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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 714.00 | 712.00 | 716.00 | 716.00 | 712.00 | 712.00 | 54,328 | 16:35:21 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Trust,ex Ed,religious,charty | -29.55M | -34.27M | -0.5892 | -12.08 | 414.09M |
From Apr 2022 to Apr 2024
TIDMANII
RNS Number : 9006Q
Aberdeen New India Invest Trust PLC
01 July 2022
ABERDEEN NEW INDIA INVESTMENT TRUST PLC
LEI - 549300D2AW66WYEVKF02
ANNUAL FINANCIAL REPORT
For the year ended 31 March 2022
PERFORMANCE HIGHLIGHTS
Hot Features
Premium
Share price total return(A) Net asset value total return(A)
+3.7% +11.2%
2021 +65.6% 2021 +52.7%
Ongoing charges ratio(A) MSCI India Index total return(B)
1.06% +23.9%
2021 1.16% 2021 +59.1%
Discount to net asset value(A)
19.4%
2021 13.6%
(A) Alternative Performance Measure.
(B) Sterling
adjusted.
Financial Highlights and Financial Calendar
Financial Highlights
31 March 2022 31 March 2021 % change
======================================== ============== ============== ========
Equity shareholders' funds (net assets) GBP403,995,000 GBP366,106,000 +10.3
======================================== ============== ============== ========
Market capitalisation GBP325,607,000 GBP316,448,000 +2.9
======================================== ============== ============== ========
Share price (mid market) 562.00p 542.00p +3.7
======================================== ============== ============== ========
Net asset value per Ordinary share 697.30p 627.05p +11.2
======================================== ============== ============== ========
Discount to net asset value(A) 19.4% 13.6%
======================================== ============== ============== ========
Net gearing(A) 5.5% 5.8%
======================================== ============== ============== ========
Total return per share 69.64p 216.25p
======================================== ============== ============== ========
Operating costs
======================================== ============== ============== ========
Ongoing charges ratio(A) 1.06% 1.16%
---------------------------------------- -------------- -------------- --------
(A) Considered to be an Alternative Performance Measure.
Financial Calendar
Financial year end 31 March 2022 ================================= ================== Annual General Meeting 28 September 2022 ================================= ================== Expected announcement of results June 2023 for year ended 31 March 2023 ================================= ==================
STRATEGIC REPORT
Chairman's Statement
Dear Shareholder,
Overview
For the year ended 31 March 2022 (the "Year"), your Company's net asset value ("NAV") increased by 11.2% in total return terms. By comparison, the Company's Benchmark (MSCI India Index) rose by 23.9% in sterling total return terms. Accompanied by a widening of the Company's discount from 13.6% to 19.4% as at 31 March 2022, the Company's share price total return was only 3.7% for the Year.
The positive performance of Indian equities masked the challenging conditions that the country endured over the Year. At the start, India was facing a devastating health crisis due to Covid-19, before signs of recovery emerged in the economy as large swathes of the country re-opened. Unfortunately, market volatility held back the portfolio's absolute return in the second half as the conflict in Ukraine sent energy and commodity prices surging. Not only did this hurt India, as a net energy importer, but it also meant that positive stock fundamentals were largely ignored.
Against this backdrop, cyclical and value stocks outperformed their quality peers that are favoured by your Manager. The portfolio's financial holdings, including HDFC Bank and Kotak Mahindra Bank , had a disappointing run, as they lagged the higher-growth companies in the broader market. Not holding energy as well as metals and mining companies negatively affected performance in the second half of the Year. It is worthwhile highlighting that your Manager's investment style, which focuses on quality companies, often lags in bull markets and outperforms in down markets, which has held back the Company's performance over the past two years.
Nonetheless, your Manager has taken steps to reposition and refresh the portfolio with a focus on improving near-term performance. The Manager's Report provides further details on how the portfolio performed and how the Manager is adapting to changing market dynamics and finding opportunities where valuations appear to have been overly downgraded.
At the start of the Year, India struggled with a Covid-19 wave resulting in daily cases reportedly exceeding 400,000 at the peak. The nation's healthcare system was pushed to the brink and, unfortunately, the crisis extracted a heavy human toll. Thankfully more than 60% of the population has some protection against the disease now while medical facilities now have an adequate supply of beds and oxygen. When the third wave of infection arrived in January 2022, associated with the Omicron variant, economic activity in India continued without any significant hindrance. A rebound in factory activity, industrial production growth and higher levels of goods and services tax collections pointed to a path of recovery to pre-Covid levels.
One encouraging development emerged in the real estate sector. Following a lengthy downturn, India's housing market has been signalling a recovery, with homes becoming more affordable, which resulted in gains for the Company's holdings in Prestige Estates and Godrej Properties .
Other sectors contributing to the Company's solid absolute performance included information technology and healthcare, with the former represented by Mphasis and Infosys and the latter by Fortis Healthcare which profited from the vaccine roll-out (see the case studies).
The major development during the second half of the Year was Russia's invasion of Ukraine: the two countries supply a host of vital commodities to the world, ranging from wheat to barley and copper to nickel. Fears of disruption sent prices of those commodities and associated products soaring, alongside oil, stoking global inflation fears. While India is almost self-sufficient in its food supply, it is a net importer of oil and elevated energy prices are gradually adding to the country's import bills. Higher input costs, related to rising commodity prices, are affecting margins for the portfolio's quality holdings in the consumer sector such as Hindustan Unilever . Several of these consumer companies have turned cautious in their outlook, flagging expected slowdowns in the volume of fast-moving consumer goods as Indian households prioritise essentials. In light of higher-for-longer commodity prices, your Manager has taken another look at the energy and metals and mining sectors, and towards the end of the Year, purchased a low-cost aluminium and copper stock, Hindalco Industries .
The Year also saw the Company investing in several e-commerce stocks, including FSM E-Commerce ("Nykaa") and Zomato , as well as diversifying into smaller cap opportunities such as leading health insurer Star Health and Allied Insurance and affordable housing provider Aptus Value Housing Finance .
Another notable event during the Year was a shift in India's stance in its climate goal commitments. After years of avoiding making a firm commitment in terms of carbon reduction targets, India has publicly pledged to achieve net zero emissions by 2070. It plans to source 50% of its energy requirements from renewable sources by 2030, which bodes well for the further development of alternative sources of power. The portfolio already has exposure to quality names that are destined to play an integral role in India's shift towards green energy in the coming decades. One example is the Power Grid Corporation of India , the country's largest electric power transmission utility.
Proposed introduction of conditional tender offer
The Board announced on 24 March 2022 its intended introduction of a five-yearly performance-related conditional tender offer (the "Conditional Tender Offer").
The Board remains concerned about the relative underperformance of the Company's net asset value ("NAV") recently, as compared to its Benchmark. Following discussions with the Manager, the Board has decided that, should the adjusted NAV total return underperform the Company's Benchmark over the five year period from 1 April 2022 (the "Assessment Period"), then shareholders will be offered the opportunity to realise up to 25 per cent of their investment for cash at a level close to NAV. Five years has been chosen as this best corresponds with the Manager's typical investment time horizon.
In order to align the Company's continuation vote with the Assessment Period for the Conditional Tender Offer, the Board proposes to move from the Company's current cycle of annual continuation votes to five-yearly continuation votes (together with the Conditional Tender Offer, the "Proposals"). While there is no formal requirement for shareholders to vote on the introduction of the five-yearly Conditional Tender Offer, shareholders' approval is required to amend the Company's articles of association in order to replace the annual continuation vote with a continuation vote at least every five years and, accordingly a resolution will be put to shareholders at the next AGM. The Proposals are subject to the passing, at the AGM on 28 September 2022, of ordinary Resolution 8, as the Company's annual continuation vote, and special Resolution 12, in connection with the change to the articles of association. In addition, any Conditional Tender Offer will be subject to the passing of the five-yearly continuation vote.
Board
The Board was pleased to announce the appointment of David Simpson as a Director of the Company with effect from 1 November 2021 following a search conducted by an independent recruitment consultancy. David is involved in India in his capacity as a non-executive director of ITC Limited ("ITC"), a major listed Indian company. ITC has a diversified presence in FMCG, hotels, packaging, specialty paper and agri-business. ITC represented 2.3% of the Company's net assets at 31 March 2022. David has agreed that he will recuse himself from all discussions regarding ITC to avoid any potential conflict of interest.
The Company also announced, with effect from 1 August 2022, the appointment of Andrew Robson as a Director of the Company, also undertaken by an independent recruitment consultancy. Andrew is a Chartered Accountant with expertise in investment banking, as a finance director, and brings to the Company considerable investment trust experience. The other Directors are delighted to welcome Andrew to the Board and very much look forward to working with him.
Stephen White will be retiring from the Board at the conclusion of the AGM after serving nine years as a Director, including nearly all of his tenure as Chairman of the Audit Committee. The other Directors would like to thank Stephen for his considerable contribution to the Company, including the particular experience he brought as an investment professional to the Board's deliberations. Andrew will succeed Stephen as Audit Committee Chairman following the AGM.
After serving as a Director of the Company since 2012 and as Chairman for eight years, I shall also be stepping down from the Board of the Company at the AGM. My successor as Chairman is Michael Hughes while David Simpson replaces Michael as Senior Independent Director.
Gearing
As at 31 March 2022, the full GBP30 million had been drawn of the total available bank loan facility provided by Royal Bank of Scotland International (London Branch) (31 March 2021 - GBP24m), which resulted in net gearing of 5.5%, as compared to 5.8% at 31 March 2021. The ability to gear is one of the advantages of the closed ended company structure and your Manager continues to seek opportunities to deploy this facility for the benefit of shareholders.
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 pursues a policy of selective buybacks of shares where to do so, in the opinion of the Board, is in the best interests of shareholders, while also having regard to the overall size of the Company. Over the year, as global markets became more unsettled, the discount to NAV widened from 13.6% to 19.4% as at 31 March 2022.
The Company bought back into treasury 448,201 (2021 - 335,653) Ordinary shares, resulting in 57,937,127 shares in issue with voting shares and an additional 1,133,013 shares held in treasury at 31 March 2022. Between the year end and the date of this Report a further 360,030 shares were bought back into treasury resulting in 57,577,097 shares in issue with voting shares and 1,493,043 shares held in treasury.
The Board believes that a combination of stronger long-term investment performance and effective marketing should increase demand for the Company's shares and reduce the discount to NAV at which they trade, over time.
Indian Capital Gains Tax
The Company, along with other investment vehicles, is subject to both short and long term capital gains taxes in India on the growth in value of its investment portfolio, which become payable when underlying investments are sold and profits crystallised. Where investments are valued at a profit, but not yet sold, the Company must accrue for the potential capital gains tax payable, which amounted to GBP14.5m (2021 - GBP13.6m) at 31 March 2022, equivalent to a reduction in the NAV per share of 25.1p or 3.5%.
Continuation of the Company
Your Board considers that the Company's investment objective remains relevant and appropriate and, in view of its longer term performance record, recommends that Shareholders vote in favour of Ordinary resolution 8 at the AGM, to allow the Company to continue as an investment trust.
Annual General Meeting
In a return to the familiar format before the onset of Covid-19, the AGM will be held in person at 12.30pm in Bow Bells House, 1 Bread Street, London EC4M 9HH on Wednesday 28 September 2022. The AGM 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 refreshments which will follow the AGM. Shareholders, whether attending the AGM or not, are encouraged to submit questions for the Board and/or Manager, in advance, by email to new.india@abrdn.com .
Outlook
Even before Covid-19 reached its borders, India's growth outlook had been muted as the country slowly adapted to new structural reforms. At the moment, I am encouraged by India's ability to bring the pandemic under control and the government's longer term commitment to guide the country towards a US$5 trillion economy, making it an economic powerhouse of the future.
There are some areas that still merit caution. Firstly, India's large informal economy, which has borne the brunt of the Covid-19 and economic crises since 2020, is taking longer to rebound and secondly, overall unemployment remains high. I am confident that the situation will improve from hereon as the Indian economy continues to enjoy broad policy support from the government. Economists are expecting the country's growth trajectory to remain one of the fastest among major economies in the coming years.
Importantly, in May 2022, for the first time in two years, the Reserve Bank of India increased interest rates to combat soaring consumer prices, particularly for food and fuel, with inflation at an 18 month high and India no longer as isolated as it was from the effects of higher global prices. Indian households face a challenge to stretch their budgets further as food price inflation is expected to persist due to higher transportation costs, supply-side bottlenecks and weakness in the jobs market.
However, there are plenty of reasons to be upbeat about India's long-term outlook. It is an enormous country with tremendous consumer spending power and a highly digitalised economy. Favourable demographics, including a younger population and an expanding middle class, and relative stability make for a solid long-term growth story. Your Manager continues to look for good quality, well-managed companies that are going to benefit from India's economic expansion and prosperity.
India remains a magnet for international companies stuck in low-growth markets of their own. A considerable degree of India's economic growth is a consequence of the commitment by these companies to the country. The list is long and illustrious but in recent years, all has not been sweetness and light. The shifting regulatory landscape is a constant reminder of the quixotic approach to regulation that Indian administrations have engaged in. But of greater concern is growing evidence of bias on the part of the current administration to support domestic players to the exclusion of international investors. The current takeover of Holcim's Indian operations by JSW Steel is billed as 'Modi's bias towards nationalistic companies'. Nationalism may be part of Mr Modi's domestic playbook but has no place in a world of free trade and investment and has to be contrary to India's hopes of becoming a credible player in a global context.
Envoi
It has been a great privilege for me to serve on the Board of this Company for ten years, and as Chairman for eight. It is universally accepted that the directors of a public company are there to act in the best interests of the shareholders. It is also true that this is easier said than done. But it is my hope that shareholders will look back over the past decade and recognise that the Board has sought consistently to promote and protect the interests of its shareholders. A complete recital of the measures instituted is not necessary but it is worth recording that a performance linked incentive fee was removed as early as 2014 on the basis that the Manager was paid adequately enough to outperform. Two reductions in management fee followed, a scheme of share buybacks was begun and as reported above, a periodic performance-related tender has been negotiated.
