Annual Financial Report
29/06/2023 07:00
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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) £357,919,000 £403,995,000 -11.4
Market capitalisation £285,747,000 £325,607,000 -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 Ordinary share(A) -8.5 N/A N/A N/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 £300 million
(formerly £350 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 £300
million (formerly £350 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 £11.8
million (2022 - £2.7 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 £30 million had been drawn of the total
available bank loan facility provided by Royal Bank of Scotland International
(London Branch) (31 March 2022 - £30m), 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 £11.1 million (2022 - £14.5 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 £97 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 and share price compared to the Benchmark The Board considers the Company's NAV return, the Adjusted NAV return and
share price return, 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 business strategy leads to lack of demand for The Board reviews its strategy and investment mandate annually in the context
the Company's shares, leading to its shares trading at a persistent and of developments in markets and taking account of investor feedback.
anomalous discount to its Net Asset Value
Market risk - falls in the prices of securities issued by Indian companies, The Investment Manager seeks to reduce market risk by investing in a wide
which may be caused by company-specific issues or may be determined by local variety of companies with strong balance sheets and the ability to generate
and international economic, political, social, and financial factors, increased earnings. In addition, investments are made in diversified sectors
including pandemics, natural disasters or geo-political conflicts. in order to reduce the risk of a single large exposure. The Investment Manager
believes that diversification should be looked at in absolute terms rather
than relative to the Benchmark. The performance of the portfolio relative to
the Benchmark and the underlying stock and sector weightings in the portfolio
against their Benchmark weightings are monitored closely by the Board.
Poor investment performance - poor investment performance leads to loss of The investment performance of the Manager is reviewed at each Board meeting
asset value in comparison to the benchmark and/or the peer group, and, over and compared to the benchmark and the peer group. Exposure to a range of risk
time, can lead to a widening of the discount to NAV at which the Company's factors is also reviewed.
shares trade.
Discount - factors which affect the discount to NAV at which the Ordinary The Board keeps under review the discount and undertakes selective buyback of
shares of the Company trade. These may include the popularity of the shares where to do so would be in the best interests of shareholders, balanced
investment objective of the Company, the popularity of investment trust shares against reducing the overall size of the Company. Any shares bought back are
in general, the investment performance of the Company, and the ease with which held in treasury.
the Company's Ordinary shares can be traded on the London Stock Exchange.
Single country risk - the Company invests in companies which are incorporated The Company's exposure to India is an integral part of its investment
in, or derive significant revenue or profit from, a single country - India. strategy. Risk can be mitigated, to a degree, by the monitoring of emerging
Investing in a single country, which is also an emerging market, is generally risks, and by appropriate actions in relation to portfolio construction,
a higher risk strategy than investing more widely, or in developed markets. liquidity and gearing.
There is likely to be greater political and regulatory risk, and the standards
of disclosures and corporate governance may be less developed than in The Board is kept informed of political, regulatory and tax issues affecting
developed markets. In addition, there may be specific internal political and the portfolio.
social issues, or wider geo-political issues, which could lead to social
upheaval, unrest, or conflict.
The Board monitors the Rupee/Sterling exchange rate and reviews the currency
impacts on both capital and income at each meeting, although the Company did
These events may lead to falls in equity markets, and also adverse foreign not hedge its foreign currency exposure during the year.
currency movements.
Depositary - insolvency of the depositary or custodian or sub-custodian, or a The depositary, BNP Paribas Trust Corporation UK Limited, presents to the
shortfall in the assets held by that depositary, custodian or sub-custodian Board at least annually on the Company's compliance with the Alternative
arising from fraud, operational errors or settlement difficulties resulting in Investment Fund Managers Directive ("AIFMD"). The Manager separately monitors
a loss of assets owned by the Company. the activities of the depositary and reports to the Board on any exceptions
arising.
