TIDMANII
RNS Number : 3023E
abrdn New India Investment Trust
29 June 2023
abrdn New India Investment Trust plc
(formerly Aberdeen New India Investment Trust PLC)
LEI - 549300D2AW66WYEVKF02
Annual Report 31 March 2023
Seeking world-class, well governed companies at the heart of
India's growth
abrdnnewindia.co.uk
"India's large population, favourable demographics and evolving
middle class set it apart from other emerging markets. Domestic
consumption, urbanisation and infrastructure remain long term
structural growth stories, coupled with the digitalisation
opportunity."
Michael Hughes, Chairman
"Given the quality and strong fundamentals of our portfolio
holdings, we believe that your Company is well positioned to
deliver on its performance objective for shareholders."
Kristy Fong and James Thom
Investment Manager
Why invest in India?
Aspiration
India's population is the largest in the world with an expanding
middle class which will drive consumption growth
Building India
Urbanisation and infrastructure development have multiplier
effects for job creation and the wider economy
Renewables
India has committed to meeting half of its energy needs from
renewable sources by 2030
Domestic opportunities
Global businesses are investing in, and shifting production to,
India, drawn by a wealth of incentives and opportunities
Exporting talent
India's giant tech service sector, built on a highly educated
and diligent workforce, drives the export of services by helping
global companies keep pace with the fast-changing tech innovation
landscape
Digitalisation
India has made immense progress in digital investments, which
will underpin its rise to be one of the largest global economies by
the middle of this century
Why invest in abrdn New India Investment Trust plc?
Robust financial strength and sustainable competitive
advantage
Indian companies meeting a 'quality' threshold are included in
the portfolio, displaying both strong financial characteristics and
a consistent competitive advantage in attractive industries or
sectors
Engaged Management
The management of the best companies in India is world-class and
understands the importance of sustainability and good governance to
drive the best outcomes for investors and other stakeholders
Return of growth stocks
As interest rates peak globally over the medium term, investors
will seek out growth stocks which are set to benefit. The
portfolio's focus on those Indian companies with the desire and
capacity to expand will drive performance
Financial Highlights and Performance
Financial Highlights
31 March 2023 31 March 2022 % change
======================================== ============== ============== ========
Equity shareholders' funds (net assets) GBP357,919,000 GBP403,995,000 -11.4
======================================== ============== ============== ========
Market capitalisation GBP285,747,000 GBP325,607,000 -12.2
======================================== ============== ============== ========
Share price (mid market) 512.00p 562.00p -8.9
======================================== ============== ============== ========
Net asset value per Ordinary share(A) 641.32p 697.30p -8.0
======================================== ============== ============== ========
Discount to net asset value(A) 20.2% 19.4%
======================================== ============== ============== ========
Net gearing(A) 5.8% 5.5%
======================================== ============== ============== ========
Total return per share (60.00p) 69.64p
======================================== ============== ============== ========
Operating costs
======================================== ============== ============== ========
Ongoing charges ratio(A) 1.09% 1.06%
---------------------------------------- -------------- -------------- --------
(A) Considered to be an Alternative Performance Measure.
Performance (total return, in Sterling terms)
1 year 3 year 5 year 10 year
% return % return % return % return
===================================== ======== ======== ======== ========
Share price(A) -8.9 +56.5 +20.5 +116.5
===================================== ======== ======== ======== ========
Net asset value per Ordinary
share(A) -8.0 +56.1 +31.0 +139.1
===================================== ======== ======== ======== ========
Adjusted net asset value per -8.5 N/A N/A N/A
Ordinary share(A)
------------------------------------- -------- -------- -------- --------
MSCI India Index (sterling adjusted) -6.0 +85.3 +54.7 +144.6
------------------------------------- -------- -------- -------- --------
(A) Considered to be an Alternative Performance Measure.
Source: abrdn plc, Morningstar & Lipper.
STRATEGIC REPORT
Chairman's Statement
Dear Shareholder
This marks my first annual statement for the Company as Chairman
following Hasan Askari's retirement. As I noted in the 30 September
2022 Half-Yearly Report, Hasan stood down as Chairman at the Annual
General Meeting on 28 September 2022 and I once again would like to
express my appreciation for his leadership over the past 10 years.
Together with Stephen White, who also stepped down as a Director,
they have made extremely valuable contributions to the running of
this Company. Stephen's successor as Audit Committee Chairman is
Andrew Robson, who was appointed as a Director of the Company on 1
August 2022. David Simpson succeeded me as Senior Independent
Director while Rebecca Donaldson was appointed Chairman of the
Management Engagement Committee.
The Board travelled to India in February 2023, accompanied by
the Investment Manager, to visit current and prospective investee
companies. This trip left the Board in no doubt as to the
investment opportunities in India which are available to the
Company.
Overview
In an unsettling period for global markets generally, your
Company's net asset value ("NAV") fell by 8.0% on a sterling total
return basis over the year ended 31 March 2023 (the "Year"). This
lagged the MSCI India Index (the Company's "Benchmark"), which fell
6.0%, also in sterling total return terms. The Company's share
price fell by 8.9% to finish at 512.0p while the discount to NAV
widened slightly from 19.4% to 20.2%, as at 31 March 2023.
Macroeconomic concerns dominated the Year, as investors weighed
up the optimism of a return to growth post-pandemic against the
fears of rising inflation, the risk of global recession and the
armed conflict which continues in Ukraine. All of this contributed
to what was a volatile stockmarket backdrop.
This global picture appeared at odds with a more positive
scenario experienced within India. As the pandemic subsided, there
were signs of recovery in urban consumer demand and the housing
market was similarly buoyant. Notably, the Reserve Bank of India
("RBI") forecasts GDP growth of 6% over the next fiscal year to 31
March 2024, placing India among the fastest-growing world
economies.
While the RBI has pursued a tighter monetary policy, inflation
was manageable despite being above the central bank's tolerance
levels. The currency situation, however, was less encouraging. With
a growing trade deficit and elevated oil prices due to the
Ukrainian crisis making imports more expensive, the rupee weakened
against sterling. Even here though, the RBI's deep currency
reserves ensure that it can intervene to stem any drastic currency
fall. Most of the obstacles facing India - higher oil prices and
fears of a global recession for instance - have come from outside
its borders.
Performance
Whilst lagging the Benchmark, one of the most significant
drivers of positive relative performance by the Company over the
Year was not holding in the portfolio any of the Adani entities
(the "Adani Group"). As I mentioned in the 30 September 2022
Half-Yearly Report, the Adani Group dominated Benchmark returns in
2022, driving India's equity market higher over much of that year,
and weighing on the Company's relative returns as a result. Your
Investment Manager studiously avoided the Adani Group - its
subsidiary companies do not meet stringent quality criteria and
your Investment Manager has had long-standing reservations over
governance, viewing the collective Adani Group as opaque, complex,
and highly leveraged, and with elevated valuations not supported by
fundamentals.
A US short-seller report, accusing the Adani Group of stock
manipulation and accounting fraud, preceded a sharp share price
fall, benefiting the Company's relative returns. In the Board's
view, this episode vindicates your Investment Manager's consistent
approach to the Adani Group and underscores why good corporate
governance matters as part of the overall assessment of
environmental, social and governance ("ESG") factors when making
investment decisions.
Another knock-on effect from the Adani Group's share-price fall
was that better quality securities, which had struggled for much of
the Year, once again started to find favour with investors. This
shift benefited many of the Company's quality holdings with more
defensive characteristics.
Elsewhere, the Indian stockmarket witnessed weaker share price
performance from sectors that were more sensitive to interest
rates, among them the quality growth internet stocks that were
added to the Company's portfolio in 2021. Despite being in the
'pre-profit' stage, your Investment Manager selected these
companies because of their strong market positions, competitive
advantages, cash-rich balance sheets and capable management.
However, as the interest rate environment shifted early in 2022,
these types of companies were sold off by investors despite
exhibiting strong fundamentals.
Other rate-sensitive areas were also impacted. Real estate
stocks fared poorly despite the Company's holdings delivering
robust pre-sales growth. The Investment Manager is confident that
the portfolio is positioned in property companies that will benefit
from industry consolidation.
In a period of higher interest rates and inflation, as witnessed
during the Year, one would typically expect quality stocks to be
more resilient. However, with global macro factors such as
geopolitical risks shaking up markets these fundamentals have been
largely ignored. Growth stocks favoured by the Investment Manager
were disproportionately sold off and value stocks rose sharply for
much of 2022.
That said, it is worth highlighting that, in a turbulent market
as seen in the first three months of 2023, your Company's core
quality names held up well and several of the previously
underperforming growth stocks had already begun to recover towards
the end of the Year.
The Board is supportive of the Investment Manager's view that a
focus on quality should benefit longer-term returns. Unlike the
broader Indian market, these companies, in aggregate, have
historically delivered consistent double-digit earnings growth.
Their ESG metrics are also superior compared with those included in
the Benchmark. While the underperformance relative to the Benchmark
is still disappointing, the Board has noted the recovery in
performance in the final three months of the Year and remains
optimistic that the quality stocks held within the portfolio will
deliver attractive returns in time.
A more in-depth discussion of the portfolio performance is
contained in the Investment Manager's Review.
Reduction in Fee
The Board was pleased to announce on 31 March 2023 that it had
reached agreement with the Manager to amend its management fee
arrangements. With effect from 1 April 2023, the investment
management fee will be calculated at an annual rate of 0.8%
(formerly 0.85%) in respect of the first GBP300 million (formerly
GBP350 million) of the Company's net assets and an annual rate of
0.6% (formerly 0.7%) in respect of the Company's net assets in
excess of GBP300 million (formerly GBP350 million).
Change of Name of the Company
The Company also announced on 31 March 2023 that it had changed
its name to abrdn New India Investment Trust plc which the Board
considered was more consistent with the branding of the Investment
Manager's parent company, abrdn.
Conditional tender offer
In March 2022 the Board announced the introduction of a
five-yearly performance-related conditional tender offer. The Board
was concerned about the relative underperformance of the Company's
NAV, as compared to its Benchmark. Following discussions with the
Investment Manager, the Board decided that, should the Company's
NAV total return underperform the Company's Benchmark over the
five-year period from 1 April 2022, then shareholders should be
offered the opportunity to realise up to 25 per cent of their
investment for cash at a level close to NAV. For these purposes,
the Company's NAV per share is adjusted for Indian capital gains
tax (the "Adjusted NAV") to enable a like-for-like comparison with
the Benchmark. The Board monitors closely the performance of the
Company's portfolio and over the first year of the measurement
period, from 1 April 2022 to 31 March 2023, the Adjusted NAV total
return was -8.5% versus the Benchmark's total return of -6.0% (for
additional information, please see the Alternative Performance
Measures).
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.
The discount sits wider than the historic average and the Board
has instructed a step-up in share buyback activity. Over the Year,
the Company bought back into treasury 2,127,206 (2022 - 448,201)
Ordinary shares at a cost of GBP11.8 million (2022 - GBP2.7
million), resulting in 55,809,921 shares in issue with voting
rights and an additional 3,260,219 shares held in treasury as at 31
March 2023. Between the year end and the date of this Report a
further 885,248 shares were bought back into treasury resulting in
54,924,673 shares in issue with voting shares and 4,145,467 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.
Gearing
As at 31 March 2023, 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 2022 - GBP30m),
which resulted in net gearing of 5.8%, as compared to 5.5% at 31
March 2022. 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.
Even though gearing detracted from the Company's performance
over the Year, your Board and Manager believe that it should
continue to benefit performance over the medium term even though
its cost has risen with higher interest rates.
Impact of 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 GBP11.1 million (2022 - GBP14.5 million) at 31 March
2023, equivalent to a reduction in the NAV per share of 20.0p or
3.1% at 31 March 2023 (2022 - 25.1p or 3.5%).
Environmental, Social and Governance
I am pleased to note that the Company's portfolio was recently
rated "A" under the MSCI ESG Ratings. This reflects well on your
Investment Manager's consistent efforts to engage with the
companies held within your Company's portfolio and efforts to drive
improvements on various issues. More details on your Investment
Manager's ESG process can be found in the Investment Manager's
Report and Case Studies, as well as in the latest Annual Report. A
Sustainable Investment Report for the Company is also published
every six months and is available at: abrdnnewindia.co.uk .
Shareholder Engagement
The Board encourages shareholders to visit the Company's website
or other social media channels for the latest information and
access to podcasts, thought-leadership articles and monthly
factsheets. The Board is seeking to improve the information
available to shareholders and to encourage greater interaction.
Further to this, the Board has supported the enhancement of the
website, alongside more frequent updates by the Investment
Manager.
Annual General Meeting
The Company's AGM will be held at Wallacespace, 15 Artillery
Lane, London E1 7HA at 12.30pm on Wednesday 27 September 2023. The
AGM provides shareholders with an opportunity to ask any questions
that they may have of either the Board or the Investment 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 Investment Manager, in advance, by email to
new.india@abrdn.com.
Online Shareholder event
In order to encourage and promote interaction and engagement
with the Company's shareholders, the Board is holding an
interactive Online Shareholder Presentation at 10.30am on 14
September 2023, to cater for those shareholders who may be unable
to attend the AGM. During the Presentation, shareholders will
receive a short introduction from the Chairman and portfolio update
from the Investment Manager, followed by an interactive question
and answer session. The Presentation is being held ahead of the AGM
in order to allow shareholders to submit their proxy votes prior to
the meeting. Further information on how to register for the
Presentation may be found at:
https://www.workcast.com/register?cpak=6156852042983466
Change of Investment Policy
The Directors are proposing an amendment to the Company's
investment policy, subject to Financial Conduct Authority and
shareholder approval. If so approved, the Company will have the
flexibility to invest over time in unquoted Indian companies which
are close to coming to market through an Initial Public Offering
("IPO"). Many such companies tend to offer pre-IPO investment
rounds in the months leading up to a planned IPO. The Investment
Manager will continue to undertake deep due diligence on such
opportunities.