It is my hope that shareholders will take comfort from these developments; safeguarding their interests is, and will remain, a priority for this Board.
Hasan Askari
Chairman
30 June 2022
Investment Manager's Review
The Company's net asset value ("NAV") total return was 11.2% in sterling terms over the year ended 31 March 2022 (the "Year"), compared with the Benchmark's total return of 23.9%. In absolute terms, both the Benchmark and your Company finished ahead of the wider emerging markets asset class over the Year as Indian shares demonstrated resilience in an increasingly volatile environment.
However, although your Company's NAV gained over the Year, the underperformance relative to the Benchmark is disappointing. Such performance reflects the Company's long-term quality focus. Unlike the broader Indian market, our portfolio companies, in aggregate, have historically delivered consistent double-digit earnings growth. Their environmental, social and governance (ESG) metrics are also superior versus those comprising the Benchmark. However, quality investing, as a style, often lags in bull market conditions and outperforms in down markets. This was evident from your Company's performance over the pandemic-hit period. The Company demonstrated resilience during the down market in the year ending March 2020. However, it lagged in the subsequent two double-digit bull markets in the years ending March 2021 and March 2022 , as quality fell out of favour amid bullish market conditions and investors rotated into value stocks and commodities. With market conditions becoming more volatile this year, we believe quality stocks will return to favour and our companies will deliver attractive risk-adjusted returns over time.
Market and Performance review
It was a Year of two halves for Indian equities. Over the first six months, Indian equities displayed remarkable resilience despite a massive surge in Covid-19 cases due to the emergence of the Delta variant. The outbreak slowed the momentum of the country's economic recovery and dampened consumer sentiment severely, but the Indian government resisted another countrywide lockdown such as the one in 2020. Instead, it implemented targeted mobility restrictions, which helped to cushion the impact of the second wave. In this environment, the Indian stock market outpaced most of its emerging and developed market peers, building on the steep rally in 2020. Steady corporate earnings further supported sentiment as companies adapted to the resurgence of Covid-19 cases.
The Company's NAV gained 20.3% during this first-half period. Real estate was the best-performing sector thanks to the housing turnaround, and your Company benefited from the positions in property developers Godrej Properties , Prestige Estates and, indirectly, for Piramal Enterprises , which has a housing finance business. India has experienced a sharp decline in home sales and residential construction over the past few years, but a combination of affordable home prices, favourable mortgage rates, rising incomes and stamp duty rebates in some states propelled a wider housing recovery. Elsewhere, technology company Mphasis did well on the back of record deal wins and bumper earnings, as the sector benefited from healthy demand for cloud migration and business transformation needs. Mphasis carried that momentum into the second half and was the top contributor to performance for the Year. We hold these companies because their businesses are closely aligned with India's growth story, and we expect them to outperform in the longer term.
Your Company's total return, however, did not keep pace with the Benchmark's total return of 23.9% over the Year. We held a more cautious view on the devastating pandemic effects on the Indian economy and maintained our bias towards defensive quality names in the consumer staples sector, namely Hindustan Unilever , which we hold in high regard given its solid balance sheet, distribution scale and unrivalled portfolio of brands. Instead, cyclical steel stocks, which we do not hold, outperformed on the back of China's removal of steel export rebates and price hikes. Likewise in the financials sector, your Company's core bank holdings - HDFC , HDFC Bank and Kotak Mahindra - lagged lenders that delivered faster growth. We prefer banks that have a proven track record in lending. With their strong, low-cost deposit franchise and digital capabilities, we believe that our bank holdings will continue to deliver steady growth and returns over different cycles.
The largest stock detractor over the first half was Aegis Logistics . Following a good run, shares of the oil and gas logistics provider retreated when its liquefied petroleum gas terminal business was hampered by cyclones and Covid-19 disruptions delayed its growth projects. That said, these one-off events should not affect longer-term demand trends.
In the latter half of the Year, markets turned volatile on inflation worries, which were exacerbated in the final months by spiralling commodity prices due to the Russia-Ukraine conflict. Earlier gains in the domestic equity market were pared by uncertainties over India's heavy reliance on oil and certain commodities. Indian equities ended the second half of the Year flat as beneficiaries of energy and commodity inflation mitigated share price corrections elsewhere. Against this backdrop, your Company recorded negative returns for the period, and this contributed to the bulk of the underperformance over the Year. We outline the reasons for the underperformance in the second half below.
First, your Company has always preferred businesses that are underpinned by long-term structural growth over those that are subject to boom-bust cycles and/or are beholden to government policies. As such, the Company has an underweight to energy as well as metals and mining stocks, which performed well in the commodity-led inflationary environment. On the flip side, companies such as Hindustan Unilever and UltraTech Cement corrected on the back of margin concerns. However, we note that both companies have demonstrated pricing power and reported better-than-expected earnings after the review period.
Second, your Company believes in investing in companies backed by reputable promoter groups with a track record of delivering value to all shareholders. The Company does not hold energy and telecommunications conglomerate Reliance Industries and the Adani group of companies. We have been monitoring Reliance Industries' efforts in deleveraging and transformation towards building a digital ecosystem and a clean energy play. However, we continue to prefer Bharti Airtel and Power Grid Corporation of India , which share similar growth drivers, and delivered higher shareholder returns of 10% and 22%, respectively, in the second half, outperforming Reliance Industries' gain of 5%. The telecommunications industry in India is today effectively a duopoly between Reliance Jio and Bharti Airtel, with a weak third player, Vodafone India. Bharti Airtel, in our view, has a superior franchise and has been delivering better earnings and returns on the back of market share gains and tariff hikes. Power Grid, which operates the country's national electricity grid and transmits about half of the electricity that is used domestically, is poised to play a key role in the growth of renewable energy delivery to the grid over the next few decades as the government plans ambitious transition targets for the electricity sector.
Also hurting relative performance was the lack of exposure to the Adani group of companies, including solar power developer Adani Green Energy, whose share price surged due to the company's small free float - and not, we believe, because of its fundamentals. We have not seen such a meteoric rise in the share prices of our renewable names, but we believe shareholders will be rewarded in time. ReNew Energy , our newly added holding, generates electricity from a mix of wind, solar and, more recently, hydro power. We believe that ReNew has both scale and clarity around its pipeline and is fully funded for its capacity build-out. Management has also shown discipline in bidding at renewable energy auctions.
Third, India was not immune to the rotation from growth to value stocks amid growing expectations for central banks to raise interest rates. We participated in a number of initial public offerings (IPOs) last year as these are attractive and differentiated business models that have a long growth runway, given that internet penetration is still at a nascent stage in India. We were mindful about valuations and took initial toehold positions with a view of adding on weakness. There were initial successes such as Zomato and FSN E-Commerce (Nykaa) , while fintech players like Paytm and online insurance platform PB Fintech (Policybazaar) have been under pressure since listing. With the subsequent market volatility, we took the opportunity to build up our position in Nykaa where we have higher conviction. On the other hand, we exited Paytm shortly due to rising regulatory concerns and continued executive turnover that weakened the investment thesis underpinning our purchase.
Separately, on the ESG front, we continued to regularly engage with the companies held within your Company's portfolio to drive improvements on various issues. Over the Year, we engaged with Godrej Properties and Prestige Estates and were impressed by the quality of management. We spoke with Godrej Properties about improving its board independence and discussed how the company could improve its MSCI ESG score. Similarly, we encouraged Prestige Estates to improve its annual ESG disclosures by aligning management incentives with the company's performance.
Finally, a noteworthy event subsequent to the end of the Year was the announcement of a merger of HDFC Bank with HDFC through a share swap. The merged bank will be more than twice the size of India's next largest private bank, creating a financial giant in one of Asia's fastest-growing countries. This transformational event comes at a time when their share prices have lagged the market despite the companies delivering consistent results. The merger is earnings, book value and capital accretive, and has minimal integration risks. As shareholders of both HDFC and HDFC Bank, we are highly supportive of the merger and are pleased that the boards and management teams have taken such a significant step that should boost shareholder value.
Strategy and Outlook
Looking ahead, we remain confident in our long-term quality approach. The core of the portfolio continues to be built around the highest quality stocks. That said, we have taken steps to reposition the portfolio to reflect the changing macro environment and where we see attractive future opportunities such as renewable energy and technology/internet as discussed above.
Over the past 12 months, we reduced our exposure to the consumer staples sector by exiting lower conviction holdings such as Jyothy Labs and Godrej Consumer. In addition, we divested Gujarat Gas as rising input costs, most notably in liquefied natural gas, will likely put significant pressure on the company's margins. Conversely, we introduced Hindalco Industries , a vertically integrated, low-cost aluminium and copper play. As a global leader in automotive and can-aluminium sheets, Hindalco is a clear beneficiary of the rising trend towards lighter automotive weights for electric vehicles and can better support lower emissions. It also stands to benefit from a greater push for the use of recyclable materials.
At the same time, we adjusted the mix of holdings within the financials sector to include ICICI Bank . In our view, the lender has proven, on a fundamental basis, that it is firmly back on a growth footing with its new management team, sensible risk management and innovative digital capability. This was funded with the sale of Axis Bank. Within the insurance sector, we exited ICICI Prudential and participated in the IPOs of leading health insurer Star Health and Allied Insurance and South India-based affordable housing company Aptus Value Housing Finance.
Elsewhere, we initiated Vijaya Diagnostic Centre, a dominant player in the south of India that operates in a highly fragmented market. Against this, we tidied up lower conviction holdings Biocon, Bosch and Shree Cement.
Market conditions globally have become more volatile this year. India is not immune to the turmoil. Policymakers have the unenviable task of managing commodity-led inflation without compromising the country's economic recovery from the Covid-19 crisis. The Reserve Bank of India revised its initial dovish stance after the end of the Year and, in May, raised its policy repo rate by 40 basis points to 4.4%. Rising commodity prices and higher interest rates may hinder earnings growth momentum, which could lead to market wobbles, given that Indian equities are trading at a premium. In these times of uncertainties, we expect our portfolio holdings to demonstrate earnings and balance sheet resilience relative to their peers. We remain confident that our companies will deliver attractive risk-adjusted returns over the long term.
Kristy Fong and James Thom
Investment Manager
30 June 2022
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 invests primarily 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 2022.
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 NAV The Board considers the Company's NAV return
and share price compared and share price return, relative to the Benchmark,
to the Benchmark to be the best indicator of performance over
time. The figures for this year and for the past
three, five and ten years are set out in the
Annual Report and a graph showing NAV and share
price total return performance against the Benchmark
over the past five years is shown in the 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 shown in the 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 Financial
Highlights.
========================== =======================================================
Principal Risks and Uncertainties
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, including emerging 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 which is available from the Company's website: aberdeen-newindia.co.uk .
The principal risks and uncertainties, and emerging risks, 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. In addition the Board has identified, as an emerging risk which it considers is likely to become more relevant for the Company in the future, the implications for the Company's investment portfolio of a changing climate. The Board assesses this emerging risk as it develops, including how investor sentiment is evolving towards climate risk within investment portfolios, and will consider how the Company may mitigate this risk, any other emerging risks, if and when they become material.
In all other respects, the Company's principal risks and uncertainties have not changed materially since the date of the previous 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
which may themselves be determined variety of companies with strong
by local and international economic, balance sheets and the earnings power
political and financial factors to pay increasing dividends. In addition,
and management actions. investments are made in diversified
sectors in order to reduce the risk
of a single large exposure. The Investment
Manager believes that diversification
should be looked at in absolute terms
rather than relative to the Benchmark.
The performance of the portfolio
relative to the Benchmark and the
underlying stock and sector weightings
in the portfolio against their Benchmark
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
other currencies, affecting the at each meeting, although the Company
overall value of the portfolio. did not hedge its foreign currency
exposure during the year.
============================================= =============================================
Discount - factors which affect The Board keeps under review the
the discount to NAV at which the discount and does consider the selective
Ordinary shares of the Company trade. buyback of shares where to do so
These may include the popularity would be in the best interests of
of the investment objective of the shareholders, balanced against reducing
Company, the popularity of investment the overall size of the Company.
trust shares in general and the Any shares bought back are held in
ease with which the Company's Ordinary treasury.
shares can be traded on the London
Stock Exchange.
============================================= =============================================
Depositary - insolvency of the depositary The depositary, BNP Paribas Securities
or custodian or sub-custodian, or Services London Branch, presents
a shortfall in the assets held by to the Board at least annually on
that depositary, custodian or sub-custodian the Company's compliance with the
arising from fraud, operational Alternative Investment Fund Managers
errors or settlement difficulties Directive ("AIFMD"). The Manager
resulting in a loss of assets owned separately monitors the activities
by the Company. of the depositary and reports to
the Board on any exceptions arising.
============================================= =============================================
Financial and regulatory - the financial The financial risks associated with
risks associated with the portfolio the Company include market risk,
could result in losses to the Company. liquidity risk and credit risk, all
In addition, failure to comply with of which are mitigated by the Manager.
relevant regulation (including the Further details of the steps taken
Companies Act, the Financial Services to mitigate the financial risks associated
and Markets Act, the Alternative with the portfolio are set out in
Investment Fund Managers Directive, Note 17 to the financial statements.
accounting standards, investment The Board is responsible for ensuring
trust regulations and the Listing the Company's compliance with applicable
Rules, Disclosure Guidance and Transparency regulations. Monitoring of this compliance,
Rules and Prospectus Rules) may and regular reporting to the Board
have an adverse impact on the Company. thereon, 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.
