Annual Financial Report
NEW INDIA INVESTMENT TRUST PLC
ANNUAL FINANCIAL REPORT
For the year ended 31 March 2015
STRATEGIC REPORT - COMPANY SUMMARY AND FINANCIAL HIGHLIGHTS
Company
The Company is an investment trust whose Ordinary shares are listed on the premium segment of the Official List of the UK Listing Authority and are admitted to trading on the London Stock Exchange. The Company aims to attract long term private and institutional investors wanting to benefit from the growth prospects of the Indian economy.
What is an Investment Trust?
Investment trusts are a way to make a single investment that gives you a share in a much larger portfolio. A type of collective investment, they let you spread your risk and access investment opportunities you might not find on your own.
Investment Objective
The investment objective of the Company is to provide shareholders with long-term capital appreciation by investment in companies which are incorporated in India, or which derive significant revenue or profit from India, with dividend yield from the Company being of secondary importance.
Company Benchmark
MSCI India Index (Sterling-adjusted).
Investment Manager
Aberdeen Asset Management Asia Limited ("Investment Manager").
Alternative Investment Fund Manager
Aberdeen Fund Managers Limited ("AFML" or "the AIFM" or "the Manager").
Website
Up-to-date information, including the Company's Pre-Investment Disclosure Document, may be found on the Company's website - www.newindia-trust.co.uk
Financial Highlights
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|
Year ended |
Year ended |
|
|
31 March 2015 |
31 March 2014 |
|
Share price total return |
+56.4% |
-5.1% |
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Net asset value total return |
+46.3% |
-1.9% |
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Benchmark total return |
+35.6% |
-2.8% |
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Source: Aberdeen Asset Managers Limited, Fundamental Data, Factset. |
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STRATEGIC REPORT - OVERVIEW OF STRATEGY
Strategy and Business Model
The Company is an investment trust and is supervised by a Board of independent non-executive directors. The Company outsources the majority of its activities, as opposed to employing personnel directly, and the Directors do not envisage any change either to this model or to the Company's activities in the foreseeable future.
The Directors are responsible for determining the investment policy while day-to-day management of the Company's assets is sub-delegated to Aberdeen Asset Management Asia Limited ("the Investment Manager").
The Company's Financial Highlights are shown above and a report on the Company's business is given in the Chairman's Statement and in the Investment Manager's Report.
Investment Policy
The Company's investment objective is shown in Company Summary and Financial Highlights.
The Company (either directly or through its Mauritian subsidiary, New India Investment Company (Mauritius) Limited (the "Subsidiary")) primarily invests in Indian equity securities.
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.
Borrowing Policy
The Company is permitted to borrow up to 25% of its net assets (measured when new borrowings are incurred). It is intended that this power should be used to leverage the Company's portfolio in order to enhance returns when and to the extent that it is considered appropriate to do so.
Gearing will be used in relation to specific opportunities or circumstances. The Directors will take care to ensure that borrowing covenants will permit flexibility of investment policy. As at 31 March 2015, the Company had no borrowing facility in place.
Currency and Hedging Policy
The Company's financial statements are maintained in Sterling while, because of its investment focus, many of the Company's investments are denominated and quoted in currencies other than Sterling, including in particular, the Indian Rupee. Although it is not the Company's present intention to do so, the Company may, where appropriate and economic to do so, employ a policy of hedging against fluctuations in the rate of exchange between Sterling and other currencies in which its investments are denominated. Cash balances are held in such currency or currencies as the Manager considers appropriate, although it is expected that this would primarily be Sterling.
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 does not have any investments in other listed investment companies at 31 March 2015.
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.
Key Performance Indicators ("KPIs")
At each Board meeting, the Directors consider a number of performance measures to assess the Company's success in achieving its objective. The principal KPIs identified for the Company are the performance of both the Net Asset Value and the Share Price as compared to the performance of the MSCI India Index return (Sterling-adjusted) and relevant figures for the year period under review may be found in Results.
Principal Risks and Uncertainties
The Board has identified the principal risks and uncertainties affecting its business. The Board is aware that, apart from those issues it can identify, there are likely to be matters about which it does not or cannot know which may also affect the Company.
With that reservation, the Board believes that the factors which could have the most significant adverse impact on shareholders would be likely to include:
• falls in the prices of securities in Indian companies, which may be themselves determined by local and international economic, political and financial factors and management actions;
• adverse movements in the exchange rate between Sterling and the Rupee as well as between other currencies affecting the overall value of the portfolio;
• a lack of appropriate stock selection by the Company's Investment Manager;
• factors which affect the discount to net asset value at which the Ordinary shares of the Company trade. These may include the popularity of the investment objective of the Company, the popularity of investment trust shares in general and the ease with which the Company's Ordinary shares can be traded on the London Stock Exchange;
• insolvency of the depositary or custodian or sub-custodian, or a shortfall in the assets held by that depositary, custodian or sub-custodian arising from fraud, operational errors or settlement difficulties resulting in a loss of assets owned by the Company; and
• changes in or breaches of the complicated set of statutory, tax and regulatory rules within which the Company seeks to conduct its business.
Some of these risks can be mitigated or managed to a greater or lesser extent by the actions of the Board in appointing competent investment managers and custodians. In addition, the Board seeks to put in place, through its contractual arrangements and through various monitoring processes, controls which should avert (but do not guarantee the avoidance of) what might be regarded as operational mistakes. However, investment tends to involve both risk and opportunity regarding future prospects, and the Board cannot avoid either in the Company's search for returns.
Other financial risks are detailed in note 15 to the Financial Statements.
Board Diversity
The Board recognises the importance of having a range of skilled, experienced individuals with the right knowledge in order to allow the Board to fulfill its obligations. At 31 March 2015, there were three male Directors and one female Director.
Environmental, Social and Human Rights Issues
The Company has no employees as it is managed by Aberdeen Fund Managers Limited and there are therefore no disclosures to be made in respect of employees. The Company's socially and environmentally responsible investment policy is outlined in the Statement of Corporate Governance in the full Annual Report.
Global Greenhouse Gas Emissions
The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.
Duration
The Company does not have a fixed life but an Ordinary resolution to continue the Company is put to shareholders at each Annual General Meeting ("AGM").
Hasan Askari
Chairman
11 June 2015
STRATEGIC REPORT - CHAIRMAN'S STATEMENT
Dear Shareholder,
I am pleased to report that your Company's net asset value ("NAV") rose by 46.3% to reach 385.49p, for the year ended 31 March 2015. The Ordinary share price rose 56.4% to 352.00p. This resulted in a narrowing of the discount to NAV from 14.6% to 8.7%. By comparison, the benchmark MSCI India Index (Sterling-adjusted) gained 35.6%.
It is gratifying to note the significant outperformance of the NAV relative to the benchmark. This is an acknowledgement of your Manager's successful bottom-up investment approach, which focuses on defensive business models, healthy balance sheets, proven management, transparency and good corporate governance.
The stock market's vigour owed much to the victory in the 2014 elections of the Bharatiya Janata Party ("BJP") early in the review period, which kindled a sustained rally. Share prices repeatedly tested new highs over the course of the year. Investors seemed confident that the policies of the BJP government led by Narendra Modi would be a departure from those pursued by Congress, its predecessor, which had faced unrelenting criticism over alleged corruption and deteriorating economic growth. Mr Modi's initial attempts to galvanise the economy did not disappoint. Investors embraced the new leadership's decisiveness in reducing resource-crippling fuel subsidies, albeit this was no doubt helped by the plunge in global crude oil prices. They also generally welcomed the BJP's inaugural budget, which focused on development and reform. The passage of laws that lifted foreign ownership in life insurance companies and allowed the re-auction of licences to mine coal commercially was also well received.
Meanwhile, quarterly GDP growth rebounded above 5%, after nearly two years of moribund expansion below that level. Further endorsement came from the International Monetary Fund and World Bank, which expected India's growth to surpass China's in a few years. On the ground, however, the picture was slightly different, with various industrial segments still facing uncertain demand. The reprieve offered by falling crude oil prices and the consequent easing of inflationary pressures allowed the central bank to make two unscheduled interest rate cuts back to back towards the end of the review period.
Arguably, the market rally would not have been sustained without expectations of further monetary easing that underpinned sentiment worldwide. Even as the US Federal Reserve ended its quantitative easing programme, central banks in Japan, China and Europe loosened policy to prop up their own slowing economies, and the enhanced liquidity created by these policies helped buoy Indian stocks.
Against this backdrop, your Company's lack of exposure to energy-related stocks was a key contributor to performance, given the sector's reversal of fortunes caused by the decline in oil prices. The materials sector was also relatively weak, but the portfolio's holdings here did remarkably well, thereby rewarding your Company with excellent returns. A notable contributor was industrial paints specialist Kansai Nerolac Paints. Elsewhere, consumer-related holdings rose on hopes of a recovery in demand, with auto-parts maker Bosch standing out. Conversely, Jammu & Kashmir Bank detracted, although the portfolio's other financial holdings did well on expectations of easing interest rates and an improvement in spending. Meanwhile, the health care sector rallied as exporters were bolstered by signs of a US economic recovery and dollar strength, so the relatively light exposure to Sun Pharmaceutical Industries weighed on returns. A detailed discussion follows in the Investment Manager's Report.
Indian Minimum Alternative Tax
Following the end of the Company's financial year, the issue of the possible application of Minimum Alternative Tax ("MAT") to foreign portfolio investors in India has generated much commentary and concerns that foreign investors could be liable for tax going back several years. Your Company welcomed the subsequent clarification by the Indian Central Board of Direct Taxes that companies which benefitted from double taxation treaties were exempt from the MAT levy. The Board will continue to monitor developments carefully but does not anticipate the imposition of MAT on the Company or its subsidiaries. Further information on MAT may be found in the Statement of Corporate Governance within the full Annual Report.
Continuation of the Company
Your Board considers that the Company's investment objective remains relevant and appropriate and therefore recommends that Shareholders vote in favour of resolution 8 at the Annual General Meeting, to allow the Company to continue as an investment trust.
