the individuals' performance continues to be effective and demonstrates commitment to the role. The Board therefore has no hesitation in recommending, at the AGM, the individual re-elections of Hasan Askari, Rachel Beagles, Stephen White and Michael Hughes as Directors of the Company.
All appointments to the Board of Directors are considered by the Board as a whole. The Board's overriding priority in appointing new Directors to the Board is to identify the candidate with the optimal range of skills and experience to complement the existing Directors. The Board also recognises the benefits, and is supportive, of the principle of diversity in its recruitment of new Directors.
Directors' Insurances and Indemnities
The Company maintains insurance in respect of Directors' and Officers' liabilities in relation to their acts on behalf of the Company. Furthermore, each Director of the Company is entitled to be indemnified out of the assets of the Company to the extent permitted by law against all costs, charges, losses, expenses and liabilities incurred by them in the actual or purported execution and/or discharge of their duties and/or the exercise or purported exercise of their powers and/or otherwise in relation to or in connection with their duties, powers or office. These rights are included in the Articles of Association of the Company and the Company has granted indemnities to each Director on this basis.
Management of Conflicts of Interest and Anti-Bribery Policy
The Board has a procedure in place to deal with a situation where a Director has a conflict of interest. As part of this process, the Directors prepare a list of other positions held and all other conflict situations that may need to be authorised either in relation to the Director concerned or his/her connected persons. The Board considers each Director's situation and decides whether to approve any conflict, taking into consideration what is in the best interests of the Company and whether the Director's ability to act in accordance with his/her wider duties is affected. Each Director is required to notify the Company Secretaries of any potential, or actual, conflict situations which will need authorising by the Board. Authorisations given by the Board are reviewed at each Board meeting.
No Director has a service contract with the Company although Directors are issued with letters of appointment upon taking up office. There were no contracts with the Company during, or at the end of the year, in which any Director was interested.
The Board takes a zero tolerance approach to bribery and has adopted appropriate procedures designed to prevent bribery. The Standard Life Aberdeen Group also takes a zero tolerance approach and has its own detailed policy and procedures in place to prevent bribery and corruption.
In relation to the corporate offence of failing to prevent tax evasion, it is the Company's policy to conduct all business in an honest and ethical manner. The Company takes a zero-tolerance approach to facilitation of tax evasion whether under UK law or under the law of any foreign country and is committed to acting professionally, fairly and with integrity in all its business dealings and relationships.
Substantial Interests
The Company had been notified of the following share interests above 3% in the Company as at 31 March 2019:
Shareholder Number of shares held % held Clients of the Standard Life Aberdeen Group 12,193,985 20.6 Lazard Asset Management 7,085,625 12.0 City of London Investment Management 5,564,307 9.4 Clients of Hargreaves Lansdown 5,240,652 8.9 Standard Life Aberdeen Group retail plans 2,697,119 4.6 Charles Stanley 1,822,258 3.1
As at the date of approval of this Report, the Company had not been notified of any changes to the above interests under the UKLA's Disclosure Guidance and Transparency Rules.
Board Committees
The Directors have appointed a number of Committees as set out below. Copies of each Committee's terms of reference, which define its responsibilities and duties, are available on the Company's website or from the Company Secretaries, on request.
Audit Committee
The Audit Committee' Report may be found in the published Annual Report.
Management Engagement Committee
The Board has established a Management Engagement Committee, comprising all of the Directors, with Rachel Beagles as Chairman, which is responsible for reviewing matters concerning the MA which exists between the Company and ASFML together with the promotional activities programme operated by the Manager to which the Company contributes. The terms and conditions of the Manager's appointment, including an evaluation of performance and fees, are reviewed annually and were last considered at the meeting of the Committee in November 2018.
In monitoring the performance of the Manager, the Committee considers the investment approach and investment record of the Manager over shorter and longer-term periods, taking into account the Company's performance against the benchmark index and peer group funds. The Committee also reviews the management processes, risk control mechanisms and promotional activities of the Manager.
The Committee considers the continuing appointment of the Manager, on the terms agreed, to be in the interests of the shareholders because the Standard Life Aberdeen Group has the investment management, promotional and associated secretarial and administrative skills required for the effective and successful operation of the Company.
Nomination Committee
On 5 June 2019, the Board established a Nomination Committee, comprising all of the Directors, with Hasan Askari as Chairman. The Committee is responsible for undertaking an annual evaluation of the Board as well as longer term succession planning and, when appropriate, oversight of appointments to the Board.
As the Company has no employees and the Board is comprised wholly of non-executive directors and, given the size and nature of the Company, the Board has not established a separate remuneration committee and Directors' fees are determined by the Nomination Committee.
Accountability and Audit
The responsibilities of the Directors and the Auditor, in connection with the financial statements, appear below.
The Directors who held office at the date of this Report each confirm that, so far as he or she is aware, there is no relevant audit information of which the Company's Auditor is unaware, and that he or she has taken all the steps that he or she could reasonably be expected to have taken as a Director in order to make him or her aware of any relevant audit information and to establish that the Company's Auditor is aware of that information. Additionally, there have been no important events since the year end which warrant disclosure.
The Directors have reviewed the level of non-audit services provided by the Auditor during the year, together with the Auditor's procedures in connection with the provision of such services, and remain satisfied that the Auditor's objectivity and independence is being safeguarded.
Going Concern
In accordance with the Financial Reporting Council's guidance on Going Concern and Liquidity Risk, the Directors have reviewed the Company's ability to continue as a going concern. The Company's assets consist substantially of a portfolio of quoted securities which in most circumstances are realisable within a short timescale. The Directors are mindful of the principal risks and uncertainties disclosed in the Strategic Report and in Note 17 to the financial statements and have reviewed income forecasts detailing revenue and expenses; accordingly, the Directors believe that the Company has adequate financial resources to continue in operational existence for the foreseeable future and for at least 12 months from the date of this Report.
This is also based on the assumption that ordinary resolution 8, that the Company continues as an investment trust, which will be proposed at the AGM of the Company on 5 September 2019, is passed by shareholders as it has been in the years since it was put in place. The Directors consult annually with major shareholders and, as at the date of approval of this Report, had no reason to believe that this assumption was incorrect.
In July 2018, the Company entered into a two year, GBP30 million revolving credit facility (the "Facility") with Natwest Markets Plc, part of The Royal Bank of Scotland Group plc, of which GBP15 million was drawn down at 31 March 2019. The Board has set limits for borrowing and regularly reviews the level of any gearing and compliance with banking covenants.
In advance of expiry of the Facility in July 2020, the Company will enter into negotiations with its bankers. If acceptable terms are available from the existing bankers, or any alternative, the Company would expect to continue to access a Facility. However, should these terms not be forthcoming, any outstanding borrowing would be repaid through the proceeds of equity sales.
The UK Stewardship Code and Proxy Voting
Responsibility for actively monitoring the activities of portfolio companies has been delegated by the Board to the AIFM which has sub-delegated that authority to the Manager. The full text of the Company's response to the Stewardship Code may be found on the Company's website.
Responsible Investment
The Board is aware of its duty to act in the interests of the Company. The Board acknowledges that there are risks associated with investment in companies which fail to conduct business in a socially responsible manner. The Investment Manager considers social, environmental and ethical factors which may affect the performance or value of the Company's investments. The Directors, through the Company's Investment Manager, encourage companies in which investments are made to adhere to best practice in the areas of Environmental, Social and Corporate Governance stewardship. They believe that this can best be achieved by entering into a dialogue with company management to encourage them, where necessary, to improve their policies in this area.
Relations with Shareholders
The Directors place great importance on communication with shareholders. The Annual Report is widely distributed to other parties who have an interest in the Company's performance. Shareholders and investors may obtain up-to-date information on the Company through its website, aberdeen-newindia.co.uk, or via the Standard Life Aberdeen Group's Customer Services Department. The Company responds to letters from shareholders on a wide range of issues.
The Board's policy is to communicate directly with shareholders and their representative bodies without the involvement of the management group (either the Company Secretaries or the Standard Life Aberdeen Group) in situations where direct communication is required and representatives from the Board offer to meet with major shareholders on an annual basis in order to gauge their views.