Financial and regulatory - the financial risks associated with the portfolio The financial risks associated with the Company include market risk, liquidity
could result in losses to the Company. In addition, failure to comply with risk and credit risk, all of which are mitigated by the Manager. Further
relevant regulation (including the Companies Act, the Financial Services and details of the steps taken to mitigate the financial risks associated with the
Markets Act, the Alternative Investment Fund Managers Directive, accounting portfolio are set out in Note 17 to the financial statements.
standards, investment trust regulations and the Listing Rules, Disclosure
Guidance and Transparency Rules and Prospectus Rules) may have an adverse The Board is responsible for ensuring the Company's compliance with applicable
impact on the Company. regulations. Monitoring of this compliance, and regular reporting to the Board
thereon, has been delegated to the Manager. The Board receives updates from
the Manager and AIC briefings concerning industry changes. From time to time,
the Company also employs external advisers covering specific areas of
Any change in the Company's tax status or in taxation legislation either in compliance.
India or in the UK (including the tax treatment of dividends, capital gains or
other investment income received by the Company) could affect the value of the In particular, the Board receives reports from the Manager covering investment
investments held by the Company and the Company's ability to provide returns movements, the level and type of forecast income and expenditure and the
to shareholders or alter the post-tax returns to shareholders. 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 should enhance the total return on the The Board is responsible for determining the gearing strategy for the Company,
Ordinary shares where the return on the Company's underlying assets is rising with day-to-day gearing decisions being made by the Investment Manager.
and exceeds the cost of borrowing, it will have the opposite effect where the Borrowings are short term in nature and particular care is taken to ensure
underlying return is less than the cost of borrowing, further reducing the that any bank covenants permit maximum flexibility of investment policy. The
total return on the Ordinary shares. A significant fall in the value of the Board has agreed certain gearing restrictions with the Manager and reviews
Company's investment portfolio could result in a breach of bank covenants and compliance with these guidelines at each Board meeting.
trigger demands for early repayment.
Loan agreements are entered into 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 £30m 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 £30m 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 £30m
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 and Community The Board and Manager are committed to investing in a 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 (£'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 (£'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 consumer goods company (FMCG) in India, with an HDFC Bank is amongst the best retail banking franchises in India, with a
unrivalled portfolio of brands, an extensive nationwide distribution network, high-quality wholesale portfolio, solid underwriting standards and a
and a long and successful operational track record in the country. progressive digital stance further strengthening its competitive edge.
3.4% Power Grid Corporation of India 3.4% Ultratech Cement
Power Grid Corporation of India forms the backbone of India's electricity A clear industry leader in India's cement industry, backed by strong brand
infrastructure. It is poised to play a key role in the growth of renewable recognition, a good distribution and sales network and solid product quality.
energy delivery to the grid over the next few decades as the government plans Its focus on cost efficiency and an improving energy mix have given UltraTech
ambitious renewable targets for the electricity sector. a cost advantage.
3.1% SBI Life Insurance 2.9% Aegis Logistics Ltd
Among the leading domestic life insurers, SBI Life's competitive edge comes A strong and conservative player in India's gas and liquids logistics sector,
from a wide reach of SBI branches, highly productive agents, a low cost ratio with a first mover advantage in key ports and a fair amount of capacity
and a reputable SBI brand. expansion 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 delivering superior growth and returns improvement without Fortis Healthcare is one of the largest healthcare services in India,
compromising on asset quality. It has leveraged on its scale as well as retail operating the second and third largest hospital chain in
and digital franchise to grow in mortgages and also growing off a low base in
India by revenue and beds, as well as a diagnostic lab business of national
business banking and SMEs, while the way it articulates its growth approach scale.
also sounds sensible.
In both segments, Fortis operates at the premium end.
2.2% Bharti Airtel 2.2% Syngene International
Bharti Airtel remains the leading telecom service provider with a pan-India Syngene International is a leading contract research organisation serving both
reach and sophisticated customer base with higher average mobile spending. pharmaceutical majors and biotech start-ups.