============================================= =============================================
Financial and regulatory (continued) In particular, the Board receives
Any change in the Company's tax reports from the Manager covering
status or in taxation legislation investment movements, the level and
either in India or in the UK (including type of forecast income and expenditure
the tax treatment of dividends, and the amount of proposed dividends
capital gains or other investment with a view to ensuring that the
income received by the Company) Company continues to qualify as an
could affect the value of the investments investment trust under Chapter 4
held by the Company and the Company's of Part 24 of the Corporation Tax
ability to provide returns to shareholders Act 2010. A breach of these regulations
or alter the post-tax returns to would mean that the Company is no
shareholders. longer exempt from UK capital gains
tax on profits realised from the
sale of its investments.
============================================= =============================================
Gearing - while 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
return on the Company's underlying being made by the Investment Manager.
assets is rising and exceeds the Borrowings are short term in nature
cost of borrowing, it will have and particular care is taken to ensure
the opposite effect where the underlying that any bank covenants permit maximum
return is less than the cost of flexibility of investment policy.
borrowing, further reducing the The Board has agreed certain gearing
total return on the Ordinary shares. restrictions with the Manager and
A significant fall in the value reviews compliance with these guidelines
of the Company's investment portfolio at each Board meeting. Loan agreements
could result in a breach of bank are entered into following review
covenants and trigger demands for by the Company's 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 seeks to achieve this through subscription to, and participation in, the promotional programme run by abrdn on behalf of all the investment companies under its management. The Company's financial contribution to the programme is matched by abrdn. abrdn's 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 abrdn investor relations programme which involves regional roadshows, promotional and public relations campaigns.
Board Diversity and Succession
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 committed to, 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 2022, there were four male Directors and one female Director on the Board.
The Board has agreed a policy whereby no Director, including the Chairman, shall serve for longer than the ninth AGM after the date of their initial date of appointment as a Director unless in relation to exceptional circumstances
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 and the Manager's ESG engagement are outlined below.
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 and Streamlined Energy and Carbon Reporting ("SECR")
All of the Company's activities are outsourced to third parties. The Company therefore has no greenhouse gas emissions to report from the operations of its business, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013. For the same reason as set out above, the Company considers itself to be a low energy user under the SECR regulations and therefore is not required to disclose energy and carbon information.
Duration
The Company does not have a fixed life but ordinary resolution 8, to continue the Company, will be put to shareholders at the AGM. If special resolution 12, to change the Company's Articles of Association, is approved, the continuation vote will be put to shareholders next at the AGM in 2027 and at every fifth AGM thereafter.
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.
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 reviewing 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;
- the Directors regularly review the Company's level of gearing, including the financial modelling undertaken by the Manager to establish what level of reduction in the Company's NAV would require to occur in order to cause a breach in the covenants attached to the Company's GBP30m loan facility;
- the Company's third party suppliers continuing to deliver services to the Company in accordance with the underlying agreements and not experiencing significant operational difficulties in respect of the services provided to the Company, although, if required, alternative suppliers could be engaged to provide these services at limited notice; and
- in advance of expiry in August 2022 of the Company's GBP30m loan the Company has entered 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 resolution 8, to continue the Company, is passed at the AGM on 28 September 2022 as it has been previously. If special resolution 12, to change the Company's Articles of Association, is approved at the AGM, the continuation vote will be put to shareholders next at the AGM in 2027.
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 making this assessment, the Board has considered in particular the risk of a large economic shock, a continuing period of significant stock market volatility, a significant reduction in the liquidity of the portfolio or changes in investor sentiment, and how these factors might affect 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
30 June 2022
Promoting the Success of the Company
The Purpose of the Company and Role of the Board
The Board is required to report on how it has discharged its duties and responsibilities under section 172 of the Companies Act 2006 (the "s172 Statement"). Under section 172, the Directors have a duty to promote the success of the Company for the benefit of its members as a whole, taking into account the likely long term consequences of decisions, the need to foster relationships with the Company's stakeholders and the impact of the Company's operations on the environment.
The purpose of the Company is to act as a vehicle to provide, over time, attractive financial returns to its shareholders. Investment trusts, such as the Company, are long-term investment vehicles and are typically externally managed, have no employees, and are overseen by an independent non-executive board of directors.
During the year, the Board was comprised of either four of five independent non-executive Directors with a broad range of skills and experience across all major functions that affect the Company. The Board retains responsibility for taking all decisions relating to the Company's investment objective and policy, gearing, corporate governance and strategy, and for monitoring the performance of the Company's service providers.
The Board's philosophy is that the Company should operate in a transparent culture where all parties are provided with respect as well as the opportunity to offer practical challenge and participate in positive debate which is focused on the aim of achieving the expectations of shareholders and other stakeholders alike. The Board expects the Manager to act as a responsible steward of the Company's investments. The Manager's approach to responsible investing may be found at https://www.abrdn.com/en/responsible-investing
How the Board Engages with Stakeholders
The Company's main stakeholders are its Shareholders, the Manager, Investee Companies, Service Providers, Debt Providers and the Environment and Community. The Board considers its stakeholders at Board meetings and receives feedback on the Manager's interactions with them
Stakeholder How the Board Engages
=================== ===================================================================
Shareholders Its shareholders are key stakeholders and the Board places
great importance on communication with them. The Board
welcomes all shareholders' views and aims to act fairly
between all shareholders. The Directors, Manager and Company's
broker regularly meet with current and prospective shareholders
to discuss performance and shareholder feedback is discussed
by the Directors at Board meetings. In addition, the Directors
meet with major shareholders in the absence of representatives
of the Manager.
Regular updates are provided to shareholders through the
Annual Report, Half Yearly Report, Manager's monthly factsheets,
Company announcements, including daily net asset value
announcements, and the Company's website. In normal years,
the Company's Annual General Meeting provides a forum,
both formal and informal, for shareholders to meet and
discuss issues with the Directors and Manager.
=================== ===================================================================
Manager The Investment Manager's Report details the key investment
decisions taken during the year. The Investment Manager
has continued to manage the Company's assets in accordance
with the mandate provided by shareholders, with the oversight
of the Board.
The Board regularly reviews the Company's performance
against its investment objective and the Board undertakes
an annual strategy review to ensure that the Company is
positioned well for the future delivery of its objective
for its stakeholders. The Board receives presentations
from the Investment Manager at every Board meeting to
help it to exercise effective oversight of the Investment
Manager and the Company's strategy. The Board, through
the Management Engagement Committee, formally reviews
the performance of the Manager at least annually and further
details are provided in the Directors' Report.
=================== ===================================================================
Investee Companies Responsibility for actively monitoring the activities
of portfolio companies has been delegated by the Board
to the Manager which has sub-delegated that authority
to the Investment Manager.
The Board has also given discretionary powers to the Investment
Manager to exercise voting rights on resolutions proposed
by the investee companies within the Company's portfolio.
The Manager reports on a quarterly basis on stewardship
(including voting) issues.
Through engagement and exercising voting rights, the Investment
Manager actively works with companies to improve corporate
standards, transparency and accountability.
=================== ===================================================================
Service Providers The Board seeks to maintain constructive relationships
with the Company's suppliers either directly or through
the Manager with regular communications and meetings.
The Audit Committee conducts an annual review of the performance,
terms and conditions of the Company's key service providers
to ensure they are performing in line with Board expectations
and providing value for money.
=================== ===================================================================
Debt Providers On behalf of the Board, the Manager maintains a constructive
working relationship with Royal Bank of Scotland International
Limited (London Branch), part of NatWest Group plc, the
provider of the Company's GBP30m multi-currency loan facility,
ensuring compliance with its loan covenants and arranging
for regular updates for the lender on the Company's business
activities, where requested.
=================== ===================================================================
Environment The Board and Manager are committed to investing in a
and Community responsible manner and the Investment Manager integrates
Environmental, Social and Governance ("ESG") considerations
into its research and analysis as part of the investment
decision-making process. Further information on the Manager's
ESG engagement, with case studies from the investment
portfolio, may be found above.
=================== ===================================================================
Specific Examples of Stakeholder Consideration During the Year
While the importance of giving due consideration to the Company's stakeholders is not new, and is considered as part of every Board decision, the Directors were particularly mindful of stakeholder considerations during the following decisions undertaken during the year ended 31 March 2022.
Proposed Conditional Tender Offer
The Board announced on 24 March 2022 its intended introduction of a five-yearly performance-related conditional tender offer; further information may be found in the Chairman's Statement.
Board
The Board, via the Nomination Committee, considered the need to ensure continuity of governance in view of the retirement of two Directors at the AGM in September 2022. During the year ended 31 March 2022, in order to provide continuity, David Simpson was appointed as a Director while, after the year end, Andrew Robson was appointed a Director. In terms of leadership, Michael Hughes, with six years' experience as a Director, will succeed Hasan Askari as Chairman of the Company.
Share buybacks
During the year the Company bought back into treasury 448,201 shares, providing a small accretion to the NAV per share and a degree of liquidity to the market at times when the discount to the NAV per share had widened unusually. It is the view of the Board that this policy is in the interest of all shareholders. The Board reached this decision following its strategic review and decided that continuing with limited share buybacks would be in shareholders' best interests.
Performance
Performance (total return, in Sterling terms)
1 year 3 year 5 year 10 year
% return % return % return % return
====================================== ======== ======== ======== ========
Share price(A) +3.7 +22.2 +27.6 +153.7
====================================== ======== ======== ======== ========
Net asset value per Ordinary share(A) +11.2 +31.3 +43.2 +186.4
====================================== ======== ======== ======== ========
MSCI India Index (sterling adjusted) +23.9 +43.2 +61.7 +179.9
-------------------------------------- -------- -------- -------- --------
(A) Considered to be an Alternative Performance Measure.
Source: abrdn plc, Morningstar & Lipper.
Ten Year Financial Record
Year to 31 March 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 ========================== ======= ======= ======= ======= ======= ======= ======= ======== ======= ======= Total income (GBP'000)(A) 2,414 376 341 374 3,104 3,318 3,602 5,185 4,517 5,059 ========================== ======= ======= ======= ======= ======= ======= ======= ======== ======= ======= Per share (p) ========================== ======= ======= ======= ======= ======= ======= ======= ======== ======= ======= Net revenue return/(loss) 0.20 (0.36) (0.39) (1.06) (0.28) (0.71) (0.35) 2.08 0.19 (0.28) ========================== ======= ======= ======= ======= ======= ======= ======= ======== ======= ======= Dividends(B) n/a n/a n/a n/a n/a n/a n/a 1.00 n/a n/a ========================== ======= ======= ======= ======= ======= ======= ======= ======== ======= ======= Total return/(loss) 24.75 (5.16) 121.94 (23.42) 125.81 2.12 41.90 (120.34) 216.25 69.64 ========================== ======= ======= ======= ======= ======= ======= ======= ======== ======= ======= Net asset value per share (p) ========================== ======= ======= ======= ======= ======= ======= ======= ======== ======= ======= Basic 268.71 263.55 385.49 362.07 487.88 490.00 531.90 411.41 627.05 697.30 ========================== ======= ======= ======= ======= ======= ======= ======= ======== ======= ======= Shareholders' funds (GBP'000) 158,726 155,680 227,708 213,874 288,190 289,444 314,196 241,583 366,106 403,995 -------------------------- ------- ------- ------- ------- ------- ------- ------- -------- ------- ------- (A) Year 2013 reflects the consolidated amounts of the Company and its Subsidiary, years 2014 to 2022 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. (B) 2020 dividend represents 0.22p per share paid from revenue reserves and 0.78p per share paid from capital reserves.
Ten Largest Investments
As at 31 March 2022
Infosys Housing Development Finance
Corporation
One of India's premier software A steady, well-managed financial
developers, it continues to services conglomerate with leading
impress with its strong management, positions in mortgage finance,
solid balance sheet and sustainable retail banking, life insurance
business model. and asset management, supported
by a broad distribution network,
efficient cost structure and
balance sheet quality.
Tata Consultancy Services ICICI Bank
A top-class Indian IT services Delivering superior growth and
provider with the most consistent returns improvement without
execution and lowest attrition compromising on asset quality.
rates. It is a long-term compounder It has leveraged on its scale
with a decent outlook for revenue as well as retail and digital
growth and order wins over the franchise to grow in mortgages
medium term. and also growing off a low base
in business banking and SMEs.
Bharti Airtel Hindustan Unilever
The leading telecom service The largest fast-moving consumer
provider with a pan-India reach goods company (FMCG) in India,
and sophisticated customer base with an unrivalled portfolio
with higher average mobile spending. of brands, an extensive distribution
network nationwide, and a long
and successful operational track
record in the country.
Power Grid Corporation of India Ultratech Cement
Forms the backbone of India's A clear industry leader in India's
electricity infrastructure. cement industry, backed by strong
It plans and manages brand recognition, a good distribution
the national grid network, and sales network and solid
along with several regional product quality. Its focus on
ones, and transmits about half cost efficiency and an improving
of the electricity that is energy mix has given UltraTech
used domestically. a
cost advantage.
HDFC Bank Kotak Mahindra Bank
Known to have the best retail A full-service private-sector
banking franchise in India, bank in India that has good
with a high quality wholesale asset quality and a relatively
portfolio, solid underwriting low level of non-performing
standards and a progressive loans compared to many of its
digital stance further strengthening peers. It is well positioned
its competitive edge. in an industry that offers higher
growth than most markets in
Asia, given the low level of
financial penetration.