The unquoted companies that the Investment Manager would seek to
invest in would be those which meet its strict quality criteria,
have clear and understandable business models and strong management
teams. The Board, together with the Investment Manager, believes
that the proposed change would provide the Company with better
access to more opportunities at more favourable prices and with the
opportunity to perform deeper due diligence on the relevant
companies. These opportunities would also take advantage of the
closed ended nature of the Company. Investments would only be made
as and when suitable opportunities arise.
Investment in unquoted Indian investments would be limited to
10% of the Company's net asset value, in aggregate, and calculated
at the time of investment.
Outlook
India remains one of the world's fastest-growing economies,
sustained by a stable macroeconomic environment. Supportive
government spending, a revival in consumption and an easing of
supply chain bottlenecks are likely to provide a buffer against
rising interest rates and a likely global slowdown.
With a pro-growth budget for the 2024 fiscal year, there is
increasing focus on India's industrial policy, as the country seeks
to entrench its position as a global manufacturing hub. The
domestic economy is in the early stages of a cyclical upswing.
Inflation is easing, and there is good momentum in real estate,
infrastructure development and consumer spending. The Board is
optimistic that companies with strong fundamentals favoured by your
Investment Manager, those with pricing power, a competitive
advantage, balance sheet strength and steady free cash flow, will
thrive in such an environment.
That said, we must remain cogniscent of the risks. Stockmarkets
remain volatile and the external pressures on India have not eased.
However, the Company's core quality holdings should still deliver
resilient compounding earnings growth, even as global macro
conditions stay weak. The consistency of earnings growth of the
portfolio continues to be healthy. Fundamentals, including the
ability to sustain margins, remain solid, supported by experienced
management teams. In time, we would expect these positives to once
again be reflected in better share price performance.
Over the longer term, both I and the other Directors are
confident that India remains a compelling investment opportunity.
Its large population, favourable demographics and evolving middle
class set it apart from other emerging markets. Domestic
consumption, urbanisation and infrastructure remain long term
structural growth stories, coupled with the digitalisation
opportunity.
Michael Hughes
Chairman
28 June 2023
Investment Manager's Review
The Company's net asset value ("NAV") total return was -8.0% in
sterling terms for the year ended 31 March 2023 (the "Year")
compared with a total return of -6.0% for the MSCI India Index (the
"Benchmark").
Over what was another volatile year for equities, the Company's
focus on long-term quality bore fruit towards the final three
months of the Year. Reiterating the Chairman's observations, we are
encouraged that the focus on quality holdings and avoiding
investing in large corporate groups that fail to meet our stringent
criteria, is starting to deliver better performance. We are focused
on improving performance and will continue to work hard to enhance
returns for shareholders.
Market and Performance review
India was actually among the most resilient markets in what was
an exceptionally turbulent year for global risk assets. The Year
was marked by rising inflation, slowing global growth, and the
ongoing Ukraine conflict. There were also challenging moments such
as banking sector turmoil in developed markets, emanating from the
US.
Despite these external headwinds, the Indian economy continued
its post-pandemic recuperation. Aided by increasing government
capital expenditure and easing supply chain worries, the services
sector gradually improved while we witnessed a manufacturing
revival. While this was underway, inflation eased to a 16-month low
by the end of the Year to sit at 5.7%.
Looking at the portfolio's performance over the Year, it is
perhaps best explained in two distinct periods. Between April and
December 2022, the Company's performance fell sharply behind the
Benchmark. However, between January and March 2023 - performance
was much improved and recouped some of the earlier losses.
Over the first period, the key reasons for the under-performance
against the Benchmark were: not holding any of the Adani group of
companies (the "Adani Group") in the portfolio, negative stock
selection in Azure Power Global and Piramal Enterprises, the poor
returns from the IT services stocks, and not holding Mahindra &
Mahindra in the early part of the review period. We discussed these
reasons in greater detail in the Half-Yearly Report for the six
months ended 30 September 2022 (available from
www.abrdnnewindia.co.uk) and while we had taken some profits from
our IT services holdings, our overall overweight exposure to the
sector detracted from performance during the early part of the
Year.
For the second period, as the final three months of the Year,
the recovery in performance was mainly due to the unravelling of
the Adani Group, which started in January 2023 after the
publication of a highly critical report by a US short-seller; a key
event which your Chairman has made a reference to also. We believe
in investing in businesses that are backed by reputable promoter
groups with a track record of delivering value to all shareholders.
We continue to view the Adani Group as lower quality stocks given
their weak financial track records, highly over-leveraged balance
sheets and major ESG concerns, which make them risky bets in our
view, which we have not been prepared to expose the portfolio to.
We have always been clear about our reservations over the
transparency and accounting practices of the Adani Group and the
dramatic share-price collapse is a vindication of our rigorous
investment process that filters out low-quality companies from the
outset.
The relative contribution from the financials sector also turned
positive. The share price of PB Fintech, which operates the online
insurance platform Policybazaar, staged a strong recovery after its
results showed that it was on track to turn profitable - in terms
of its earnings before interest, taxation, depreciation, and
amortisation (EBITDA) - in the next financial year. It was one of
the high-quality growth stocks in the portfolio whose share price
was depressed heavily in 2022 due to the rotation away from growth
to value, despite displaying healthy fundamental
characteristics.
Our holdings in core banks such as ICICI Bank and HDFC Bank also
held up better than other lenders as the banking sector was weighed
down by concerns over the collective exposure to Adani loans. In
addition, HDFC Bank's upcoming merger with HDFC appears to remain
on track, which we viewed as positive for the stock, and our
exposure to it.
These holdings were also buoyed by better credit growth, higher
interest rates and good asset quality.
Our industrial capex and infrastructure-related holdings also
contributed to better relative performance. ABB India's strong
portfolio of products and services benefited from the recovering
capex cycle. The company also plans to invest US$121 million
(approximately GBP97 million) over the next five years to expand
its capacity to meet growing demand. Power Grid Corporation of
India, which benefits from the country's need to invest in power
infrastructure, outperformed after delivering good results.
UltraTech Cement performed well, as the company ramped up capacity,
driven by strong demand from infrastructure and housing and rising
private sector capex.
Aegis Logistics, in the energy sector, remains a strong
performer, which is well-positioned to capitalise on continued
growth in demand for Liquid Petroleum Gas in India with its key
terminal infrastructure in strategic locations along the country's
coastline.
On the other hand, our e-commerce, IT services and real estate
sectors remained under pressure for the latter period.
In consumer discretionary, e-commerce company Nykaa continued to
experience a falling share price despite delivering robust growth.
However, we were concerned about the series of management changes
the company had been through and have since sold the holding.
Crompton Greaves Consumer Electricals fell short of earnings
expectations due to weaker consumer durables demand amid high
inflation - we have also reduced the holding as the macro backdrop
remains challenging for the company.
Elsewhere, our real estate holdings, namely Godrej Properties,
was held back by concerns that rising mortgage rates will affect
demand. We have not seen any evidence of this as the company
reported robust growth in residential home sales in the major
markets. We maintain our conviction in the stock as Godrej remains
in a good position, with a robust balance sheet, ahead of both the
structural market consolidation and the industry upcycle, that we
are anticipating.
IT services remained weak on global recessionary fears. As we
are concerned that valuations in this sector do not reflect the
slowdown in technology spending, we have continued to reduce the
portfolio's exposure to the sector by selling Mphasis.
On the ESG front, we continued to engage with companies on
various issues. Following our discussions with Affle India
(corporate governance), Godrej Properties (green strategy) and
UltraTech Cement (decarbonisation efforts), we made the first
post-Covid trip to India in February 2023 which helped our
engagement and understanding of the ESG issues in the
portfolio.
Portfolio activity
The Company maintains an above-Benchmark exposure to financial
services, which includes banks and life insurance, real estate, and
healthcare. Within financials, we have added to our private banks'
exposure with an initiation in Axis Bank as the stock is
attractively valued and its turnaround strategy has started to show
results. In Healthcare, we bought an initial holding in JB
Chemicals, which is one of the top pharmaceutical companies in
India, measured by sales.
As we remain positive about the industrial capex cycle and
premiumisation trend within domestic consumption, we initiated a
position in cable and wire manufacturer KEI Industries, leading
domestic jeweller Titan Industries and Tata Consumer Products, a
consumer products company with strong brands. These were funded
with the sales of our lower conviction holdings mentioned above
such as Mphasis, Nykaa, logistics and supply chain firm Delhivery
and healthcare company Sanofi India.
Outlook
The next 12 months remains uncertain, with no end in sight to
the Russia-Ukraine conflict, an expected rearrangement in global
supply chains and a looming recession in the United States.
However, India's swelling economy and domestic demand, robust
macroeconomic management and proactive policy measures mean that
the country is well-placed to tackle such external headwinds.
We remain confident that our portfolio, as positioned, has the
right features to withstand the current challenging environment. In
the short-term, once the global interest rate cycle peaks, we
believe that the growth to value rotation will ease or even
reverse, and our resilient, higher-quality, growth stocks will
outperform. Given the quality and strong fundamentals of our
portfolio holdings, we believe that your Company is well positioned
to deliver on its performance objective for shareholders.
Kristy Fong and James Thom
Investment Manager
28 June 2023
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. Under normal circumstances, over
the longer term and in tandem with the rising value of the
Company's investments, gearing is expected to improve returns.
The Company's Gearing is essentially structural in nature but,
in addition, may be used for 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, nearly all of its portfolio
investments are denominated and quoted in 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.
Proposed Amendment to Investment Policy
The Company is proposing to amend its investment policy to allow
investment into unlisted companies subject to a limit, measured in
the aggregate and at the time of investment, of 10% of the
Company's net asset value.
Further information regarding this change may be found in the
Chairman's Statement. The Board is seeking shareholders' approval
to the amendment under Resolution 9 in the Notice of Annual General
Meeting.
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 2023.
Benchmark
The Company's Benchmark is the MSCI India Index
(Sterling-adjusted). The Board also considers the Adjusted NAV in
relation to the conditional tender offer announced in March
2022.
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 the Adjusted NAV return and share price return,
to the Benchmark all relative 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 on above for the NAV return
and share price total return while a graph showing
NAV and share price total return performance
against the Benchmark over the past five years
is included in the published Annual Report
========================== =======================================================
Discount to NAV The discount at which the Company's share price
trades relative to the NAV per share is monitored
by the Board. A graph showing the discount over
the last five years is included in the published
Annual Report.
========================== =======================================================
Ongoing charges The Board regularly monitors the operating costs
of the Company and the ongoing charges for this
year and the previous year are disclosed in Financial
Highlights and Performance.
========================== =======================================================
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:
abrdnnewindia.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, the
general escalation of geo-political risk globally. This may have
implications for India (see "Single Country Risk" below). In
addition, the Audit Committee considers 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, and 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
============================================ ============================================
Strategic risk - inappropriate The Board reviews its strategy and
business strategy leads to lack investment mandate annually in the
of demand for the Company's shares, context of developments in markets
leading to its shares trading at and taking account of investor feedback.
a persistent and anomalous discount
to its Net Asset Value
============================================ ============================================
Market risk - falls in the prices The Investment Manager seeks to
of securities issued by Indian reduce market risk by investing
companies, which may be caused in a wide variety of companies with
by company-specific issues or may strong balance sheets and the ability
be determined by local and international to generate increased earnings.
economic, political, social, and In addition, investments are made
financial factors, including pandemics, in diversified sectors in order
natural disasters or geo-political to reduce the risk of a single large
conflicts. 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.
============================================ ============================================
Poor investment performance - poor The investment performance of the
investment performance leads to Manager is reviewed at each Board
loss of asset value in comparison meeting and compared to the benchmark
to the benchmark and/or the peer and the peer group. Exposure to
group, and, over time, can lead a range of risk factors is also
to a widening of the discount to reviewed.
NAV at which the Company's shares
trade.
============================================ ============================================
Discount - factors which affect The Board keeps under review the
the discount to NAV at which the discount and undertakes selective
Ordinary shares of the Company buyback of shares where to do so
trade. These may include the popularity would be in the best interests of
of the investment objective of shareholders, balanced against reducing
the Company, the popularity of the overall size of the Company.
investment trust shares in general, Any shares bought back are held
the investment performance of the in treasury.
Company, and the ease with which
the Company's Ordinary shares can
be traded on the London Stock Exchange.
============================================ ============================================
Single country risk - the Company The Company's exposure to India
invests in companies which are is an integral part of its investment
incorporated in, or derive significant strategy. Risk can be mitigated,
revenue or profit from, a single to a degree, by the monitoring of
country - India. Investing in a emerging risks, and by appropriate
single country, which is also an actions in relation to portfolio
emerging market, is generally a construction, liquidity and gearing.
higher risk strategy than investing The Board is kept informed of political,
more widely, or in developed markets. regulatory and tax issues affecting
There is likely to be greater political the portfolio.
and regulatory risk, and the standards The Board monitors the Rupee/Sterling
of disclosures and corporate governance exchange rate and reviews the currency
may be less developed than in developed impacts on both capital and income
markets. In addition, there may at each meeting, although the Company
be specific internal political did not hedge its foreign currency
and social issues, or wider geo-political exposure during the year.
issues, which could lead to social
upheaval, unrest, or conflict.
These events may lead to falls
in equity markets, and also adverse
foreign currency movements.
============================================ ============================================
Depositary - insolvency of the The depositary, BNP Paribas Trust
depositary or custodian or sub-custodian, Corporation UK Limited, presents
or a shortfall in the assets held to the Board at least annually on
by that depositary, custodian or the Company's compliance with the
sub-custodian arising from fraud, Alternative Investment Fund Managers
operational errors or settlement Directive ("AIFMD"). The Manager
difficulties resulting in a loss separately monitors the activities
of assets owned by the Company. of the depositary and reports to
the Board on any exceptions arising.