Portfolio
As at 31 March 2023
Valuation Total assets
2023 2023
Company Industry £'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 Percentage
As at 31 March 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 material, and impact corporate performance Understanding ESG risks and opportunities alongside other financial metrics Informed and constructive engagement helps foster better companies, enhancing
allows us to make better investment decisions the value of our clients' 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 insight 02. Active Ownership 03. Risk & Monitoring 04. Our People
High quality fundamental and first hand research Engage and vote with aim of improving financial resilience and investment Combine in-house and external scoring to inform view Over 130 equity professionals, and 40+ central & on-desk ESG specialists
performance
across the world
Assessment if ESG for all stocks under coverage
Active tracking of fund holdings against ESG objectives
Raise standards 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 class 2. Leader 3. Average 4. Below average 5. Laggard
ESG considerations are a material part of the company's core business strategy ESG considerations ESG risks are considered as a part of principal business Evidence of some financially material controversies Many financially material controversies
not market leading
Excellent disclosure
Disclosure in line with regulatory requirements Poor governance or limited oversight of key ESG issues Severe governance concerns
Disclosure is good, but not best in class
Makes opportunities from strong ESG risk management
Governance is generally good but some minor concerns Some issues in treating minority shareholders poorly Poor treatment of minority shareholders
Governance is
generally very good
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 & Data Provide high quality climate-change insights and thematic research across Provide relevant high-quality data and insights on climate-change trends,
asset classes and regions. This includes using climate-related data as an risks and opportunities that are fully integrated into our decision making and
input into the investment process. drive positive outcomes for our clients
Investment Integration Understanding the potential 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 Engagement Investee Engagement & Voting Better understands investee 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 & Influence Collaborate with climate-change-related industry associations and participate
in relevant initiatives. Engage with peers and policymakers to drive industry
developments and best practice.
Investor Disclosure Disclosures Disclose climate-change-related 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 15.7%
against management?
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 £350m
and 0.70% on net assets above £350m.
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 £300m and 0.6%
on net assets above £300m.
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 Board members Percentage of the Board Number of senior positions on the Board Number in executive management Percentage of executive management
Men 3 75% 3 (B) n/a n/a
Women 1 25% (A) 1 (C, D) n/a n/a
Not specified/prefer not to say - - - n/a n/a
(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 of Board members Percentage of the Board Number of senior positions on the Board Number in executive management Percentage of executive management
White British or other White 4 100% (A) 100% n/a n/a
(including minority-white groups)
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):
Director Board and Committee Meetings Audit Committee Meetings Management Engagement Committee Meetings Nomination
Committee 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, £30 million revolving
credit facility (the "Facility") with Royal Bank of Scotland International
Limited (London Branch), part of NatWest Group plc, of which £30 million was
drawn down at 31 March 2023 (2022 - £30 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:
Shareholder Number of 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 £200,000 within the Company's Articles of Association. This limit
may only be amended by shareholder resolution and a resolution to increase the
limit from £150,000 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.
Year ended 31 March 2023 31 March 2022 31 March 2021
£
£
£
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: £40,000 (Chairman), £34,500 (Audit Committee Chairman) and
£30,000 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 2023 31 March 2022
Director £ £
Michael Hughes (A) 33,803 27,500
David Simpson (B) 29,000 11,458
Andrew Robson (C) 21,355 n/a
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 2023 31 March 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 ended Year ended Year ended 31 March
31 March 31 March 2021
%
2023 2022
%
%
Michael Hughes (A) 22.9 1.9 1.9
David Simpson (B) 153.1 n/a n/a
Andrew Robson (C) n/a n/a n/a
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 £'000 £'000 £'000 £'000 £'000 £'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 £'000 £'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
£'000 £'000 £'000 £'000 £'000 £'000 £'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
£'000 £'000 £'000 £'000 £'000 £'000 £'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 £'000 £'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, £30 million revolving
credit facility (the "Facility") with Royal Bank of Scotland International
Limited (London Branch), part of NatWest Group plc, of which £30m was drawn
down at 31 March 2023 (2022 - £30m). 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 £30 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
£'000 £'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
£'000 £'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 £350 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 £3,284,000 (2022 -
£3,328,000) and the balance due to the Manager at the year end was £759,000
(2022 - £532,000). 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 £300 million and
0.6% thereafter of the Company's net assets, valued monthly.
5. Administrative expenses
2023 2022
£'000 £'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 £176,000 (2022 -
£166,000) and £46,000 (2022 - £42,000) was due to the Manager at the year
end.
The only fees paid to KPMG LLP by the Company are the audit fees of £60,000
(2022 - £45,000). The amounts disclosed above for Auditor's remuneration are
all shown net of VAT.