In addition, members of the Board may accompany the Manager when undertaking meetings with institutional shareholders.
The Company Secretaries only act on behalf of the Board, not the Manager, and there is no filtering of communication. At each Board meeting the Board receives full details of any communication from shareholders to which the Chairman responds, as appropriate, on behalf of the Board.
The Notice of AGM included within the Annual Report is normally sent out at least 20 working days in advance of the meeting. All shareholders have the opportunity to put questions to the Board and Manager at the Company's AGM.
Special Business at the Annual General Meeting
The AGM will be held on 5 September 2019 and the AGM Notice and related notes may be found on the Company's website. Resolutions relating to the following items will be proposed at the AGM:
Continuance of the Company
In accordance with Article 160 of the Articles of Association of the Company adopted on 22 September 2011, the Directors are required to propose an Ordinary resolution at each AGM of the Company that the Company continue as an investment trust. Accordingly, the Directors are proposing, as ordinary resolution 8, that the Company continues as an investment trust and recommend that shareholders support the continuance of the Company.
Share Repurchases
At the AGM held on 6 September 2018, shareholders approved the renewal of the authority for the Company to repurchase its Ordinary shares, which was unused at the date of approval of this Report.
The principal aim of a share buy-back facility is to enhance shareholder value by acquiring shares at a discount to NAV as and when the Directors consider this to be appropriate. The purchase of shares, when they are trading at a discount to NAV, should result in an increase in the NAV per share for the remaining shareholders. This authority, if conferred, will only be exercised if to do so would result in an increase in the NAV per share for the remaining shareholders, and if it is in the best interests of shareholders generally. Any purchase of shares will be made within guidelines established from time to time by the Board. It is proposed to seek shareholder authority to renew this facility for another year at the AGM. Under the current Listing Rules, the maximum price that may be paid on the exercise of this authority must not exceed the higher of: (i) 105% of the average of the middle market quotations for the shares over the five business days immediately preceding the date of purchase; and (ii) the higher of the last independent trade and the highest current independent bid on the trading venue where the purchase is carried out. The minimum price which may be paid is 25p per share. Shares which are purchased under this authority will either be cancelled or held as treasury shares.
Special resolution 9 in the Notice of AGM will, if passed, renew the authority to purchase in the market a maximum of 14.99% of shares in issue on 12 June 2019, being the nearest practicable date to the approval of this Report (equivalent to approximately 8.8m Ordinary shares). Such authority will expire on the date of the AGM in 2020 or on 30 September 2020, whichever is earlier. This means in effect that the authority will have to be renewed at the next AGM, or earlier, if the authority has been exhausted.
Issue of Shares
Ordinary resolution 10 in the Notice of AGM will, if passed, renew the authority to allot unissued share capital up to an aggregate nominal amount of GBP738,376 (equivalent to approximately 3.0 million Ordinary shares, or 5% of the Company's existing issued share capital on 12 June 2019, being the nearest practicable date to the approval of this Report). Such authority will expire on the date of the AGM in 2020 or on 30 September 2020, whichever is earlier, which means that the authority will have to be renewed at the next AGM or, if earlier, if the authority has been exhausted.
When shares are to be allotted for cash, the Companies Act 2006 (the "Act") provides that existing shareholders have pre-emption rights and that the new shares must be offered first to such shareholders in proportion to their existing holding of shares. However, shareholders can, by Special resolution, authorise the Directors to allot shares otherwise than by a pro rata issue to existing shareholders. Special resolution 11 will, if passed, give the Directors power to allot for cash equity securities up to an aggregate nominal amount of GBP738,376 (equivalent to approximately 3.0 million Ordinary shares, or 5% of the Company's existing issued share capital at 12 June 2019, being the nearest practicable date to the approval of this Report), as if Section 561(1) of the Act did not apply. This is the same nominal amount of share capital which the Directors are seeking the authority to allot pursuant to resolution 10. This authority will expire on the date of the AGM in 2020 or on 30 September 2020, whichever is earlier, which means that the authority will have to be renewed at the AGM or, if earlier, if the authority has been exhausted. This authority will not be used in connection with a rights issue by the Company.
The Directors intend to use the authorities given by resolutions 10 and 11 to allot shares, or sell shares from treasury, and disapply pre-emption rights only in circumstances where this will be clearly beneficial to shareholders as a whole. The issue proceeds would be available for investment in line with the Company's investment policy. No issue of shares, or sale of shares from treasury, would be made which would effectively alter the control of the Company without the prior approval of shareholders in general meeting.
Under the Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003 (as amended) (the "Treasury Share Regulations") the Company is permitted to buy back and hold shares in treasury and then sell them at a later date for cash, rather than cancelling them. The Treasury Share Regulations require such sale to be on a pre-emptive, pro rata, basis to existing shareholders unless shareholders agree by Special resolution to disapply such pre-emption rights. Accordingly, in addition to giving the Directors power to allot unissued Ordinary share capital on a non pre-emptive basis, resolution 11, if passed, will give the Directors authority to sell Ordinary shares from treasury on a non pre-emptive basis. No dividends may be paid on any shares held in treasury and no voting rights will attach to such shares.
The benefit of the ability to hold treasury shares is that such shares may be resold. This should give the Company greater flexibility in managing its share capital, and improve liquidity in its shares. The Board would only expect to issue new Ordinary shares or sell Ordinary shares from treasury at a price per Ordinary share which represented a premium to the NAV per share. It is also the intention of the Board that sales from treasury would only take place when the Board believes that to do so would assist in the provision of liquidity to the market.
Recommendation
The Board considers Resolutions 8, 9,10 and 11 to be in the best interests of the Company and its members as a whole and are likely to promote the success of the Company for the benefit of its members as a whole. Accordingly, the Board unanimously recommends that shareholders should vote in favour of the resolutions to be proposed at the Annual General Meeting, as they intend to do in respect of their own shareholdings, amounting to 34,915 Ordinary shares.
Additional Information
Where not provided elsewhere in the Directors' Report, the following provides the additional information required to be disclosed by The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008.
The Company is not aware of any significant agreements to which it is a party, apart from the MA, that take effect, alter or terminate upon a change of control of the Company following a takeover. Other than the MA with the Manager, further details of which are set out in the Directors' Report, the Company is not aware of any contractual or other agreements which are essential to its business which might reasonably be expected to have to been disclosed in the Directors' Report.
Hasan Askari
Chairman
12 June 2019
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with IFRSs as adopted by the EU and applicable law.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently; - make judgements and estimates that are reasonable and prudent; - state whether they have been prepared in accordance with IFRSs as adopted by the EU;
- assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
- use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or to have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies 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 but not for the content of any information included on the website that has been prepared or issued by third parties. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Responsibility Statement of the Directors in respect of the Annual Financial Report
We confirm that to the best of our knowledge:
- the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
- the strategic 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.
We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.
For and on behalf of the Board
Hasan Askari
Chairman
12 June 2019
STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
31 March 2019 31 March 2018
Revenue Capital Revenue Capital
return return Total return return Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income
Income from investments
and other income 3 3,602 - 3,602 3,318 - 3,318
Gains on investments
held at fair value
through profit or loss 10(a) - 27,826 27,826 - 1,781 1,781
Currency losses - (349) (349) - (110) (110)
________ _________ ________ ________ _______ ________
3,602 27,477 31,079 3,318 1,671 4,989
________ _________ ________ ________ _______ ________
Expenses
Investment management
fees 4 (2,774) - (2,774) (3,015) - (3,015)
Administrative expenses 5 (805) - (805) (714) - (714)
________ _________ ________ ________ _______ ________
(3,579) - (3,579) (3,729) - (3,729)
________ _________ ________ ________ _______ ________
Profit/(loss) before
finance costs and taxation 23 27,477 27,500 (411) 1,671 1,260
Finance costs 6 (223) - (223) - - -
________ _________ ________ ________ _______ ________
(Loss)/profit before
taxation (200) 27,477 27,277 (411) 1,671 1,260
________ _________ ________ ________ _______ ________
Taxation 7 (8) (2,517) (2,525) (6) - (6)
________ _________ ________ ________ _______ ________
(Loss)/profit for the
year (208) 24,960 24,752 (417) 1,671 1,254
________ _________ ________ ________ _______ ________
(Loss)/return per Ordinary
share (pence) 9 (0.35) 42.25 41.90 (0.71) 2.83 2.12
________ _________ ________ ________ _______ ________
The Company does not have any income or expense that is not included in
"(Loss)/profit for the year", and therefore this represents the "Total
comprehensive income for the year", as defined in IAS 1 (revised).