Portfolio
As at 31 March 2022
=============================== ======================= ========= ============
Valuation Total assets
2022 2022
Company Industry GBP'000 %
=============================== ======================= ========= ============
Infosys Information Technology 48,301 11.1
=============================== ======================= ========= ============
Housing Development Finance
Corporation Financials 38,570 8.9
=============================== ======================= ========= ============
Tata Consultancy Services Information Technology 32,056 7.4
=============================== ======================= ========= ============
ICICI Bank Financials 28,179 6.5
=============================== ======================= ========= ============
Bharti Airtel(A) Communication Services 21,758 5.0
=============================== ======================= ========= ============
Hindustan Unilever Consumer Staples 20,965 4.8
=============================== ======================= ========= ============
Power Grid Corporation of
India Utilities 16,062 3.7
=============================== ======================= ========= ============
Ultratech Cement Materials 14,452 3.3
=============================== ======================= ========= ============
HDFC Bank Financials 13,319 3.1
=============================== ======================= ========= ============
Kotak Mahindra Bank Financials 12,815 3.0
------------------------------- ----------------------- --------- ------------
Ten largest investments 246,477 56.8
-------------------------------------------------------- --------- ------------
MphasiS Information Technology 12,806 2.9
=============================== ======================= ========= ============
SBI Life Insurance Financials 12,131 2.8
=============================== ======================= ========= ============
Maruti Suzuki India Consumer Discretionary 11,966 2.8
=============================== ======================= ========= ============
Piramal Enterprises Financials 11,580 2.7
=============================== ======================= ========= ============
Container Corporation of
India Industrials 11,353 2.6
=============================== ======================= ========= ============
Asian Paints Materials 11,253 2.6
=============================== ======================= ========= ============
Larsen & Toubro Industrials 11,229 2.6
=============================== ======================= ========= ============
ITC Consumer Staples 10,007 2.3
=============================== ======================= ========= ============
Fortis Healthcare Healthcare 9,490 2.2
=============================== ======================= ========= ============
Prestige Estates Projects Real Estate 8,011 1.8
------------------------------- ----------------------- --------- ------------
Top twenty investments 356,303 82.1
-------------------------------------------------------- --------- ------------
Affle India Communication Services 8,003 1.8
=============================== ======================= ========= ============
Nestlé India Consumer Staples 6,410 1.5
=============================== ======================= ========= ============
Aegis Logistics Energy 6,392 1.5
=============================== ======================= ========= ============
Syngene International Healthcare 6,364 1.5
=============================== ======================= ========= ============
Crompton Greaves Consumer
Electricals Consumer Discretionary 6,326 1.5
=============================== ======================= ========= ============
Godrej Properties Real Estate 5,871 1.4
=============================== ======================= ========= ============
Vijaya Diagnostic Centre Healthcare 5,686 1.3
=============================== ======================= ========= ============
FSN E-Commerce Ventures Consumer Discretionary 5,149 1.2
=============================== ======================= ========= ============
Renew Energy Energy 4,637 1.1
=============================== ======================= ========= ============
PB Fintech Financials 4,556 1.0
------------------------------- ----------------------- --------- ------------
Top thirty investments 415,697 95.9
-------------------------------------------------------- --------- ------------
Sanofi India Healthcare 4,434 1.0
=============================== ======================= ========= ============
Info Edge Communication Services 4,361 1.0
=============================== ======================= ========= ============
Azure Power Utilities 4,094 0.9
=============================== ======================= ========= ============
Hindalco Industries Materials 3,035 0.7
=============================== ======================= ========= ============
Star Health & Allied Insurance Financials 2,865 0.7
=============================== ======================= ========= ============
Aptus Value Housing Finance Financials 2,323 0.5
=============================== ======================= ========= ============ Zomato Information Technology 2,178 0.5 =============================== ======================= ========= ============ Godrej Agrovet Consumer Staples 894 0.2 ------------------------------- ----------------------- --------- ------------ Total investments 439,881 101.4 -------------------------------------------------------- --------- ------------ Net current liabilities (before deducting prior charges)(B) (5,886) (1.4) -------------------------------------------------------- --------- ------------ Total assets(B) 433,995 100.0 -------------------------------------------------------- --------- ------------ (A) Current year represents equity holding both fully paid and partly paid (B) Excluding loan balances. Unless otherwise stated, investments are in common stock.
Our Investment Manager's ESG Process
The Investment Manager believes that a company's ability to sustainably generate returns for investors depends on the management of its environmental impact, its consideration of the interests of society and stakeholders, and on the way it is governed. By putting ESG factors at the heart of its investment process, the Investment Manager aims to generate better outcomes for the Company's shareholders. The three factors can be considered as follows:
- Environmental factors relate to how a company conducts itself with regard to environmental conservation and sustainability. Types of environmental risks and opportunities include a company's energy consumption, waste disposal, land development and carbon footprint, among others.
- Social factors pertain to a company's relationship with its employees and vendors. Risks and opportunities can include (but are not limited to) a company's initiatives on employee health and well-being, and how supplier relationships align with corporate values.
- Corporate governance factors can include the corporate decision-making structure, independence of board members, the treatment of minority shareholders, executive compensation and political contributions, among others.
At the investment stage, ESG factors and analysis can help to frame where best to invest by considering material risks and opportunities alongside other financial metrics. Due diligence can ascertain whether such risks are being adequately managed, and whether the market has understood and priced them accordingly.
The Investment Manager is an active investor, voting at shareholder meetings in a deliberate manner, working with companies to drive positive change, and engaging with policymakers on ESG and stewardship matters. Furthermore, with respect to the Company, the Board has supported the Investment Manager in actively choosing, in future, not to invest in tobacco companies nor investing in companies directly exposed to controversial weapons.
There are three core principles which underpin the Investment Manager's investment approach (shown below) and the time it dedicates to ESG analysis as part of its overall fundamental equity research process:
abrdn's ESG Engagement
How the Investment Manager embeds ESG into its Investment Process
Can we measure it?
There are elements of ESG that can be quantified, for example the diversity of a board, the carbon footprint of a company, and the level of employee turnover. While diversity can be monitored, measuring inclusion is more of a challenge. Although it is possible to measure the level of staff turnover, it is more challenging to quantify corporate culture. Relying on calculable metrics alone would potentially lead to misleading insights. As active managers, quantitative and qualitative assessments are blended to better understand the ESG performance of a company.
The Investment Manager's analysts consider such factors in a systematic and globally-applied approach to assess and compare companies consistently on their ESG credentials, both regionally and against their peer group. Some of the key questions asked of companies include:
- How material are ESG issues for this company, and how are they being addressed? - What is the quality of this company's governance, ownership structure and management?
- Are incentives and key performance indicators aligned with the company's strategy and the interests of shareholders?
The questions asked differ from company to company; the type of questions poised to a bank would be quite different from those of a semiconductor manufacturing firm.
The ESG Scoring System
Having considered the regional universe and peer group in which a company operates, the Investment Manager allocates it an ESG score between one and five. This is applied across every stock covered globally. Examples of each category and a small sample of the criteria used are detailed below:
1. Best in 2. Leader 3. Average 4. Below average 5. Laggard
class
====================== =================== ====================== ======================= ========================
ESG considerations ESG considerations ESG risks are Evidence of Many financially
are material not market considered as some financially material controversies
part of the leading a part of principal material controversies Severe governance
company's core Disclosure is business Poor governance concerns
business strategy good, but not Disclosure in or limited oversight Poor treatment
Excellent disclosure best in class line with regulatory of key ESG issues of minority
Makes opportunities Governance is requirements Some issues shareholders
from strong generally very Governance is in treating
ESG risk management good generally good minority shareholders
but some minor poorly
concerns
====================== =================== ====================== ======================= ========================
At the last review reported to the Board, 47.4% of the companies in the portfolio were rated under the
Investment Manager's scoring system as 'Leaders', reflecting the portfolio's focus on quality, while 50.0% of the companies were rated as 'Average'. A generally positive momentum has been witnessed from companies in the portfolio in terms of ESG, in terms of both practices and disclosure, and it was pleasing to note that the second half of the year saw a number of upgrades to company scores following extensive engagement by the Investment Manager. More generally, engagements in India continue to focus on environmental impact and climate change, as well as resource intensity, cybersecurity, board dynamics and independent directors. The portfolio did not hold any companies rated as either 'Below Average' or' Laggard'.
While the Investment Manager seeks to encourage better disclosure and ESG considerations by companies, it will
not always necessarily exclude one if improvements are expected. Overall, the Company supports an approach seeking to target:
- an aggregate portfolio ESG rating that is better than, or equal to, the benchmark measured by the MSCI ESG rating (CCC-AAA) based on the weighted average of each company's MSCI ESG rating;
- a Carbon Intensity that is at least 10% lower than the benchmark, as measured by the abrdn Carbon Footprint Tool (which uses Trucost data for Scope 1 & 2 emissions). This tool enables analysis of company, sector, and the overall portfolio's carbon footprint.
The Board receives six monthly updates with regards these metrics which will be published on the Company website when available, and while not guaranteed there is an aim that the Investment Manager's investment process will deliver against these targets at the same time as delivering long term growth.
Climate Change
Climate change is one of the most significant challenges of the 21st century and has big implications for investors.
The energy transition is underway in many parts of the world, and policy changes, falling costs of renewable energy,
and a change in public perception are happening at a rapid pace. Assessing the risks and opportunities of climate change is a core part of the investment process. In particular, the Investment Manager considers:
Transition risks and opportunities
Governments could take robust climate change mitigation actions to reduce emissions and transition to a
low-carbon economy. This is reflected in targets, policies and regulation and can have a considerable impact on
high-emitting companies.
Physical risks and opportunities
Insufficient climate change mitigation action will lead to more severe and frequent physical damage. This results in financial implications, including damage to crops and infrastructure, and the need for physical adaptation such
as flood defences.
The Investment Manager has aligned its approach with that advocated by the investor agenda of the Principles for Responsible Investment (PRI) - a United Nations-supported initiative to promote responsible investment as a way of enhancing returns and better managing risk.
PRI provides an intellectual framework to steer the massive transition of financial capital towards low-carbon opportunities. It also encourages fund managers to demonstrate climate action across four areas: investments; corporate engagement; investor disclosure; and policy advocacy, as explained below:
To assist in the analysis, the Investment Manager has developed a proprietary climate scenario analysis tool. Climate scenario analysis involves modelling the impact on financial assets of a range of pathways (for both physical climate change and the transition to a low carbon economy) under plausible assumptions for future policy and technological change. This allows the Investment Manager to explore the impact of climate change on portfolios and to inform investment decisions.
Importance of Engagement
The Investment Manager is committed to regular, ongoing engagement with the companies in which it invests, to help to maintain and enhance their ESG standards into the future.
As part of the investment process, the Investment Manager undertakes a significant number of company meetings each year on behalf of the Company. Your Company is supported by on-desk ESG analysts, as well as a well-resourced specialist ESG Investment team. These meetings provide an opportunity to discuss various relevant ESG issues including board composition, remuneration, audit, climate change, labour issues, human rights, bribery and corruption. Companies are strongly encouraged to set clear targets or key performance indicators on all material ESG risks.
Our Engagement Activity
We regularly engage with companies we invest in. The following chart shows the engagements that have included ESG topics. Over the period we met with 17 portfolio companies on ESG topics and had 32 engagements with them. This does not include positions we have moved out of or are considering. These are the themes that we have engaged on:
Our Voting Activity
Voting Summary Total ============================== ====== How many meetings were you eligible to vote? 70 ============================== ====== How many meetings did you vote at? 68 ============================== ====== How many resolutions were you eligible to vote on? 626 ============================== ====== What % of resolutions did you vote on for which you were eligible? 98.6% ============================== ====== Of the resolutions on which you voted, what % did you vote with management? 95.9% ============================== ====== Of the resolutions on which you voted, what % did you vote against management? 3.4% ============================== ====== Of the resolutions on which you voted, what % did you abstain from voting? 0.6% ============================== ====== In what % of meetings, for which you did vote, did you vote at least once against management? 22.1% ============================== ======
ESG engagements are conducted with consideration of the 10 principles of the United Nations Global Compact, and companies are expected to meet fundamental responsibilities in the areas of human rights, labour, the environment and anti-corruption.
This engagement is not limited to a company's management team. It can include many other stakeholders such as non-government agencies, industry and regulatory bodies, as well as activists and the company's customers and clients.
While the Investment Manager focuses on investing in quality companies, the investment team is aware that in some cases Asian companies can lag those in Western Europe in terms of ESG. This is perhaps more true of emerging Asia than developed Asia. In investing across Asia, the Investment Manager focuses on companies and management teams exhibiting desirable behavioural traits and characteristics (for example, a track record of fair treatment of minority shareholders, thoughtful capital allocation and return) rather than a strict focus on structures (for example, relating to board composition). Subsequent to an investment, the Investment Manager engages energetically with companies to improve and enhance ESG, aiming to encourage companies to implement processes and practises that will protect and enhance shareholder value. The Investment Manager has a long track record of such constructive engagement, drawing on investment experiences globally to bring these insights to the Company's holdings.
Investment Case Studies
Fortis Healthcare
Creating a world-class healthcare delivery system in India
For years, India's healthcare sector was placed down the pecking order when it came to allocating resources. In recent years, however, it has been expanding significantly due to growing demand for medical services, consultations and medical tourism. The industry has grown at a compound annual growth rate of around 22% in recent years, and in 2022, government estimates project it will reach over $370 billion. In terms of revenue and employment, healthcare is now one of the largest sectors of the Indian economy.
As India's middle class expands, there will be a growing demand for both preventative and premium quality healthcare. Higher proportion of lifestyle-related health issues, such as cholesterol, high blood pressure, obesity, poor diet and alcohol consumption will lead to greater demand for specialised care services. Furthermore, Covid-19 has changed long-term attitudes towards personal health monitoring and medical check-ups.
Such trends augur well for Fortis Healthcare, one of the country's largest integrated healthcare services providers, operating the second-biggest hospital chain by revenue. The network comprises 36 healthcare facilities with about 4,000 operational beds across India, with a greater presence in North Indian cities. Fortis also has a diagnostics business with labs all over the country. Both operations are positioned as premium services, allowing Fortis to tap into India's widening aspirational demographic.