============================================ ============================================
Financial and regulatory - the The financial risks associated with
financial risks associated with the Company include market risk,
the portfolio could result in losses liquidity risk and credit risk,
to the Company. In addition, failure all of which are mitigated by the
to comply with relevant regulation Manager. Further details of the
(including the Companies Act, the steps taken to mitigate the financial
Financial Services and Markets risks associated with the portfolio
Act, the Alternative Investment are set out in Note 17 to the financial
Fund Managers Directive, accounting statements.
standards, investment trust regulations The Board is responsible for ensuring
and the Listing Rules, Disclosure the Company's compliance with applicable
Guidance and Transparency Rules regulations. Monitoring of this
and Prospectus Rules) may have compliance, and regular reporting
an adverse impact on the Company. to the Board thereon, has been delegated
Any change in the Company's tax to the Manager. The Board receives
status or in taxation legislation updates from the Manager and AIC
either in India or in the UK (including briefings concerning industry changes.
the tax treatment of dividends, From time to time, the Company also
capital gains or other investment employs external advisers covering
income received by the Company) specific areas of compliance.
could affect the value of the investments In particular, the Board receives
held by the Company and the Company's reports from the Manager covering
ability to provide returns to shareholders investment movements, the level
or alter the post-tax returns to and type of forecast income and
shareholders. expenditure and the amount of proposed
dividends with a view to ensuring
that the Company continues to qualify
as an investment trust under Chapter
4 of Part 24 of the Corporation
Tax Act 2010. A breach of these
regulations would mean that the
Company is no 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
the opposite effect where the underlying ensure that any bank covenants permit
return is less than the cost of maximum flexibility of investment
borrowing, further reducing the policy. The Board has agreed certain
total return on the Ordinary shares. gearing restrictions with the Manager
A significant fall in the value and reviews compliance with these
of the Company's investment portfolio guidelines at each Board meeting.
could result in a breach of bank
covenants and trigger demands for Loan agreements are entered into
early repayment. following review by the Company's
lawyers.
============================================ ============================================
Promoting the Company
The Board recognises the importance of updating existing
investors as well as promoting the Company to prospective
investors, with the aim of improving liquidity in the Company's
shares and reducing the discount at which they trade, thereby
enhancing value. Communicating the long-term attractions of the
Company is key.
The Board seeks to achieve this through subscription to, and
participation in, the promotional programme run by abrdn on behalf
of 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 Company further supports the Manager's investor relations
programme which involves regional roadshows as well as 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 2023,
there were three 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 abrdn Fund
Managers Limited and there are therefore no disclosures to be made
in respect of employees. The Company's responsible investment
policy is outlined below while the Manager's ESG engagement is set
out 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, further to a change
in the Articles of Association approved by shareholders at the AGM
on 28 September 2022, an ordinary resolution to continue the
Company is put to shareholders at every fifth AGM. The next
continuation resolution will be put to shareholders at the AGM in
2027.
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 detailed above, 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 2025 of the Company's GBP30m
loan the Company will enter into negotiations with its bankers. If
acceptable terms are available from the existing bankers, or any
alternative, the Company would expect to continue to access
borrowings. However, should these terms not be forthcoming, any
outstanding borrowing would be repaid through the proceeds of
equity sales.
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.
Michael Hughes,
Chairman
28 June 2023
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. Under this legislation, 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 between four and six
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-gb/seeing-things-differently
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 Chairman, 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 Chairman
meets with major shareholders in the absence of representatives
of the Manager, as necessary.
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 in the published Annual Report.
=================== ===================================================================
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 2023.
Share buybacks
During the year the Company bought back into treasury 2.1
million shares, providing a small accretion to the NAV per share
and a degree of liquidity to the market. The discount at which the
Company's share price sits as compared to its NAV per share is
wider than the historic average and the Board has instructed a
step-up in share buyback activity. It is the view of the Board that
this policy is in the interest of all shareholders.
Visit to India
Members of the Board, accompanied by the Investment Manager,
visited India in February 2023 and met with a number of investee
companies.
Online Shareholder event
As explained in the Chairman's Statement, to encourage and
promote interaction and engagement with the Company's shareholders,
the Board is holding an Online Shareholder Presentation at 10.30am
on 14 September 2023. During the presentation, shareholders will
receive updates from the Chairman and Investment Manager and then
be able to participate in an interactive question and answer
session. The online presentation is being held ahead of the AGM in
order to allow shareholders to submit their proxy votes prior to
the AGM.
Change in Management Fee
Following discussions with the Manager, a fee reduction was
agreed for the benefit of shareholders (see the Directors' Report
for details).
Performance
Ten Year Financial Record
Year to 31 March 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
========================== ======= ======= ======= ======= ======= ======= ======== ======= ======= =======
Total income (GBP'000) 376 341 374 3,104 3,318 3,602 5,185 4,517 5,059 6,123
========================== ======= ======= ======= ======= ======= ======= ======== ======= ======= =======
Per share (p)
========================== ======= ======= ======= ======= ======= ======= ======== ======= ======= =======
Net revenue (loss)/return (0.36) (0.39) (1.06) (0.28) (0.71) (0.35) 2.08 0.19 (0.28) (0.59)
========================== ======= ======= ======= ======= ======= ======= ======== ======= ======= =======
Dividends(A) n/a n/a n/a n/a n/a n/a 1.00 n/a n/a n/a
========================== ======= ======= ======= ======= ======= ======= ======== ======= ======= =======
Total (loss)/return (5.16) 121.94 (23.42) 125.81 2.12 41.90 (120.34) 216.25 69.64 (60.00)
========================== ======= ======= ======= ======= ======= ======= ======== ======= ======= =======
Net asset value per
share (p)
========================== ======= ======= ======= ======= ======= ======= ======== ======= ======= =======
Basic 263.55 385.49 362.07 487.88 490.00 531.90 411.41 627.05 697.30 641.32
========================== ======= ======= ======= ======= ======= ======= ======== ======= ======= =======
Shareholders' funds
(GBP'000) 155,680 227,708 213,874 288,190 289,444 314,196 241,583 366,106 403,995 357,919
========================== ======= ======= ======= ======= ======= ======= ======== ======= ======= =======
(A) 2020 dividend represents 0.22p per share paid from revenue reserves
and 0.78p per share paid from capital reserves.
Top Ten Active Weights
As at 31 March 2023
4.0% Hindustan Unilever 3.4% HDFC Bank
The largest fast-moving HDFC Bank is amongst
consumer goods company the best retail banking
(FMCG) in India, with franchises in India,
an unrivalled portfolio with a high-quality
of brands, an extensive wholesale portfolio,
nationwide distribution solid underwriting standards
network, and a long and a progressive digital
and successful operational stance further strengthening
track record in the its competitive edge.
country.
Power Grid Corporation
3.4% of India 3.4% Ultratech Cement
Power Grid Corporation A clear industry leader
of India forms the backbone in India's cement industry,
of India's electricity backed by strong brand
infrastructure. It is recognition, a good
poised to play a key distribution and sales
role in the growth of network and solid product
renewable energy delivery quality. Its focus on
to the grid over the cost efficiency and
next few decades as an improving energy
the government plans mix have given UltraTech
ambitious renewable a cost advantage.
targets for the electricity
sector.
3.1% SBI Life Insurance 2.9% Aegis Logistics Ltd
Among the leading domestic A strong and conservative
life insurers, SBI Life's player in India's gas
competitive edge comes and liquids logistics
from a wide reach of sector, with a first
SBI branches, highly mover advantage in key
productive agents, a ports and a fair amount
low cost ratio and a of capacity expansion
reputable SBI brand. to come. Its storage
and logistics segment
is benefitting from
the burgeoning flow
of chemicals and fuels
across the country.
In addition, the government's
push for the adoption
of cleaner energy has
boosted its liquefied
natural gas business.
2.8% ICICI Bank 2.5% Fortis Healthcare
ICICI Bank has been Fortis Healthcare is
delivering superior one of the largest healthcare
growth and returns improvement services in India, operating
without compromising the second and third
on asset quality. It largest hospital chain
has leveraged on its in
scale as well as retail India by revenue and
and digital franchise beds, as well as a diagnostic
to grow in mortgages lab business of national
and also growing off scale.
a low base in business In both segments, Fortis
banking and SMEs, while operates at the premium
the way it articulates end.
its growth approach
also sounds sensible.
2.2% Bharti Airtel 2.2% Syngene International
Bharti Airtel remains Syngene International
the leading telecom is a leading contract
service provider with research organisation
a pan-India reach and serving both pharmaceutical
sophisticated customer majors and biotech start-ups.
base with higher average
mobile spending.
Portfolio
As at 31 March 2023
====================================================================================
Valuation Total assets
2023 2023
Company Industry GBP'000 %
================================== ======================= ========= ============
ICICI Bank Financials 35,816 9.2
================================== ======================= ========= ============
Infosys Information Technology 33,442 8.6
================================== ======================= ========= ============
Housing Development Finance
Corporation Financials 31,462 8.1
================================== ======================= ========= ============
Hindustan Unilever Consumer Staples 27,450 7.1
================================== ======================= ========= ============
Tata Consultancy Services Information Technology 20,983 5.4
================================== ======================= ========= ============
Power Grid Corporation of
India Utilities 17,541 4.5
================================== ======================= ========= ============
Bharti Airtel Communication Services 17,413 4.5
================================== ======================= ========= ============
Ultratech Cement Materials 16,678 4.3
================================== ======================= ========= ============
HDFC Bank Financials 14,318 3.7
================================== ======================= ========= ============
SBI Life Insurance Financials 14,234 3.7
---------------------------------- ----------------------- --------- ------------
Ten largest investments 229,337 59.1
----------------------------------------------------------- --------- ------------
Aegis Logistics Energy 12,913 3.3
================================== ======================= ========= ============
Maruti Suzuki India Consumer Discretionary 12,337 3.2
================================== ======================= ========= ============
Fortis Healthcare Healthcare 9,789 2.5
================================== ======================= ========= ============
Mahindra & Mahindra Consumer Discretionary 9,587 2.5
================================== ======================= ========= ============
Kotak Mahindra Bank Financials 9,392 2.4
================================== ======================= ========= ============
Nestlé India Consumer Staples 8,285 2.2
================================== ======================= ========= ============
Asian Paints Materials 8,098 2.1
================================== ======================= ========= ============
Syngene International Healthcare 7,314 1.9
================================== ======================= ========= ============
ABB India Industrials 6,969 1.8
================================== ======================= ========= ============
Hindalco Industries Materials 6,686 1.7
---------------------------------- ----------------------- --------- ------------
Top twenty investments 320,707 82.7
----------------------------------------------------------- --------- ------------
Container Corporation of India Industrials 6,624 1.7
================================== ======================= ========= ============
Prestige Estates Projects Real Estate 6,445 1.7
================================== ======================= ========= ============
Godrej Properties Real Estate 6,333 1.7
================================== ======================= ========= ============
PB Fintech Financials 6,170 1.6
================================== ======================= ========= ============
Vijaya Diagnostic Centre Healthcare 5,934 1.5
================================== ======================= ========= ============
Renew Energy Energy 5,474 1.4
================================== ======================= ========= ============
Affle India Communication Services 5,226 1.4
================================== ======================= ========= ============
Info Edge Communication Services 4,371 1.1
================================== ======================= ========= ============
Tata Consumer Products Consumer Staples 4,000 1.0
================================== ======================= ========= ============
Crompton Greaves Consumer
Electricals Consumer Discretionary 3,961 1.0
---------------------------------- ----------------------- --------- ------------
Top thirty investments 375,245 96.8
----------------------------------------------------------- --------- ------------
Axis Bank Financials 3,922 1.0
================================== ======================= ========= ============
Aptus Value Housing Finance Financials 3,390 0.9
================================== ======================= ========= ============
KEI Industries Industrials 3,181 0.8
================================== ======================= ========= ============
Titan Consumer Discretionary 3,173 0.8
================================== ======================= ========= ============
JB Chemicals & Pharmaceuticals Healthcare 2,284 0.6
================================== ======================= ========= ============
FSN E-Commerce Ventures Consumer Discretionary 176 -
---------------------------------- ----------------------- --------- ------------
Total investments 391,371 100.9
----------------------------------------------------------- --------- ------------
Net liabilities (before deducting
prior charges)(A) (3,534) (0.9)
----------------------------------------------------------- --------- ------------
Total assets(A) 387,837 100.0
----------------------------------------------------------- --------- ------------
(A) Excluding loan balances, but including non-current liabilities.
Unless otherwise stated, investments are in common stock.
====================================================================================
Sector Analysis
Sector Breakdown As at 31 March Percentage
2023
--------------------------------- -----------
Financials 30.3
Information Technology 13.9
Consumer Staples 10.1
Materials 8.0
Consumer Discretionary 7.5
Communication Services 6.9
Healthcare 6.5
Energy 4.7
Utilities 4.5
Industrials 4.3
Real Estate 3.3
Our Investment Manager's Responsible Investment Process
The Investment Manager believes that a company's ability to
generate sustainable 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:
ESG factors are financially Understanding ESG risks Informed and constructive
material, and impact and opportunities alongside engagement helps foster
corporate performance other financial metrics better companies, enhancing
allows us to make better the value of our clients'
investment decisions investments
As part of their company research, our stock analysts evaluate
the ownership, governance and management quality of the companies
they cover. They also assess potential environmental and social
risks that the companies may face. These insights are captured in
our company research notes.
Our stock analysts work closely with dedicated ESG specialist
who sit within each regional investment team and provide
industry-leading expertise and insight at the company level. These
specialists also mediate the insights developed by our central ESG
Investment team to the stock analysts, as well as interpret and
contextualise sector and company insights.
Our central ESG investment team provides thought leadership,
thematic and global sector insights, as well as event-driven
research. The team is also heavily involved in the stewardship of
our investments and supports company engagement meetings where
appropriate.
abrdn's ESG Engagement
How the Investment Manager embeds ESG into its Investment
Process
01. Investment 02. Active Ownership 03. Risk & Monitoring 04. Our People
insight
-------------------------- -------------------------- ------------------------- ---------------------------
High quality fundamental Engage and vote Combine in-house Over 130 equity
and first hand with aim of improving and external scoring professionals,
research financial resilience to inform view and 40+ central
Assessment if ESG and investment Active tracking & on-desk ESG specialists
for all stocks performance of fund holdings across the world
under coverage Raise standards against ESG objectives
in companies and
industries we invest
in, and help drive
industry best practice.