All of the (loss)/profit and total comprehensive income is attributable
to the equity holders of the parent company. There are no minority interests.
The total column of this statement represents the Statement of Comprehensive
Income of the Company, prepared in accordance with IFRS. The revenue and
capital columns are supplementary to this and are prepared under guidance
published by the Association of Investment Companies (see Note 2 to the
Financial Statements).
All items in the above statement derive from continuing operations.
The accompanying notes are an integral part of these financial statements.
STATEMENT OF FINANCIAL POSITION
As at As at
31 March 31 March
2019 2018
Notes GBP'000 GBP'000
Non-current assets
Investments held at fair value through
profit or loss 326,626 285,357
Subsidiary held at fair value through
profit or loss 43 27
_________ ________
10 326,669 285,384
Current assets
Cash at bank 4,227 4,436
Other receivables 11 2,583 27
_________ ________
6,810 4,463
_________ ________
Current liabilities
Bank loan 12(a) (15,000) -
Other payables 12(b) (1,933) (403)
_________ ________
(16,933) (403)
_________ ________
Net current (liabilities)/assets (10,123) 4,060
_________ ________
Non-current liabilities
Deferred tax liability on Indian capital
gains 13 (2,350) -
_________ ________
Net assets 314,196 289,444
_________ ________
Share capital and reserves
Ordinary share capital 14 14,768 14,768
Share premium account 2(m) 25,406 25,406
Special reserve 2(m) 15,778 15,778
Capital redemption reserve 2(m) 4,484 4,484
Capital reserve 15 254,856 229,896
Revenue reserve 2(m) (1,096) (888)
_________ ________
Equity shareholders' funds 314,196 289,444
_________ ________
Net asset value per Ordinary share (pence) 16 531.90 490.00
_________ ________
STATEMENT OF CHANGES IN EQUITY
Year ended 31 March
2019
Share Capital
Share premium Special redemption Capital Revenue
capital account reserve reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April
2018 14,768 25,406 15,778 4,484 229,896 (888) 289,444
Net profit/(loss)
after taxation - - - - 24,960 (208) 24,752
________ _________ ________ ________ ________ _________ ________
Balance at 31 March
2019 14,768 25,406 15,778 4,484 254,856 (1,096) 314,196
________ _________ ________ ________ ________ _________ ________
Year ended 31 March
2018
Share Capital
Share premium Special redemption Capital Revenue
capital account reserve reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April
2017 14,768 25,406 15,778 4,484 228,225 (471) 288,190
Net profit/(loss)
after taxation - - - - 1,671 (417) 1,254
________ _________ ________ ________ ________ _________ ________
Balance at 31 March
2018 14,768 25,406 15,778 4,484 229,896 (888) 289,444
________ _________ ________ ________ ________ _________ ________
The accompanying notes are an integral part of these financial statements.
CASH FLOW STATEMENT
Year ended Year ended
31 March 2019 31 March 2018
Notes GBP'000 GBP'000
Cash flows from operating activities
Dividend income received 3,559 3,470
Interest income received 15 2
Investment management fee paid (2,780) (3,014)
Overseas withholding tax (8) (6)
Other cash expenses (774) (727)
__________ __________
Cash inflow/(outflow) from operations 12 (275)
Interest paid (212) -
__________ __________
Net cash outflows from operating activities (200) (275)
__________ __________
Cash flows from investing activities
Purchases of investments (67,814) (38,311)
Sales of investments 53,321 39,707
Indian Capital Gains Tax on sales (167) -
__________ __________
Net cash (outflow)/inflow from investing
activities (14,660) 1,396
__________ __________
Cash flows from financing activities
Drawdown of loan 15,000 -
__________ __________
Net cash inflow from financing activities 15,000 -
__________ __________
Net increase in cash and cash equivalents 140 1,121
Cash and cash equivalents at the start
of the year 4,436 3,425
Effect of foreign exchange rate changes (349) (110)
__________ __________
Cash and cash equivalents at the end
of the year 2(h),17 4,227 4,436
__________ __________
There were no non-cash transactions during the year (2018 - GBPnil).
The accompanying notes are an integral part of these financial statements.
Notes to the Financial Statements for the year ended 31 March 2019
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 ("s1158").
The Company has a wholly-owned subsidiary, New India Investment
Company (Mauritius) Limited (in liquidation) ("the Company's Subsidiary")
which is registered at 33 Edith Cavell Street, Port Louis, 11324,
Mauritius. The Company's Subsidiary was placed into solvent liquidation
on 15 November 2017.
2. Accounting policies
(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 2019.
The financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS"), as adopted
by the International Accounting Standards Board ("IASB"), and
interpretations issued by the International Reporting Interpretations
Committee of the IASB ("IFRIC"). The Company adopted all of the
IFRS which took effect during the year including amendments to
IAS 7 which requires entities to provide disclosures that enable
users of financial statements to evaluate changes in liabilities
arising from financing activities, including both changes arising
from cash flows and non-cash changes.
The financial statements have also been prepared in accordance
with the AIC's Statement of Recommended Practice 'Financial Statements
of Investment Trust Companies and Venture Capital Trusts' issued
in November 2014 and updated in February 2018 with consequential
amendments (applicable for accounting periods beginning on or
after 1 January 2019 but adopted early).
The Company's assets consist substantially of equity shares in
companies listed on recognised stock exchanges and in most circumstances
are realisable within a short timescale. The Board has set limits
for borrowing and regularly reviews actual exposures in addition
to compliance with banking covenants. The Directors have, at
the time of approving the financial statements, a reasonable
expectation that the Company has adequate resources to continue
in operational existence for the foreseeable future. Thus they
continue to adopt the going concern basis of accounting in preparing
the financial statements. Further details is included in the
Directors' Report (unaudited).
Significant estimates and judgements
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates which
requires management to exercise its judgement in the process
of applying the accounting policies. The Directors do not believe
that any accounting judgements or estimates have been applied
to these financial statements that have a significant risk of
causing material adjustment to the carrying amount of assets
and liabilities within the next financial year. The Directors
believe that there are two key judgements. The first of these
for consideration has been the application of IFRS 10 'Consolidated
Financial Statements' including the Amendments, 'Investment entities
(Amendments to IFRS 10, IFRS 12 and IAS 27) (Investment Entity
Amendments). The amendments require entities that meet the definition
of an investment entity to fair value certain subsidiaries through
profit or loss in accordance with IAS 39 Financial Instruments:
Recognition and Measurement, rather than consolidate their results.
However, entities which are not themselves investment entities
and provide investment related services to the Company will continue
to be consolidated. Secondly, the Company also considers the
selection of Sterling as its functional currency to be a key
judgement.
Assessment as an investment entity
Entities which meet the definition of an investment entity are
required to fair value subsidiaries through profit or loss rather
than consolidate them. To determine whether an entity meets the
definition of an investment entity it is required to meet the
following three criteria:
(i) an entity obtains funds from one or more investors for the
purpose of providing those investors with investment services;
the Company provides investment services and has several
investors who pool funds to gain access to these services
and investment opportunities which they might not be able
to as individuals.
(ii) an entity commits to its investors that its business purpose
is to invest funds solely from capital appreciation, investment
income, or both; the Company's investment objective is to
provide shareholders with long-term capital appreciation
by investment in companies which are incorporated in India,
or which derive significant revenue or profit from India,
with dividend yield from the Company being of secondary importance.