For a long time, Fortis had failed to meet our corporate governance criteria. Our views changed in 2019 when Malaysian healthcare giant IHH took a 31% stake in the company and injected much-needed capital to shore up the company's balance sheet and overhaul its board of directors. We have been encouraged by how things have progressed under new CEO Ashutosh Raghuvanshi, a cardiac surgeon turned management leader who joined Fortis from Narayana Health, a hospital chain famous for having some of the lowest cost levels in the world and hyper-efficient processes.
Following a tumultuous period of corporate governance crisis involving the company's previous promoters, Raghuvanshi's impressive track record bolsters confidence in his ability to continue turning the business around. Under his leadership, operational efficiency and margins have improved as the new management implemented a dynamic cost-cutting program as a first step to nurse the company back to health. Fortis weathered the Covid crisis relatively well, without needing to undertake drastic measures to manage costs as many non-urgent surgeries were being postponed.
We remain positive on Fortis' long-term prospects. The healthcare sector has ample opportunities for growth in a supportive policy environment where the government continues to strengthen India's healthcare infrastructure. Fortis has a well-established brand reputation in the industry that affords it better bargaining power to procure equipment, drugs and supplies. The company also owns assets in prime locations within India's major cities where the government is releasing fewer plots of lands for new hospitals, which gives Fortis a first-mover advantage in some locations.
Infosys
From humble beginnings to one of India's top IT services names
Infosys was founded in 1981 with a capital of just US$250. Over the past four decades, as India became a hub for tech talent, Infosys grew into one of the country's leading household names, providing technology consulting and software services to corporate clients across the world. Today, it employs over 300,000 people globally and generates over US$16 billion of revenues a year.
Despite its size and scale, Infosys has over the years successfully navigated the ever-changing technology landscape with remarkable nimbleness, benefiting from the trend towards digital transformation and migration to the cloud. In recent years, the company has taken market share from its peers, driven by its investments in digital capabilities, as well as its strength in delivery, recruitment and training. It has been delivering comparatively stronger growth, and beating its own revenue guidance for the past three years.
Today, Infosys is among the top three players in the industry, with attractive margins, deep industry knowledge and expertise in a competitive, fragmented market. The group has solid financials and a superior cash generation ability, and it is led by highly capable and experienced management. In fact, the size of its new contract wins has steadily increased over the past three years.
The Covid-19 pandemic accelerated demand for IT services as companies scrambled to implement remote working environments to ensure business continuity, migrating more systems to the cloud and accelerating digital solutions. Infosys was a key beneficiary of this, gaining market share, announcing large new deal wins and expanding its margins, making the stock among the top performers for the Trust over the period. Looking ahead, we expect double-digit earnings growth for Infosys despite an increasingly uncertain environment.
Infosys also has excellent environmental, social and governance (ESG) credentials in an industry with growth tailwinds, as evidenced by its A rating from MSCI. The group has underlined the importance of ESG as an evaluation criterion for its deal wins.
As part of its ESG Vision 2030 framework, the company has set clear targets around carbon emissions, clean tech opportunities and diversity. For example, Infosys has been carbon neutral since 2020. Focusing on workforce diversity, robust governance practices and human capital development, Infosys plans to extend digital skills to over 10 million people and increase the percentage of women in its workforce to at least 45%.
On corporate governance, due to the fragmented ownership structure of the firm, the lack of a controlling shareholder better aligns management and promoter group to minority investors. Infosys also has more independent representation on its board, including an independent lead director, which can potentially provide more objective oversight of management.
Directors' Report
The Directors present their Report and the audited Financial Statements of the Company for the year ended 31 March 2022, 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") in Financial Highlights.
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 2022. 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
During the year ended 31 March 2022 the Company bought back into treasury 448,201 Ordinary shares (2021- 335,653 Ordinary shares). As at 31 March 2022, the Company's issued share capital consisted of 57,937,127 Ordinary shares (2021 - 58,385,328 Ordinary shares) with voting rights, each share holding one voting right in the event of a poll, and an additional 1,133,013 Ordinary shares in treasury, with no voting rights or entitlement to receive dividends. Between 1 April 2022 and the date of approval of this Report an additional 360,030 Ordinary shares were bought back resulting in the Company's issued share capital consisting of 57,577,097 Ordinary shares and an additional 1,493,043 shares in treasury.
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.
Manager and Company Secretaries
The Company has appointed the Manager as its alternative investment fund manager, to provide investment management, risk management, promotional activities and administration and company secretarial services to the Company. The Company's portfolio is managed by the Investment Manager by way of a group delegation agreement in place between the Manager and Investment Manager. In addition, the Manager 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 2022: a monthly fee, payable in arrears, calculated at an annual rate of 0.85% of the Company's net assets up to GBP350m and 0.70% above net assets of GBP350m and is otherwise calculated on the same basis as previously. Prior to 1 April 2021, the fee was calculated on the same basis other than the rate was 0.9% of the Company's net assets up to GBP350m and 0.75% above net assets of GBP350m.
There is a rebate for any fees received in respect of any investments by the Company in investment vehicles managed by abrdn. The MA is terminable by either party on not less than six months' notice. In the event of termination on less than the agreed notice period, compensation is payable to the Manager in lieu of the unexpired notice period.
The fees, and other expenses, payable to abrdn during the year ended 31 March 2022 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 FCA, this statement describes how the Company applies the Main Principles identified in the UK Corporate Governance Code published in July 2018 (the "UK Code") and which is applicable for the Company's year ended 31 March 2022. The UK Code is available on the Financial Reporting Council's (the "FRC") website: frc.org.uk .
The Board has also considered the AIC Code of Corporate Governance as published in February 2019 (the "AIC Code") which addresses all the principles and recommendations set out in the UK Code, as well as setting out additional guidance on issues which are of specific relevance to investment trusts. The AIC Code is 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 AIC Code and UK Code include provisions relating to
- the Board's policy on the tenure of the Chairman (AIC Code provision 24 and UK Code provision 19); further information may be found below regarding the tenure of Hasan Askari, as the Company's Chairman;
- the composition of the Audit Committee (AIC Code provision 29 and UK Code provision 24): the other Directors consider that it is appropriate for the Chairman of the Board to be a member of, but not chair, the Audit Committee, due to the Board's small size, the lack of any perceived conflict of interest, and because the other Directors believe that Hasan Askari continues to be independent; and
- the establishment of a remuneration committee (AIC Code provision 37 and UK Code provision 32): for the reasons set out in the AIC Code the Board considers that this provision is 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 this provision.
The full text of the Company's Statement of Corporate Governance can be found on its website:
aberdeen-newindia.co.uk.
Directors
The Board consists of a non-executive Chairman and four non-executive Directors who served throughout the year under review, other than David Simpson who joined the Board on 1 November 2021. The Senior Independent Director is Michael Hughes.
The Chairman is responsible for providing effective leadership to the Board, by setting the tone of the Company, demonstrating objective judgement and promoting a culture of openness and debate. The Chairman facilitates the effective contribution and encourages active engagement by each Director. In conjunction with the Company Secretary, the Chairman ensures that Directors receive accurate, timely and clear information to assist them with effective decision-making. The Chairman acts upon the results of the Board evaluation process by recognising strengths and addressing any weaknesses and also ensures that the Board engages with major shareholders and that all Directors understand shareholder views.
The Senior Independent Director acts as a sounding board for the Chairman and acts as an intermediary for other directors, when necessary. Working closely with the Nomination Committee, the Senior Independent Director takes responsibility for an orderly succession process for the Chairman, and leads the annual appraisal of the Chairman's performance. The Senior Independent Director is also available to shareholders to discuss any concerns they may have.
The names and biographies of each of the Directors are shown in the Annual Report 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 Directors attended scheduled Board and Committee meetings during the year ended 31 March 2022 as follows (with their eligibility to attend the relevant meeting in brackets):
Board Management
and Audit Engagement Nomination
Committee Committee Committee Committee
Director Meetings Meetings Meetings Meetings
============== ========== ========== =========== ==========
Hasan Askari 8 (8) 3 (3) 1 (1) 1 (1)
============== ========== ========== =========== ==========
Michael
Hughes 8 (8) 3 (3) 1 (1) 2 (2)
============== ========== ========== =========== ==========
Stephen
White 9 (9) 3 (3) 1 (1) 2 (2)
============== ========== ========== =========== ==========
Rebecca
Donaldson 7 (7) 3 (3) 1 (1) 2 (2)
============== ========== ========== =========== ==========
David Simpson
(A) 3 (3) 2 (2) 1 (1) 1 (1)
-------------- ---------- ---------- ----------- ----------
(A) Appointed as a Director on 1
November 2021.
Hasan Askari and Stephen White are not standing for re-election as Directors and will retire from the Board at the conclusion of the AGM on 28 September 2022. Michael Hughes will succeed Hasan Askari as Chairman of the Company while David Simpson will succeed Michael Hughes as Senior Independent Director. Subsequent to the year end, Andrew Robson was appointed a Director of the Company with effect from 1 August 2022, and will succeed Stephen White as Chairman of the Audit Committee at the conclusion of the AGML
Michael Hughes and Rebecca Donaldson, each being eligible, retire and offer themselves for re-election as Directors of the Company. David Simpson and Andrew Robson, each being eligible, retire and offer themselves for election as a Director.
David Simpson is a non-executive director of ITC Limited ("ITC"), a major listed Indian company. ITC has a diversified presence in FMCG, hotels, packaging, specialty paper and agri-business and represented 2.3% of the Company's total portfolio as at 31 March 2022. David Simpson has agreed that he will recuse himself from all discussions regarding ITC to avoid any potential conflict of interest.
Accordingly, 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 individual contribution of each Director is set out on in the Annual Report.
The Board has adopted a policy that all Directors, including the Chairman, shall not serve for more than nine years from the date of their initial date of appointment as a Director of the Company unless in relation to exceptional circumstances.
The ninth anniversary of Hasan Askari's term as a Director was 21 September 2021. As set out in the Annual Report for the year ended 31 March 2022, the other Directors, led by Michael Hughes as Senior Independent Director, determined that it was in the best interests of shareholders that Hasan Askari continue as Chairman until the AGM on 28 September 2022, in order to oversee the recruitment of two new Directors.
The Board therefore has no hesitation in recommending, at the next AGM, the individual elections of David Simpson and Andrew Robson and the individual re-elections of Michael Hughes and Rebecca Donaldson 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 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 committed to, 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 deeds of 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. Other than the deeds of indemnity referred to above, 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. abrdn 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.
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's Report may be found in the Annual Report.
Management Engagement Committee
The Board has established a Management Engagement Committee comprising all of the Directors, which was chaired throughout the year by Michael Hughes.
The Committee is responsible for reviewing matters concerning the MA which exists between the Company and the Manager 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 2021.
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 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 it believes that the abrdn has the investment management, promotional and associated
secretarial and administrative skills required for the effective and successful operation of the Company.
Nomination Committee
The Board has established a Nomination Committee, comprising all of the Directors, which was chaired throughout the year by Hasan Askari. 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.
The Company engaged Lintstock Ltd, an independent external service provider which has no other connection to the Company, to undertake a board evaluation in March 2021. Assisted by Lintstock Ltd, the Board assessed that it had in place the appropriate balance of skills, experience, length of service and knowledge of the Company, while also recognising the advantages of diversity. Details of the individual contribution made by each Director may be found in the Annual Report.
In April 2022, the Board facilitated a self-assessment evaluation which was collated and discussed by the Chairman with other Directors. The Senior Independent Director provided feedback to the Chairman.
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. In line with best practice in corporate governance, Hasan Askari did not chair the Committee in relation to his own succession. Chaired by Stephen White, the Committee approved the appointment of Michael Hughes as Chairman of the Company with effect from the conclusion of the AGM on 28 September 2022.
Accountability and Audit
The responsibilities of the Directors and the Auditor, in connection with the financial statements, appear in the Annual Report.
The Directors who held office at the date of approval of this Directors' Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company's Auditor is unaware, and each Director has taken all the steps that he or she could reasonably be expected to have taken as a Director in order to make himself or herself 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 review, as applicable, the level of non-audit services provided by the Auditor, together with the Auditor's procedures in connection with the provision of such services. No non-audit services were provided by the auditor during the year or to the date of this Report. The Directors remain satisfied that the Auditor is objective and independent.
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 above 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 28 September 2022, 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 2020, the Company entered into a two year, GBP30 million revolving credit facility (the "Facility") with Royal Bank of Scotland International Limited (London Branch), part of NatWest Group plc, of which GBP30m was drawn down at 31 March 2022 (2021 - GBP30m). on 30 June 2022, the Company agreed to extend the Facility to 5 August 2022. 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 August 2022, the Company has entered 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 results of stress testing prepared by the Manager, which models a sharp decline in market levels and income, demonstrated that the Company had the ability to raise sufficient funds so as to both pay expenses and remain within its debt covenants.
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. Responsibility for actively monitoring the sustainability investing activities of portfolio companies has been delegated by the Board to the AIFM which has sub-delegated that authority to the Manager. Further information may be found at: abrdn.com/en/asieurope/responsible-investing
Substantial Interests
The Company had been notified of the following share interests above 3% in the Company as at 31 March 2022:
Number of
Shareholder shares held % held
========================== ============ ======
Clients of abrdn 11,144,048 19.2
========================== ============ ======
Lazard Asset Management 9,040,332 15.6
========================== ============ ======
City of London Investment
Management 6,859,351 11.8
========================== ============ ======
Clients of Hargreaves
Lansdown (execution
only) 4,162,456 7.2
========================== ============ ======
Interactive Investor
(execution only) 3,410,085 5.9
========================== ============ ======
abrdn retail plans 2,455,254 4.2
========================== ============ ======
The above interests at 31 March 2022 were unchanged other than, in relation to Lazard Asset Management, which advised the Company on 5 May 2022 of a holding of 6,418,621 shares, equivalent to 11.1% of the Company's shares in issue (excluding treasury shares) and, in relation to clients of abrdn, which advised the Company on 15 June 2022 of a holding of 8,519,024 shares, equivalent to 14.8% of the Company's shares in issue (excluding treasury shares) and, in relation to City of London Investment Management, which advised the Company on 16 June 2022 of a holding of 7,179,947 shares, equivalent to 12.5% of the Company's share in issue (excluding treasury shares).