-------------------------- -------------------------- ------------------------- ---------------------------
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 a 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, 53% 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 45% of the companies were rated as 'Average'. A generally
positive momentum has been witnessed from companies in the
portfolio in terms of ESG, in covering 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 half-yearly updates with regards to these
metrics which are published on the Company website 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:
Focus Objective Aim
---------------- -------------------- ----------------------------------------- -------------------
Investments Research & Provide high quality climate-change Provide relevant
Data insights and thematic research high-quality
across asset classes and regions. data and insights
This includes using climate-related on climate-change
data as an input into the trends, risks
investment process. and opportunities
that are fully
integrated
into our decision
making and
drive positive
outcomes for
our clients
-------------------
Investment Understanding the potential
Integration impacts of climate-change
risks and opportunities across
regions and sectors, integrate
these into our investment
decisions and understand the
implications for our portfolios.
-------------------
Client Solutions Understand client needs in
relation to climate change
and low-carbon product demand.
Develop innovative climate-related
client solutions and products
across all asset classes.
-------------------- -----------------------------------------
Corporate Investee Engagement Better understands investee
Engagement & Voting exposure and management of
climate change risks and opportunities.
Influence investee companies
on management of climate change
risks and opportunities via
engagement and voting.
Highlight expectation to apply
the Task Force on Climate-related
Financial Disclosures ("TCFD")
framework when reporting on
climate-related data.
-------------------- -----------------------------------------
Policy Advocacy Collaboration Collaborate with climate-change-related
& Influence industry associations and
participate in relevant initiatives.
Engage with peers and policymakers
to drive industry developments
and best practice.
-------------------- -----------------------------------------
Investor Disclosures Disclose climate-change-related
Disclosure data using TCFD reporting
framework across the four
pillars: governance, strategy,
risk management and targets.
-------------------- ----------------------------------------- -------------------
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
The Investment Manager regularly engages with companies we
invest in. The following chart shows the engagements that have
included ESG topics. Over the six months ended 31 December 2022,
the Investment Manager met with 17 portfolio companies on ESG
topics and had 32 engagements with them. This does not include
positions that have been sold or are under consideration for sale.
These are the themes that the Investment Manager has engaged
on:
Our Voting Activity
Voting Summary Total
======================================================= ======
How many meetings were you eligible to vote? 90
======================================================= ======
How many meetings did you vote at? 89
======================================================= ======
How many resolutions were you eligible to vote on? 470
======================================================= ======
What % of resolutions did you vote on for which you
were eligible? 99.6%
======================================================= ======
Of the resolutions on which you voted, what % did you
vote with management? 90.6%
======================================================= ======
Of the resolutions on which you voted, what % did you
vote against management? 8.6%
======================================================= ======
Of the resolutions on which you voted, what % did you
abstain from voting? 0.9%
======================================================= ======
In what % of meetings, for which you did vote, did
you vote at least once against management? 15.7%
======================================================= ======
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
ReNew Energy Global
ReNew Energy Global is one of India's largest renewable energy
independent power producers. Founded in 2011, it has over 150
operational energy projects in solar, wind and hydro power spread
across 18 Indian states(1) .
The Investment Manager likes ReNew for several reasons: First,
the scale of its business and clarity on its steady pipeline of
projects is reassuring. Secondly, the company has expertise around
engineering, procurement, and construction in wind power, which is
a rare occurrence amongst companies in India. Finally, ReNew has
proven that it is able to undertake complex projects without losing
focus on creating value for shareholders.
The management team has also executed well on the company's
expansion as well as its commercial and industrial strategy.
Further, they have been disciplined in bidding at auctions.
India is one of the world's largest and fastest-growing
economies. It still relies heavily on fossil fuels to meet the
country's rising energy demands - coal is a major contributor to
India's carbon footprint, which accounts for 7% of global CO2
emissions(2) .
This is because the capacity to generate sufficient renewable
power is currently being built. In the short-to-medium term, India
will remain reliant on fossil fuels, however, renewables are
expected to make up the lion's share of power sources in the
country(3) over the long run.
Decarbonisation has been gaining notable traction in recent
years. Supportive and consistent government policies have enabled
capacity additions(4) in solar, hydropower, wind, and biomass
power. India has publicly set a target for achieving 500 gigawatts
of installed renewable capacity by 2030.
ReNew's clean energy projects at present account for only about
1.4% of India's total installed renewable capacity and helps to
avoid 0.5% of the country's carbon emissions annually(5) . This
offers the company significant scope for growth as it continues to
expand its clean energy capacity with more projects in the coming
years.
On the ESG front, ReNew has set sustainability targets it aims
to achieve by 2030(6) . They include becoming water positive,
sending zero solid waste to landfill and having 100% of the
electricity for its operations sourced from clean energy
sources.
These are ambitious and commendable targets and the Investment
Manager engaged with the company on its progress towards achieving
them, including its efforts around recycling and water efficiency.
On the latter, ReNew has been innovative in its use of robotic
cleaning to minimise water consumption. The Investment Manager
continues to engage with ReNew on these matters.
1 Source: https://investor.renewpower.in/static-files/3ee261b8-b606-41f4-8c2f-b824d5ceacfe
2 Source: https://ourworldindata.org/co2/country/india
3 Source: UBS, How to navigate India's net-zero US$20trn capex
across the supply chain? (July 2022)
4 Source:
https://www.argusmedia.com/en/news/2436897-india-plans-250gw-of-renewable-capacity-in-five-years
5 Source: ReNew Energy Global
6 Source: https://renewpower.in/sustainability-renew/
SBI Life Insurance
In India, financial inclusion lies close to the heart of the
government. Since August 2014, Pradhan Mantri Jan Dhan Yojana, a
national mission for financial inclusion, has aimed to provide
financial services to large swathes of the population who are
un-served and under-served.
This means helping to ensure that individuals and businesses
have access to useful and affordable financial products and
services that meet their needs. These include transactions,
payments, savings, credit and insurance that are delivered in a
responsible and sustainable way.
While progress has been made, there is still some way to go.
Take the life insurance ownership gap, for instance. Of India's
rural population, only 22% own a life insurance policy. This
compares with 73% across urban areas(1) . The low rural rate is due
to a lack of funds, high premiums and cumbersome buying
processes.
Across our holdings, SBI Life Insurance has what it takes to
help tackle the under-provision of insurance. It is the largest
private life insurance provider domestically, with a higher
presence in rural and semi-rural areas than its local peers.
SBI Life's lower average ticket size versus that of its rivals
also underscores its affordable premiums. This would help increase
insurance access to those who would otherwise go without life
protection.
The company focuses on expanding its services to underpenetrated
areas. It has good support from a reputable brand. It also has a
productive agency force and an extensive bancassurance distribution
network.
This focus sits well with the United Nations' Sustainable
Development Goal 8.10 - to strengthen the capacity of domestic
financial institutions to encourage and expand access to banking,
insurance and financial services for all.
Backed by a solid balance sheet and low-cost base, SBI Life is
well placed to capitalise on its entrenched and broad network to
tap the massive under-serviced insurance market.
Aside from aiding financial inclusion, this also offers the
insurer significant scope for growth. This is given its diversified
products and rising share of higher-margin protection business.
Its longer-term prospects are promising, when taking into
account the growing middle class, young insurable population and
growing awareness of the need for protection and insurance planning
in India.
1 Around a fifth of rural population owns life insurance
products vs 73% in urban India: Survey | Mint (livemint.com)
Directors' Report
The Directors present their Report and the audited Financial
Statements of the Company for the year ended 31 March 2023, taking
account of any events between the year end and the date of approval
of this Report.
Results
The Company's results, including its performance for the year
against its Key Performance Indicators ("KPIs"), may be found in
the Strategic Report.
Change of Name
The Company changed name, on 31 March 2023, from Aberdeen New
India Investment Trust PLC to abrdn New India Investment Trust
plc.
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 2023. 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 2023 the Company bought back into
treasury 2,127,206 (2022 - 448,201) Ordinary shares. This was
equivalent to 3.7% of the Company's issued share capital (excluding
treasury shares) at 1 April 2022 (2022 - 0.8%). As at 31 March
2023, the Company's issued share capital consisted of 55,809,921
Ordinary shares (2022 - 57,937,127 Ordinary shares) with voting
rights, each share holding one voting right in the event of a poll,
and an additional 3,260,219 (2022 - 1,133,013) Ordinary shares in
treasury, with no voting rights or entitlement to receive
dividends. Between 1 April 2023 and 28 June 2023 as the date of
approval of this Report, an additional 885,248 Ordinary shares were
bought back resulting in the Company's issued share capital
consisting of 54,924,673 Ordinary shares and an additional
4,145,467 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 abrdn Holdings Limited and promotional
activities to abrdn Investments Limited.
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
2023: 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%
on net assets above GBP350m.
The Company announced on 31 March 2023 that, with effect from 1
April 2023, investment management fees are calculated on the same
basis as previously other than the rate is 0.8% of the Company's
net assets up to GBP300m and 0.6% on net assets above GBP300m.
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 2023 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 high standards of corporate
governance, as set out in its Statement of Corporate
Governance.
Directors
The Board consisted of a non-executive Chairman and between
three and five non-executive Directors, all of whom served
throughout the year under review, other than Andrew Robson, Hasan
Askari and Stephen White. Andrew Robson joined the Board on 1
August 2022. Hasan Askari was Chairman until 28 September 2022,
when he was succeeded by Michael Hughes. The Senior Independent
Director was Michael Hughes until 28 September 2022 and David
Simpson thereafter. Stephen White was Chairman of the Audit
Committee until his retirement on 28 September 2022 when he was
succeeded by Andrew Robson. Rebecca Donaldson was appointed
Chairman of the Management Engagement Committee on 28 September
2022.
Board Diversity
The Board recognises the importance of having a range of
skilled, experienced individuals with the right knowledge
represented on the Board in order to allow it to fulfil its
obligations. The Board also recognises the benefits and is
supportive of the principle of diversity in its recruitment of new
Board members.
The Board will not display any bias for age, gender, race,
sexual orientation, religion, ethnic or national origins,
socio-economic background or disability in considering the
appointment of its Directors. In view of its size, the Board will
continue to ensure that all appointments are made on the basis of
merit against the specification prepared for each appointment. In
doing so, the Board will take account of the three targets set out
in the FCA's Listing Rules, in effect for listed companies with
year ends starting 1 April 2022, which are set out in the two
tables below.
As an externally managed investment company, the Board employs
no executive staff, and therefore does not appoint either a chief
executive officer (CEO) or a chief financial officer (CFO), both of
which are deemed senior board positions by the FCA. However, the
Board considers the Chairs of the Audit Committee, Management
Engagement Committee and Nomination Committee to be senior board
positions and the following disclosures are made on this basis.
Other senior board positions recognised by the FCA are chair of the
board and senior independent director.
The Board has resolved that the Company's year end date is the
most appropriate date for disclosure purposes. The following
information has been provided by each Director through the
completion of questionnaires. There have been no changes since the
year end as at the date of approval of this Report.
Board Gender as at 31 March 2023
Number of Number in Percentage
Number of Percentage senior positions executive of executive
Board members of the Board on the Board management management
===================== ============== ============= ================= =========== =============
Men 3 75% 3 (B) n/a n/a
===================== ============== ============= ================= =========== =============
Women 1 25% (A) 1 (C, D) n/a n/a
===================== ============== ============= ================= =========== =============
Not specified/prefer - - - n/a n/a
not to say
--------------------- -------------- ------------- ----------------- ----------- -------------
(A) Does not meet the target of at least 40% as set out in LR 9.8.6R
(9)(a)(i)
(B) Chairman of the Board (also Chairman of the Nomination Committee),
Senior Independent Director, Chairman of the Audit Committee and Chairman
of the Nomination Committee
(C) Chairman of the Management Engagement Committee
(D) Meets target of at least 1 as set out in LR 9.8.6R (9)(a)(ii)
Board Ethnic Background as at 31 March 2023
Number Percentage Number of Number in Percentage
of Board of the senior positions executive of executive
members Board on the Board management management
============================== ========= ========== ================= =========== =============
White British or other
White
(including minority-white
groups) 4 100% (A) 100% n/a n/a
============================== ========= ========== ================= =========== =============
Mixed/Multiple Ethnic
Groups - 0% - n/a n/a
============================== ========= ========== ================= =========== =============
Asian/Asian British - 0% - n/a n/a
============================== ========= ========== ================= =========== =============
Black/African/Caribbean/Black
British - 0% - n/a n/a
============================== ========= ========== ================= =========== =============
Other ethnic group, including
Arab - 0% - n/a n/a
============================== ========= ========== ================= =========== =============
Not specified/prefer not
to say - 0% - n/a n/a
------------------------------ --------- ---------- ----------------- ----------- -------------
(A) Is less than the target of at least 1 as set out in LR 9.8.6R (9)(a)(iii)
As shown in the above tables, the Company has not as yet met the
targets set out in LR 9.8.6R (9)(a)(i) and LR 9.8.6R (9)(a)(iii).
The Board considers its normal size of four Directors to be
appropriate for an investment trust, and retirement of each
Director at the AGM following the ninth anniversary of their
appointment to be an appropriate individual tenure. While the
targets for diversity are inevitably more challenging to achieve
for a smaller board with infrequent appointment opportunities, the
Board is fully supportive of the principles behind the targets and
they will be carefully considered in all future appointments. The
biographical details of the Directors are included on the Company's
website while the most recent Board appointment was in August
2022.
Chairman and Senior Independent Directors
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, biographies and contribution of each of the Directors
are shown on the Company's website and indicate their range of
experience as well as length of service. Each Director has the
requisite high level and range of business and financial experience
which enables the Board to provide clear and effective leadership
and proper stewardship of the Company.
David Simpson is a non-executive director of ITC Limited
("ITC"), a major listed Indian company. ITC represented 2.3% of the
Company's total portfolio as at 31 March 2022 prior to its sale in
December 2022. Between the date of his appointment and up until the
Company's sale of its holding in ITC, David Simpson recused himself
from all discussions regarding ITC to avoid any potential conflict
of interest.
Hasan Askari and Stephen White retired as Directors at the
conclusion of the AGM on 28 September 2022.