Alternative Investment Fund Managers Directive
The Company reported, in its Half-Yearly Report, the changes made to its arrangements with the Aberdeen Group in July 2014 as a result of the implementation of the AIFMD in the UK. This resulted in the appointments in July 2014 of a new alternative investment fund manager, Aberdeen Fund Managers Limited ("AFML"), and a depositary, BNP Paribas Securities Services, London Branch. These regulatory changes have also placed additional periodic disclosure requirements on the Company's AIFM, AFML. As a result, your Annual Report now contains additional unaudited disclosures which may be found at the end of this Report. There is no change in the commercial arrangements from the previous investment management agreement which was in place up to 14 July 2014, other than, with effect from 21 November 2014, the Manager also agreed to forego any current and future entitlement to a performance fee from the Company.
Manager
Your Board has carefully considered the continued appointment of your Manager. The Manager's recent performance and long-term track record, as well as their expertise and tested investment style, make the case for their continued appointment.
Presentational changes
Following the issuance by the International Accounting Standards Board in December 2014 of Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28), IFRS 10 now states that investment entities should measure all of their subsidiaries that are themselves investment entities, at fair value. As a result, the Company's Mauritian subsidiary through which certain investments are purchased, which was previously consolidated into the Company's Financial Statements, is now measured at fair value.
This change has not affected the net assets, profit before tax or net assets per share but has resulted in certain presentational changes. The Financial Statements and notes for the comparative period ended 31 March 2014 have been restated applying the amended standard.
Annual General Meeting
The Annual General Meeting ("AGM") will be held at Bow Bells House, 1 Bread Street, London EC4M 9HH on Wednesday 9 September 2015 at 12.30pm and provides shareholders with an opportunity to meet the Board and to ask any questions that they may have of either the Board or the Manager. I look forward to meeting as many of you as possible.
Outlook
Since the Company's year end on 31 March 2015, the Indian stock-market has turned more circumspect following the celebratory rally of the past 12 months. While investors still seem genuinely encouraged by Prime Minister Modi's restructuring efforts thus far, they also recognise that economic headwinds and structural shortcomings persist. The BJP's election defeat in Delhi, its first major loss in state elections since it came to power, was also a reminder of the uncertain state of politics in India and how conflicting interests can derail the reform agenda. Whether the new government is able to garner enough support to push through further reforms, such as rationalising the tax system by implementing a nationwide goods-and-services tax or speeding up the approval of infrastructure projects with the Land Acquisition Act, remains to be seen. Retooling the economy is expected to be a long-term undertaking.
At the corporate level, earnings growth remains muted and this is reflected in the stock market, with share prices having fallen since the review period ended. This is not necessarily a cause for worry. The best of Indian companies have always thrived in the worst of circumstances and any market correction would be an opportunity to add fairly-priced stocks. Long term, India's prospects remain undiminished.
Hasan Askari
Chairman
11 June 2015
STRATEGIC REPORT - INVESTMENT MANAGER'S REPORT
Portfolio Overview
The Company's net asset value rose by 46.3% in Sterling terms in the 12 months ended 31 March 2015, compared to the benchmark MSCI India Index's 35.6% gain, in total return terms.
While the materials sector as a whole was one of the weakest index performers over the period, our positive stock selection within the sector meant it was the key contributor to the Company's relative returns. Kansai Nerolac Paints did particularly well on the back of robust earnings and the optimistic outlook for auto-sector demand. The plunge in oil prices also helped contain input costs. Likewise, our consumer discretionary stocks also proved advantageous on expectations that a cyclical recovery would boost auto-related businesses; Bosch was the top contributor, despite flat revenues.
Our lack of exposure to energy stocks provided a further boost, given the sector's poor performance. Index heavyweight Reliance Industries, which we do not own, was particularly out of favour following mediocre results from several divisions, a lack of clarity on gas prices, and concerns over its foray into non-core businesses such as telecommunications and US shale. Oil & Natural Gas Corporation also underperformed on uncertainty over its subsidy burden.
Elsewhere, your utility holding Gujarat Gas had a very good run in the wake of its merger with parent Gujarat State Petroleum Corporation and a favourable change in natural gas allocation policy, which should support margins. In the industrials sector, Container Corp of India (Concor) and ABB India were notable contributors on decent results and anticipation of a pick-up in industrial activity. Concor was further buoyed by the proposed dedicated freight corridor; it stands to be a key beneficiary, given its dominance among railway-cargo transporters. Meanwhile, consumer staples stock Nestlé India did well on better consumer spending and an improving economic outlook.
Conversely, our underweight position in healthcare weighed on relative performance. It was the best performing sector over the year as the improving US economy and weaker Rupee lifted sentiment for exporters. Furthermore, Indian pharmaceuticals are developing increasingly sophisticated products, helping them to advance up the value chain. Our stock selection also detracted, largely due to sharp share price gains among some of our non-holdings. We initiated Sun Pharmaceuticals during the period, which outperformed, but it weighed on relative returns due to our underweight exposure relative to the benchmark. On the other hand, Lupin was a prominent contributor, making decent progress on its product pipeline and high-margin complex generic drugs.
Our underweight position to the IT sector proved costly; it staged a comeback on a recovery in offshore earnings. Holding Mphasis weighed on the portfolio as its results were poor, due partly to losses at Digital Risk, its recent acquisition. Management is confident this is a short-term lapse. Infosys detracted due to our underweight position, after it rebounded following its successful management handover. It remains a core holding. Elsewhere, Jammu & Kashmir Bank was a notable detractor on concerns over deteriorating asset quality. Against that, financial holdings HDFC Bank, Gruh Finance, ICICI Bank and ING Vysya Bank gained alongside the broader sector on expectations of accelerating economic growth and easing interest rates.
Economic News
The Bharatiya Janata Party's ("BJP") landslide election win early in the period kicked off a protracted celebration in India's stockmarkets, driven by expectations that Prime Minister Narendra Modi would revive India's flagging economy with a series of business-friendly, pro-growth reforms. There were early signs of a nascent recovery: fiscal first-quarter GDP growth came in at 5.7% - welcome after almost two years of sub-5% growth - while S&P upgraded its outlook on the country's credit rating to stable from negative. Meanwhile, more recent forecasts have pointed to India boasting one of the world's fastest-growing major economies over the next couple of years. The IMF expects GDP growth of 7.2% in 2015.
Early signs of economic recovery were arguably less to do with policy progress and more to the collapse in global oil prices, given India's position as a net importer. The current account deficit has narrowed measurably, while the trade deficit fell to multi-quarter lows in February; but the effects were felt most keenly in inflation readings. After preoccupying monetary policy-makers and dominating economic news flow for several quarters, consumer prices eased markedly, becoming much less of an issue. Even the Reserve Bank of India, which had made no secret of its predilection for managing inflation over actively supporting growth, was pacified enough to cut interest rates twice in the first quarter of 2015. Modi also took the opportunity to chip away at costly fuel subsidies. However economic momentum was sustained. Lacklustre manufacturing, industrial production and exports remained perennial sticking points.
In politics, the BJP suffered its first major stumble, losing the Delhi state elections to the Aam Aadmi Party in late 2014. However, its inaugural annual budget was largely encouraging. While it lacked bold transformations, it did provide a clear, consistent road map for reforms. Finance Minister Arun Jaitley emphasised the pursuit of growth through public spending, as the fiscal deficit took a back seat. He delivered a programme of structural and business-friendly initiatives, as well as tax cuts for the corporate sector and more welfare for the poor. Elsewhere, Modi chalked up his first significant reform win, passing two bills in the upper house of parliament he had earlier forced through temporarily via executive order; raising the limit on foreign ownership of life insurance companies, and permitting the auction of coal-block allowances previously revoked by the Supreme Court.
Sector Views
Information Technology
We continue to like IT companies despite sluggish growth in the software sector - the unsurprising outcome of uncertainty in the global macroeconomic environment. The major Indian IT outsourcing companies are leaders in their field; they have attractive cost structures, qualified management and competitive software engineering skills. Our core positions are in Infosys and Tata Consultancy Services, both of which boast robust balance sheets, generate healthy cash flows, and have diversified global presences. We complement this position with smaller holdings in CMC and Mphasis.
Infosys enjoyed resilient demand in the December quarter, which boosted margins and helped fortify already healthy cash reserves. Meanwhile, CEO, Dr Vishal Sikka, announced plans to restructure the organisation to streamline internal functions and improve efficiency. The company also acquired Israel-based software automation services provider Panaya for US$200 million. This will enhance Infosys' automation technologies, expand its client base and allow it to cross-sell services. The move signals management's resolve to put its US$5.5 billion cash pile to good use.
Against that, Mphasis suffered declining contributions from parent HP, as well as a soft US mortgage market, which drove losses at acquisition Digital Risk. This overshadowed progress in its direct channel business. While this is disappointing, management is confident it can turn the business around. It is one of our portfolio's cheapest stocks at 11x price-to-earnings, with a 4.3% dividend yield.
Energy
Over the decades, India has failed to meet the challenge of providing its public reliable and reasonably priced energy. The pace of reform has been slow, even with the BJP at the helm. However, more recent steps have been encouraging. Modi took advantage of the slump in oil prices and the popular momentum afforded by election wins in two key states to announce diesel deregulation and a hike in natural gas prices which permitted price increases in liquefied petroleum gas to be more directly passed on to consumers.
Despite these promising developments, we remain wary of investing directly in the sector. We do not have exposure to index heavyweight Reliance Industries as we are uncomfortable with its aggressive expansion plans into upstream resource exploration, telecommunications and possibly financial services. These often require extensive capital outlay in areas where the company has neither a proven track record nor a clear competitive advantage. We also continue to avoid public sector energy companies. For one, the budget's lower provisions for oil and gas sector subsidies could see state-run upstream firms assume more of the burden.
Financials
Although fragmented and competitive, we have a substantial position in the banking sector, which is poised to benefit in the long term from middle-class wealth expansion. We like banks that can manage risks throughout the credit cycle and have a strong deposit-collecting franchise. Public-sector banks, which comprise 70% of the sector, have been the key casualties of the diminishing credit cycle. Our private-sector holdings are more resilient, thanks to their relatively prudent underwriting standards.
A key event during the period was Kotak Mahindra Bank's all-stock merger with ING Vysya Bank, creating India's fourth-largest private lender. We believe this is a good deal for both parties as Kotak will benefit from a stronger presence in the south and in small-to-medium business banking, while capital constraints will no longer hinder ING Vysya's franchise-expansion plans.