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 abrdn'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 abrdn) 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 prior to the Company's AGM.
Annual General Meeting
The AGM will be held on 28 September 2022 and the AGM Notice and related notes may be found in the Annual Report. Resolutions relating to the following items will be proposed at the AGM as special business.
Continuation of the Company (Resolution 8)
In accordance with Article 166 of the Articles of Association of the Company approved by shareholders on 23 September 2020, the Directors are required to propose an Ordinary resolution at each AGM that the Company continue as an investment trust. Accordingly, the Directors are proposing, as ordinary resolution 8, that the Company continue as an investment trust and recommend that shareholders support the continuation of the Company.
Share Repurchases (Resolution 9)
At the AGM held on 9 September 2021, shareholders approved the renewal of the authority for the Company to repurchase its Ordinary shares.
The principal aim of a share buy-back facility is to reduce the volatility in the Discount. In addition, the purchase of shares, when they are trading at a Discount, 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 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.
Renewal of the authority to buy back shares is sought at the AGM as the Board considers that this mechanism has assisted in lowering the volatility of the discount reflected in the Company's share price and is also accretive, in NAV terms, for continuing shareholders. 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 as at 30 June 2022, being the nearest practicable date to the approval of this Report (equivalent to approximately 8.6 million Ordinary shares). Such authority will expire on the date of the AGM in 2023 or on 30 September 2023, 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 (Resolutions 10 and 11)
Ordinary resolution 10 in the Notice of AGM will, if passed, renew the authority to allot unissued share capital up to an aggregate of 5%, equivalent to approximately 2.9 million Ordinary shares, of the Company's existing issued share capital, excluding treasury shares, as at 30 June 2022, being the nearest practicable date to the approval of this Report). Such authority will expire on the date of the AGM in 2023 or on 30 September 2023, whichever is earlier, which means that the authority will have to be renewed at the next AGM or, 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 5% (equivalent to approximately 2.9 million Ordinary shares), of the Company's existing issued share capital as at 30 June 2022, 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 2023 or on 30 September 2023, whichever is earlier, which means that the authority will have to be renewed at the next AGM or, 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.
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.
Articles of Association (Resolution 12)
Resolution 12 proposes to amend the Company's Articles of Association (the "Articles") in light of the announcement made by the Company on 24 March 2022 in relation to the proposed introduction of a five-yearly performance related conditional tender offer. Further detail on the proposed conditional tender offer is contained in the Chairman's Statement.
In order to align the Company's continuation vote with the assessment period for the proposed conditional tender offer, the Company proposes to amend article 166 (Duration of the Company) to replace the Company's current cycle of annual continuation votes with five-yearly continuation votes, to coincide with the year of assessment of the Company's performance for the purpose of the conditional tender offer.
While there is no formal requirement for shareholders to vote on the introduction of the proposed conditional tender offer, shareholders' approval by way of special resolution is required for this amendment to the Articles.
As noted above under Continuation of the Company, the current annual continuation vote will take place, as normal, at the AGM on 28 September 2022. If the continuation vote is not passed by shareholders at the AGM, neither the proposed conditional tender offer nor the proposed amendment to the Articles will be implemented.
Similarly, the proposed conditional tender offer will only be introduced if this year's continuation vote and resolution 12 for amendment to the Articles are both passed at
the AGM.
If shareholders vote in favour of these proposals, any conditional tender offer that is triggered at the conclusion of the five-yearly Assessment Period will be subject to the passing of the five-yearly continuation vote. The first Assessment Period would run from 1 April 2022 to 31 March 2027 and the first five-yearly continuation vote would take place at the AGM later in 2027.
Resolution 12 proposes one further amendment to the Articles: to delete Article 173. Article 173 was added following the enactment of the Companies Act 2006 (the Act). It drew into the Articles provisions which prior to the Act would have been contained in the Company's memorandum of association, including the Company's name. Article 173 has been superseded by changes in company law since, including the provision allowing UK companies flexibility to change their name in the manner permitted by their articles of association, as now reflected in Article 170 which permits the Company to change its name by directors' resolution. The Company is proposing to remove Article 173 to eliminate any potential inconsistency.
The Articles, as proposed to be amended, together with a version showing amendments from the current Articles, will be available for inspection under 'Key Literature' on the Company's website, aberdeen-newindia.co.uk , and on the national storage mechanism from the date of the publication of the Annual Report until the close of the AGM, and will also be available for inspection at the venue of the Company's AGM from 15 minutes before and during the AGM.
Recommendation
The Board considers all of the Resolutions to be put to shareholders at the AGM 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 33,276 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 above, 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.
The financial risk management objectives and policies arising from its financial instruments and the exposure of the Company to risk are disclosed in Note 17 to the Financial Statements.
Hasan Askari,
Chairman
30 June 2022
Statement of Directors' responsibilities in respect of the Annual Report and financial statements
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 UK-adopted international accounting standards 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 its profit or loss 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, relevant and reliable;
- state whether they have been prepared in accordance with UK adopted international accounting standards;
- 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 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 its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and 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.
In accordance with Disclosure Guidance and Transparency Rule 4.1.14R, the financial statements will form part of the annual financial report prepared using the single electronic reporting format under the TD ESEF Regulation. The auditor's report on these financial statements provides no assurance over the ESEF format.
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
30 June 2022
Statement of Comprehensive Income
Year ended Year ended
31 March 2022 31 March 2021
=============================== ==========
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 3 4,904 155 5,059 4,517 - 4,517
=============================== ========== ======== ======== ======== ======== ======== ========
Gains on investments held
at fair value through profit
or loss 10(a) - 45,078 45,078 - 140,538 140,538
=============================== ========== ======== ======== ======== ======== ======== ========
Currency losses - (342) (342) - (404) (404)
------------------------------- ---------- -------- -------- -------- -------- -------- --------
4,904 44,891 49,795 4,517 140,134 144,651
------------------------------- ---------- -------- -------- -------- -------- -------- --------
Expenses
=============================== ========== ======== ======== ======== ======== ======== ========
Investment management fees 4 (3,328) - (3,328) (2,801) - (2,801)
=============================== ========== ======== ======== ======== ======== ======== ========
Administrative expenses 5 (927) - (927) (821) - (821)
------------------------------- ---------- -------- -------- -------- -------- -------- --------
(4,255) - (4,255) (3,622) - (3,622)
------------------------------- ---------- -------- -------- -------- -------- -------- --------
Profit before finance costs
and taxation 649 44,891 45,540 895 140,134 141,029
=============================== ========== ======== ======== ======== ======== ======== ========
Finance costs 6 (290) - (290) (334) - (334)
------------------------------- ---------- -------- -------- -------- -------- -------- --------
Profit before taxation 359 44,891 45,250 561 140,134 140,695
------------------------------- ---------- -------- -------- -------- -------- -------- --------
Taxation 7 (525) (4,140) (4,665) (452) (13,624) (14,076)
------------------------------- ---------- -------- -------- -------- -------- -------- --------
(Loss)/profit for the year (166) 40,751 40,585 109 126,510 126,619
------------------------------- ---------- -------- -------- -------- -------- -------- --------
(Loss)/return per Ordinary
share (pence) 9 (0.28) 69.92 69.64 0.19 216.06 216.25
------------------------------- ---------- -------- -------- -------- -------- -------- --------
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 Company. There are no non-controlling
interests.
The total column of this statement represents the Statement of Comprehensive
Income of the Company, prepared in accordance with UK-adopted International
Accounting Standards. 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 2022 31 March 2021
Notes GBP'000 GBP'000
=========================================== ====== ============= =============
Non-current assets
=========================================== ====== ============= =============
Investments held at fair value through
profit or loss 10 439,881 401,669
=========================================== ====== ============= =============
Current assets
=========================================== ====== ============= =============
Cash at bank 9,772 2,588
=========================================== ====== ============= =============
Other receivables 11 2,160 530
------------------------------------------- ------ ------------- -------------
11,932 3,118
------------------------------------------- ------ ------------- -------------
Current liabilities
=========================================== ====== ============= =============
Bank loan 12(a) (30,000) (24,000)
=========================================== ====== ============= =============
Other payables 12(b) (3,287) (1,038)
------------------------------------------- ------ ------------- -------------
(33,287) (25,038)
------------------------------------------- ------ ------------- -------------
Net current liabilities (21,355) (21,920)
------------------------------------------- ------ ------------- -------------
Non-current liabilities
=========================================== ====== ============= =============
Deferred tax liability on Indian capital
gains 13 (14,531) (13,643)
------------------------------------------- ------ ------------- -------------
Net assets 403,995 366,106
------------------------------------------- ------ ------------- -------------
Share capital and reserves
=========================================== ====== ============= =============
Ordinary share capital 14 14,768 14,768
=========================================== ====== ============= =============
Share premium account 2(l) 25,406 25,406
=========================================== ====== ============= =============
Special reserve 2(l) 9,932 12,628
=========================================== ====== ============= =============
Capital redemption reserve 2(l) 4,484 4,484
=========================================== ====== ============= =============
Capital reserve 2(l) 349,462 308,711
=========================================== ====== ============= =============
Revenue reserve 2(l) (57) 109
------------------------------------------- ------ ------------- -------------
Equity shareholders' funds 403,995 366,106
------------------------------------------- ------ ------------- -------------
Net asset value per Ordinary share
(pence) 16 697.30 627.05
------------------------------------------- ------ ------------- -------------
The financial statements were approved by the Board of Directors and
authorised for issue on 30 June 2022 and were signed on its behalf
by:
Hasan Askari
Chairman
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Equity
Year ended 31 March 2022
==============================================================================================================
Share Capital
Share premium Special redemption Capital Revenue
capital account reserve reserve reserve reserve Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
====================== ============= ======== ======== ======== =========== ======== ======== ========
Balance at 1 April
2021 14,768 25,406 12,628 4,484 308,711 109 366,106
====================== ============= ======== ======== ======== =========== ======== ======== ========
Net profit/(loss)
after taxation - - - - 40,751 (166) 40,585
====================== ============= ======== ======== ======== =========== ======== ======== ========
Buyback of share
capital to treasury - - (2,696) - - - (2,696)
---------------------- ------------- -------- -------- -------- ----------- -------- -------- --------
Balance at 31 March
2022 14,768 25,406 9,932 4,484 349,462 (57) 403,995
---------------------- ------------- -------- -------- -------- ----------- -------- -------- --------
Year ended 31 March 2021
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
2020 14,768 25,406 14,139 4,484 182,656 130 241,583
====================== ============= ======== ======== ======== =========== ======== ======== ========
Net profit after
taxation - - - - 126,510 109 126,619
====================== ============= ======== ======== ======== =========== ======== ======== ========
Equity dividend
paid 8 - - - - (455) (130) (585)
====================== ============= ======== ======== ======== =========== ======== ======== ========
Buyback of share
capital to treasury - - (1,511) - - - (1,511)
---------------------- ------------- -------- -------- -------- ----------- -------- -------- --------
Balance at 31 March
2021 14,768 25,406 12,628 4,484 308,711 109 366,106
---------------------- ------------- -------- -------- -------- ----------- -------- -------- --------
The accompanying notes are an integral part of these financial statements.
Statement of Cash Flows
Year ended Year ended
31 March 2022 31 March 2021
Notes GBP'000 GBP'000
========================================== ======= ============= =============
Cash flows from operating activities
========================================== ======= ============= =============
Dividend income received 3,983 3,580
========================================== ======= ============= =============
Investment management fee paid (3,573) (2,427)
========================================== ======= ============= =============
Other cash expenses (921) (812)
------------------------------------------ ------- ------------- -------------
Cash (outflow)/inflow from operations (511) 341
========================================== ======= ============= =============
Interest paid (283) (302)
------------------------------------------ ------- ------------- -------------
Net cash (outflow)/inflow from operating
activities (794) 39
------------------------------------------ ------- ------------- -------------
Cash flows from investing activities
========================================== ======= ============= =============
Purchases of investments (130,909) (69,103)
========================================== ======= ============= =============
Sales of investments 139,176 71,555
========================================== ======= ============= =============
Indian capital gains tax (paid)/refunded
on sales (3,251) 19
========================================== ======= ============= =============
Net cash inflow from investing activities 5,016 2,471
------------------------------------------ ------- ------------- -------------
Cash flows from financing activities
========================================== ======= ============= =============
Equity dividend paid - (585)
========================================== ======= ============= =============
Buyback of shares (2,696) (1,511)
========================================== ======= ============= =============
Drawdown/(repayment) of loan 6,000 (6,000)
------------------------------------------ ------- ------------- -------------
Net cash inflow/(outflow) from financing
activities 3,304 (8,096)
------------------------------------------ ------- ------------- -------------
Net increase/(decrease) in cash and
cash equivalents 7,526 (5,586)
========================================== ======= ============= =============
Cash and cash equivalents at the start
of the year 2,588 8,578
========================================== ======= ============= =============
Effect of foreign exchange rate changes (342) (404)
------------------------------------------ ------- ------------- -------------
Cash and cash equivalents at the end
of the year 2(h),17 9,772 2,588
------------------------------------------ ------- ------------- -------------
There were no non-cash transactions
during the year (2021 - GBPnil).
The accompanying notes are an integral part of these financial statements.
Notes to the Financial Statements
For the year ended 31 March 2022
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").