(iii) an entity measures and evaluates the performance of substantially
all of its investments on a fair value basis; the Company
has elected to measure and evaluate the performance of all
of its investments on a fair value basis. The fair value
basis is used to present the Company's performance in its
communication with the market and the primary measurement
attribute to evaluate performance of all of its investments
and to make investment decisions.
During the year to 31 March 2017, the Subsidiary sold all of
its remaining investments to the Company and consequently the
Board was of the opinion that the Subsidiary no longer met the
definition of an Investment Entity. In November 2017, the Subsidiary
was placed into solvent liquidation. As the expected liquidation
proceeds of the Subsidiary are deemed to be immaterial to the
financial position, performance and cash flows of the group,
the Subsidiary continues to be held at fair value through profit
or loss rather than being consolidated.
Functional currency
The Company's investments are made in Indian Rupee and US Dollar,
however the Board considers the Company's functional currency
to be Sterling. In arriving at this conclusion, the Board considered
that the shares of the Company are listed on the London Stock
Exchange, it is regulated in the United Kingdom, principally
having its shareholder base in the United Kingdom and also pays
expenses in Sterling, as it would dividends, if declared by the
Company.
New and amended accounting standards and interpretations
The Company applied, for the first time, certain standards and
amendments, which are effective for annual periods beginning
on or after 1 January 2018. The nature and impact is described
below:
IFRS 9 'Financial Instruments'
The Company adopted IFRS 9 'Financial Instruments' on its effective
date of 1 January 2018. IFRS 9 replaces IAS 39 'Financial Instruments:
Recognition and Measurement' and introduces new requirements
for classification and measurement, impairment and hedge accounting.
The adoption of IFRS 9 has had no significant impact on the financial
statements of the Company.
IFRS 15 'Revenue from contracts with customers'
The Company adopted IFRS 15 'Revenue from contracts with customers'
on its effective date of 1 January 2018. IFRS 15 replaces IAS
18 'Revenue' and establishes a five-step model to account for
revenue arising from contracts with customers. In addition, guidance
on interest and dividend income have been moved from IAS 18 to
IFRS 9 without significant changes to the requirements. Therefore,
there was no significant impact of adopting IFRS 15 for the Company.
At the date of authorisation of these financial statements, the
following amendments to Standards and Interpretations were assessed
to be relevant and are all effective for annual periods beginning
on or after 1 January 2019:
IFRIC 23 - Uncertainty over Income Tax Treatments
In addition, under the Annual Improvements to IFRSs 2015 - 2017
Cycle, a number of Standards are included for annual periods
beginning on or after 1 January 2019.
The Company intends to adopt the Standards and Interpretations
in the reporting period when they become effective and the Board
does 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 may be revised presentations to the Financial
Statements and additional disclosures.
(b) Presentation of Statement of Comprehensive Income
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 Statement of Comprehensive Income
between items of revenue and capital nature has been presented
in the Statement of Comprehensive Income.
(c) Segmental reporting
The Board has considered the requirements of IFRS 8 'Operating
Segments' and is of the view that the Company is engaged in a
single segment business, of investing in Indian quoted equities
and that therefore the Company has only a single operating segment.
The Board of Directors, as a whole, has been identified as constituting
the chief operating decision maker of the Company. The key measure
of performance used by the Board to assess the Company's performance
is the total return on the Company's net asset value, as calculated
under IFRS, and therefore no reconciliation is required between
the measure of profit or loss used by the Board and that contained
in the financial statements.
(d) Income
Dividends receivable on equity shares are recognised in the Statement
of Comprehensive Income on the ex-dividend date, and gross of
any applicable withholding tax. Dividends receivable on equity
shares where no ex-dividend date is quoted are brought into account
when the Company's right to receive payment is established. Special
dividends are credited to capital or revenue, according to their
circumstances. Where a company has elected to receive dividends
in the form of additional shares rather than in cash, the amount
of the cash dividend foregone is recognised in the Statement
of Comprehensive 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 year.
(e) Expenses and interest payable
All expenses, with the exception of interest expenses, which
are recognised using the effective interest method, are accounted
for on an accruals basis. Expenses are charged to the revenue
column of the Statement of Comprehensive Income except as follows:
* expenses which are incidental to the acquisition or
disposal of an investment are charged to the capital
column of the Statement of Comprehensive Income and
separately identified and disclosed in note 9 (b);
and
* expenses are charged to the capital column of the
Statement of Comprehensive Income where a connection
with the maintenance or enhancement of the value of
the investments can be demonstrated.
(f) Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax. Tax payable is based on the taxable profit
for the year. Taxable profit differs from profit before tax as
reported in the Statement of Comprehensive Income because it
excludes items of income or expense that are taxable or deductible
in other years and it further excludes items that are never taxable
or deductible. The Company's liability for current tax is calculated
using tax rates that have been enacted or substantively enacted
by the Balance Sheet date.
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, using enacted tax rates that are expected to apply at
the date the deferred tax position is unwound.
(g) Investments
The Company has adopted the classification and measurement provisions
of IFRS 9 'Financial Instruments' which replaces IAS 39 'Financial
Instruments: Recognition and Measurement'. It makes changes to
classification and measurement of financial assets and introduces
an 'expected credit loss' model for the impairment of financial
assets.
The adoption of IFRS 9 did not result in any change to the classification
or measurement of financial instruments in either the current
or prior year. The Company's investments remain classified as
fair value through profit or loss. Under IAS 39 the Company carried
its investments at fair value through profit or loss under a
designation option; on adoption of IFRS 9, the investments are
classified as fair value through profit or loss.
The Company classifies its investments based on their contractual
cash flow characteristics and the Company's business model for
managing the assets. The business model, which is the determining
feature, is such that the portfolio of investments is managed,
performance and risk is evaluated, on a fair value basis. The
Manager is also compensated based on the fair value of the Company's
assets. Consequently, all investments are measured at fair value
through profit or loss.
Investments are recognised and de-recognised at trade date where
a purchase or sale is under a contract whose terms require delivery
within the timeframe established by the market concerned, and
are measured at fair value. For listed investments, this is deemed
to be bid market prices or closing prices on a recognised stock
exchange. 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 been measured at fair value, which is deemed to
be its net asset value.
Gains and losses arising from the changes in fair value are included
in net profit or loss for the period as a capital item. Transaction
costs are treated as a capital cost.
(h) Cash and cash equivalents
Cash comprises cash in hand and at 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.
(i) Other receivables
The Company has adopted the classification and measurement provisions
of IFRS 9 'Financial Instruments' which replaces IAS 39 'Financial
Instruments: Recognition and Measurement'. Financial assets previously
classified as other receivables are held to collect contractual
cash flows and give rise to cash flows representing solely payments
of principal and interest. As such they are measured at amortised
cost. Other receivables held by the Company do not carry any
interest, they have been assessed as not having any expected
credit losses over their lifetime due to their short-term nature.
(j) Other payables
The Company has adopted the classification and measurement provisions
of IFRS 9 'Financial Instruments' which replaces IAS 39 'Financial
Instruments: Recognition and Measurement'. Other payables are
non-interest bearing and are stated at amortised cost.
(k) Borrowings
Bank loans are initially recognised at cost, being the fair value
of the consideration received, net of any issue expenses. Subsequently,
they are measured at amortised cost using the effective interest
method. Finance charges are accounted for on an accruals basis
using the effective interest rate method and are charged 100%
to revenue.
(l) Dividends payable
Dividends are recognised from the date on which they are declared
and approved by shareholders.
(m) Nature and purpose of reserves
Called-up share capital
The Ordinary share capital on the Balance Sheet relates to the
number of shares in issue and in treasury. Only when the shares
are cancelled, either from treasury or directly, is a transfer
made to the capital redemption reserve. This reserve is not distributable.
Share premium account
The balance classified as share premium includes the premium
above nominal value from the proceeds on issue of any equity
share capital comprising Ordinary shares of 25p. This reserve
is not distributable.
Special reserve
The special reserve arose following Court approval in 1998 to
transfer GBP30 million from the share premium account. This reserve
is distributable and its function is to fund any share buy-backs
by the Company.