Unfortunately, ICICI Bank suffered deteriorating asset quality in its corporate loan book, which could take a few more quarters to stabilise. Management remains cautious and does not expect a recovery in growth until 2017. That said, the bank has a robust retail franchise, is well capitalised and has a decent return on equity. Jammu & Kashmir Bank has also had to lift provisions on the back of flagging asset quality. Looking ahead, the level of non-performing loans may increase for a period after June 2015 following the end of a temporary exemption allowing banks to exclude restructured loans from the onerous provisioning requirements related to non-performing loans; however, this is a bigger risk for public-sector banks. A turnaround in the credit cycle relies on a sustained economic recovery and the resumption of stalled infrastructure projects.
Consumer Discretionary
We like the automotive story in India, as the sector also stands to benefit from rising disposable incomes. We especially favour the two-wheeler segment due to its relative affordability. Since motorcycles are seen as a necessity rather than a luxury, the segment is more resilient in difficult times compared to four-wheelers. We are shareholders in the re-branded Hero MotoCorp. The company suffered anaemic demand in the December quarter, while margins came under pressure from higher labour and promotion costs. However, profits were still 23% higher year-to-date. We also hold Bosch Ltd, another auto-sector related company.
Consumer Staples
We hold both local and multinational brands in the competitive, fast-moving consumer goods landscape. Homegrown brands have the advantage in catering to local tastes and regional preferences, while the multinationals have strong brands and more aspirational products. We select the best from both worlds - Hindustan Unilever has the widest portfolio of household and personal products; ITC, an associate of British American Tobacco, has a thriving tobacco business; and Godrej Consumer Products is a leader in the personal care, hair, and household segments both locally and in emerging markets.
Consumer demand has picked up after a relatively soft first half of the financial year. Nestle India, Hindustan Unilever and Godrej Consumer Products all reported good earnings growth and improved margins as flagging commodity prices pulled down input costs. Godrej is performing particularly well in Indonesia, Africa and Latin America. On the other hand, ITC's results were relatively lacklustre. Tax hikes weighed on revenues from cigarettes, although profits for the division still rose 10% on price increases and good cost control. However, there were further tax increases in the budget, which could well put more pressure on volumes. That said, ITC's non-cigarette fast-moving consumer goods (FMCG), hospitality and packaging businesses should help cushion the impact of softer cigarette sales.
Materials
While the fund has a significant exposure to the sector, we do not hold any metals and mining companies. They are extremely cyclical, tend to be highly leveraged and are often backed by aggressive promoters. To us, the most attractive materials businesses are cement companies. We hold Grasim Industries, the flagship company of the Aditya Birla Group, and complement this with its pure cement subsidiary UltraTech Cement, as well as Ambuja Cements and ACC Ltd, which are owned by Swiss group Holcim.
In quarterly results, UltraTech Cement, Ambuja and ACC benefited from improved demand; however, prices were soft, while costs remained high. These pressures are likely to linger over the near term, particularly given the higher freight charges announced in the rail budget. The government's commitment to higher infrastructure spending is good news, though, and will benefit the cement industry over the long term. Elsewhere, Aditya Birla Chemicals India will merge with Grasim Industries through a share swap, as the group looks to amalgamate related businesses. Grasim will become the group's vehicle for chemicals services, while subsidiary Ultratech will house the cement businesses.
We are also invested in well-run, financially stable and market-leading multinational subsidiaries such as the paint maker, Kansai Nerolac, industrial gases and engineering firm Linde India, and industrial lubricant producer Castrol India. Castrol's full-year profits were down on the back of muted auto demand and flat oil prices in the December quarter. Linde's quarterly profits benefited from higher gas sales as its Rourkela plant came on-stream, while Kansai reported a 30% jump in profits for the first nine months of the financial year; however demand slackened in the December quarter.
Healthcare
India has a vibrant healthcare industry given the operational strength of its pharmaceutical companies and access to a substantial scientific talent pool. Our holdings include a mix of multinational subsidiaries (GlaxoSmithKline Pharmaceuticals and Sanofi India) that channel their products into the Indian market, as well as local company, Piramal Enterprises, and Lupin, a well-run generic drug maker with an attractive product pipeline and healthy balance sheet. We also bought Sun Pharmaceuticals during the quarter.
Our healthcare stocks reported largely lacklustre results for the December quarter. Glaxo India's earnings suffered from supply constraints and higher costs while Sanofi's earnings were flat as a gain from the disposal of a commercial building counterbalanced the hit from higher wages and price controls on key products. Delayed US approvals and currency fluctuations weighed on Lupin's performance, overshadowing robust growth in Japan and Africa, however, its share price rose alongside the broader sector.
Industrials
The sector remains dogged by challenges, including a slowdown in industrial activity, infrastructure bottlenecks, regulatory uncertainty, and high leverage. Our exposure is limited to ABB India, a manufacturer and distributor of power and automation equipment, and Container Corporation of India (Concor), a rail-freight operator.
Concor's results were surprisingly healthy as robust and sustainable growth in export-import cargo, coupled with price hikes, more than offset higher haulage charges. That said, management warned that upcoming haulage rate hikes could dampen domestic traffic. As such, we anticipate flat profits this year. ABB's flat earnings reflected restrained demand as customers remained cautious on power and infrastructure projects. However, the company anticipates greater opportunities in renewables and around Modi's smart cities initiative. Meanwhile, decent execution, improved productivity and good cost management drove a 44% increase in quarterly profits, while full-year profits grew by 27% year-on-year.
Utilities
This sector, made up of power and gas utilities, has also been hamstrung by shortages of key inputs, as well as regulatory uncertainty. Gujarat Gas's December quarter earnings were relatively poor, as sluggish industrial activity and customer switching weighed on sales. That said, the company could benefit from synergies following the merger with Gujarat State Petroleum Corporation. Gail India's performance suffered from falling demand, declining gas availability, higher input costs and a greater subsidy burden. Elsewhere, Tata Power had a profitable quarter, despite weaker coal contribution and further losses at its Mundra power plant as the tariff issue remained unresolved.
Telecommunication Services
The Indian telecommunications market is one of the most competitive in the world and the large players (e.g. Bharti Airtel, Reliance Communications, Vodafone and Idea) battle hard for market share. That said, the domestic market has been more buoyant recently, driven by a period of relatively benign competition and robust data growth; although, Bharti Airtel's improving domestic performance continues to be marred by softness in Africa. Meanwhile, the recent telecoms spectrum auction raised US$18 billion for the government, exceeding expectations. The top three operators, including Bharti Airtel, spent a total of US$13.6 billion, buying up 80% of the spectrum available.
Strategy
Sentiment toward Indian equities has turned decidedly more cautious recently.
The market's stellar run over the past year was largely based on expectations following Modi's decisive election win. Investors launched a lengthy celebration of anticipated reforms, long-awaited infrastructure development, a surge in investment, and accelerated economic growth, before most of it actually happened. Modi has made considerable inroads during his first year in office; the recent passage of two key bills is particularly encouraging. However, India is no quick fix and Modi's approach is characteristically slow and steady.
Meanwhile, little has changed for India Inc. Businesses have yet to see a material upswing in earnings and many are keeping the lid firmly shut on capital expenditure. More recently, the finance minister's revelation that the minimum alternative tax (MAT) would be retroactively applied to foreign fund managers registered in India, potentially raising as much as US$6.4 billion for the government, caused a series of market tremors. It also provided a stark reminder to foreign firms of the risks of swimming in India's murky regulatory waters. Given these factors, returns could well be more modest over the medium term.
We are relatively sanguine about short-term market fluctuations, which provide an ideal opportunity to stock up on high-quality companies at attractive valuations. The country offers a multitude of well-run, shareholder-friendly firms, with solid balance sheets and excellent growth potential. For long-term stockpickers like us, India remains an exciting investment destination. The fund is currently positioned to benefit from the country's growing domestic consumption, as well as demand for high-quality financial and IT services, and pharmaceutical products. If and when reforms spark greater industrial activity and increased infrastructure investment, our cement holdings should also do well.
Portfolio changes
In the review period, we bought generic drugmaker Sun Pharmaceuticals. A solid company, with a good track record, its current valuation does not reflect potential synergies with acquisition Ranbaxy. The combined entity offers a broader product suite and has less reliance on the US market. We also bought shares in tower infrastructure firm Bharti Infratel, as we like its business model, healthy cashflows and robust balance sheet and believe it will benefit from India's growing appetite for data. A holding was also purchased in Kotak Mahindra Bank as we consider that its management has navigated the financial cycles well, consistently avoiding major financial pitfalls, while maintaining one of the sector's highest rates of asset and loan growth over the last decade.
Elsewhere, we participated in Tata Power's rights issue, increasing our holding at an attractive discount. However, we did not participate in HDFC Bank's $1.6 billion share sale, given the meagre discount. We have exposure to the Bank both directly, as well as through HDFC.
Aberdeen Asset Management Asia Limited
Investment Manager
11 June 2015
STRATEGIC REPORT - RESULTS
Financial Highlights
|
|
31 March 2015 |
31 March 2014 |
% change |
|
Total equity shareholders' funds (net assets) |
£227,708,000 |
£155,680,000 |
+46.3 |
|
Market capitalisation |
£207,926,893 |
£132,907,815 |
+56.4 |
|
Share price (mid market) |
352.00p |
225.00p |
+56.4 |
|
Net asset value per share |
385.49p |
263.55p |
+46.3 |
|
Discount to net asset value |
8.7% |
14.6% |
|
|
|
|
|
|
|
Total return/(loss) per share |
121.94p |
(5.16p) |
|
|
Revenue loss per share{A} |
(0.39p) |
(0.36p) |
|
|
Revenue reserves per share{A} |
0.54p |
1.29p |
|
|
Prospective gross portfolio yield{B} |
1.3% |
1.5% |
|
|
MSCI India portfolio yield{B} |
1.4% |
1.5% |
|
|
Prospective portfolio P/E ratio{C} |
26.2x |
20.3x |
|
|
|
|
|
|
|
Ongoing charges |
|
|
|
|
Ongoing charges ratio{D} |
1.40% |
1.60% |
|
|
{A} The 2014 financial statements have been restated to reflect the change to accounting policies as set out in the accompanying notes.