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 2022.
The financial statements have been prepared in accordance with
UK-adopted international accounting standards ("IFRS").These
comprise standards 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.
The financial statements have also been prepared in accordance
with the Companies Act 2006 and the Statement of Recommended
Practice (SORP), "Financial Statements of Investment Trust
Companies and Venture Capital Trusts," issued in April 2021.
The Company's assets consist mainly of equity shares in companies
listed on a recognised stock exchange and in most circumstances,
including in the current market environment, are considered
to be realisable within a short timescale. The Board has set
limits for borrowing and regularly reviews actual exposures,
cash flow projections and compliance with banking covenants,
including the headroom available. On 6 July 2020, the Company
entered into a two year GBP30 million loan facility of which
the full amount is drawn down on a short-term basis through
a revolving credit facility and can be repaid without incurring
any financial penalties. On 30 June 2022, the Company agreed
an extension of the facility to 5 August 2022. In advance of
expiry of the facility in August 2022, the Company has entered
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. Having
taken these factors into account, as well as the continued
impact on the Company of the Covid-19 virus, the Directors
believe that the Company has adequate resources to continue
in operational existence for the foreseeable future and has
the ability to meet its financial obligations as they fall
due for a period of at least twelve months from the date of
approval of this Report. For these reasons, the Company continues
to adopt the going concern basis of accounting in preparing
the financial statements. 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 28 September 2022, 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.
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 Company considers the selection
of Sterling as its functional currency to be a key judgement.
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, where 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 2021. The adoption of these Standards
and Amendments did not have a material impact on the financial
results of the Company. The nature is described below:
- IAS 39, IFRS 4, 7, 9 and 16 Amendments (Interest Benchmark
Reform Phase 2)
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 2022 and thereafter;
- IFRS 9 Amendments (Annual Improvements 2018-2020)
- IAS 1 Amendments (Classification of Liabilities as Current
or Non-Current)
- IAS 1 Amendments (Disclosure of Accounting Policies)
- IAS 8 Amendments (Definition of Accounting Estimates)
- IAS 12 Amendments (Deferred Tax related to Assets and Liabilities
arising from a Single Transaction)
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 a 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, which is one
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 10 (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 Statement of Financial Position
date.
Deferred tax. Deferred tax is recognised in respect of all
temporary differences at the Statement of Financial Position
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 Statement of Financial Position
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. Investments have been designated upon initial
recognition as 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 initially at fair value. Subsequent to initial recognition,
investments are recognised at 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,
and 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.
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'
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'.
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) Nature and purpose of reserves
Called-up share capital. The Ordinary share capital on the
Statement of Financial Position 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 for the purpose of funding
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. The
part of this reserve represented by realised capital gains
is available for distribution by way of dividend.
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.
(m) Foreign currency. Overseas monetary assets and liabilities
are converted into Sterling at the rate of exchange ruling
at the Statement of Financial Position 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.
3. Income
======================== ======= =======
2022 2021
GBP'000 GBP'000
======================== ======= =======
Income from investments
======================== ======= =======
Overseas dividends 5,059 4,517
---------------------------- ------- -------
4. Investment management fees
============================================== ============ ============
2022 2021
GBP'000 GBP'000
============================================== ============ ============
Investment management fees 3,328 2,801
-------------------------------------------------- ------------ ------------
The Company has an agreement with the Manager 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 0.85% up to GBP350 million
and 0.7% thereafter of the Company's net assets, valued monthly.
The management agreement is terminable by either the Company or
the Manager on six months' notice. The amount payable in respect
of the Company for the year was GBP3,328,000 (2021 - GBP2,801,000)
and the balance due to the Manager at the year end was GBP532,000
(2021 - GBP775,000). All investment management fees are charged
100% to the revenue column of the Statement of Comprehensive Income.
Prior to 1 April 2021, the management fee was payable monthly
in arrears based on an annual amount of 0.9% up to GBP350 million
and 0.75% thereafter of the Company's net assets, valued monthly.
5. Administrative expenses
===================================================== ======== ========
2022 2021
GBP'000 GBP'000
===================================================== ======== ========
Directors' fees 133 122
========================================================= ======== ========
Promotional activities 166 166
========================================================= ======== ========
Auditor's remuneration:
===================================================== ======== ========
- fees payable for the audit of the Company's
annual financial statements 45 35
========================================================= ======== ========
Legal and advisory fees 62 84
========================================================= ======== ========
Custodian and overseas agents' charges 320 252
========================================================= ======== ========
Depositary fees 40 38
--------------------------------------------------------- -------- --------
Other 161 124
--------------------------------------------------------- -------- --------
927 821
--------------------------------------------------------- -------- --------
The Manager supports the Company with promotional activities through
its participation in the abrdn Investment Trust Share Plan and
ISA. The total fees paid and payable under the agreement during
the year were GBP166,000 (2021 - GBP166,000) and GBP42,000 (2021
- GBP42,000) was due to the Manager at the year end.
The only fees paid to KPMG LLP by the Company are the audit fees
of GBP45,000 (2021 - GBP35,000). The amounts disclosed above for
Auditor's remuneration are all shown net of VAT.
6. Finance costs
=============================== ================ ===============
2022 2021
GBP'000 GBP'000
------------------------------- ---------------- ---------------
On bank loans 290 334
----------------------------------- ---------------- ---------------
Finance costs are charged 100% to revenue as disclosed in the
accounting policies.
7. Taxation
2022 2021
============================================ ========================= ===========================
Revenue Capital Total Revenue Capital Total
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 - 3,251 3,251 - - -
===================================================== ======= ======= ======= ======= ======== ========
Indian capital gains tax charge
refunded on sales - - - - (19) (19)
===================================================== ======= ======= ======= ======= ======== ========
Overseas taxation 525 - 525 452 - 452
----------------------------------------------------- ------- ------- ------- ------- -------- --------
Total current tax charge for
the year 525 3,251 3,776 452 (19) 433
===================================================== ======= ======= ======= ======= ======== ========
Movement in deferred tax liability
on Indian capital gains - 889 889 - 13,643 13,643
----------------------------------------------------- ------- ------- ------- ------- -------- --------
Total tax charge for the year 525 4,140 4,665 452 13,624 14,076
----------------------------------------------------- ------- ------- ------- ------- -------- --------
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. The Company has recognised a deferred tax liability
of GBP14,531,000 (2021 - GBP13,643,000) on capital gains which
may arise if Indian investments are sold.
On 1 April 2020, the Indian Government withdrew an exemption
from withholding tax on dividend income. Dividends are received
net of 20% withholding tax and a cess charge of 4%. A further
surcharge of either 2% or 5% is applied if the receipt exceeds
a certain threshold. Of this total charge, 10% of the withholding
tax is irrecoverable with the remainder being shown in the Statement
of Financial Position as an asset due for reclaim.
(b) Factors affecting the tax charge for the year . The tax charged
for the year can be reconciled to the (loss)/profit per the
Statement of Comprehensive Income as follows:
2022 2021
============================================ ========================= ===========================
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================================ ======= ======= ======= ======= ======== ========
Profit before tax 359 44,891 45,250 561 140,134 140,695
----------------------------------------------------- ------- ------- ------- ------- -------- --------
UK corporation tax on profit
at the standard rate of 19%
(2021 - 19%) 68 8,529 8,597 107 26,625 26,732
===================================================== ======= ======= ======= ======= ======== ========
Effects of:
============================================ ======= ======= ======= ======= ======== ========
Gains on investments held
at fair value through profit
or loss not taxable - (8,565) (8,565) - (26,702) (26,702)
===================================================== ======= ======= ======= ======= ======== ========
Currency losses not taxable - 65 65 - 77 77
===================================================== ======= ======= ======= ======= ======== ========
Deferred tax not recognised
in respect of tax losses 857 - 857 750 - 750
===================================================== ======= ======= ======= ======= ======== ========
Expenses not deductible for
tax purposes 6 - 6 1 - 1
===================================================== ======= ======= ======= ======= ======== ========
Indian capital gains tax charged/(refunded)
on sales - 3,251 3,251 - (19) (19)
===================================================== ======= ======= ======= ======= ======== ========
Movement in deferred tax liability
on Indian capital gains - 889 889 - 13,643 13,643
===================================================== ======= ======= ======= ======= ======== ========
Irrecoverable overseas withholding
tax 525 - 525 452 - 452
===================================================== ======= ======= ======= ======= ======== ========
Non-taxable dividend income (931) - (931) (858) - (858)
----------------------------------------------------- ------- ------- ------- ------- -------- --------
Total tax charge 525 4,169 4,694 452 13,624 14,076
----------------------------------------------------- ------- ------- ------- ------- -------- --------
(c) At 31 March 2022, the Company had surplus management expenses
and loan relationship debits with a tax value of GBP6,949,000
(2021 - GBP4,424,000) based on enacted tax rates, in respect
of which a deferred tax asset has not been recognised. No deferred
tax asset has been recognised because the Company is not expected
to generate taxable income in the future in excess of the deductible
expenses of those future periods. Therefore, it is unlikely
that the Company will generate future taxable revenue that would
enable the existing tax losses to be utilised.
8. Ordinary dividends on equity shares
================================================== ========= ========
2022 2021
GBP'000 GBP'000
================================================== ========= ========
Amounts recognised as distributions paid
during the year:
================================================== ========= ========
Interim dividend for 2020 from revenue
reserves of 0.22p - 130
====================================================== ========= ========
Interim dividend for 2020 from capital
reserves of 0.78p - 455
------------------------------------------------------ --------- --------
- 585
------------------------------------------------------ --------- --------
There was no revenue available for distribution by way of dividend
for the year ended 31 March 2022 (2021 - GBP109,000). An interim
dividend was paid during the year ended 31 March 2021 to satisfy
the requirements of Sections 1158-1159 of the Corporation Tax
Act 2010 under which the Company qualifies as an investment trust
in respect of the year ended 31 March 2020. For further details
see the Directors' Report on page 40 of the 2021 Annual Report.
9. (Loss)/return per Ordinary share
=========================================================================================
2022 2021
============================= ============================ ============================
Revenue Capital Total Revenue Capital Total
============================= ======= ======= ========== ======= ======= ==========
Net (loss)/profit (GBP'000) (166) 40,751 40,585 109 126,510 126,619
================================= ======= ======= ========== ======= ======= ==========
Weighted average number
of Ordinary shares in issue 58,276,006 58,551,911
================================= ======= ======= ========== ======= ======= ==========
(Loss)/return per Ordinary
share (pence) (0.28) 69.92 69.64 0.19 216.06 216.25
--------------------------------- ------- ------- ---------- ------- ------- ----------
10. Investments held at fair value through profit or loss
2022 2021
(a) Valuation GBP'000 GBP'000
============================================ ============ ==========
Opening book cost 255,914 246,479
============================================= ========= ============ ==========
Opening investment holdings fair
value gains 145,755 18,165
--------------------------------------------- --------- ------------ ----------
Opening valuation 401,669 264,644
============================================= ========= ============ ==========
Movements in the year:
============================================ ============ ==========
Purchases 132,928 68,032
============================================= ========= ============ ==========
Sales - proceeds (139,794) (71,545)
============================================= ========= ============ ==========
Gains on investments 45,078 140,538
--------------------------------------------- --------- ------------ ----------
Closing valuation 439,881 401,669
--------------------------------------------- --------- ------------ ----------
2022 2021
GBP'000 GBP'000
============================================ ============ ==========
Closing book cost 293,858 255,914
============================================= ========= ============ ==========
Closing investment holdings fair
value gains 146,023 145,755
--------------------------------------------- --------- ------------ ----------
Closing valuation 439,881 401,669
--------------------------------------------- --------- ------------ ----------
The Company generated GBP139,794,000 (2021 - GBP71,545,000)
from investments sold in the period. The book cost of these
investments when they were purchased was GBP94,984,000 (2021
- GBP58,597,000). These investments have been revalued over
time and until they were sold any unrealised gains/losses were
included in the fair value of the investments.
(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:
2022 2021
GBP'000 GBP'000
============================================ ============ ==========
Purchases 167 109
============================================= ========= ============ ==========
Sales 211 120
--------------------------------------------- --------- ------------ ----------
378 229
------------------------------------------------------- ------------ ----------
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.
11. Other receivables
========================================= ======= =======
2022 2021
========================================= ======= =======
GBP'000 GBP'000
========================================= ======= =======
Amounts due from brokers 211 -
============================================== ======= =======
Recoverable tax on Indian dividends 1,019 485
============================================== ======= =======
Prepayments and accrued income 930 45
---------------------------------------------- ------- -------
2,160 530
---------------------------------------------- ------- -------
None of the above amounts are past their
due date or impaired (2021 - nil).
12. Current liabilities
================================================================================
2022 2021
(a) Bank loan GBP'000 GBP'000
================================================= =========== ==========
Loans repayable within one year 30,000 24,000
----------------------------------------------------------- ----------- ----------
In July 2020, the Company agreed a GBP30 million two year uncommitted
multicurrency revolving loan facility with Royal Bank of Scotland
International (London Branch). GBP30 million was drawn down
at 31 March 2022 (31 March 2021 - GBP24 million) at an all-in
interest rate of 1.0135% until 8 April 2022 (2021 - 0.94925%
until 12 April 2021). On 30 June 2022, the Company agreed an
extension of the facility to 5 August 2022. At the date of
this Report the Company had drawn down GBP30 million at an
all-in interest rate of 1.9036% until 6 July 2022.
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. The Company complied
with all covenants during the year and up to the date of signing
this Report.