Capital redemption reserve
The capital redemption reserve arose when Ordinary shares were
redeemed, and subsequently cancelled by the Company, at which
point an amount equal to the par value of the Ordinary share
capital was transferred from the Ordinary share capital to the
capital redemption reserve. This reserve is not distributable.
Capital reserve
This reserve reflects any gains or losses on investments realised
in the period along with any increases and decreases in the fair
value of investments held that have been recognised in the Statement
of Comprehensive Income. This reserve is not distributable except
for the purpose of funding share buybacks to the extent that
gains are deemed realised.
Revenue reserve
This reserve reflects all income and costs which are recognised
in the revenue column of the Statement of Comprehensive Income.
The revenue reserve represents the amount of the Company's reserves
distributable by way of dividend.
(n) 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 Statement of Comprehensive Income.
2019 2018
3. Income GBP'000 GBP'000
Income from investments
Overseas dividends 3,587 3,316
Other operating income
Deposit interest 15 2
__________ __________
3,602 3,318
__________ __________
2019 2018
4. Investment management fees GBP'000 GBP'000
Investment management fees 2,774 3,015
__________ __________
The Company has an agreement with Aberdeen Standard Fund Managers
Limited ("ASFML") (formerly Aberdeen Asset Managers Limited ("AAML"))
for the provision of management and secretarial services.
During the year, the management fee was payable monthly in arrears
and was based on an annual amount of 0.9% up to GBP350m and 0.75%
thereafter of the net assets of the Company, excluding the fair
value of the subsidiary, New India Investment Company (Mauritius)
Limited (in liquidation) valued monthly. The management agreement
is terminable by either the Company or ASFML on 6 months' notice.
The amount payable in respect of the Company for the year was GBP2,774,000
(2018 - GBP3,015,000) and the balance due to ASFML at the year end
was GBP240,000 (2018 - GBP246,000). All investment management fees
are charged 100% to the revenue column of the Statement of Comprehensive
Income.
New India Investment Company (Mauritius) Limited (in liquidation)
also had an agreement with AAML to receive management services based
on an annual amount of 1% of its net asset value. The management
fee was chargeable up to 15 November 2017 when the Subsidiary was
placed into solvent liquidation. The amount payable during the year
to 31 March 2018 was GBPnil. The balance due to AAML at 31 March
2018 was GBPnil.
Year ended Year ended
31 March 31 March
2019 2018
5. Administrative expenses GBP'000 GBP'000
Directors' fees 116 114
Promotional activities 156 148
Auditor's remuneration:
- fees payable for the audit of the Company's
annual accounts 24 21
Legal and advisory fees 61 -
Custodian and overseas agents' charges 294 275
Other 154 156
__________ __________
805 714
__________ __________
The Company has an agreement with ASFML for the provision of promotional
activities in relation to the Company's participation in the Aberdeen
Standard Investment Trust Share Plan and ISA. The total fees paid
and payable under the agreement during the year were GBP156,000
(2018 - GBP148,000) and GBP39,000 (2018 - GBP39,000) was due to
ASFML at the year end.
The only fees paid to KPMG LLP by the Company are the audit fees
of GBP23,500 (2018 - GBP21,000). The amounts disclosed above for
Auditor's remuneration are all shown net of VAT.
Year ended Year ended
31 March 31 March
2019 2018
6. Finance costs GBP'000 GBP'000
Interest on bank loans 223 -
__________ __________
Finance costs are charged 100% to revenue as disclosed in the accounting
policies.
2019 2018
Revenue Capital Total Revenue Capital Total
7. Tax on ordinary activities GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(a) Analysis of charge for
the year
Indian capital gains
tax charge on sales - 167 167 - - -
Overseas taxation 8 - 8 6 - 6
_______ _______ _______ _______ _______ ______
Total current tax charge
for the year 8 167 175 6 - 6
Deferred tax liability
on Indian capital gains - 2,350 2,350 - - -
_______ _______ _______ _______ _______ ______
Total tax charge for
the year 8 2,517 2,525 6 - 6
_______ _______ _______ _______ _______ ______
The Company is liable to Indian capital gains tax under Section
115 AD of the Indian Income Tax Act 1961.
On 1 April 2018, the Indian Government withdrew an exemption
from capital gains tax on investments held for twelve months
or longer. Accordingly, the Company has recognised a deferred
tax liability of GBP2,350,000 on capital gains which may arise
if Indian investments are sold.
(b) Factors affecting the tax charge for the year
The tax charged for the year can be reconciled to the profit/(loss)
per the Statement of Comprehensive Income as follows:
2019 2018
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Loss)/profit before tax (200) 27,477 27,277 (411) 1,671 1,260
UK corporation tax on
(loss)/profit at the standard
rate of 19% (2018 - 19%) (38) 5,221 5,183 (78) 317 239
Effects of:
Gains on investments held
at fair value through
profit or loss not taxable
(see note below) - (5,287) (5,287) - (338) (338)
Currency losses not taxable - 66 66 - 21 21
Movement in excess expenses 720 - 720 707 - 707
Expenses not deductible
for tax purposes - - - 1 - 1
Indian capital gains tax
charge on sales - 167 167 - - -
Movement in deferred tax
liability on Indian capital
gains - 2,350 2,350 - - -
Irrecoverable overseas
withholding tax 8 - 8 6 - 6
Non-taxable dividend income (682) - (682) (630) - (630)
_______ _______ _______ _______ _______ ______
Total tax charge 8 2,517 2,525 6 - 6
_______ _______ _______ _______ _______ ______
(c) The Company has excess expenses of GBP15,399,000 (2018 - GBP11,621,000)
carried forward. This sum has arisen due to cumulative deductible
expenses having exceeded taxable income over the life of the
Company. It is considered too uncertain that there will be sufficient
taxable profits against which these expenses can be offset and,
therefore, in accordance with IAS 12, a deferred tax asset of
GBP2,618,000 (2018 - GBP1,976,000) has not been recognised, based
on the deferred tax rate of 17% (2018 - 17%). Any excess management
expenses will be utilised against any taxable income that may
arise in the future.
Due to the Company's status as an Investment Company, and its
intention to continue meeting the conditions required to obtain
approval in the foreseeable future, the Company has not provided
for deferred tax on any capital gains and losses arising on the
revaluation or disposal of investments.
8. Dividends on equity shares
No final dividend is being proposed for the year ended 31 March
2019. The total dividend for the year is GBPnil (2018 - GBPnil).
Year ended Year ended
31 March 2019 31 March 2018
9. (Loss)/return per Ordinary Revenue Capital Total Revenue Capital Total
share
Net (loss)/profit (GBP'000) (208) 24,960 24,752 (417) 1,671 1,254
Weighted average number
of Ordinary shares in
issue 59,070,140 59,070,140
(Loss)/return per Ordinary
share (pence) (0.35) 42.25 41.90 (0.71) 2.83 2.12
10. Investments held at fair value through profit or loss
Year ended 31 March 2019 Year ended 31 March 2018
Investments Investments
In Parent Total In subsidiary Parent Total
subsidiary {A}
{A}
(a) Company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening book cost 20,564 203,625 224,189 20,564 196,152 216,716
Opening investment
holdings fair value
(losses)/gains (20,537) 81,732 61,195 (20,511) 88,794 68,283
_______ _______ _______ _______ _______ ______
Opening valuation 27 285,357 285,384 53 284,946 284,999
Movements in the
year:
Purchases - 69,306 69,306 - 38,311 38,311
Sales - proceeds - (55,847) (55,847) - (39,707) (39,707)
Sales - realised
net gains - 7,155 7,155 - 8,869 8,869
Increase/(decrease)
in investment holdings
fair value gains 16 20,655 20,671 (26) (7,062) (7,088)
_______ _______ _______ _______ _______ ______
Closing valuation 43 326,626 326,669 27 285,357 285,384
_______ _______ _______ _______ _______ ______
{A} In solvent liquidation from 15 November 2017.