|
|||
|
{B} Source - Aberdeen Asset Management Asia Limited (estimated information)/Factset. |
|||
|
{C} Consensus broker views. |
|||
|
{D} Ongoing charges ratio is calculated in accordance with guidance issued by the AIC as the total of the investment management fee and ongoing administrative expenses of the Company and its Subsidiaries divided by the average daily published cum income net asset value throughout the year. |
|||
Performance (total return)
|
|
1 year |
3 year |
5 year |
|
|
% return |
% return |
% return |
|
Share price |
+56.4 |
+58.6 |
+60.5 |
|
Net asset value per Ordinary share |
+46.3 |
+58.0 |
+61.0 |
|
MSCI India Index (sterling adjusted) |
+35.6 |
+41.8 |
+17.1 |
Ten Year Financial Record
|
Year to 31 March |
2006 |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
2013 |
2014 |
2015 |
|
Total income{A} (£'000) |
1,175 |
1,212 |
1,073 |
1,347 |
1,335 |
2,338 |
2,702 |
2,414 |
376 |
341 |
|
Per share (p) |
|
|
|
|
|
|
|
|
|
|
|
Net revenue return |
(0.03) |
0.04 |
(0.89) |
0.18 |
(0.63) |
0.15 |
0.61 |
0.20 |
(0.36) |
(0.39) |
|
Total return |
65.47 |
(5.75) |
24.85 |
(41.03) |
139.19 |
31.71 |
(24.95) |
24.75 |
(5.16) |
121.94 |
|
Net asset value per share (p) |
|
|
|
|
|
|
|
|
|
|
|
Basic |
158.47 |
152.71 |
177.52 |
137.45 |
275.42 |
268.90 |
243.96 |
268.71 |
263.55 |
385.49 |
|
Diluted |
146.12 |
141.58 |
161.18 |
129.36 |
239.44 |
n/a |
n/a |
n/a |
n/a |
n/a |
|
|
______ |
______ |
______ |
______ |
______ |
______ |
______ |
______ |
______ |
______ |
|
Shareholders' funds (£'000) |
75,797 |
73,054 |
84,968 |
63,653 |
129,320 |
158,842 |
144,105 |
158,726 |
155,680 |
227,708 |
|
|
______ |
______ |
______ |
______ |
______ |
______ |
______ |
______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
|
|
|
|
The figures for 2006 are for the period 1 March 2005 to 31 March 2006. The figures for 2007 onwards are for the year to 31 March. |
||||||||||
|
{A} Figures for 2006 - 2013 include subsidiary company New India Investment Company (Mauritius) Limited; excluded from 2014 and 2015 following adoption of Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27 (2012)) which is more fully discussed in note 2 (a). |
||||||||||
Investment Portfolio - Ten Largest Investments
As at 31 March 2015
|
|
|
Valuation |
Net assets |
Valuation |
|
|
|
as at |
as at |
as at |
|
|
|
31 March 2015 |
31 March 2015 |
31 March 2014 |
|
Company |
Sector |
£'000 |
% |
£'000 |
|
Housing Development Finance Corporation |
|
|
|
|
|
Leading domestic mortgage provider with a leading distribution network, cost structure and balance sheet quality. |
Financials |
20,811 |
9.1 |
13,434 |
|
Tata Consultancy Services |
|
|
|
|
|
A major information technology and software service provider. |
Information Technology |
15,956 |
7.0 |
12,749 |
|
Infosys |
|
|
|
|
|
One of the leading information technology companies in India. |
Information Technology |
15,873 |
7.0 |
12,592 |
|
ICICI Bank |
|
|
|
|
|
Leading commercial bank group with a strong presence in insurance, brokerage and asset management activities. |
Financials |
13,262 |
5.8 |
11,280 |
|
Bosch |
|
|
|
|
|
The listed subsidiary of Bosch in India, it manufactures and supplies automotive components for passenger vehicles and trucks. |
Consumer Discretionary |
12,057 |
5.3 |
5,610 |
|
Ambuja Cements{A} |
|
|
|
|
|
A manufacturer of cement and owner of specially designed ships and terminals built for transportation of its goods. |
Materials |
8,737 |
3.8 |
6,140 |
|
ITC |
|
|
|
|
|
The leading manufacturer and distributor of cigarettes in India. It supplements this by selling other consumer products through its extensive distribution network. An associate of British American Tobacco. |
Consumer Staples |
8,549 |
3.8 |
6,324 |
|
Hero MotoCorp |
|
|
|
|
|
The world's largest producer of motorcycles. |
Consumer Discretionary |
7,963 |
3.5 |
6,390 |
|
Container Corporation of India |
|
|
|
|
|
India's largest container freight operator. The government-owned company is primarily engaged in rail carrier services and terminal & warehousing operating activities. |
Industrials |
7,912 |
3.5 |
4,533 |
|
Lupin |
|
|
|
|
|
One of the oldest and largest generic pharmaceutical companies in India with US being its key revenue source and Japan growing in contribution. |
Healthcare |
7,869 |
3.5 |
2,336 |
|
Top ten investments |
|
118,989 |
52.3 |
|
|
Portfolio investments reflect consolidated investee holdings of both the parent company (New India Investment Trust PLC) and its subsidiary company (New India Investment Company (Mauritius) Limited). |
||||
|
{A} Comprises equity and listed or tradeable ADR and GDR holdings. |
||||
Investment Portfolio - Other Investments
As at 31 March 2015
|
|
|
Valuation |
Net assets |
Valuation |
|
|
|
as at |
as at |
As at |
|
|
|
31 March 2015 |
31 March 2015 |
31 March 2014 |
|
Company |
Sector |
£'000 |
% |
£'000 |
|
Hindustan Unilever |
Consumer Staples |
7,795 |
3.4 |
5,050 |
|
Godrej Consumer Products |
Consumer Staples |
7,151 |
3.1 |
5,599 |
|
Nestlé India |
Consumer Staples |
7,022 |
3.1 |
4,038 |
|
HDFC Bank |
Financials |
6,384 |
2.8 |
5,488 |
|
Grasim Industries{A} |
Materials |
6,295 |
2.8 |
4,665 |
|
Kansai Nerolac Paints |
Materials |
6,293 |
2.8 |
3,214 |
|
Gujarat Gas |
Utilities |
5,885 |
2.5 |
2,413 |
|
Piramal Enterprises |
Healthcare |
5,222 |
2.3 |
3,051 |
|
Ultratech Cement{A} |
Materials |
5,038 |
2.2 |
3,559 |
|
MphasiS |
Information Technology |
4,477 |
2.0 |
4,303 |
|
Top twenty investments |
|
180,551 |
79.3 |
|
|
Bharti Airtel |
Telecommunication Services |
4,070 |
1.8 |
2,286 |
|
ACC |
Materials |
3,922 |
1.7 |
2,951 |
|
ABB India |
Industrials |
3,784 |
1.7 |
2,394 |
|
Linde India |
Materials |
3,455 |
1.5 |
2,358 |
|
Sanofi India |
Healthcare |
3,395 |
1.5 |
2,934 |
|
Gruh Finance |
Financials |
2,977 |
1.3 |
1,695 |
|
ING Vysya Bank |
Financials |
2,776 |
1.2 |
1,761 |
|
GlaxoSmithKline Pharmaceuticals |
Healthcare |
2,564 |
1.1 |
1,388 |
|
CMC |
Information Technology |
2,477 |
1.1 |
1,661 |
|
Kotak Mahindra Bank |
Financials |
2,466 |
1.1 |
- |
|
Top thirty investments |
|
212,437 |
93.3 |
|
|
GAIL (India) GDR |
Utilities |
2,452 |
1.1 |
2,530 |
|
Jammu & Kashmir Bank |
Financials |
2,033 |
0.9 |
3,103 |
|
Castrol India |
Materials |
1,995 |
0.9 |
1,211 |
|
Sun Pharmaceutical Industries |
Healthcare |
1,866 |
0.8 |
- |
|
Tata Power |
Utilities |
1,844 |
0.8 |
1,733 |
|
Biocon |
Healthcare |
1,207 |
0.5 |
- |
|
Bharti Infratel |
Telecommunication Services |
1,160 |
0.5 |
- |
|
Total portfolio investments |
|
224,994 |
98.8 |
|
|
Other net current assets held in subsidiaries |
704 |
0.3 |
|
|
|
Total investments |
|
225,698 |
99.1 |
|
|
Net current assets |
|
2,010 |
0.9 |
|
|
Net assets |
|
227,708 |
100.0 |
|
|
Unless otherwise stated, investments are in common stock. Purchases and/or sales effected during the year will result in 2015 and 2014 values not being directly comparable. Where 2014 valuation is "-" this indicates the company was not held at the previous year-end. |
||||
|
Portfolio investments reflect consolidated investee holdings of both the parent company (New India Investment Trust PLC) and its subsidiary company (New India Investment Company (Mauritius) Limited). |
||||
|
{A} Comprises equity and listed or tradeable ADR and GDR holdings. |
||||
DIRECTORS' REPORT
Status
The Company is registered as a public limited company in England & Wales under company number 02902424. The Company is an investment company as defined by Section 833 of the Companies Act 2006 and is a member of the Association of Investment Companies.
The Company has been approved by HM Revenue and Customs as an investment trust under Sections 1158 - 1159 of Corporation Tax Act 2010 and Part 2 Chapter 1 Statutory Instrument 2011/2999 for all financial years commencing on or after 1 April 2012, subject to the Company continuing to meet the relevant eligibility criteria.
The Company intends to manage its affairs so as to be a qualifying investment for inclusion in the stocks and shares component of an Individual Savings Account and it is the Directors' intention that the Company should continue to qualify.
Results
The Company's results, including its performance for the year against its Key Performance Indicators, may be found in Results. The Company is not paying a dividend for the year ended 31 March 2015 (2014 - nil). Further information about the KPIs set by the Board is in the Overview of Strategy.
Strategic Report
The Strategic Report, including the Chairman's Statement and the Investment Manager's Report, is intended to provide shareholders with the information and measures that the Directors use to assess, direct and oversee the Manager in the management of the Company's portfolio.
The Company's investment objective and investment policy are set out on in the Company Summary and Overview of Strategy, respectively.
The investment portfolio at the year end, which contained 37 companies, is set out above.
Performance
During the year ended 31 March 2015, the Company's net asset value per share rose by 46.3%, which was ahead of the benchmark, the MSCI India (Sterling-adjusted), which rose 35.6% over the same period (all figures in Sterling total return terms).
Oversight and Review of Performance
The Board meets at least four times a year to review performance with the Manager. As well as carrying out the matters set out in the Statement of Corporate Governance (which may be found in the full Annual Report), the Board receives, for each meeting, a detailed portfolio report and an analysis of economic indicators. The Board discusses performance and strategy, including economic conditions, and uses such measures as attribution analysis against the benchmark to assess the Company's success in achieving its objectives.