2022 2021
(b) Other payables GBP'000 GBP'000
================================================= =========== ==========
Amounts due to brokers 2,019 -
=========================================================== =========== ==========
Other creditors 1,268 1,038
----------------------------------------------------------- ----------- ----------
3,287 1,038
----------------------------------------------------------- ----------- ----------
13. Non-current liabilities
========================================= ======= =======
2022 2021
GBP'000 GBP'000
========================================= ======= =======
Deferred tax liability on Indian capital
gains 14,531 13,643
---------------------------------------------- ------- -------
14. Ordinary share capital
=========================== ============= ========= ============ ========
2022 2021
=========================== ======================== ======================
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 57,937,127 14,485 58,385,328 14,597
================================ ============= ========= ============ ========
Held in treasury:
=========================== ============= ========= ============ ========
Ordinary shares of
25p each 1,133,013 283 684,812 171
-------------------------------- ------------- --------- ------------ --------
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.
During the year 448,201 (2021 - 335,653) Ordinary shares of 25p
each were repurchased by the Company at a total cost, including
transaction costs, of GBP2,696,000 (2021 - GBP1,511,000). All
of the shares were placed in treasury. Shares held in treasury
represent 1.92% (2021 - 1.16%) of the Company's total issued shares
at the year end. Shares held in treasury do not carry a right
to receive dividends.
15. Analysis of changes in net debt
==========================================================================
Net
Currency Cash
2021 differences flows 2022
GBP'000 GBP'000 GBP'000 GBP'000
========================= ========== ============= ========= =========
Cash and short term
deposits 2,588 (342) 7,526 9,772
=============================== ========== ============= ========= =========
Debt due within
one year (24,000) - (6,000) (30,000)
------------------------------- ---------- ------------- --------- ---------
(21,412) (342) 1,526 (20,228)
------------------------------- ---------- ------------- --------- ---------
Net
Currency Cash
2020 differences flows 2021
GBP'000 GBP'000 GBP'000 GBP'000
========================= ========== ============= ========= =========
Cash and short term
deposits 8,578 (404) (5,586) 2,588
=============================== ========== ============= ========= =========
Debt due within
one year (30,000) - 6,000 (24,000)
------------------------------- ---------- ------------- --------- ---------
(21,422) (404) 414 (21,412)
------------------------------- ---------- ------------- --------- ---------
A statement reconciling the movement in net funds to the net cash
flow has not been presented as there are no differences from the
above analysis.
16. Net asset value per Ordinary share
The net asset value per Ordinary share is based on a net asset
value of GBP403,995,000 (2021 - GBP366,106,000) and on 57,937,127
(2021 - 58,385,328) Ordinary shares, being the number of Ordinary
shares in issue at the year end, excluding shares held in treasury.
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 the Manager
under the terms of its management agreement with the Manager (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 the Manager collectively
assume responsibility for the Manager's obligations under the
AIFMD including reviewing investment performance and monitoring
the Company's risk profile during the year.
The Manager is a fully integrated member of abrdn, which provides
a variety of services and support to the Manager in the conduct
of its business activities, including in the oversight of the
risk management framework for the Company. The Manager has delegated
the day to day administration of the investment policy to the
Investment manager, 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
Manager 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 abrdn's risk management processes and systems which are
embedded within the abrdn's operations. abrdn'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 and Risk Management.
The team is headed up by abrdn's Chief Risk Officer, who reports
to the CEO of the Group. The Risk Division achieves its objective
through embedding the Risk Management Framework throughout the
organisation using abrdn's operational risk management system
("SHIELD").
abrdn's Internal Audit Department is independent of the Risk Division
and reports directly to the abrdn's CEO and to the Audit Committee
of abrdn's Board of Directors. The Internal Audit Department is
responsible for providing an independent assessment of the abrdn's
control environment.
abrdn's corporate governance structure is supported by several
committees to assist the board of directors of abrdn, its subsidiaries
and the Company to fulfil their roles and responsibilities. abrdn'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.
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 2022 Years % GBP'000 GBP'000
=========================== ================= ============= ======= ========
Assets
=========================== ================= ============= ======= ========
Sterling - - - 8,676
================================ ================= ============= ======= ========
US Dollars - - - 15
================================ ================= ============= ======= ========
Indian Rupee - - - 1,081
-------------------------------- ----------------- ------------- ------- --------
- 9,772
-------------------------------- ----------------- ------------- ------- --------
Weighted average Weighted
period for average Fixed Floating
which
rate is fixed interest rate rate rate
Years % GBP'000 GBP'000
=========================== ================= ============= ======= ========
Liabilities
=========================== ================= ============= ======= ========
Bank loan - GBP30,000,000 0.02 1.01 30,000 -
-------------------------------- ----------------- ------------- ------- --------
Weighted average Weighted
period for average Fixed Floating
which
rate is fixed interest rate rate rate
At 31 March 2021 Years % GBP'000 GBP'000
=========================== ================= ============= ======= ========
Assets
=========================== ================= ============= ======= ========
Sterling - - - 2,457
================================ ================= ============= ======= ========
US Dollars - - - 7
================================ ================= ============= ======= ========
Indian Rupee - - - 124
-------------------------------- ----------------- ------------- ------- --------
- 2,588
-------------------------------- ----------------- ------------- ------- --------
Weighted average Weighted
period for average Fixed Floating
which
rate is fixed interest rate rate rate
Years % GBP'000 GBP'000
=========================== ================= ============= ======= ========
Liabilities
=========================== ================= ============= ======= ========
Bank loan - GBP24,000,000 0.08 0.95 24,000 -
-------------------------------- ----------------- ------------- ------- --------
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 is shown in note 12.
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 SONIA
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 2022
would have decreased/increased by GBP202,000 (2021 - decrease/increase
GBP214,000). 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:
2022 2021
============== ================================== ================================
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 8,731 15 8,746 - 7 7
============== ============ ========= ========= ============ ======== ========
Indian Rupee 431,150 1,081 432,231 401,669 124 401,793
-------------- ------------ --------- --------- ------------ -------- --------
439,881 1,096 440,977 401,669 131 401,800
-------------- ------------ --------- --------- ------------ -------- --------
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.
2022 2022 2021 2021
Revenue Equity(A) Revenue Equity(A)
GBP'000 GBP'000 GBP'000 GBP'000
===================== ============ =============== =========== ==============
US Dollar - 875 2 1
======================= ============ =============== =========== ==============
Indian Rupee 506 43,223 450 40,179
----------------------- ------------ --------------- ----------- --------------
506 44,098 452 40,180
--------------------- ------------ --------------- ----------- --------------
(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.
Price risk sensitivity. If market prices at the Statement of Financial
Position 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 2022 would have increased /(decreased)
by GBP65,982,000 (2021 - increased/(decreased) by GBP60,250,000)
and capital reserves would have increased /(decreased) by the
same amount.
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 5 August 2022. Other payables are settled within one year.
Details of borrowings and other payables at 31 March 2022 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 uncommitted
multicurrency revolving loan facility, of which GBP30,000,000
(2021 - GBP24,000,000) was drawn down at the year end. Other payables
amounted to GBP3,287,000 (2021 - GBP1,038,000).
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 (2021 - same).
Credit risk exposure . In summary, compared to the amounts included
in the Statement of Financial Position, the maximum exposure to
credit risk at 31 March was as follows:
2022 2021
================================= ====================================== ==================================
Statement Statement
Financial Maximum Financial Maximum
Position Exposure Position Exposure
GBP'000 GBP'000 GBP'000 GBP'000
================================= =================== ================= ================= ===============
Current assets
================================== =================== ================= ================= ===============
Loans and receivables 1,086 1,086 - -
================================== =================== ================= ================= ===============
Cash at bank and in hand 9,772 9,772 2,588 2,588
================================== ------------------- ----------------- ----------------- ---------------
10,858 10,858 2,588 2,588
--------------------------------- ------------------- ----------------- ----------------- ---------------
The exposure noted in the above table is not representative of
the exposure across the year as a whole.
None of the Company's financial assets are past due or impaired
(2021 - same).
Fair values of financial assets and financial liabilities. The
fair value of bank loans are represented in the table below;
2022 2021
GBP'000 GBP'000
================================= =================== ================= ================= ===============
Bank loan 30,000 24,000
-------------------------------------------------------------------------- ----------------- ---------------
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 GBP30,000,000 as at 31 March 2022 (2021 - GBP24,000,000)
compared to an accounts value in the financial statements GBP30,000,000
(2021 - GBP24,000,000) (note 12).
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 includes taking account
of the Manager's views on the market;
- the opportunity to buy back equity shares for cancellation
or holding in treasury, 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 opportunity for new issues of equity shares; and
- the extent to which any 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 Statement of Financial Position are grouped into the fair
value hierarchy at the Statement of Financial Position date are
as follows:
Level Level Level Total
1 2 3
As at 31 March Note GBP'000 GBP'000 GBP'000 GBP'000
2022
=================== ===================== ===== ======= ======= ======= =========
Financial assets at fair value
through profit or loss
========================================== ===== ======= ======= ======= =========
Quoted equities a) 439,881 - - 439,881
------------------- --------------------------------- ------- ------- ------- ---------
Net fair value 439,881 - - 439,881
------------------- --------------------------------- ------- ------- ------- ---------
Level Level Level Total
1 2 3
As at 31 March Note GBP'000 GBP'000 GBP'000 GBP'000
2021
=================== ===================== ===== ======= ======= ======= =========
Financial assets at fair value
through profit or loss
========================================== ===== ======= ======= ======= =========
Quoted equities a) 401,669 - - 401,669
------------------- --------------------------------- ------- ------- ------- ---------
Net fair value 401,669 - - 401,669
------------------- --------------------------------- ------- ------- ------- ---------
a) Quoted equities . The fair value of the Company'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.
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 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 are disclosed in notes 4 and 5.
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.
Discount to net asset value per Ordinary share
The discount is the amount by which the share price is lower than the
net asset value per share with debt at par value, expressed as a percentage
of the net asset value.
2022 2021
=================================================== =============== ======== ========
NAV per Ordinary share a 697.30p 627.05p
=================================================== =============== ======== ========
Share price b 562.00p 542.00p
=================================================== =============== ======== ========
Discount (a-b)/a 19.4% 13.6%
--------------------------------------------------- --------------- -------- --------
Net gearing
Net gearing measures the total borrowings less cash and cash equivalents
divided by shareholders' funds, expressed as a percentage. Under AIC
reporting guidance cash and cash equivalents includes amounts due to
and from brokers at the year end.
2022 2021
=================================================== =============== ======== ========
Borrowings (GBP'000) a 30,000 24,000
=================================================== =============== ======== ========
Cash (GBP'000) b 9,772 2,588
=================================================== =============== ======== ========
Amounts due to brokers (GBP'000) c 2,019 -
=================================================== =============== ======== ========
Amounts due from brokers (GBP'000) d 211 -
=================================================== =============== ======== ========
Shareholders' funds (GBP'000) e 403,995 366,106
--------------------------------------------------- --------------- -------- --------
Net gearing (a-b+c-d)/e 5.5% 5.8%
--------------------------------------------------- --------------- -------- --------
Ongoing charges ratio
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 are expressed as a percentage of the average net asset values
with debt at par value throughout the year.
2022 2021
=================================================== =============== ======== ========
Investment management fees (GBP'000) 3,328 2,801
==================================================================== ======== ========
Administrative expenses (GBP'000) 927 821
==================================================================== ======== ========
Less: non-recurring charges(A) (GBP'000) (28) -
-------------------------------------------------------------------- -------- --------
Ongoing charges (GBP'000) 4,227 3,622
-------------------------------------------------------------------- -------- --------
Average net assets (GBP'000) 399,442 312,355
-------------------------------------------------------------------- -------- --------
Ongoing charges ratio 1.06% 1.16%
-------------------------------------------------------------------- -------- --------
(A) Professional fees unlikely to
recur.
The ongoing charges ratio provided in the Company's Key Information
Document is calculated in line with the PRIIPs regulations which includes
amongst other things, the cost of borrowings and transaction costs.
Total return
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. Share
price and NAV total returns are monitored against open-ended and closed-ended
competitors, and the Benchmark, respectively.
Share
Year ended 31 March 2022 NAV Price
=================================================== =============== ======== ========
Opening at 1 April 2021 a 627.05p 542.00p
=================================================== =============== ======== ========
Closing at 31 March 2022 b 697.30p 562.00p
=================================================== =============== ======== ========
Price movements c=(b/a)-1 11.2% 3.7%
=================================================== =============== ======== ========
Dividend reinvestment(A) d N/A N/A
--------------------------------------------------- --------------- -------- --------
Total return c+d +11.2% +3.7%
--------------------------------------------------- --------------- -------- --------
Share
Year ended 31 March 2021 NAV Price
=================================================== =============== ======== ========
Opening at 1 April 2020 a 411.41p 328.00p
=================================================== =============== ======== ========
Closing at 31 March 2021 b 627.05p 542.00p
=================================================== =============== ======== ========
Price movements c=(b/a)-1 52.4% 65.2%
=================================================== =============== ======== ========
Dividend reinvestment(A) d 0.3% 0.4%
--------------------------------------------------- --------------- -------- --------
Total return c+d +52.7% +65.6%
--------------------------------------------------- --------------- -------- --------
(A) NAV total return involves investing the net dividend in the NAV
of the Company with debt at par 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 financial information set out above does not constitute the Company's statutory accounts for the years ended 31 March 2022 or 2021 but is derived from those accounts. Statutory accounts for 2021 have been delivered to the registrar of companies, and those for 2022 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.
The statutory accounts for the financial year ended 31 March 2022 have been approved by the Board and audited and will be filed with the Registrar of Companies in due course.
The Company's Annual General Meeting which will be held at 12.30pm on 28 September 2022 at Bow Bells House, 1 Bread Street, London EC4M 9HH.
The Annual Report will be posted to shareholders in July 2022. Further copies may be ordered from the Manager's website: www.invtrusts.co.uk .
On behalf of the Board
Aberdeen Asset Management PLC
Secretaries
30 June 2022
END
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