The Directors attended scheduled Board and Committee meetings
during the year ended 31 March 2023 as follows (with their
eligibility to attend the relevant meeting in brackets):
Management
Board Audit Engagement Nomination
and Committee Committee Committee Committee
Director Meetings Meetings Meetings Meetings
================== ============== ========== =========== ==========
Michael Hughes 9 (9) 3 (3) 1 (1) 2 (2)
================== ============== ========== =========== ==========
David Simpson 8 (8) 3 (3) 1 (1) 2 (2)
================== ============== ========== =========== ==========
Andrew Robson
(A) 6 (6) 2 (2) 1 (1) 1 (1)
================== ============== ========== =========== ==========
Rebecca Donaldson 8 (8) 3 (3) 1 (1) 2 (2)
================== ============== ========== =========== ==========
Hasan Askari
(B) 3 (3) 1 (1) - (-) - (-)
================== ============== ========== =========== ==========
Stephen White
(B) 4 (4) 1 (1) - (-) 1 (1)
------------------ -------------- ---------- ----------- ----------
(A) Appointed as a Director on 1 August 2022.
(B) Retired as a Director on 28 September
2022.
Michael Hughes, Rebecca Donaldson, David Simpson and Andrew
Robson, each being eligible, retire and offer themselves for
individual re-election as Directors of the Company.
The Board as a whole believes that each Director remains
independent of the Manager 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 in the
published 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 Board therefore has no hesitation in recommending, at the
next AGM, the individual re-elections of Michael Hughes, Rebecca
Donaldson, David Simpson and Andrew Robson as Directors of the
Company.
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 is set out below.
Management Engagement Committee
The Board has established a Management Engagement Committee
comprising all of the Directors, which was chaired until 28
September 2022 by Michael Hughes, and by Rebecca Donaldson
thereafter.
The Committee is responsible for reviewing matters concerning
the management agreement 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 2022.
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. A change to the investment management
fee, with effect from 1 April 2023, was agreed during the year and
further information may be found above.
Nomination Committee
The Board has established a Nomination Committee, comprising all
of the Directors, which was chaired until 28 September 2022 by
Hasan Askari, and by Michael Hughes thereafter. 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 on the Company's website.
In May 2023, the Board facilitated a self-assessment evaluation
which was collated and discussed by the Chairman with the other
Directors. David Simpson, as 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.
In relation to the appointment of Andrew Robson as a Director,
the Company engaged Trust Associates, an independent search agency
with no other connection to the Company.
Accountability and Audit
The responsibilities of the Directors and the Auditor, in
connection with the financial statements, appear in the Statement
of Directors' Responsibilities and in the Auditor's 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.
In August 2022, the Company entered into a three-year, GBP30
million revolving credit facility (the "Facility") with Royal Bank
of Scotland International Limited (London Branch), part of NatWest
Group plc, of which GBP30 million was drawn down at 31 March 2023
(2022 - GBP30 million). 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 2025,
the Company will enter 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 Manager which has sub-delegated
that authority to the Investment 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 2023:
Number of
Shareholder shares held % held
================================ ============ ======
City of London Investment
Management 7,641,453 13.7
================================ ============ ======
Lazard Asset Management 6,897,668 12.3
================================ ============ ======
Clients of abrdn 5,461,416 9.8
================================ ============ ======
Clients of Hargreaves Lansdown
(execution only) 4,106,422 7.4
================================ ============ ======
Clients of Interactive Investor
(execution only) 3,872,310 7.0
================================ ============ ======
Allspring Global Investments 3,340,628 6.0
================================ ============ ======
1607 Capital Partners 2,657,410 4.8
================================ ============ ======
abrdn retail plans 2,438,534 4.4
================================ ============ ======
The above interests at 31 March 2023 were unchanged at the date
of approval of this Report other than in relation to 1607 Capital
Partners, which advised the Company on 19 May 2023 of a holding of
2,798,010 shares, equivalent to 5.1% of the Company's shares in
issue (excluding treasury shares) and City of London, which advised
the Company on 12 June 2023 of a holding of 7,711,453 shares,
equivalent to 14.0% of the Company's shares 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, abrdnnewindia.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 27 September 2023 and the AGM Notice and
related notes may be found in the published Annual Report.
Resolutions relating to the following items will be proposed at the
AGM as special business.
Change of Investment Policy (Resolution 9)
The Company is proposing to amend its investment policy to allow
investment into unquoted companies before their intended initial
public offerings subject to a limit, measured in the aggregate and
at the time of investment, of 10% of the Company's net asset value.
The ability to invest in such opportunities over time is one of the
benefits of the closed ended structure of the Company. This change
requires both FCA and shareholder approval and it is intended that
Resolution 9 will be put to shareholders at the forthcoming AGM for
their approval.
Further information on the reasons for this amendment may be
found in the Chairman's Statement.
Share Repurchases (Resolution 10)
At the AGM held on 22 September 2022, 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 10 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 28 June 2023, being the nearest
practicable date to the approval of this Report (equivalent to
approximately 8.2 million Ordinary shares). Such authority will
expire on the date of the AGM in 2024 or on 30 September 2024,
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 11 and 12)
Ordinary resolution 11 in the Notice of AGM will, if passed,
renew the authority to allot unissued share capital up to an
aggregate of 10%, equivalent to approximately 5.5 million Ordinary
shares, of the Company's existing issued share capital, excluding
treasury shares, as at 28 June 2023, being the nearest practicable
date to the approval of this Report). Such authority will expire on
the date of the AGM in 2024 or on 30 September 2024, 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 12 will, if passed, give
the Directors power to allot for cash equity securities up to 10%
(equivalent to approximately 5.5 million Ordinary shares), of the
Company's existing issued share capital as at 28 June 2023, 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 11.
This authority will expire on the date of the AGM in 2024 or on
30 September 2024, 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
11 and 12 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 12, if passed, will give the
Directors authority to sell Ordinary shares from treasury on a non
pre-emptive basis. No dividends may be paid on any shares held in
treasury and no voting rights will attach to such shares. The
benefit of the ability to hold treasury shares is that such shares
may be resold. This should give the Company greater flexibility in
managing its share capital and improve liquidity in its shares. The
Board would only expect to issue new Ordinary shares or sell
Ordinary shares from treasury at a price per Ordinary share which
represented a premium to the NAV per share. It is also the
intention of the Board that sales from treasury would only take
place when the Board believes that to do so would assist in the
provision of liquidity to the market.
Recommendation
The Board considers 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 20,446 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 management agreement, that take
effect, alter or terminate upon a change of control of the Company
following a takeover. Other than the management agreement 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.
Michael Hughes,
Chairman
28 June 2023
Statement of Corporate Governance
abrdn New India Investment Trust plc (the "Company") is
committed to high standards of corporate governance. The Board is
accountable to the Company's shareholders for good governance and
this statement describes how the Company has applied the principles
identified in the UK Corporate Governance Code as published in July
2018 (the "UK Code"), which is available on the Financial Reporting
Council's (the "FRC") website: frc.org.uk and is applicable for the
Company's Year.
The Board has also considered the principles and provisions of
the AIC Code of Corporate Governance as published in February 2019
(the "AIC Code"). The AIC Code addresses the principles and
provisions set out in the UK Code, as well as setting out
additional provisions on issues that are of specific relevance to
the Company. The AIC Code is available on the AIC's website:
theaic.co.uk.
The Board considers that reporting against the principles and
provisions of the AIC Code, which has been endorsed by the FRC,
provides more relevant information to shareholders.
The Board confirms that, during the year ended 31 March 2023,
the Company has complied with the provisions of the AIC Code, and
the relevant provisions of the UK Code, except for those provisions
relating to:
-- the composition of the Audit Committee (AIC Code provision
29): 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
Michael Hughes was independent on appointment and continues to be
independent; and
-- the establishment of a remuneration committee (AIC Code
provision 37): 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 Board considers that these provisions are not relevant to
the position of the Company being an externally managed investment
company. In particular, all of the Company's day-to-day management
and administrative functions are outsourced to third parties. As a
result, the Company has no executive directors, employees or
internal operations. The Company has therefore not reported further
in respect of these provisions.
Further information on how the Company has applied the AIC Code,
the UK Code, the Companies Act 2006 and the FCA's DTR 7.2.6 can be
found in the Annual Report as follows:
-- the composition and operation of the Board and its Committees
are detailed in the Directors' Report and in the Audit Committee's
Report;
-- the Board's policy on diversity and information on Board
diversity is included in the Directors' Report;
-- the Company's approach to internal control and risk
management is detailed in the Audit Committee's Report;
-- the contractual arrangements with the Manager are set out
above while details of the annual assessment of the Manager may be
found in the Management Engagement Committee;
-- the Company's capital structure and voting rights are
summarise in the Directors' Report;
-- the substantial interests disclosed in the Company's shares
are listed in the Directors' Report;
-- the rules concerning the appointment and replacement of
Directors are contained in the Company's Articles of Association
and are summarised in the Directors' Remuneration Report. There are
no agreements between the Company and its Directors concerning
compensation for loss of office; and
-- the powers to issue or buy back the Company's ordinary
shares, which are sought annually, and any amendments to the
Company's Articles of Association require a special resolution (75%
majority) to be passed by shareholders and information on these
resolutions may be found in the Directors' Report.
Michael Hughes,
Chairman
28 June 2023
Audit Committee's Report
The Audit Committee presents its Report for the year ended 31
March 2023.
Committee Composition
The Directors have appointed an Audit Committee (the
"Committee") consisting of the whole Board, which was chaired by
Stephen White until 28 September 2022, and by Andrew Robson
thereafter. The other Directors consider that it is appropriate for
the Chairman of the Board to be a member of, but not chair, the
Committee. This is due to the Board's small size, the lack of any
perceived conflict of interest and because the other Directors
believe that Hasan Askari, the Chairman until 28 September 2022,
was independent, while Michael Hughes, the Chairman thereafter,
continues to be independent and brings considerable financial
expertise to the Committee.
The Directors have satisfied themselves both that at least one
of the Committee's members has recent and relevant financial
experience (Andrew Robson is a member of the Institute of Chartered
Accountants in England and Wales), and that the Committee as a
whole possesses competence relevant to the investment trust
sector.
Role of the Audit Committee
The principal function of the Committee is to assist the Board
in relation to the reporting of financial information, the review
of financial controls and the management
of risk.
The Committee meets not less than twice each year, in line with
the cycle of annual and half-yearly reports, which is considered by
the Directors to be a frequency appropriate to the size and
complexity of the Company. The Committee has defined terms of
reference which are reviewed and re-assessed for their adequacy on
an annual basis. Copies of the terms of reference are available
from the Company's website or from the Company Secretaries, on
request.
In summary, the Committee's main functions are:
-- to review and monitor the internal control systems and risk
management systems (including review of non-financial risks) on
which the Company is reliant;
-- to consider annually whether there is a need for the Company
to have its own internal audit function;
-- to review and monitor the integrity of the half-yearly report
and annual financial statements of the Company;
-- to review, and report to the Board on, the significant
financial reporting issues and judgements made in connection with
the preparation of the Company's financial statements, half-yearly
reports, announcements and related formal statements;
-- to review the content of the Annual Report and advise the
Board on whether, taken as a whole, it is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Company's position and performance,
business model and strategy;
-- to meet with the Auditor to review their proposed audit
programme of work and the findings of the Auditor. The Committee
shall also use this as an opportunity to assess the effectiveness
of the audit process;
-- to develop and implement policy on the engagement of the
Auditor to supply non-audit services. During the year under review,
no non-audit services were provided to the Company by KPMG LLP. All
non-audit services must be approved in advance by the Committee and
will be reviewed in light of statutory requirements to maintain the
Auditor's independence;
-- to review a statement from the Manager detailing the
arrangements in place within abrdn whereby its staff may, in
confidence, escalate concerns about possible improprieties in
matters of financial reporting or other matters
(whistleblowing);
-- to review and approve the remuneration and terms of
engagement of the Auditor;
-- to monitor and review annually the Auditor's independence,
objectivity, effectiveness, resources and qualification;
-- to monitor the requirement for rotation of the Auditor and to
oversee any tender for the external audit of the Company;
-- to keep under review the appointment of the Auditor and to
recommend to the Board and shareholders the reappointment of the
existing auditor or, if appropriate, the appointment of a new
Auditor; and
-- to evaluate its own performance each year, in relation to
discharging its main functions, by means of a section devoted to
the Committee within the Directors' annual self-evaluation.
Activities during the Year
The Committee met on three occasions during the year to consider
the Annual Report, the Half-Yearly Report and the Company's system
of risk management and internal control. Reports from abrdn's
internal audit, business risk and compliance departments were
considered by the Committee at these meetings.
Review of Internal Controls Systems and Risk Management
The Board is ultimately responsible for the Company's system of
internal control and risk management and for reviewing its
effectiveness. The Committee confirms that there is a robust
process for identifying, evaluating and managing the Company's
significant business and operational risks, that it was in place
for the year ended 31 March 2023 and up to the date of approval of
this Annual Report, that it is regularly reviewed by the Board and
accords with the FRC guidance on internal controls.
The principal risks and uncertainties facing the Company are
identified in the Strategic Report.
The design, implementation and maintenance of controls and
procedures to safeguard the assets of the Company and, to manage
its affairs properly, extends to operational and compliance
controls and risk management. This includes controls over financial
reporting risks related to the preparation of the Annual Report,
which are delegated to the Manager as part of the Management
Agreement ("MA") and the Committee receives regular reports from
the Manager as to how these controls
are operating.
Internal control and risk management systems are monitored and
supported by the Manager's business risk and compliance functions
which undertake periodic examination of business processes,
including compliance with the terms of the MA, and ensures that any
recommendations to improve controls are implemented.
Risk is considered in the context of the FRC and the UK Code
guidance and includes financial, regulatory, market, operational
and reputational risk. Risks are identified and documented through
a risk heat-map, which is a pictorial representation of the risks
faced by the Company, after taking account of any mitigating
controls to minimise
the risk, ranked in order of likelihood and impact on
the Company.