Capital Structure
There have been no changes to the Company's issued share capital during the year. The issued Ordinary share capital at 31 March 2015, and at the date of approval of this Report, consisted of 59,070,140 Ordinary shares of 25p. Each Ordinary share of the Company carries one vote at a general meeting of the Company.
Directors
Details of the current Directors are provided in the full Annual Report and on the Company's website. William Salomon retired as a Director at the AGM on 11 September 2014.
The Articles of Association require that Directors retire and be subject to election at the first Annual General Meeting ("AGM") following their appointment and thereafter at the AGM held in the third calendar year following the year in which the Director was elected or last re-elected, and, (except in the case of the Chairman) at each AGM following the ninth anniversary of the date on which the Director was first elected (as opposed to re-elected). With effect from the year ended 31 March 2014, the Board has adopted a policy that all Directors will normally retire at each AGM and stand for re-election.
The re-elections of Hasan Askari, Rachel Beagles, Victor Bulmer-Thomas and Stephen White as Directors were considered by the Board, with each relevant Director abstaining, and are recommended to shareholders. The reasons for the Board's recommendations are set out in the Statement of Corporate Governance, which may be found in the full Annual Report.
Directors' Insurances and Indemnities
The Company maintains insurance in respect of Directors' and Officers' liabilities in relation to their acts on behalf of the Company. Furthermore, each Director of the Company is entitled to be indemnified out of the assets of the Company to the extent permitted by law against all costs, charges, losses, expenses and liabilities incurred by them in the actual or purported execution and/or discharge of their duties and/or the exercise or purported exercise of their powers and/or otherwise in relation to or in connection with their duties, powers or office. These rights are included in the Articles of Association of the Company and the Company has granted indemnities to each Director on this basis.
Corporate Governance
The Statement of Corporate Governance, which forms part of the Directors' Report, may be found in the full Annual Report.
Manager and Company Secretary
Management and Secretarial Agreements
The Company's investment management arrangements with the Aberdeen Group were reorganised during the year. This followed the Alternative Investment Fund Managers Directive (the "Directive"), proposed by the EU to enhance shareholder protection, becoming fully implemented in the UK on 22 July 2014. This Directive required the Company to appoint an authorised Alternative Investment Fund Manager and a depositary, the latter overlaying the previous custody arrangements.
The Company appointed Aberdeen Fund Managers Limited ("AFML"), a wholly-owned subsidiary of Aberdeen Asset Management PLC, as its alternative investment fund manager ("AIFM") with effect from 15 July 2014, following AFML's authorisation by the FCA, to act as the Company's Alternative Investment Fund Manager. In order to facilitate this appointment, the Company terminated its existing investment management agreement with Aberdeen Asset Management Asia Limited ("AAM Asia") and entered into a new management agreement with AFML. The new management agreement ("MA") with AFML was agreed on the same commercial terms as the previous agreement with AAM Asia and is also compliant with the new regulatory regime under the Directive. Under the new arrangements, AFML has been appointed to provide the Company with investment management, risk management, administration and company secretarial services as well as promotional activities. The Company's portfolio will continue to be managed by AAM Asia by way of a group delegation agreement in place between AFML and AAM Asia. In addition, AFML has sub-delegated promotional activities to Aberdeen Asset Managers Limited ("AAM") and administrative and secretarial services to Aberdeen Asset Management PLC.
Under the terms of the MA, investment management fees payable to the Manager have been calculated and charged on the following basis throughout the year ended 31 March 2015:
• a monthly fee, payable in arrears, calculated on an annual rate of 1.0% of total assets less current liabilities, with a rebate to the Company for any fees received in respect of any investments by the Company in investment vehicles managed by the Aberdeen Group.
With effect from 21 November 2014, the Manager also agreed to forego any current and future entitlement to a performance fee from the Company. Accordingly, no performance fee was payable to the Manager in respect of the period from 1 April 2014 to 21 November 2014, forming part of the year ended 31 March 2015 (2014 - nil).
The management agreement is terminable by either party on not less than 12 months' notice. In the event of termination on less than the agreed notice period, compensation is payable in lieu of the unexpired notice period.
The fees payable to Aberdeen Group companies during the year ended 31 March 2015 are disclosed in Notes 4 and 5 to the Financial Statements. The investment management fees are chargeable 100% to revenue.
In monitoring the performance of the Manager, the Board considers the investment approach and investment record of the Manager over shorter and longer-term periods, taking into account the Company's performance against the benchmark index and peer group funds. The Board also reviews the management processes, risk control mechanisms and promotional activities of the Manager and, as a result of this review, considers that the continuing appointment of the Manager, on the terms agreed, to be in the interests of the shareholders because the Aberdeen Group has the investment management, promotional and associated secretarial and administrative skills required for the effective operation of the Company. The Board also undertakes a review of the management fees in comparison with peers and believes that the Company's current level of management fees is competitive.
Depositary Agreement
In addition, the Company entered into a depositary agreement with AFML and BNP Paribas, London Branch on 15 July 2014. The appointment of a depositary is a new requirement under the Directive, incorporating the functions of a custodian but also monitoring compliance of the Company with the Directive. In this latter role, the depositary is responsible for: general oversight of the Company, including the valuation, the investment restrictions, the collection of income and the application and distribution of that income; the safekeeping of the Company's financial instruments and appropriate record-keeping and ownership verification of other assets; and monitoring of the Company's cashflows, in particular significant movements, by ensuring that reconciliations are performed.
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 of a diverse portfolio of listed equity shares which in most circumstances are realisable within a short timescale. The Directors are mindful of the principal risks and uncertainties disclosed in the Overview of Strategy and in Note 15 to the Financial Statements and have reviewed cashflow forecasts detailing revenue and liabilities; accordingly, the Directors believe that the Company has adequate financial resources to continue in operational existence for the foreseeable future and for at least 12 months from the date of this Report.
This is also based on the assumption that Ordinary resolution 8, that the Company continues as an investment trust, which will be proposed at the AGM of the Company on 9 September 2015, is passed by shareholders as it has been in the years since it was put in place. The Directors consult annually with major shareholders and, as at the date of approval of this Report, had no reason to believe that this assumption was incorrect.
Substantial Interests
The Company was aware of the following share interests in the Company, above 3%, as at the latest practicable date prior to the approval of this Report:
|
Shareholder |
Number of shares held |
% held |
|
Lazard Asset Management |
12,201,027 |
20.7 |
|
Clients of Aberdeen Asset Management |
11,428,196 |
19.4 |
|
Clients of Hargreaves Lansdown |
3,693,470 |
6.3 |
|
Aberdeen Investment Trusts - ISA and Share plans |
2,531,347 |
4.3 |
|
W H Ireland |
2,171,607 |
3.7 |
|
City of London Investment Management |
2,098,041 |
3.6 |
Accountability and Audit
The Directors who held office at the date of this Report each confirm that, so far as he or she is aware, there is no relevant audit information of which the Company's Auditor is unaware, and he or she has taken all the steps that he or she could reasonably be expected to have taken as a Director in order to make him or her aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.
Independent Auditor
Ernst & Young LLP ("EY") have expressed their willingness to continue in office. Resolution 7 to re-appoint EY as Independent Auditor of the Company for the ensuing year and to authorise the Directors to fix their remuneration, will be put to shareholders at the forthcoming AGM.
Annual General Meeting
The AGM will be held on 9 September 2015 and the AGM Notice and related notes may be found in the full Annual Report. Resolutions relating to the following items will be proposed at the AGM:-
Continuance of the Company
In accordance with Article 160 of the Articles of Association of the Company adopted on 22 September 2011, the Directors are required to propose an Ordinary resolution at each AGM of the Company that the Company continue as an investment trust. Accordingly, the Directors are proposing that the Company continues as an investment trust and recommend that shareholders support the continuance of the Company by voting in favour of resolution 8.
Share Repurchases
At the AGM held on 11 September 2014, shareholders approved the renewal of the authority for the Company to repurchase its Ordinary shares, which was unused at the date of approval of this Report.
The principal aim of a share buy-back facility is to enhance shareholder value by acquiring shares at a discount to net asset value as and when the Directors consider this to be appropriate. The purchase of shares, when they are trading at a discount to net asset value per share, should result in an increase in the net asset value 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 net asset value per share for the remaining shareholders, and if it is in the best interests of shareholders generally. Any purchase of shares will be made within guidelines established from time to time by the Board. It is proposed to seek shareholder authority to renew this facility for another year at the AGM. Under the current Listing Rules, the maximum price that may be paid on the exercise of this authority must not exceed the higher of: (i) 105% of the average of the middle market quotations for the shares over the five business days immediately preceding the date of purchase; and (ii) the higher of the last independent trade and the highest current independent bid on the trading venue where the purchase is carried out. The minimum price which may be paid is 25p per share. Shares which are purchased under this authority will either be cancelled or held as treasury shares.
Special resolution 9 in the Notice of AGM will, if passed, renew the authority to purchase in the market a maximum of 14.99% of shares in issue on 11 June 2015, being the nearest practicable date to the approval of this Report (equivalent to approximately 8.8m Ordinary shares). Such authority will expire on the date of the next AGM or on 30 September 2016, 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. The Directors recommend that shareholders vote in favour of resolution 9.
Issue of Shares
Ordinary resolution 10 in the Notice of AGM will, if passed, renew the authority to allot unissued share capital up to an aggregate nominal amount of £738,376 (equivalent to approximately 3.0 million Ordinary shares, or 5% of the Company's existing issued share capital on 11 June 2015, being the nearest practicable date to the approval of this Report). Such authority will expire on the date of the next AGM or on 30 September 2016, whichever is earlier, which means that the authority will have to be renewed at the next AGM or, if earlier, if the authority has been exhausted.
When shares are to be allotted for cash, the Companies Act 2006 (the "Act") provides that existing shareholders have pre-emption rights and that the new shares must be offered first to such shareholders in proportion to their existing holding of shares. However, shareholders can, by special resolution, authorise the Directors to allot shares otherwise than by a pro rata issue to existing shareholders. Special resolution 11 will, if passed, give the Directors power to allot for cash equity securities up to an aggregate nominal amount of £738,376 (equivalent to approximately 3.0 million Ordinary shares, or 5% of the Company's existing issued share capital at 11 June 2015, 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 next AGM or on 30 September 2016, whichever is earlier, which means that the authority will have to be renewed at the next AGM or, if earlier, if the authority has been exhausted. This authority will not be used in connection with a rights issue by the Company.