6. Finance costs
2023 2022
£'000 £'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
£'000 £'000 £'000 £'000 £'000 £'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 £11,148,000 (2022 - £14,531,000) 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
£'000 £'000 £'000 £'000 £'000 £'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 - 6,720 6,720 - (8,565) (8,565)
taxable not subject to UK corporation tax
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 £33,305,000 (2022 - £27,796,000) with a tax value of
£8,326,000 (2022 - £6,949,000) 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 -
£nil).
9. (Loss)/return per Ordinary share
2023 2022
Revenue Capital Total Revenue Capital Total
Net (loss)/profit for the year (£'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 £'000 £'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
£'000 £'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 £112,369,000 (2022 - £139,794,000) from investments
sold in the period. The book cost of these investments when they were
purchased was £97,005,000 (2022 - £94,984,000). 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
£'000 £'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
£'000 £'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 £'000 £'000
Loans repayable within one year 29,918 30,000
In July 2020, the Company agreed a £30 million two year uncommitted
multicurrency revolving loan facility with Royal Bank of Scotland
International (London Branch). £30 million was drawn down at 31 March 2023
(31 March 2022 - £30 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 £105,000 of
expenses which are amortised over the remaining life of the loan. At the date
of this Report the Company had drawn down £26 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 £150 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 £'000 £'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
£'000 £'000
Deferred tax liability on Indian capital gains 11,148 14,531
14. Ordinary share capital
2023 2022
Number £'000 Number £'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
£11,810,000 (2022 - £2,696,000). 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
£'000 £'000 £'000 £'000 £'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
£'000 £'000 £'000 £'000 £'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
£357,919,000 (2022 - £403,995,000) 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 which average Fixed Floating
rate is fixed interest rate rate rate
At 31 March 2023 Years % £'000 £'000
Assets
Sterling - 3.18 - 7,139
US Dollars - - - 8
Indian Rupee - - - 31
- 7,178
Weighted average Weighted
period for which average Fixed Floating
rate is fixed interest rate rate rate
Years % £'000 £'000
Liabilities
Bank loan - £30,000,000 0.16 3.43 29,918 -
Weighted average Weighted
period for which average Fixed Floating
rate is fixed interest rate rate rate
At 31 March 2022 Years % £'000 £'000
Assets
Sterling - - - 8,676
US Dollars - - - 15
Indian Rupee - - - 1,081
- 9,772
Weighted average Weighted
period for which average Fixed Floating
rate is fixed interest rate rate rate
Years % £'000 £'000
Liabilities
Bank loan - £30,000,000 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 £199,000 (2022 -
decrease/increase £202,000). 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
£'000 £'000 £'000 £'000 £'000 £'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)
£'000 £'000 £'000 £'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 £58,706,000 (2022 -
increased/(decreased) by £65,982,000) 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 £30 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 £30 million uncommitted
multicurrency revolving loan facility, of which £30,000,000 (2022 -
£30,000,000) was drawn down at the year end. Other payables amounted to
£3,279,000 (2022 - £3,287,000).
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 of Statement of
Financial Maximum Financial Maximum
Position Exposure Position Exposure
£'000 £'000 £'000 £'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
£'000 £'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 £29,918,000 as at 31 March 2023 (2022 - £30,000,000) compared to an
accounts value in the financial statements £29,918,000 (2022 - £30,000,000)
(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 1 Level 2 Level 3 Total
As at 31 March 2023 Note £'000 £'000 £'000 £'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 1 Level 2 Level 3 Total
As at 31 March 2022 Note £'000 £'000 £'000 £'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 (£'000) 357,919 N/A
Indian CGT charge for the period (£'000) (1,870) N/A
Net assets attributable excluding Indian CGT charge (£'000) 356,049 N/A
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 (£'000) a 29,918 30,000
Cash (£'000) b 7,178 9,772
Amounts due to brokers (£'000) c 1,418 2,019
Amounts due from brokers (£'000) d 3,266 211
Shareholders' funds (£'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 (£'000) 3,284 3,328
Administrative expenses (£'000) 1,028 927
Less: non-recurring charges(A) (£'000) (27) (28)
Ongoing charges (£'000) 4,285 4,227
Average net assets (£'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 2023 NAV Adjusted NAV Price
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 2022 NAV NAV Price
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
(http://www.invtrusts.co.uk) .
On behalf of the Board
abrdn Holdings Limited
Secretaries
28 June 2023
END
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