The key components designed to provide effective risk management
and internal control are outlined below:
-- the Manager prepares forecasts and management accounts which
allow the Board to assess the Company's activities and review its
performance; the emphasis is on obtaining the relevant degree of
assurance and not merely reporting by exception;
-- the Board and Manager have agreed clearly-defined investment
criteria, specified levels of authority and exposure limits.
Reports on these issues, including performance statistics and
investment valuations, are regularly submitted to the Board, and
there are meetings with the Manger and Investment Manager
as appropriate;
-- as a matter of course, the Manager's compliance department
continually reviews the Manager's operations; and
-- written agreements are in place which specifically define the
roles and responsibilities of the Manager and other third-party
service providers.
The Committee has considered the need for an internal audit
function but, due to the delegation of certain business functions
to the Manager, has decided to place reliance on abrdn's systems
and internal audit procedures, including the ISAE3402 Report, a
global assurance standard for reporting on internal controls for
service organisations, commissioned by the Manager's immediate
parent company, abrdn. At its June 2023 meeting, the Committee
carried out an annual assessment of risk management and internal
controls for the year ended 31 March 2023 by considering
documentation from the Manager, including the internal audit and
compliance functions, and taking account of events since 31 March
2023.
The system of internal control and risk management is designed
to meet the Company's particular needs and the risks to which it is
exposed. Accordingly, this system is designed to manage, rather
than eliminate, the risk of failure to achieve business objectives
and, by its nature, can only provide reasonable, and not absolute,
assurance against misstatement and loss.
External Agencies
The Board has contractually delegated to external agencies,
including the Manager and other service providers, certain
services: the management of the investment portfolio, the
depositary services (which include the custody and safeguarding of
the assets), the share registration services and the day-to-day
accounting and company secretarial requirements. Each of these
contracts was entered into after full and proper consideration by
the Board of the quality and cost of services offered in so far as
they relate to the affairs of the Company. The Board receives and
considers reports from each service provider, including the
Manager, on a regular basis. In addition, ad hoc reports and
information are supplied to the Board as requested.
Financial Reporting and Significant Issues
During its review of the Company's financial statements for the
year ended 31 March 2023, the Committee identified one potentially
significant financial reporting risk facing the Company which is
unchanged from the prior year, namely valuation and existence of
investments, as well as several additional risks, which also
reflected the Auditor's assessment of the principal financial
statement risks affecting the Company as part of the Auditor's
planning and reporting of the year end audit.
Valuation and Existence of Investments
The valuation of investments is undertaken in accordance with
the accounting policies, disclosed in Notes 2(a) and 2(g) to the
financial statements. With reference to the IFRS 13 fair value
hierarchy, all of the Company's investments at 31 March 2023 were
categorised as Level 1 as they are considered liquid and quoted in
active markets. The portfolio is reviewed and verified by the
Manager on a regular basis and management accounts including a full
portfolio listing are prepared each month and circulated to the
Board. BNP Paribas Trust Corporation UK Limited (the "Depositary")
has been appointed as depositary to safeguard the assets of the
Company. The Depositary checks the consistency and accuracy of its
records on a monthly basis and reports its findings to the Manager.
Separately, the investment portfolio is reconciled regularly by the
Manager.
Other Financial Reporting Issues
As well as fraud risk and corporate governance and disclosures,
the other accounting area of financial reporting particularly
considered by the Committee was compliance with Sections 1158 and
1159 of the Corporation Tax Act 2010. Approval of the Company as an
investment trust under those sections for financial years
commencing on or after 1 April 2012 has been obtained and ongoing
compliance with the eligibility criteria is monitored on a regular
basis by the Manager and reported to the Directors.
Review of Auditor
The Committee has reviewed, and considered appropriate, the
effectiveness of the Auditor including:
-- Independence - the Auditor discusses with the Committee, at
least annually, the steps it takes to ensure its independence and
objectivity and makes the Committee aware of any potential issues,
explaining all relevant safeguards;
-- Quality of audit work - including the ability to resolve
issues in a timely manner (identified issues are satisfactorily and
promptly resolved), its communications/presentation of outputs (the
explanation of the audit plan, any deviations from it and the
subsequent audit findings are comprehensive and comprehensible),
and working relationship with management (the Auditor has an
effective working relationship with the Manager); and
-- Quality of people and service - including continuity and
succession plans (the audit team is made up of sufficient, suitably
experienced staff with provision made for knowledge of the
investment trust sector and retention on rotation of the senior
statutory auditor).
Tenure and Reappointment of KPMG LLP as Auditor
KPMG has expressed its willingness to be reappointed auditor to
the Company. Resolution 8, which is to be put to shareholders at
the forthcoming AGM, proposes the reappointment of KPMG as
Independent Auditor of the Company, and also seeks authorisation
for the Directors to fix KPMG's remuneration for the year to 31
March 2024.
Listed companies are required to tender the external audit at
least every ten years and change audit firm at least every twenty
years. The Committee last undertook an audit tender process in 2016
when KPMG LLP was appointed as auditor in respect of financial
years ended on or after 31 March 2017. The Company is required to
tender the external audit no later than for the year ending 31
March 2027. In accordance with professional and regulatory
standards, the audit director responsible for the audit is rotated
at least every five years in order to protect independence and
objectivity and to provide fresh challenge to the business. The
year ended 31 March 2023 is the fifth year for which the present
audit director from KPMG LLP, Gary Fensom, has served as the senior
statutory auditor.
Andrew Robson
Chairman of the Audit Committee
28 June 2023
Directors' Remuneration Report
This Directors' Remuneration Report comprises
three parts:
1. a Remuneration Policy, which is subject to a binding
shareholder vote every three years - was most recently approved by
shareholders at the AGM on 23 September 2020 where the proxy votes
for the relevant resolution were: For - 34.8m votes (99.7%);
Discretionary - 18,900 votes (0.1%); Against - 69,596 votes (0.2%);
and Withheld - 80,801 votes. The Remuneration Policy will be put to
shareholders again at the AGM on 27 September 2023, as resolution
3;
2. an annual Implementation Report, which is subject to an advisory vote; and
3. an Annual Statement.
The law requires the Company's Auditor to audit certain of the
disclosures provided. Where disclosures have been audited, they are
indicated as such. The Auditor's opinion is included in their
report.
The Directors' Remuneration Policy and level of Directors'
remuneration are determined by the Nomination Committee, which was
chaired by Hasan Askari until 28 September 2022, and by Michael
Hughes thereafter, and comprises all of the Directors. The
Remuneration Policy is reviewed by the Nomination Committee on an
annual basis.
Remuneration Policy
The Board's policy is that the remuneration of non-executive
Directors should be sufficient to attract Directors of the quality
required to run the Company successfully. The remuneration should
also reflect the nature of the Directors' duties, responsibilities
and the value of their time spent and be fair and comparable to
that of other investment trusts that are similar in size and have a
similar capital structures and investment objectives.
Appointment
-- The Company only intends to appoint non-executive
Directors.
-- All the Directors are non-executive appointed under the terms
of Letters of Appointment.
-- Directors must retire and be subject to election, at the
first AGM after their appointment, and re-election at least every
three years thereafter, although the Board has approved a policy of
annual re-election.
-- New appointments to the Board will be placed on the fee
applicable to all Directors at the time of appointment.
-- No incentive or introductory fees will be paid to encourage a
Directorship.
-- The Directors are not eligible for bonuses, pension benefits,
share options, long term incentive schemes or other benefits.
-- Directors are entitled to re-imbursement of out-of-pocket
expenses incurred in connection with the performance of their
duties, including travel expenses.
-- The Company indemnifies its Directors for all costs, charges,
losses, expenses and liabilities which may be incurred in the
discharge of their duties.
Performance, Service Contracts, Compensation and Loss of
Office
-- The Directors' remuneration is not subject to any
performance-related fee.
-- No Director has a service contract.
-- No Director was interested in contracts with the Company
during the period or subsequently.
-- The terms of appointment provide that a Director may be
removed without notice.
-- Compensation will not be due upon leaving office.
-- No Director is entitled to any other monetary payment or to
any assets of the Company.
Statement of Voting at General Meeting
At the Company's last AGM, held on 28 September 2022,
shareholders approved the Directors' Remuneration Report (other
than the Directors' Remuneration Policy) in respect of the year
ended 31 March 2022 and the following proxy votes were received on
the Resolution: For - 35.5m votes (99.8%); Discretionary - 22,055
votes (0.1%); Against - 62,421 votes (0.1%); and Withheld - 52,502
votes.
The fact that the Remuneration Policy is subject to a binding
vote at every third AGM does not imply any change on the part of
the Company. The principles remain the same as for previous years.
There have been no changes to the Directors' Remuneration Policy
during the period of this Report nor are there any proposals for
the foreseeable future.
This part of the Remuneration Report provides details of the
Company's Remuneration Policy for Directors of the Company. This
policy takes into consideration the principles of the UK Corporate
Governance Code. No shareholder views were sought in setting the
Remuneration Policy although any comments received from
shareholders would be considered on an ongoing basis. 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 during the year under review. The Nomination Committee is
responsible for determining Directors' remuneration.
The Directors' Remuneration Policy was approved by shareholders
at the AGM on 23 September 2020.
Implementation Report
The Directors are non-executive and the limit on their aggregate
annual fees is set at GBP200,000 within the Company's Articles of
Association. This limit may only be amended by shareholder
resolution and a resolution to increase the limit from GBP150,000
was last approved by shareholders at the AGM in 2018.
Review of Directors' Fees
The levels of fees for the year and the preceding year are set
out in the table below.
31 March 31 March 31 March
2023 2022 2021
Year ended GBP GBP GBP
================== ======== ========= ========
Chairman 38,000 36,500 36,000
================== ======== ========= ========
Chairman of Audit
Committee 33,000 30,500 30,000
================== ======== ========= ========
Director 29,000 27,500 27,000
------------------ -------- --------- --------
The Nomination Committee carried out a review of Directors'
annual fees during the year, including assessing the prevailing
inflation rate and the increased time required by the Company to
devote to regulatory matters, and concluded that these should
change, with effect from 1 April 2023, to the following fees per
annum: GBP40,000 (Chairman), GBP34,500 (Audit Committee Chairman)
and GBP30,000 for each other Director. There are no further fees to
disclose as the Company has no employees, chief executive or
executive directors.
Spend on Pay
As the Company has no employees, the Directors do not consider
it appropriate to present a table comparing remuneration paid to
employees with distributions to shareholders. The fees paid to
Directors are shown in the table.
Company Performance
During the year the Board carried out a review of investment
performance. The graph shows the share price total return (assuming
all dividends are reinvested) to Ordinary shareholders compared to
the total return from the Benchmark for the ten-year period to 31
March 2023 (rebased to 100 at 31 March 2013). This Benchmark was
selected for comparison purposes as it is used by the Board for
investment performance measurement.
Fees Payable (Audited)
The Directors who served in the year received the fees, as set
out in the table below, which excluded employers' National
Insurance contributions.
Year ended Year ended
31 March 31 March
2023 2022
Director GBP GBP
================== ========== ==========
Michael Hughes
(A) 33,803 27,500
================== ========== ==========
David Simpson
(B) 29,000 11,458
================== ========== ==========
Andrew Robson 21,355 n/a
(C)
================== ========== ==========
Rebecca Donaldson 29,000 27,500
================== ========== ==========
Hasan Askari
(D) 19,036 36,500
================== ========== ==========
Stephen White
(D) 16,317 30,500
------------------ ---------- ----------
Total 148,511 133,458
------------------ ---------- ----------
(A) Appointed as Chairman on 28
September 2022.
(B) Appointed as a Director on 1
November 2021 and Senior Independent
Director on 28 September 2022.
(C) Appointed as a Director on 1
August 2022.
(D) Retired as a Director on 28
September 2022.
Fees are pro-rated where a change takes place during a financial
year. There were no payments to third parties from the fees
referred to in the table.
Directors' Interests in the Company (Audited)
The Directors are not required to have a shareholding in the
Company. The Directors (including their connected persons) at 31
March 2023 and 31 March 2022 had no interest in the share capital
of the Company other than those interests, all of which are
beneficial, in the table below, which were also unchanged as at the
date of
this Report:
31 March 31 March
2023 2022
Ord. 25p Ord. 25p
================== ========== ========
Michael Hughes 8,115 8,115
================== ========== ========
David Simpson 3,860 3,860
================== ========== ========
Andrew Robson 4,000 n/a
================== ========== ========
Rebecca Donaldson 4,471 4,471
================== ========== ========
Hasan Askari 4,300 (A) 4,300
================== ========== ========
Stephen White 12,500 (A) 12,500
------------------ ---------- --------
(A) As at date of retirement on
28 September 2022.
Annual Percentage Change in Directors' Remuneration
(Audited)
The table below sets out the annual percentage change in
Directors' fees for the past year.
Year Year Year
ended ended ended
31 March
31 March 31 March 2021
2023 2022 %
% %
================== ========== ========= ==========
Michael Hughes
(A) 22.9 1.9 1.9
================== ========== ========= ==========
David Simpson 153.1 n/a n/a
(B)
================== ========== ========= ==========
Andrew Robson n/a n/a n/a
(C)
================== ========== ========= ==========
Rebecca Donaldson
(D) 5.5 74.6 n/a
================== ========== ========= ==========
Hasan Askari
(E) -47.8 1.4 1.4
================== ========== ========= ==========
Stephen White
(E) -46.5 1.7 1.7
================== ========== ========= ==========
Rachel Beagles n/a n/a -51.0
------------------ ---------- --------- ----------
(A) Appointed as Chairman on 28
September 2022.
(B) Appointed as a Director on
1 November 2021 and Senior Independent
Director on 28 September 2022.
(C) Appointed as a Director on
1 August 2022.
(D) Appointed as a Director on
1 September 2020.
(E) Retired as a Director on 28
September 2022.
Annual Statement
On behalf of the Board and in accordance with Part 2 of Schedule
8 of the Large and Medium-sized Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2013, the Board confirms that the
above Report on Remuneration Policy and Remuneration Implementation
summarises, as applicable, for the year ended 31 March 2023:
-- the major decisions on Directors' remuneration;
-- any substantial changes relating to Directors' remuneration
made during the year; and
-- the context in which the changes occurred and in which
decisions have been taken.