The Directors intend to use the authorities given by resolutions 10 and 11 to allot shares, or sell shares from treasury, and disapply pre-emption rights only in circumstances where this will be clearly beneficial to shareholders as a whole. The issue proceeds would be available for investment in line with the Company's investment policy. No issue of shares, or sale of shares from treasury, would be made which would effectively alter the control of the Company without the prior approval of shareholders in general meeting.
Under the Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003 (as amended) (the "Treasury Share Regulations") the Company is permitted to buy back and hold shares in treasury and then sell them at a later date for cash, rather than cancelling them. The Treasury Share Regulations require such sale to be on a pre-emptive, pro rata, basis to existing shareholders unless shareholders agree by special resolution to disapply such pre-emption rights. Accordingly, in addition to giving the Directors power to allot unissued Ordinary share capital on a non pre-emptive basis, resolution 11, if passed, will give the Directors authority to sell Ordinary shares held in 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 net asset value per share. It is also the intention of the Board that sales from treasury would only take place when the Board believes that to do so would assist in the provision of liquidity to the market.
Recommendation
The Board considers Resolutions 8, 9, 10 and 11 to be in the best interests of the Company and its members as a whole and are likely to promote the success of the Company for the benefit of its members as a whole. Accordingly, the Board unanimously recommends that shareholders should vote in favour of the resolutions to be proposed at the Annual General Meeting, as they intend to do in respect of their own shareholdings, amounting to 48,820 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.
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 (for example, insider trading law). The Company is not aware of any agreements between shareholders that may result in a transfer of securities and/or voting rights.
The rules governing the appointment of Directors are set out in the Statement of Corporate Governance, which may be found in the full Annual Report. The Company's Articles of Association may only be amended by a special resolution at a general meeting of shareholders.
The Company is not aware of any significant agreements to which it is a party that take effect, alter or terminate upon a change of control of the Company following a takeover.
Other than the MA with the Manager, further details of which are set out in the section 'Management and Secretarial Agreements', the Company is not aware of any contractual or other agreements which are essential to its business which might reasonably be expected to have to been disclosed in the Directors' Report.
Hasan Askari
Chairman
11 June 2015
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable United Kingdom law and those International Financial Reporting Standards (''IFRSs'') as adopted by the European Union.
Under Company Law the Directors must not approve the Company financial statements unless they are satisfied that they present fairly the financial position, financial performance and cash flows of the Company for that period. In preparing the Company financial statements the Directors are required to:
· select suitable accounting policies in accordance with IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors", and then apply them consistently;
· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
· provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Company's financial position and financial performance;
· state that the Company has complied with IFRS, subject to any material departures disclosed and explained in the financial statements; and
· make judgments and estimates that are reasonable and prudent.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The maintenance and integrity of the website maintained for the Company is the responsibility of the Directors; the work carried out by the Auditor does not involve consideration of these matters and, accordingly, the Auditor accepts no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the web site.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Declaration
The Directors, being the persons responsible, hereby confirm to the best of their knowledge:
that the Financial Statements have been prepared in accordance with applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;
that in the opinion of the Directors, the Annual Report and Financial Statements taken as a whole, is fair, balanced and understandable and it provides the information necessary to assess the Company's performance, business model and strategy; and
the Strategic Report includes a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that the Company faces.
On behalf of the Board
Hasan Askari
Chairman
11 June 2015
STATEMENT OF COMPREHENSIVE INCOME
|
|
|
Year ended |
Year ended |
||||
|
|
|
31 March 2015 |
31 March 2014 |
||||
|
|
|
|
(restated) |
||||
|
|
|
Revenue |
Capital |
|
Revenue |
Capital |
|
|
|
|
return |
return |
Total |
return |
return |
Total |
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Revenue |
|
|
|
|
|
|
|
|
Income |
3 |
341 |
- |
341 |
376 |
- |
376 |
|
Gains/(losses) on investments held at fair value through profit or loss |
9(a) |
- |
72,254 |
72,254 |
- |
(2,833) |
(2,833) |
|
Currency gains |
|
- |
4 |
4 |
- |
- |
- |
|
|
|
________ |
_________ |
________ |
________ |
________ |
________ |
|
Total revenue |
|
341 |
72,258 |
72,599 |
376 |
(2,833) |
(2,457) |
|
|
|
________ |
_________ |
________ |
________ |
________ |
________ |
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
Investment management fees |
4 |
(100) |
- |
(100) |
(83) |
- |
(83) |
|
Other administrative expenses |
5 |
(471) |
- |
(471) |
(506) |
- |
(506) |
|
|
|
________ |
_________ |
________ |
________ |
________ |
________ |
|
(Loss)/profit before tax |
|
(230) |
72,258 |
72,028 |
(213) |
(2,833) |
(3,046) |
|
|
|
|
|
|
|
|
|
|
Taxation |
6 |
- |
- |
- |
- |
- |
- |
|
|
|
________ |
_________ |
________ |
________ |
________ |
________ |
|
(Loss)/profit for the year |
|
(230) |
72,258 |
72,028 |
(213) |
(2,833) |
(3,046) |
|
|
|
________ |
_________ |
________ |
________ |
________ |
________ |
|
|
|
|
|
|
|
|
|
|
(Loss)/return per Ordinary share (pence) |
8 |
(0.39) |
122.33 |
121.94 |
(0.36) |
(4.80) |
(5.16) |
|
|
|
________ |
_________ |
________ |
________ |
________ |
________ |
|
|
|
|
|
|
|
|
|
|
The Company does not have any income or expense that is not included in (loss)/profit for the year, and therefore the "(Loss)/profit for the year" is also the "Total comprehensive income for the year", as defined in IAS 1 (revised). |
|||||||
|
All of the (loss)/profit and total comprehensive income is attributable to the equity holders of the parent company. There are no minority interests. |
|||||||
|
The total column of this statement represents the Statement of Comprehensive Income of the Company, prepared in accordance with IFRS. The revenue and capital columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. |
|||||||
|
All items in the above statement derive from continuing operations. |
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|
The accompanying notes are an integral part of these financial statements. |
|||||||
BALANCE SHEET
|
|
|
As at |
As at |
As at |
|
|
|
31 March |
31 March |
31 March |
|
|
|
2015 |
2014 |
2013 |
|
|
|
|
(restated) |
(restated) |
|
|
Notes |
£'000 |
£'000 |
£'000 |
|
Non-current assets |
|
|
|
|
|
Investments held at fair value through profit or loss |
9 |
225,698 |
155,440 |
158,273 |
|
|
|
_________ |
________ |
________ |
|
Current assets |
|
|
|
|
|
Cash at bank |
|
2,017 |
354 |
558 |
|
Receivables |
10 |
127 |
52 |
60 |
|
|
|
_________ |
________ |
________ |
|
Total current assets |
|
2,144 |
406 |
618 |
|
|
|
_________ |
________ |
________ |
|
Current liabilities |
|
|
|
|
|
Payables |
11 |
(134) |
(166) |
(165) |
|
|
|
_________ |
________ |
________ |
|
Total current liabilities |
|
(134) |
(166) |
(165) |
|
|
|
_________ |
________ |
________ |
|
Net current assets |
|
2,010 |
240 |
453 |
|
|
|
_________ |
________ |
________ |
|
Net assets |
|
227,708 |
155,680 |
158,726 |
|
|
|
_________ |
________ |
________ |
|
|
|
|
|
|
|
Share capital and reserves |
|
|
|
|
|
Ordinary share capital |
12 |
14,768 |
14,768 |
14,768 |
|
Share premium account |
|
25,406 |
25,406 |
25,406 |
|
Special reserve |
|
15,778 |
15,778 |
15,778 |
|
Capital redemption reserve |
|
4,484 |
4,484 |
4,484 |
|
Capital reserve |
13 |
166,953 |
94,695 |
97,528 |
|
Revenue reserve |
|
319 |
549 |
762 |
|
|
|
_________ |
________ |
________ |
|
Equity shareholders' funds |
|
227,708 |
155,680 |
158,726 |
|
|
|
_________ |
________ |
________ |
|
|
|
|
|
|
|
Net asset value per Ordinary share (pence) |
14 |
385.49 |
263.55 |
268.71 |
|
|
|
_________ |
________ |
________ |
STATEMENT OF CHANGES IN EQUITY
|
Year ended 31 March 2015 |
|
|
|
|
|
|
|
|
|
|
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 2014 |
14,768 |
25,406 |
15,778 |
4,484 |
94,695 |
549 |
155,680 |
|
Net profit/(loss) on ordinary activities after taxation |
- |
- |
- |
- |
72,258 |
(230) |
72,028 |
|
|
________ |
_________ |
________ |
________ |
________ |
_________ |
________ |
|
Balance at 31 March 2015 |
14,768 |
25,406 |
15,778 |
4,484 |
166,953 |
319 |
227,708 |
|
|
________ |
_________ |
________ |
________ |
________ |
_________ |
________ |
|
|
|
|
|
|
|
|
|
|
Year ended 31 March 2014 |
|
|
|
|
|
|
|
|
|
|
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 2013 |
14,768 |
25,406 |
15,778 |
4,484 |
97,528 |
762 |
158,726 |
|
Net loss on ordinary activities after taxation |
- |
- |
- |
- |
(2,833) |
(213) |
(3,046) |
|
|
________ |
_________ |
________ |
________ |
________ |
_________ |
________ |
|
Balance at 31 March 2014 |
14,768 |
25,406 |
15,778 |
4,484 |
94,695 |
549 |
155,680 |
|
|
________ |
_________ |
________ |
________ |
________ |
_________ |
________ |
CASH FLOW STATEMENT
|
|
Year ended |
Year ended |
|
|
31 March |
31 March |
|
|
2015 |
2014 |
|
|
|
(restated) |
|
|
£'000 |
£'000 |
|
Operating activities |
|
|
|
Profit/(loss) before tax |
72,028 |
(3,046) |
|
(Gain)/loss on investments held at fair value through profit or loss |
(72,254) |
2,833 |
|
Net gains on foreign exchange |
4 |
- |
|
Sales of investments held at fair value through profit or loss |
1,996 |
- |
|
(Increase)/decrease in other receivables |
(75) |
8 |
|
(Decrease)/increase in other payables |
(32) |
1 |
|
|
__________ |
__________ |
|
Net cash inflow/(outflow) from operating activities before tax |
1,667 |
(204) |
|
|
|
|
|
Taxation paid |
- |
- |
|
|
__________ |
__________ |
|
Net cash inflow/(outflow) from operating activities |
1,667 |
(204) |
|
|
|
|
|
Cash and cash equivalents at the start of the year |
354 |
558 |
|
Effect of foreign exchange rate changes |
(4) |
- |
|
|
__________ |
__________ |
|
Cash and cash equivalents at the end of the year |
2,017 |
354 |
|
|
__________ |
__________ |
Notes to the Financial Statements for the year ended 31 March 2015
|
1. |
Principal activity |
|
|
The principal activity of the Company is that of an investment trust company within the meaning of Section 1158 of the Corporation Tax Act 2010 ("s1158"). |
|
|
|
|
|
The principal activity of its active foreign subsidiary is similar in all relevant respects to that of its United Kingdom parent. The Company has adopted IFRS 10 'Consolidated Financial Statements - Consolidation relief for Investment Entities'; as such the Company has not consolidated the results of its active subsidiaries. |
|
2. |
Accounting policies |
|
|
|
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union, and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB ("IFRIC"). |
|
|
|
|
|
|
|