Year ended 31 March 2019 Year ended 31 March 2018
Investments Investments
In Parent Total In subsidiary Parent Total
subsidiary {A}
{A}
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Closing book cost 20,564 224,239 244,803 20,564 203,625 224,189
Closing investment
holdings fair value
(losses)/gains (20,521) 102,387 81,866 (20,537) 81,732 61,195
_______ _______ _______ _______ _______ ______
Closing valuation 43 326,626 326,669 27 285,357 285,384
_______ _______ _______ _______ _______ ______
{A} In solvent liquidation from 15 November 2017.
As at As at
31 March 31 March
2019 2018
Gains on investments GBP'000 GBP'000
Realised net gains on sales of investments 7,155 8,869
Increase/(decrease) in investment holdings
fair value gains 20,671 (7,088)
_______ _______
27,826 1,781
_______ _______
The Company owns 100% of the Ordinary share capital of its subsidiary,
New India Investment Company (Mauritius) Limited (in liquidation),
an investment holding company registered in Mauritius which was
placed into solvent liquidation on 15 November 2017. The subsidiary
is revalued following updated information from the liquidator.
(b) Transaction costs
During the year, expenses were incurred in acquiring or disposing
of investments classified as fair value through profit or loss.
These have been expensed through the capital column of the Statement
of Comprehensive Income, and are included within gains on investments
at fair value through profit or loss in the Statement of Comprehensive
Income. The total costs were as follows:
Year ended Year ended
31 March 31 March
2019 2018
GBP'000 GBP'000
Purchases 129 69
Sales 105 78
_______ _______
234 147
_______ _______
The above transaction costs are calculated in line with the AIC
SORP. The transaction costs in the Company's Key Information Document
provided by the Manager are calculated on a different basis and
in line with the PRIIPs regulations.
2019 2018
11. Other receivables GBP'000 GBP'000
Amounts due from brokers 2,526 -
Prepayments and accrued income 57 27
_______ _______
2,583 27
_______ _______
None of the above amounts are past their due date or impaired (2018
- nil).
2019 2018
12. Current liabilities GBP'000 GBP'000
(a) Bank loan
Loans repayable within one year 15,000 -
_______ _______
15,000 -
_______ _______
The Company agreed a GBP30 million two year uncommitted multicurrency
revolving loan facility with NatWest Markets Plc on 24 July 2018.
GBP15 million was drawn down at 31 March 2019 at an all-in interest
rate of 1.52% and matured on 29 May 2019. At the date of this
Report the Company had drawn down GBP15,000,000 at an all-in interest
rate of 1.51725%.
The terms of the loan facility contain covenants that consolidated
gross borrowings should not exceed 20% of adjusted investment
portfolio value, the net asset value shall not at any time be
less than GBP150 million and the investment portfolio contains
a minimum of 25 eligible investments.
2019 2018
GBP'000 GBP'000
(b) Other payables
Amounts due to brokers 1,492 -
Other creditors 441 403
_______ _______
1,933 403
_______ _______
2019 2018
13. Non-current liabilities GBP'000 GBP'000
Deferred tax liability on Indian capital gains 2,350 -
2019 2018
14. Ordinary share capital Number GBP'000 Number GBP'000
Authorised 200,000,000 50,000 200,000,000 50,000
Issued and fully paid
Ordinary shares of 25p each 59,070,140 14,768 59,070,140 14,768
__________ _______ __________ _______
The Ordinary shares give shareholders voting rights, the entitlement
to all of the capital growth in the Company's assets, and to all the
income from the Company that is resolved to be distributed.
Ownership of Subsidiary
At the year end, the Company's wholly-owned Subsidiary, New India
Investment Company (Mauritius) Limited (in liquidation) ('the Subsidiary')
had share capital of 4,275,000 (2018 - 4,275,000) Redeemable Participating
Preference shares of GBP0.10 each ('Preference shares') and 50 Management
shares of GBP1 each. The Company holds 100% of the share capital of
the Subsidiary.
In January 2005, the Subsidiary issued a Warrant instrument to the
Company for a consideration of GBP32,270,000 giving the Company the
right to purchase up to 38,350,900 Preference shares, at an exercise
price per share of GBP20 per share ('the 2015 Warrant'). The 2015
Warrant was subsequently extended and is exercisable until 26 August
2020.
In August 2010, the Subsidiary issued a further Warrant instrument
to the Company for a consideration of GBP9,000,000, giving the Company
the right to purchase up to 1,321,417 Preference shares, at an exercise
price per share of GBP40 per share ('the 2020 Warrant'). The 2020
Warrant is exercisable for 10 years to 26 August 2020.
Following the above, there are two separate Warrants issued by the
Subsidiary. The Subsidiary had the right to repurchase both Warrants
in part or in whole at any time for a consideration to be determined
in the market at the time by an independent valuer.
Partial repurchase of Subsidiary Warrant
On 15 May 2008, the Subsidiary repurchased part of the 2015 Warrant,
in relation to 405,900 Preference shares, at a valuation based on
the subscription price of GBP20. In aggregate, proceeds of GBP3,004,000
were received by the Company in the form of a partial capital redemption.
These proceeds were credited to the capital reserve of the Company.
During February and March 2016, the Subsidiary repurchased a further
part of the 2015 Warrant, in relation to 30,381,195 Preference shares,
at a valuation based on the subscription price of GBP20. In aggregate,
proceeds of GBP186,607,000 were received by the Company in the form
of a partial capital redemption. These proceeds were also credited
to the capital reserve of the Company.
During March 2017, the Subsidiary repurchased a further part of the
2015 Warrant, in relation to 63,500 Preference shares, at a valuation
based on the subscription price of GBP20. In aggregate, proceeds of
GBP390,000 were received by the Company in the form of a partial capital
redemption. These proceeds were also credited to the capital reserve
of the Company.
At the year end there were then two Warrants in issue carrying the
right for the Company to subscribe for 7,500,305 and 1,321,417 new
Preference shares of 10p in the Subsidiary at GBP20 and GBP40 per
share respectively.
The Subsidiary was placed into liquidation on 15 November 2017. As
a result of the Subsidiary being placed into liquidation, the Company
may not exercise the Warrants referred to above without the consent
of the Liquidator or the Court.
2019 2018
15. Capital reserves GBP'000 GBP'000
At 1 April 2018 229,896 228,225
Currency losses (349) (110)
Movement in investment holdings fair value gains 20,671 (7,088)
Gains on sales of investments 7,155 8,869
Indian capital gains tax charge (2,517) -
_______ _______
At 31 March 2019 254,856 229,896
_______ _______
The capital reserve includes gains of GBP81,866,000 (2018 - gains
of GBP61,195,000) which relate to the revaluation of investments held
at the reporting date.
16. Net asset value per Ordinary share
The net asset value per Ordinary share is based on a net asset value
of GBP314,196,000 (2018 - GBP289,444,000) and on 59,070,140 (2018
- 59,070,140) Ordinary shares, being the number of Ordinary shares
in issue at the year end.
17. Financial instruments
Risk Management
The Company's investment activities expose it to various types of
financial risk associated with the financial instruments and markets
in which it invests. The Company'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.
The Board has delegated the risk management function to ASFML under
the terms of its management agreement with ASFML (further details
of which are included under note 4). The Board regularly reviews and
agrees policies for managing each of the key financial risks identified
with the Manager. The types of risk and the Manager's approach to
the management of each type of risk, are summarised below. Such approach
has been applied throughout the year and has not changed since the
previous accounting period. The numerical disclosures exclude short-term
debtors and creditors on the grounds of their materiality.
Risk management framework
The directors of Aberdeen Standard Fund Managers Limited collectively
assume responsibility for ASFML's obligations under the AIFMD including
reviewing investment performance and monitoring the Company's risk
profile during the year.
ASFML is a fully integrated member of the Standard Life Aberdeen Group
("the Group"), which provides a variety of services and support to
ASFML in the conduct of its business activities, including in the
oversight of the risk management framework for the Company. The AIFM
has delegated the day to day administration of the investment policy
to Aberdeen Asset Management Asia Limited, which is responsible for
ensuring that the Company is managed within the terms of its investment
guidelines and the limits set out in its pre-investment disclosures
to investors (details of which can be found on the Company's website).