Michael Hughes,
Chairman
28 June 2023
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
Michael Hughes,
Chairman
28 June 2023
Statement of Comprehensive Income
Year ended Year ended
31 March 2023 31 March 2022
============================== ========== =========================== =========================
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 5,725 302 6,027 4,904 155 5,059
============================== ========== ======= ======== ======== ======= ======= =======
Interest 3 96 - 96 - - -
============================== ========== ======= ======== ======== ======= ======= =======
(Losses)/gains on investments
held at fair value through
profit or loss 10(a) - (35,669) (35,669) - 45,078 45,078
============================== ========== ======= ======== ======== ======= ======= =======
Currency losses - (432) (432) - (342) (342)
------------------------------ ---------- ------- -------- -------- ------- ------- -------
5,821 (35,799) (29,978) 4,904 44,891 49,795
------------------------------ ---------- ------- -------- -------- ------- ------- -------
Expenses
============================== ========== ======= ======== ======== ======= ======= =======
Investment management fees 4 (3,284) - (3,284) (3,328) - (3,328)
============================== ========== ======= ======== ======== ======= ======= =======
Administrative expenses 5 (1,028) - (1,028) (927) - (927)
------------------------------ ---------- ------- -------- -------- ------- ------- -------
(4,312) - (4,312) (4,255) - (4,255)
------------------------------ ---------- ------- -------- -------- ------- ------- -------
Profit/(loss) before finance
costs and taxation 1,509 (35,799) (34,290) 649 44,891 45,540
============================== ========== ======= ======== ======== ======= ======= =======
Finance costs 6 (1,309) - (1,309) (290) - (290)
------------------------------ ---------- ------- -------- -------- ------- ------- -------
Profit/(loss) before taxation 200 (35,799) (35,599) 359 44,891 45,250
------------------------------ ---------- ------- -------- -------- ------- ------- -------
Taxation 7 (537) 1,870 1,333 (525) (4,140) (4,665)
------------------------------ ---------- ------- -------- -------- ------- ------- -------
(Loss)/profit for the year (337) (33,929) (34,266) (166) 40,751 40,585
------------------------------ ---------- ------- -------- -------- ------- ------- -------
(Loss)/return per Ordinary
share (pence) 9 (0.59) (59.41) (60.00) (0.28) 69.92 69.64
------------------------------ ---------- ------- -------- -------- ------- ------- -------
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 2023 31 March 2022
Notes GBP'000 GBP'000
========================================== ====== ============== =============
Non-current assets
========================================== ====== ============== =============
Investments held at fair value through
profit or loss 10 391,371 439,881
========================================== ====== ============== =============
Current assets
========================================== ====== ============== =============
Cash at bank 7,178 9,772
========================================== ====== ============== =============
Other receivables 11 3,715 2,160
------------------------------------------ ------ -------------- -------------
10,893 11,932
------------------------------------------ ------ -------------- -------------
Current liabilities
========================================== ====== ============== =============
Bank loan 12(a) (29,918) (30,000)
========================================== ====== ============== =============
Other payables 12(b) (3,279) (3,287)
------------------------------------------ ------ -------------- -------------
(33,197) (33,287)
------------------------------------------ ------ -------------- -------------
Net current liabilities (22,304) (21,355)
------------------------------------------ ------ -------------- -------------
Non-current liabilities
========================================== ====== ============== =============
Deferred tax liability on Indian
capital gains 13 (11,148) (14,531)
------------------------------------------ ------ -------------- -------------
Net assets 357,919 403,995
------------------------------------------ ------ -------------- -------------
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
========================================== ====== ============== =============
Capital redemption reserve 2(l) 4,484 4,484
========================================== ====== ============== =============
Capital reserve 2(l) 313,655 349,462
========================================== ====== ============== =============
Revenue reserve 2(l) (394) (57)
------------------------------------------ ------ -------------- -------------
Equity shareholders' funds 357,919 403,995
------------------------------------------ ------ -------------- -------------
Net asset value per Ordinary share
(pence) 16 641.32 697.30
------------------------------------------ ------ -------------- -------------
The financial statements were approved by the Board of Directors and
authorised for issue on 28 June 2023 and were signed on its behalf
by:
Michael Hughes
Chairman
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Equity
Year ended 31 March 2023
=============================================================================================
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 2022 14,768 25,406 9,932 4,484 349,462 (57) 403,995
========================= ======= ======= ======= ========== ======== ======= ========
Net loss after taxation - - - - (33,929) (337) (34,266)
========================= ======= ======= ======= ========== ======== ======= ========
Buyback of share capital
to treasury - - (9,932) - (1,878) - (11,810)
------------------------- ------- ------- ------- ---------- -------- ------- --------
Balance at 31 March
2023 14,768 25,406 - 4,484 313,655 (394) 357,919
------------------------- ------- ------- ------- ---------- -------- ------- --------
Year ended 31 March 2022
=============================================================================================
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 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
------------------------- ------- ------- ------- ---------- -------- ------- --------
The accompanying notes are an integral part of these financial statements.
Statement of Cash Flows
Year ended Year ended
31 March 2023 31 March 2022
Notes GBP'000 GBP'000
========================================== ======= ============= =============
Cash flows from operating activities
========================================== ======= ============= =============
Dividend income received 4,817 3,983
========================================== ======= ============= =============
Interest income received (16) -
========================================== ======= ============= =============
Investment management fee paid (3,057) (3,573)
========================================== ======= ============= =============
Other cash receipts/(expenses) 692 (921)
------------------------------------------ ------- ------------- -------------
Cash inflow/ (outflow) from operations 2,436 (511)
========================================== ======= ============= =============
Interest paid (1,189) (283)
------------------------------------------ ------- ------------- -------------
Net cash inflow/(outflow) from operating
activities 1,247 (794)
------------------------------------------ ------- ------------- -------------
Cash flows from investing activities
========================================== ======= ============= =============
Purchases of investments (100,451) (130,909)
========================================== ======= ============= =============
Sales of investments 109,314 139,176
========================================== ======= ============= =============
Indian capital gains tax paid on sales (678) (3,251)
------------------------------------------ ------- ------------- -------------
Net cash inflow from investing activities 8,185 5,016
------------------------------------------ ------- ------------- -------------
Cash flows from financing activities
========================================== ======= ============= =============
Buyback of shares (11,489) (2,696)
========================================== ======= ============= =============
Drawdown of loan - 6,000
========================================== ======= ============= =============
Costs associated with loan (105) -
------------------------------------------ ------- ------------- -------------
Net cash (outflow)/inflow from financing
activities (11,594) 3,304
------------------------------------------ ------- ------------- -------------
Net increase in cash and cash equivalents (2,162) 7,526
========================================== ======= ============= =============
Cash and cash equivalents at the start
of the year 9,772 2,588
========================================== ======= ============= =============
Effect of foreign exchange rate changes (432) (342)
------------------------------------------ ------- ------------- -------------
Cash and cash equivalents at the end
of the year 2(h),17 7,178 9,772
------------------------------------------ ------- ------------- -------------
The accompanying notes are an integral part of these financial statements.
Notes to the Financial Statements
For the year ended 31 March 2023
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").
On 31 March 2023, the Company changed its name from Aberdeen New
India Investment Trust PLC to abrdn New India Investment Trust
plc.
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 2023.
The financial statements have been prepared in accordance with
UK-adopted international accounting standards ("IFRS"). 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 July 2022.
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 and in Note 17 to the
financial statements and have reviewed income cashflow forecasts
detailing revenue and expenses; accordingly, the Directors believe
that, the Company has adequate financial resources to continue
in operational existence for at least 12 months from the date
of this Report.
In August 2022, the Company entered into a three-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
2023 (2022 - GBP30m). The Board has set limits for borrowing
and regularly reviews the level of any gearing and compliance
with banking covenants.
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.
Having taken these factors into account, the Directors believe
that the Company has adequate resources to continue in operational
existence 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.
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 certain Standards and Amendments, which are effective
for annual periods beginning on or after 1 January 2022. 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 37 Amendments (Provisions, Contingent Liabilities and Contingent
Assets)
- IFRS 3 Amendments (Business Combinations)
- IFRS 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 2023 and thereafter;
- 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 and low credit
risk.
(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. The reserve was extinguished in the
year to 31 March 2023.
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. Subsequent to the special
reserve being extinguished, the capital reserve has been used
to fund the share buy-backs by the Company.
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 is 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
======================== =========== ===========
2023 2022
GBP'000 GBP'000
======================== =========== ===========
Income from investments
------------------------ ----------- -----------
Overseas dividends 6,027 5,059
---------------------------- ----------- -----------
Other income
======================== =========== ===========
Deposit interest 93 -
============================ =========== ===========
Other interest 3 -
---------------------------- ----------- -----------
96 -
---------------------------- ----------- -----------
Total income 6,123 5,059
---------------------------- ----------- -----------
4. Investment management fees
============================================== ============ ============
2023 2022
GBP'000 GBP'000
============================================== ============ ============
Investment management fees 3,284 3,328
-------------------------------------------------- ------------ ------------
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 GBP3,284,000 (2022 - GBP3,328,000)
and the balance due to the Manager at the year end was GBP759,000
(2022 - GBP532,000). All investment management fees are charged
100% to the revenue column of the Statement of Comprehensive Income.
From 1 April 2023, the management fee is based on 0.8% up to GBP300
million and 0.6% thereafter of the Company's net assets, valued
monthly.
5. Administrative expenses
=================================================== ============ ==========
2023 2022
GBP'000 GBP'000
=================================================== ============ ==========
Directors' fees 148 133
======================================================= ============ ==========
Promotional activities 176 166
======================================================= ============ ==========
Auditor's remuneration:
=================================================== ============ ==========
- fees payable for the audit of the Company's
annual financial statements 60 45
======================================================= ============ ==========
Legal and advisory fees 68 62
======================================================= ============ ==========
Custodian and overseas agents' charges 311 320
======================================================= ============ ==========
Depositary fees 40 40
======================================================= ============ ==========
Other 225 161
------------------------------------------------------- ------------ ----------
1,028 927
------------------------------------------------------- ------------ ----------
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 GBP176,000 (2022 - GBP166,000) and GBP46,000 (2022
- 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 GBP60,000 (2022 - GBP45,000). The amounts disclosed above for
Auditor's remuneration are all shown net of VAT.
6. Finance costs
=================================================== ============ ==========
2023 2022
GBP'000 GBP'000
=================================================== ============ ==========
In relation to bank loans 1,309 290
------------------------------------------------------- ------------ ----------
Finance costs are charged 100% to revenue as disclosed in the accounting
policies.
7. Taxation
2023 2022
=================================== =========================== =========================
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 - 936 936 - 3,251 3,251
============================================ ======= ======== ======== ======= ======= =======
Under provision of Indian
capital gains tax charged
on sales for prior year - 577 577 - - -
============================================ ======= ======== ======== ======= ======= =======
Overseas taxation 537 - 537 525 - 525
-------------------------------------------- ------- -------- -------- ------- ------- -------
Total current tax charge
for the year 537 1,513 2,050 525 3,251 3,776
============================================ ======= ======== ======== ======= ======= =======
Movement in deferred tax
liability on Indian capital
gains - (3,383) (3,383) - 889 889
-------------------------------------------- ------- -------- -------- ------- ------- -------
Total tax (credit)/charge
for the year 537 (1,870) (1,333) 525 4,140 4,665
-------------------------------------------- ------- -------- -------- ------- ------- -------
The Company is liable to Indian capital gains tax under Section
115 AD of the Indian Income Tax Act 1961. The Company has recognised
a deferred tax liability of GBP11,148,000 (2022 - GBP14,531,000)
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:
2023 2022
=================================== =========================== =========================
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=================================== ======= ======== ======== ======= ======= =======
(Loss)/profit before tax 200 (35,799) (35,599) 359 44,891 45,250
-------------------------------------------- ------- -------- -------- ------- ------- -------
UK corporation tax on profit
at the standard rate of
19% (2021 - 19%) 38 (6,802) (6,764) 68 8,529 8,597
============================================ ======= ======== ======== ======= ======= =======
Effects of:
=================================== ======= ======== ======== ======= ======= =======
Losses/(gains) on investments
held at fair value through
profit or loss not taxable
not subject to UK corporation
tax - 6,720 6,720 - (8,565) (8,565)
============================================ ======= ======== ======== ======= ======= =======
Currency losses not taxable - 82 82 - 65 65
============================================ ======= ======== ======== ======= ======= =======
Deferred tax not recognised
in respect of tax losses 1,047 - 1,047 857 - 857
============================================ ======= ======== ======== ======= ======= =======
Expenses not deductible
for tax purposes 3 - 3 6 - 6
============================================ ======= ======== ======== ======= ======= =======
Indian capital gains tax
charged on sales - 936 936 - 3,251 3,251
============================================ ======= ======== ======== ======= ======= =======
Under provision of Indian
capital gains tax charged
on sales for prior year - 577 577 - - -
============================================ ======= ======== ======== ======= ======= =======
Movement in deferred tax
liability on Indian capital
gains - (3,383) (3,383) - 889 889
============================================ ======= ======== ======== ======= ======= =======
Irrecoverable overseas withholding
tax 537 - 537 525 - 525
============================================ ======= ======== ======== ======= ======= =======
Non-taxable dividend income (1,088) - (1,088) (931) (29) (960)
-------------------------------------------- ------- -------- -------- ------- ------- -------
Total tax (credit)/charge 537 (1,870) (1,333) 525 4,140 4,665
-------------------------------------------- ------- -------- -------- ------- ------- -------
(c) At 31 March 2023, the Company had surplus management expenses
and loan relationship debits of GBP33,305,000 (2022 - GBP27,796,000)
with a tax value of GBP8,326,000 (2022 - GBP6,949,000) 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
After the payment of operational expenses, there was no revenue
available for distribution by way of dividend for the year ended
31 March 2023 (2022 - GBPnil).
9. (Loss)/return per Ordinary share
============================================================================================
2023 2022
=============================== ============================= ============================
Revenue Capital Total Revenue Capital Total
=============================== ======= ======== ========== ======= ======= ==========
Net (loss)/profit for the year
(GBP'000) (337) (33,929) (34,266) (166) 40,751 40,585
==================================== ======= ======== ========== ======= ======= ==========
Weighted average number of
Ordinary shares in issue 57,105,465 58,276,006
==================================== ======= ======== ========== ======= ======= ==========
(Loss)/return per Ordinary
share (pence) (0.59) (59.41) (60.00) (0.28) 69.92 69.64
------------------------------------ ------- -------- ---------- ------- ------- ----------
10. Investments held at fair value through profit or loss
2023 2022
(a) Valuation GBP'000 GBP'000
=========================================== ============ ===========
Opening book cost 293,858 255,914
============================================ ========= ============ ===========
Opening investment holdings
fair value gains 146,023 145,755
-------------------------------------------- --------- ------------ -----------
Opening valuation 439,881 401,669
============================================ ========= ============ ===========
Movements in the year:
=========================================== ============ ===========
Purchases 99,528 132,928
============================================ ========= ============ ===========
Sales - proceeds (112,369) (139,794)
============================================ ========= ============ ===========
(Losses)/gains on investments (35,669) 45,078
-------------------------------------------- --------- ------------ -----------
Closing valuation 391,371 439,881
-------------------------------------------- --------- ------------ -----------
2023 2022
GBP'000 GBP'000
=========================================== ============ ===========
Closing book cost 296,380 293,858
============================================ ========= ============ ===========
Closing investment holdings
fair value gains 94,991 146,023
-------------------------------------------- --------- ------------ -----------
Closing valuation 391,371 439,881
-------------------------------------------- --------- ------------ -----------
The Company generated GBP112,369,000 (2022 - GBP139,794,000)
from investments sold in the period. The book cost of these
investments when they were purchased was GBP97,005,000 (2022
- GBP94,984,000). 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 (losses)/gains on investments at fair value
through profit or loss in the Statement of Comprehensive Income.