(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 2015. |
|
|
|
|
|
|
|
The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by International Accounting Standards Board (IASB) and adopted by the EU. The financial statements have been prepared on a historical-cost basis, except for financial assets and financial liabilities held at fair value through profit or loss. |
|
|
|
|
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|
|
The Company's financial statements are presented in Sterling, which is also the functional currency as it is the basis upon which shareholders operate and expenses are generally paid. All values are rounded to the nearest thousand pounds (£'000) except when otherwise indicated. |
|
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|
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|
|
Where presentational guidance set out in the Statement of Recommended Practice ("SORP"): 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued by the Association of Investment Companies ("AIC"), is consistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP. |
|
|
|
|
|
|
|
Significant 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. One of the key areas for consideration has been the application of IFRS 10 'Consolidated Financial Statements' including the Amendments, 'Investment entities (Amendments to IFRS 10, IFRS 12 and IAS 27) (Investment Entity Amendments). The amendments require entities that meet the definition of an investment entity to fair value certain subsidiaries through profit or loss in accordance with IAS 39 Financial Instruments: Recognition and Measurement, rather than consolidate their results. However, entities which are not themselves investment entities and provide investment related services to the Company will continue to be consolidated. |
|
|
|
|
|
|
|
Assessment as investment entity |
|
|
|
Entities which meet the definition of an investment entity are required to fair value subsidiaries through profit or loss rather than consolidate them. To determine whether an entity meets the definition of an investment entity it is required to meet the following three criteria:
|
|
|
|
(i) an entity obtains funds from one or more investors for the purpose of providing those investors with investment services; the Company provides investment services and has several investors who pool funds to gain access to these services and investment opportunities which they might not be able to as individuals. |
|
|
|
(ii) an entity commits to its investors that its business purpose is to invest funds solely from capital appreciation, investment income, or both; the Company's investment objective is to provide shareholders with long-term capital appreciation by investment in companies which are incorporated in India, or which derive significant revenue or profit from India, with dividend yield from the Company being of secondary importance. |
|
|
|
(iii) an entity measures and evaluates the performance of substantially all of its investments on a fair value basis; the Company has elected to measure and evaluate the performance of all of its investments on a fair value basis with the exception of its Singapore subsidiary which is dormant. The fair value basis is used to present the Company's performance in its communication with the market and the primary measurement attribute to evaluate performance of all of its investments and to make investment decisions. |
|
|
|
|
|
|
|
The Board is of the opinion that the Company meets the definition of an investment entity, and, therefore, all investments are recognised at fair value through profit or loss. This has changed the treatment for the Company's investment in New India Investment Company (Mauritius) Limited and New India Investment Company (Singapore) Pte Ltd, which were previously consolidated. |
|
|
|
|
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|
|
The change is first applicable to the Company for the year ended 31 March 2015. Under the transitional provisions of IFRS 10 this change in accounting policy is required to be accounted for retrospectively. Therefore, the relevant comparative figures have been restated. |
|
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|
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|
|
The impact of these changes on the Company's Balance Sheet is to increase the value of the investment in the subsidiaries at 31 March 2014 by £4,667,000, to decrease cash by £4,346,000, to decrease receivables by £539,000 and to decrease payables by £218,000 (31 March 2013 - £500,000). The impact of these changes on the Company Statement of Comprehensive Income is to decrease income by £2,044,000, to increase gains/losses on investments held at fair value through profit or loss by £260,000, to decrease currency gains by £16,000, to decrease investment management fees by £1,369,000, to decrease other administrative expenses by £373,000 and to decrease taxation by £58,000. |
|
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|
|
|
|
|
New standards adopted for the current year |
|
|
|
The accounting policies adopted in the current year are consistent with those of the previous year except that the Company has adopted the following new and revised accounting standards: |
|
|
|
- IFRS 10 Consolidated Financial Statements including Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) |
|
|
|
- IFRS 11 Joint Arrangements |
|
|
|
- IFRS 12 Disclosure of Interests in Other Entities |
|
|
|
- IAS 27 Separate Financial Statements (revised) |
|
|
|
- IAS 28 Investments in Associates and Joint Ventures (revised) |
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|
|
Of these standards, only IFRS 10 (including investment entities amendments) has made a significant impact to the Company as its adoption requires the restatement of results previously presented. |
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|
|
IFRS 12 requires additional disclosures to be made, but has no effect on the financial position or performance of the Company. The adoption of IFRS 11, IAS 27 (revised) and IAS 28 (revised) has not had a material impact on the financial statements. |
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|
|
Standards issued but not yet effective |
|
|
|
At the date of authorisation of these financial statements, the following Standards and Interpretations were in issue but not yet effective: |
|
|
|
- IFRS Annual Improvements 2010 to 2012 and 2011 to 2013 (effective 1 July 2014) |
|
|
|
- IFRS Annual Improvements 2012 to 2014 (effective 1 July 2016) |
|
|
|
- IFRS 9 Financial Instruments (effective 1 January 2018) |
|
|
|
In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments which reflects all phases of the financial instruments project and replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The standard introduces new requirements for classification and measurement, impairment, and Hedge Accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Retrospective application is required but comparative information is not compulsory. Early application of previous versions of IFRS 9 (2009, 2010 and 2013) is permitted if the date of initial application is before 1 February 2015. The adoption of IFRS 9 is unlikely to have a material effect on the classification and measurement of the Company's financial assets or financial liabilities. |
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|
|
- IFRS 15 Revenue from contracts with customers (effective 1 January 2017) |
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|
|
The Directors do not anticipate that the adoption of these Amendments in future periods will materially impact the Company's financial results in the period of initial application although there will be revised presentations to the Primary Financial Statements and additional disclosures. The Company intends to adopt the standards in the reporting period when they become effective. |
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(b) |
Presentation of Statement of Comprehensive Income |
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|
|
In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of revenue and capital nature has been presented in the Statement of Comprehensive Income. |
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|
(c) |
Segmental reporting |
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|
The Board has considered the requirements of IFRS 8 'Operating Segments' and is of the view that the Company is engaged in a single segment business, of investing in Indian quoted equities and that therefore the Company has only a single operating segment. The Board of Directors, as a whole, has been identified as constituting the chief operating decision maker of the Company. The key measure of performance used by the Board to assess the Company's performance is the total return on the Company's net asset value, as calculated under IFRS, and therefore no reconciliation is required between the measure of profit or loss used by the Board and that contained in the financial statements. |
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|
(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. |
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|
(e) |
Expenses and interest payable |
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|
|
All expenses, with the exception of interest expenses, which would be 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: |
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|
|
- expenses which are incidental to the acquisition or disposal of an investment are charged to the capital column of the Statement of Comprehensive Income and separately identified and disclosed in note 9 (b); and |
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|
- 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. |
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|
(f) |
Taxation |
|
|
|
The tax expense represents the sum of the tax currently payable and deferred tax. Tax payable is based on the taxable profit for the year. Taxable profit differs from profit before tax as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the Balance Sheet date. |
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|
|
Deferred tax |
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|
|
Deferred tax is recognised in respect of all temporary differences at the Balance Sheet date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the Balance Sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the temporary differences can be deducted. Deferred tax assets and liabilities are measured at the rates applicable to the legal jurisdictions in which they arise, using tax rates that are expected to apply at the date the deferred tax position is unwound. |
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|
(g) |
Investments |
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|
|
All investments have been designated upon initial recognition at fair value through profit or loss. This is done because all investments are considered to form part of a portfolio of financial assets which is evaluated on a fair value basis, in accordance with the Company's documented investment strategy, and information about the investments is provided internally on that basis. Purchases of investments are recognised on a trade date basis at the value of the consideration payable excluding transaction costs and designated upon initial recognition as held at fair value through profit or loss. Sales of assets are also recognised on a trade date basis. Proceeds are measured at fair value, which is regarded as the proceeds of sale less any transaction costs. |
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|