The AIFM has retained responsibility for monitoring and oversight
of investment performance, product risk and regulatory and operational
risk for the Company.
The Manager conducts its risk oversight function through the operation
of the Group's risk management processes and systems which are embedded
within the Group's operations. The Group's Risk Division supports
management in the identification and mitigation of risks and provides
independent monitoring of the business. The Division includes Compliance,
Business Risk, Market Risk, Risk Management and Legal. The team is
headed up by the Group's Head of Risk, who reports to the CEO of the
Group. The Risk Division achieves its objective through embedding
the Risk Management Framework throughout the organisation using the
Group's operational risk management system ("SHIELD").
The Group's Internal Audit Department is independent of the Risk Division
and reports directly to the Group's CEO and to the Audit Committee
of the Group's Board of Directors. The Internal Audit Department is
responsible for providing an independent assessment of the Group's
control environment.
The Group's corporate governance structure is supported by several
committees to assist the board of directors of the Group, its subsidiaries
and the Company to fulfil their roles and responsibilities. The Group's
Risk Division is represented on all committees, with the exception
of those committees that deal with investment recommendations. The
specific goals and guidelines on the functioning of those committees
are described on the committees' terms of reference.
Risk management
The main risks the Company faces from its financial instruments are
(i) market risk (comprising interest rate risk, currency risk and
price risk), (ii) liquidity risk and (iii) credit risk.
(i) Market 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
The interest rate risk profile of the portfolio of the Company's
financial assets and liabilities, excluding equity holdings which
are all non-interest bearing, at the Statement of Financial Position
date was as follows:
Weighted average Weighted
period for average Fixed Floating
which
rate is fixed interest rate rate
rate
At 31 March 2019 Years % GBP'000 GBP'000
Assets
Sterling - - - 3,116
US Dollars - - - 12
Indian Rupee - - - 1,099
_______ _______ _______ _______
- 4,227
_______ _______ _______ _______
Weighted average Weighted
period for average Fixed Floating
which
rate is fixed interest rate rate
rate
Years % GBP'000 GBP'000
Liabilities
Bank loan - GBP15,000,000 0.08 1.52 15,000,000 -
_______ _______ _______ _______
15,000,000 -
_______ _______ _______ _______
Weighted average Weighted
period for average Fixed Floating
which
rate is fixed interest rate rate
rate
At 31 March 2018 Years % GBP'000 GBP'000
Assets
Sterling - - - 4,436
_______ _______ _______ _______
- 4,436
_______ _______ _______ _______
There were no liabilities at 31 March 2018 subject to interest
rate risk.
The weighted average interest rate is based on the current yield
of each asset, weighted by its market value. The weighted average
interest rate on bank loans is based on the interest rate payable,
weighted by the total value of the loans. The maturity date of
the Company's loans are shown in note 11.
The floating rate assets consist of cash deposits on call earning
interest at prevailing market rates.
The Company's equity portfolio and short-term debtors and creditors
(excluding bank loans) have been excluded from the above tables.
Management of the risk
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.
Interest rate sensitivity
The sensitivity analyses below have been determined based on the
exposure to interest rates for both derivative and non-derivative
instruments at the Statement of Financial Position date and the
stipulated change taking place at the beginning of the financial
year and held constant throughout the reporting period in the
case of instruments that have floating rates.
The rate of interest on the loan is the percentage rate per annum
which is the aggregate of the applicable margin, adjusted LIBOR
Offered Rate and mandatory cost if any.
If interest rates had been 100 basis points higher or lower (based
on current parameter used by Manager's Investment Risk Department
on risk assessment) and all other variables were held constant,
the Company's revenue return for the year ended 31 March 2019
would decrease/increase by GBP60,000 (2018 - increase/decrease
GBP44,000). This is mainly attributable to the Company's exposure
to interest rates on its floating rate cash balances and bank
loans. These figures have been calculated based on cash positions
and bank loans at each year end.
In the opinion of the Directors, the above sensitivity analyses
are not representative of the year as a whole, since the level
of exposure changes frequently as part of the interest rate risk
management process used to meet the Company's objectives. The
risk parameters used will also fluctuate depending on the current
market perception.
Foreign currency risk
The Company's total return and net assets can be significantly
affected by currency translation movements as the majority of
the Company's assets and income are denominated in currencies
other than Sterling, which is the Company's functional currency.
Management of the risk
It is not the Company's policy to hedge this risk but it reserves
the right to do so, to the extent possible.
The revenue account is subject to currency fluctuation arising
on dividends paid in foreign currencies. The Company does not
hedge this currency risk.
Foreign currency exposure by currency of denomination:
31 March 2019 31 March 2018
Net Total Net Total
Overseas monetary currency Overseas monetary currency
investments assets exposure investments assets exposure
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
US Dollar 9,741 12 9,753 15,334 - 15,334
Indian Rupee 316,928 1,099 318,027 270,023 - 270,023
_______ _______ _______ _______ _______ ______
326,669 1,111 327,780 285,357 - 285,357
_______ _______ _______ _______ _______ ______
Foreign currency sensitivity
The following table details the positive impact to a 10% decrease
in Sterling against the foreign currency in which the Company
has exposure The sensitivity analysis includes foreign currency
denominated monetary items and adjusts their translation at the
year end for a 10% change in foreign currency rates. In the event
of a 10% increase in Sterling then there would be a negative impact
on the Company's returns.
2019 2019 2018 2018
Revenue Equity{A} Revenue Equity{A}
GBP'000 GBP'000 GBP'000 GBP'000
US Dollar 14 975 4 1,533
Indian Rupee 345 31,803 331 27,002
_______ _______ _______ _______
359 32,778 335 28,535
_______ _______ _______ _______
{A} Represents equity exposure to relevant currencies.
Price risk
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.
Management of the risk
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 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,
with the exception of Grasim Industries GDR, Ultratech Cement
GDR and Ambuja Cements GDR, whose primary exchange is Luxembourg,
and Cognizant Technology Solutions, whose primary exchange is
the NASDAQ in the United States. The subsidiary, New India Investment
Company (Mauritius) Limited (in liquidation) was unlisted.
Price risk sensitivity
If market prices at the Balance Sheet date had been 15% higher
or lower while all other variables remained constant, the return
attributable to Ordinary shareholders for the year ended 31 March
2019 would have increased /(decreased) by GBP49,000,000 (2018
- increased/(decreased) by GBP42,807,000) and capital 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.
Management of the risk
The Board imposes borrowing limits to ensure gearing levels are
appropriate to market conditions and reviews these on a regular
basis. Borrowings comprise a GBP30 million revolving multi-currency
credit facility, which expires on 24 July 2020. Details of borrowings
at 31 March 2019 are shown in note 12.
Liquidity risk is not considered to be significant as the Company's
assets comprise mainly readily realisable securities, which can
be sold to meet funding commitments if necessary. Short-term flexibility
is achieved through the use of the loan facility, details of which
can be found in note 12. Details of the Board's policy on gearing
are shown in the interest rate risk section of this note.
Liquidity risk exposure
The Company has a GBP30 million two year uncommitted multicurrency
revolving loan facility, of which GBP15,000,000 (2018 - GBPnil)
was drawn down at the year end. This draw down matured on 29 May
2019 with interest payable at maturity.
(iii) Credit risk
This is failure of the counterparty to a transaction to discharge
its obligations under that transaction, which could result in
the Company suffering a loss.
Management of the risk
The risk is actively managed as follows:
* investment transactions are carried out with a number
of brokers, whose credit standing is reviewed
periodically by the 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 by the Manager on
a daily basis. In addition, both stock and cash
reconciliations to custodians' records are performed
on a daily basis by the Manager to ensure
discrepancies are investigated 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
and to the Board of the Company. This review will
also include checks on the maintenance and security
of investments held; and
* cash is held only with reputable banks whose credit
ratings are monitored on a regular basis.