The total costs were as follows:
2023 2022
GBP'000 GBP'000
=========================================== ============ ===========
Purchases 166 167
============================================ ========= ============ ===========
Sales 173 211
-------------------------------------------- --------- ------------ -----------
339 378
------------------------------------------------------ ------------ -----------
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
===========================================================
2023 2022
GBP'000 GBP'000
========================================= ======= =======
Amounts due from brokers 3,266 211
============================================== ======= =======
Recoverable tax on Indian dividends 393 1,019
============================================== ======= =======
Prepayments and accrued income 56 930
---------------------------------------------- ------- -------
3,715 2,160
---------------------------------------------- ------- -------
None of the above amounts are past their
due date or impaired (2022 - nil).
12. Current liabilities
2023 2022
(a) Bank loan GBP'000 GBP'000
====================================================== ======== ========
Loans repayable within one year 29,918 30,000
================================================================ ======== ========
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 2023 (31 March 2022 - GBP30 million) at an all-in
interest rate of 7.777% until 3 April 2023 (2022 - 1.0135% until
8 April 2022). On 30 June 2022, the Company agreed an extension
of the facility to 5 August 2025, incurring GBP105,000 of expenses
which are amortised over the remaining life of the loan. At
the date of this Report the Company had drawn down GBP26 million
at an all-in interest rate of 8.028% until 2 August 2023.
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.
2023 2022
(b) Other payables GBP'000 GBP'000
====================================================== ======== ========
Amounts due to brokers 1,053 1,976
================================================================ ======== ========
Amounts due to brokers relating to buybacks
to treasury 365 43
================================================================ ======== ========
Other creditors 1,861 1,268
---------------------------------------------------------------- -------- --------
3,279 3,287
---------------------------------------------------------------- -------- --------
13. Non-current liabilities
========================================= =========== ===========
2023 2022
GBP'000 GBP'000
========================================= =========== ===========
Deferred tax liability on Indian capital
gains 11,148 14,531
---------------------------------------------- ----------- -----------
14. Ordinary share capital
========================= ============ =========== ============ =========
2023 2022
========================= ========================= =======================
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 55,809,921 13,953 57,937,127 14,485
============================== ============ =========== ============ =========
Held in treasury:
========================= ============ =========== ============ =========
Ordinary shares of
25p each 3,260,219 815 1,133,013 283
------------------------------ ------------ ----------- ------------ ---------
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 2,127,206 (2022 - 448,201) Ordinary shares of 25p
each were repurchased by the Company at a total cost, including
transaction costs, of GBP11,810,000 (2022 - GBP2,696,000). All
of the shares were placed in treasury. Shares held in treasury
represent 5.52% (2022 - 1.92%) 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 Non-cash
2022 differences flows movements 2023
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================= ======== =========== ======== ========= ========
Cash and short term deposits 9,772 (432) (2,162) - 7,178
================================== ======== =========== ======== ========= ========
Debt due within one year (30,000) - - 82 (29,918)
---------------------------------- -------- ----------- -------- --------- --------
(20,228) (432) (2,162) 82 (22,740)
---------------------------------- -------- ----------- -------- --------- --------
Net
Currency Cash Non-cash
2021 differences flows movements 2022
GBP'000 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)
---------------------------------- -------- ----------- -------- --------- --------
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 GBP357,919,000 (2022 - GBP403,995,000) and on 55,809,921
(2022 - 57,937,127) 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 2023 Years % GBP'000 GBP'000
=========================== ================ ============= ========== =========
Assets
=========================== ================ ============= ========== =========
Sterling - 3.18 - 7,139
================================ ================ ============= ========== =========
US Dollars - - - 8
================================ ================ ============= ========== =========
Indian Rupee - - - 31
-------------------------------- ---------------- ------------- ---------- ---------
- 7,178
-------------------------------- ---------------- ------------- ---------- ---------
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 0.16 3.43 29,918 -
-------------------------------- ---------------- ------------- ---------- ---------
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 -
-------------------------------- ---------------- ------------- ---------- ---------
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 2023 would
have decreased/increased by GBP199,000 (2022 - decrease/increase
GBP202,000). 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:
2023 2022
=============== ================================== ================================
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 5,474 8 5,482 8,731 15 8,746
=============== ============= ========= ======== ============ ======== ========
Indian Rupee 385,897 31 385,928 431,150 1,081 432,231
--------------- ------------- --------- -------- ------------ -------- --------
391,371 39 391,410 439,881 1,096 440,977
--------------- ------------- --------- -------- ------------ -------- --------
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.
2023 2023 2022 2022
Revenue Equity(A) Revenue Equity(A)
GBP'000 GBP'000 GBP'000 GBP'000
====================== ============ =============== =========== ===============
US Dollar - 548 - 875
======================== ============ =============== =========== ===============
Indian Rupee 603 38,593 506 43,223
------------------------ ------------ --------------- ----------- ---------------
603 39,141 506 44,098
---------------------- ------------ --------------- ----------- ---------------
(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 2023 would have increased /(decreased)
by GBP58,706,000 (2022 - increased/(decreased) by GBP65,982,000)
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 2025.
Other payables are settled within one year. Details of borrowings
and other payables at 31 March 2023 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 (2022
- GBP30,000,000) was drawn down at the year end. Other payables
amounted to GBP3,279,000 (2022 - GBP3,287,000).
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 (2022 - 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:
2023 2022
=============================== ======================================= ======================================
Statement Statement
of of
Financial Maximum Financial Maximum
Position Exposure Position Exposure
GBP'000 GBP'000 GBP'000 GBP'000
=============================== ==================== ================= =================== =================
Current assets
================================ ==================== ================= =================== =================
Loans and receivables 3,715 3,715 1,086 1,086
================================ ==================== ================= =================== =================
Cash at bank and in hand 7,178 7,178 9,772 9,772
================================ -------------------- ----------------- ------------------- -----------------
10,893 10,893 10,858 10,858
------------------------------- -------------------- ----------------- ------------------- -----------------
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
(2022 - same).
Fair values of financial assets and financial liabilities. The
fair value of bank loans are represented in the table below;
2023 2022
GBP'000 GBP'000
=============================== ==================== ================= =================== =================
Bank loan 29,918 30,000
------------------------------------------------------------------------- ------------------- -----------------
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 GBP29,918,000 as at 31 March 2023 (2022 - GBP30,000,000)
compared to an accounts value in the financial statements GBP29,918,000
(2022 - GBP30,000,000) (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 2023 Note GBP'000 GBP'000 GBP'000 GBP'000
====================================== ===== ======= ======= ======= ==========
Financial assets at fair value
through profit or loss
====================================== ===== ======= ======= ======= ==========
Quoted equities a) 391,371 - - 391,371
-------------------------------------- ------------- ------- ------- ------- ----------
Net fair value 391,371 - - 391,371
-------------------------------------- ------------- ------- ------- ------- ----------
Level Level Level Total
1 2 3
As at 31 March 2022 Note GBP'000 GBP'000 GBP'000 GBP'000
====================================== ===== ======= ======= ======= ==========
Financial assets at fair value
through profit or loss
====================================== ===== ======= ======= ======= ==========
Quoted equities a) 439,881 - - 439,881
-------------------------------------- ------------- ------- ------- ------- ----------
Net fair value 439,881 - - 439,881
-------------------------------------- ------------- ------- ------- ------- ----------
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
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.
22. Transactions with the Manager
The Company has an agreement with abrdn 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.
Adjusted net asset value per Ordinary share(A)
This performance measure is used to provide a like for like comparison
with the Company's Benchmark for the purposes of the potential five-yearly
performance-related conditional tender offer announced on 24 March
2022, which was first in effect from 1 April 2022 and is therefore
not applicable to earlier reporting periods. Further details may be
found in the Chairman's Statement.
2023 2022
=============================== ============= ============ ============= =============
Net assets attributable (GBP'000) 357,919 N/A
============================================================ ============= =============
Indian CGT charge for the period (GBP'000) (1,870) N/A
============================================================ ============= =============
Net assets attributable excluding Indian 356,049 N/A
CGT charge (GBP'000)
============================================================ ============= =============
Number of Ordinary shares in issue 55,809,921 N/A
------------------------------------------------------------ ------------- -------------
Adjusted net asset value per Ordinary share(A) 637.97p N/A
------------------------------------------------------------ ------------- -------------
(A) Adjusted NAV is the Company's NAV after adding back all Indian
capital gains tax paid or accrued in respect of realised and unrealised
gains made on investments. Comparatives for 2022 are not applicable
given the commencement date of 1 April 2022.
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.
2023 2022
=============================== ============= ============ ============= =============
NAV per Ordinary share a 641.32p 697.30p
============================================== ============ ============= =============
Share price b 512.00p 562.00p
============================================== ============ ============= =============
Discount (a-b)/a 20.2% 19.4%
---------------------------------------------- ------------ ------------- -------------
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.
2023 2022
=============================== ============= ============ ============= =============
Borrowings (GBP'000) a 29,918 30,000
============================================== ============ ============= =============
Cash (GBP'000) b 7,178 9,772
============================================== ============ ============= =============
Amounts due to brokers (GBP'000) c 1,418 2,019
============================================== ============ ============= =============
Amounts due from brokers (GBP'000) d 3,266 211
============================================== ============ ============= =============
Shareholders' funds (GBP'000) e 357,919 403,995
---------------------------------------------- ------------ ------------- -------------
Net gearing (a-b+c-d)/e 5.8% 5.5%
---------------------------------------------- ------------ ------------- -------------
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.
2023 2022
=============================== ============= ============ ============= =============
Investment management fees (GBP'000) 3,284 3,328
============================================== ============ ============= =============
Administrative expenses (GBP'000) 1,028 927
============================================== ============ ============= =============
Less: non-recurring charges(A)
(GBP'000) (27) (28)
---------------------------------------------- ------------ ------------- -------------
Ongoing charges (GBP'000) 4,285 4,227
---------------------------------------------- ------------ ------------- -------------
Average net assets (GBP'000) 394,420 399,442
---------------------------------------------- ------------ ------------- -------------
Ongoing charges ratio 1.09% 1.06%
---------------------------------------------- ------------ ------------- -------------
(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. Adjusted NAV is the Company's
NAV after adding back all Indian capital gains tax paid or accrued
in respect of realised or unrealised gains made on investments.
Share
Year ended 31 March NAV Adjusted NAV Price
2023
=============================== ============= ============ ============= =============
Opening at 1 April
2022 a 697.30p 697.30p 562.00p
=============================== ============= ============ ============= =============
Closing at 31 March
2023 b 641.32p 637.97p 512.00p
=============================== ============= ============ ============= =============
Price movements c=(b/a)-1 -8.0% -8.5% -8.9%
=============================== ============= ============ ============= =============
Dividend reinvestment(A) d N/A N/A N/A
------------------------------- ------------- ------------ ------------- -------------
Total return c+d -8.0% -8.5% -8.9%
------------------------------- ------------- ------------ ------------- -------------
Share
Year ended 31 March NAV NAV Price
2022
=============================== ============= ============ ============= =============
Opening at 1 April
2021 a 627.05p N/A 542.00p
=============================== ============= ============ ============= =============
Closing at 31 March
2022 b 697.30p N/A 562.00p
=============================== ============= ============ ============= =============
Price movements c=(b/a)-1 11.2% N/A 3.7%
=============================== ============= ============ ============= =============
Dividend reinvestment(A) d N/A N/A N/A
------------------------------- ------------- ------------ ------------- -------------
Total return c+d +11.2% N/A +3.7%
------------------------------- ------------- ------------ ------------- -------------
(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 2023 or
2022 but is derived from those accounts. Statutory accounts for
2022 have been delivered to the registrar of companies, and those
for 2023 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
2023 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 will be held at 12.30pm on
27 September 2023 at Wallacespace, 15 Artillery Lane, London E1
7HA,
The Annual Report will be posted to shareholders in July 2023.
Further copies may be ordered from the Manager's website:
www.invtrusts.co.uk .
On behalf of the Board
abrdn Holdings Limited
Secretaries
28 June 2023
END
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June 29, 2023 02:00 ET (06:00 GMT)
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