None of the Company's financial assets are secured by collateral
or other credit enhancements (2018 - same).
Credit risk exposure
In summary, compared to the amounts included in the Balance Sheet,
the maximum exposure to credit risk at 31 March was as follows:
2019 2018
Statement Statement
Financial Maximum Financial Maximum
Position Exposure Position Exposure
GBP'000 GBP'000 GBP'000 GBP'000
Current assets
Loans and receivables 2,583 2,583 27 27
Cash at bank and in hand 4,227 4,227 4,436 4,436
_______ _______ _______ _______
6,810 6,810 4,463 4,463
_______ _______ _______ _______
The exposure noted in the above table is representative of the
exposure across the year as a whole.
None of the Company's financial assets are past due or impaired
(2018 - same).
Fair values of financial assets and financial liabilities
The fair value of bank loans are represented in the table below;
2019 2018
GBP'000 GBP'000
Bank loan - GBP15,000,000 15,000 -
_______ _______
Investments held at fair value through profit or loss are valued
at their quoted bid prices which equate to their fair values.
For the fixed rate GBP loan, the fair value of borrowings has
been calculated at GBP15,000,000 as at 31 March 2019 (2018 - GBPnil)
compared to an accounts value in the financial statements GBP15,000,000
(2018 - GBPnil) (note 11).
The Directors are of the opinion that the other financial assets
and liabilities carried at amortised cost equates to their fair
value.
18. 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 Board, with the assistance of the 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.
19. Fair value hierarchy
IFRS 13 'Fair Value Measurement' requires an entity to classify fair
value measurements using a fair value hierarchy that reflects the
subjectivity of the inputs used in making measurements. The fair value
hierarchy has the following levels:
Level 1: quoted (unadjusted) market prices in active markets for identical
assets or liabilities;
Level 2: valuation techniques for which the lowest level input that
is significant to the fair value measurement is directly or indirectly
observable; and
Level 3: valuation techniques for which the lowest level input that
is significant to the fair value measurement is unobservable.
The financial assets and liabilities measured at fair value in the
Balance Sheet are grouped into the fair value hierarchy at the Balance
Sheet date are as follows:
Level Level Level Total
1 2 3
As at 31 March 2019 Note GBP'000 GBP'000 GBP'000 GBP'000
Financial assets at fair value
through profit or loss
Quoted equities a) 321,165 5,461 - 326,626
Investment in Subsidiary b) - 43 - 43
_______ _______ _______ _______
Net fair value 321,165 5,504 - 326,669
_______ _______ _______ _______
Level Level Level Total
1 2 3
As at 31 March 2018 Note GBP'000 GBP'000 GBP'000 GBP'000
Financial assets at fair value
through profit or loss
Quoted equities a) 285,357 - - 285,357
Investment in Subsidiary b) - 27 - 27
_______ _______ _______ _______
Net fair value 285,357 27 - 285,384
_______ _______ _______ _______
a) Quoted equities
The fair value of the Group's investments in quoted equities has
been determined by reference to their quoted bid prices at the reporting
date. Quoted equities included in Fair Value Level 1 are actively
traded on recognised stock exchanges. Quoted equities included in
Fair Value Level 2 are GDR holdings in Ultratech Cement, Grasim
Industries and Ambuja Cements, which are not considered to trade
actively on recognised stock exchanges.
b) Investment in Subsidiary
The Company's investment in its Subsidiary is categorised in Fair
Value Level 2 as its fair value has been determined by reference
to the liquidator's reporting in respect of the Subsidiary Company's
liquidation. The net asset value is predominantly made up of cash
and receivables.
20. Controlling party
In the opinion of the Directors on the basis of shareholdings advised
to them, the Company has no immediate or ultimate controlling party.
21. Related party transactions and transactions with the Manager
Directors' fees and interests
Fees payable during the year to the Directors and their interests
in shares of the Company are disclosed within the Directors' Remuneration
Report in the published Annual Report.
Transactions with the Manager
The Company has an agreement with Aberdeen Standard Fund Managers
Limited for the provision of management, secretarial, accounting and
administration services and for the carrying out of promotional activities
in relation to the Company. Details of transactions during the year
and balances outstanding at the year end disclosed in notes 4 and
5.
Ownership of Subsidiary
The Company owns 100% of the Ordinary share capital of its subsidiary,
New India Investment Company (Mauritius) Limited (in liquidation),
an investment holding company registered in Mauritius which was placed
into solvent liquidation on 15 November 2017. Further details of the
Company's interest can be found in note 14.
22. The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 March 2019 or 2018. Statutory
accounts for 2018 have been delivered to the registrar of companies,
and those for 2019 will be delivered in due course. The auditor has
reported on those accounts; their reports were (i) unqualified, (ii)
did not include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report and (iii)
did not contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
ALTERNATIVE PERFORMANCE MEASURES
Alternative performance measures are numerical measures of the Company's
current, historical or future performance, financial position or cash
flows, other than financial measures defined or specified in the applicable
financial framework. The Company's applicable financial framework includes
IFRS and the AIC SORP. The Directors assess the Company's performance
against a range of criteria which are viewed as particularly relevant
for closed-end investment companies.
Total return
Total return is considered to be an alternative performance measure.
NAV and share price total returns show how the NAV and share price has
performed over a period of time in percentage terms, taking into account
both capital returns and dividends paid to shareholders. NAV total return
involves investing the net dividend in the NAV of the Company with debt
at fair value on the date on which that dividend goes ex-dividend. Share
price total return involves reinvesting the net dividend in the share
price of the Company on the date on which that dividend goes ex-dividend.
The tables below provide information relating to the NAVs and share prices
of the Company on the dividend reinvestment dates during the years ended
31 March 2019 and 31 March 2018. No dividends were declared during these
years.
Share
2019 NAV price
31 March 2018 490.00p 426.00p
31 March 2019 531.90p 461.00p
__________ __________
Total return +8.6% +8.2%
__________ __________
Share
2018 NAV price
31 March 2017 487.88p 441.50p
31 March 2018 490.00p 426.00p
__________ __________
Total return +0.4% -3.5%
__________ __________
Discount to net asset value
The discount is the amount by which the share price of 461.00p (2018
- 426.00p) is lower than the net asset value per share of 531.90p (2018
- 490.00p), expressed as a percentage of the net asset value.
Net gearing
Net gearing measures the total borrowings of GBP15,000,000 (31 March
2018 - GBPnil) less cash and cash equivalents of GBP5,261,000 (31 March
2018 - GBP4,436,000) divided by shareholders' funds of GBP314,196,000
(31 March 2018 - GBP289,444,000), expressed as a percentage. Under AIC
reporting guidance cash and cash equivalents includes amounts due to
and from brokers at the year end as well as cash and cash equivalents.
These balances can be found in notes 11 and 12(b).
Ongoing charges
Ongoing charges is considered to be an alternative performance measure.
The ongoing charges ratio has been calculated in accordance with guidance
issued by the AIC as the total of investment management fees and administrative
expenses and expressed as a percentage of the average net asset values
with debt at fair value throughout the year.
2019 2018
Investment management fees (GBP'000) 2,774 3,015
Administrative expenses (GBP'000) 805 759
Less: non-recurring charges (GBP'000) (9) (3)
__________ __________
Ongoing charges (GBP'000) 3,570 3,771
__________ __________
Average net assets (GBP'000) 305,133 302,670
__________ __________
Ongoing charges ratio 1.17% 1.25%
__________ __________
The ongoing charges ratio provided in the Company's Key Information Document
is calculated in line with the PRIIPs regulations.
The Annual Report will be posted to shareholders in June 2019. Further
copies may be obtained from the registered office, Bow Bells House,
1 Bread Street, London EC4M 9HH or from the Company's website at: aberdeen-newindia.co.uk.
The Annual General Meeting will be held at Bow Bells House, 1 Bread
Street, London EC4M 9HH at 12.30 p.m. on 5 September 2019.
By Order of the Board
Aberdeen Asset Management PLC
Secretaries
12 June 2019
END
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR CKBDDABKDFAD
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