The fair value of the financial instruments is based on their quoted bid price at the Balance Sheet date, without deduction for any estimated future selling costs. Any unquoted investments would be held at fair value, as measured by the Directors using appropriate valuation methodologies such as earnings multiples, recent transactions and net assets. In the case of the Company's investment in the subsidiaries of which the Company owns 100% of its Ordinary share capital, these have been measured at fair value, which are deemed to be their net asset value. |
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|
Changes in the value of investments (including changes related to movements in foreign exchange) held at fair value through profit or loss and gains and losses on disposal are recognised in the Statement of Comprehensive Income as "Gains/(losses) on investments at fair value through profit or loss". Also included within this caption are transaction costs in relation to the purchase or sale of investments, including the difference between the purchase price of an investment and its bid price at the date of purchase. |
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(h) |
Cash and cash equivalents |
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|
|
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. |
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|
(i) |
Receivables and payables |
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|
|
Other receivables and prepayments do not carry any interest and are short-term in nature, and are, accordingly, stated at their recoverable amount. Payables are non-interest bearing and are stated at their payable amount. |
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|
(j) |
Dividends payable |
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|
|
Dividends are recognised from the date on which they are declared and approved by shareholders. |
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|
(k) |
Nature and purpose of reserves |
|
|
|
Special reserve |
|
|
|
The special reserve arose following Court approval in 1998 to transfer £30m from the share premium account. This reserve is distributable and its function is to fund any share buy-backs by the Company. |
|
|
|
|
|
|
|
Capital redemption reserve |
|
|
|
The capital redemption reserve arose when Ordinary shares were redeemed, and subsequently cancelled by the Company, at which point an amount equal to the par value of the Ordinary share capital was transferred from the Ordinary share capital to the capital redemption reserve. |
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|
|
|
|
|
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. |
|
|
|
|
|
|
|
Revenue reserve |
|
|
|
This reserve reflects all income and costs which are recognised in the revenue column of the Statement of Comprehensive Income. The revenue reserve represents the amount of the Company's reserves distributable by way of dividend. |
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|
|
|
(l) |
Foreign currency |
|
|
|
Overseas monetary assets and liabilities are converted into Sterling at the rate of exchange ruling at the Balance Sheet date. Transactions during the 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. |
|
|
|
Year ended 31 March 2015 |
Year ended 31 March 2014 |
||||
|
|
|
|
|
|
(restated) |
||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
3. |
Income |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Income from investments |
|
|
|
|
|
|
|
|
Overseas dividends |
190 |
- |
190 |
161 |
- |
161 |
|
|
Dividend from subsidiary |
150 |
- |
150 |
215 |
- |
215 |
|
|
|
_________ |
________ |
________ |
________ |
________ |
________ |
|
|
|
340 |
- |
340 |
376 |
- |
376 |
|
|
|
|
|
|
|
|
|
|
|
Other operating income |
|
|
|
|
|
|
|
|
Deposit interest |
1 |
- |
1 |
- |
- |
- |
|
|
|
________ |
________ |
________ |
________ |
________ |
________ |
|
|
|
341 |
- |
341 |
376 |
- |
376 |
|
|
|
________ |
________ |
________ |
________ |
________ |
________ |
|
|
|
Year ended 31 March 2015 |
Year ended 31 March 2014 |
||||
|
|
|
|
|
|
(restated) |
||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
4. |
Investment management fees |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Investment management fees |
100 |
- |
100 |
83 |
- |
83 |
|
|
|
________ |
________ |
________ |
________ |
________ |
________ |
|
|
|
|
|
|
|
|
|
|
|
For the year ended 31 March 2015 management and secretarial services were provided by Aberdeen Asset Management Asia Limited ("AAMAL") until 13 July 2014 and thereafter by Aberdeen Fund Managers Limited ("AFML"). There were no changes to the commercial arrangements. Under the terms of an agreement effective from 14 July 2014 (which replaced the existing arrangements with AAMAL), the Company has appointed AFML to provide management, accounting, administrative and secretarial duties. |
||||||
|
|
|
||||||
|
|
During the year, the management fee was payable monthly in arrears and was based on an annual amount of 1% of the net asset value of the Company excluding the fair value of the subsidiary, New India Investment Company (Mauritius) Limited, valued monthly. The management agreement is terminable by either the Company or AFML on 12 months' notice. The amount payable in respect of the Company for the year was £100,000 (2014 - £83,000) and the balance due to AFML at the year end was £9,000 (2014 - £8,000). All investment management fees are charged 100% to the revenue column of the Statement of Comprehensive Income. |
||||||
|
|
|
||||||
|
|
New India Investment Company (Mauritius) Limited also has an agreement with AFML to receive management services based on an annual amount of 1% of its net asset value. The amount payable during the year was £1,840,000 (2014 - £1,369,000) and the balance due to AAM Asia at the year end was £184,000 (2014 -£124,000). |
||||||
|
|
|
||||||
|
|
With effect from 21 November 2014, it was agreed to remove the performance fee arrangements between the Company and the Manager. |
||||||
|
|
|
Year ended |
Year ended |
|
|
|
31 March 2015 |
31 March 2014 |
|
|
|
|
(restated) |
|
5. |
Other administrative expenses - revenue |
£'000 |
£'000 |
|
|
Directors' fees |
116 |
117 |
|
|
Promotional activities |
122 |
99 |
|
|
Auditor's remuneration: |
|
|
|
|
- fees payable for the audit of the Company's annual accounts |
27 |
27 |
|
|
- for other services relating to taxation |
5 |
21 |
|
|
Legal and advisory fees |
68 |
40 |
|
|
Custodian and overseas agents' charges |
44 |
34 |
|
|
Other |
89 |
168 |
|
|
|
__________ |
__________ |
|
|
|
471 |
506 |
|
|
|
__________ |
__________ |
|
|
|
|
|
|
|
During the year under review, £5,000 (2014 - £21,000) was paid to the external auditor for other services relating to taxation; the majority of these fees consist of tax advice provided by EY in relation to the Company's Mauritian subsidiary. EY also advised the Company at the time of its restructuring in November 2004 when the Mauritian Subsidiary was created. The amounts disclosed above for Auditor's remuneration are all shown net of VAT. |
||
|
|
|
||
|
|
The Company has an agreement with Aberdeen Asset Management PLC ('AAM PLC') for the provision of Promotional activities, in part in relation to the Company's participation in the Aberdeen Investment Trust Share Plan and ISA. The total fees paid and payable under the agreement during the year were £122,000 (2014 - £99,000) and £35,000 (2014 - £26,000) was due to AAM PLC at the year end. |
||
|
|
|
|
Year ended 31 March 2015 |
Year ended 31 March 2014 |
||||
|
|
|
|
|
|
|
(restated) |
||
|
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
6. |
(a) |
Tax on ordinary activities |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
Current tax: |
|
|
|
|
|
|
|
|
|
Overseas taxation |
- |
- |
- |
- |
- |
- |
|
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
|
|
|
(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: |
||||||
|
|
|
|
||||||
|
|
|
|
Year ended 31 March 2015 |
Year ended 31 March 2014 |
||||
|
|
|
|
|
|
|
|
(restated) |
|
|
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
(Loss)/profit before tax |
(230) |
72,258 |
72,028 |
(213) |
(2,833) |
(3,046) |
|
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
Corporation tax on (loss)/profit at the standard rate of 21% (2014 - 23%) |
(48) |
15,174 |
15,126 |
(49) |
(652) |
(701) |
|
|
|
Effects of: |
|
|
|
|
|
|
|
|
|
(Gains)/losses on investments held at fair value through profit or loss not taxable (see note below) |
- |
(15,173) |
(15,173) |
- |
652 |
652 |
|
|
|
Currency gains not taxable |
- |
(1) |
(1) |
- |
- |
- |
|
|
|
Movement in excess expenses |
119 |
- |
119 |
136 |
- |
136 |
|
|
|
Non-taxable dividend income |
(71) |
- |
(71) |
(87) |
- |
(87) |
|
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
Total tax charge |
- |
- |
- |
- |
- |
- |
|
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company has excess expenses of £3,702,000 (2014 - £3,134,000) carried forward. This sum has arisen due to cumulative deductible expenses having exceeded taxable income over the life of the Company. It is considered too uncertain that there will be sufficient taxable profits against which these expenses can be offset and, therefore, in accordance with IAS 12, a deferred tax asset of £740,000 (2014 - £627,000) has not been recognised, based on the deferred tax rate of 20% (2014 - 20%). Any excess management expenses will be utilised against any taxable income that may arise in the future. |
||||||
|
|
|
|
||||||
|
|
|
The Company is exempt from corporation tax on capital gains provided it obtains agreement from HM Revenue & Customs that the tests within Section 1158 and 1159 of the Corporation Tax Act 2010 have been met. Under Mauritian taxation laws, no Mauritian capital gains tax is payable on profits arising from the sale of securities in the Subsidiary. |
||||||
|
7. |
Dividends on equity shares |
|
|
No final dividend is being proposed for the year ended 31 March 2015 (2014 - £nil). |
|
8. |
(Loss)/return per Ordinary share |
||||||
|
|
The basic revenue return per Ordinary share is based on the net loss after taxation of £230,000 (2014 - loss of £213,000) and on 59,070,140 (2014 - 59,070,140) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year. |
||||||
|
|
|
||||||
|
|
The earnings per Ordinary share detailed above can be further analysed between revenue return and capital return as follows: |
||||||
|
|
|
||||||
|
|
|
Year ended |
Year ended |
||||
|
|
|
31 March 2015 |
31 March 2014 |
||||
|
|
|
|
(restated) |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
Net (loss)/profit (£'000) |
(230) |
72,258 |
72,028 |
(213) |
(2,833) |
(3,046) |
|
|
Weighted average number of Ordinary shares in issue |
|
|
59,070,140 |
|
|
59,070,140 |
|
|
(Loss)/return per Ordinary share (pence) |
(0.39) |
122.33 |
121.94 |
(0.36) |
(4.80) |
(5.16) |
|
9. |
Investments held at fair value through profit or loss
|
|||||||||
|
|
|
|
Year ended 31 March 2015 |
Year ended 31 March 2014 |
||||||
|
|
|
|
|
(restated) |
||||||
|
|
|
|
Investments |
Investments |
||||||
|
|
|
|
In subsidiaries |
Overseas |
Total |
In subsidiaries |
Overseas |
Total |
||
|
|
(a) |
Company |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||
|
|
|
Opening book cost |
50,150 |
6,717 |
56,867 |
50,150 |
6,717 |
56,867 |
||
|
|
|
Opening investment holdings fair value gains |
96,712 |
1,861 |
98,573 |
99,010 |
2,396 |
101,406 |
||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
||
|
|
|
Opening valuation |
146,862 |
8,578 |
155,440 |
149,160 |
9,113 |
158,273 |
||
|
|
|
Movements in the year: |
|
|
|
|
|
|
||
|
|
|
Sales - proceeds |
- |
(1,996) |
(1,996) |
- |
- |
- |
||
|
|
|
Sales - realised net gains |
- |
319 |
319 |
- |
- |
- |
||
|
|
|
Increase/(decrease) in investment holdings fair value gains |
69,754 |
2,181 |
71,935 |
(2,298) |
(535) |
(2,833) |
||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
||
|
|
|
Closing valuation |
216,616 |
9,082 |
225,698 |
146,862 |
8,578 |
155,440 |
||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
||
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Year ended 31 March 2015 |
Year ended 31 March 2014 |
||||||
|
|
|
|
|
(restated) |
||||||
|
|
|
|
Investments |
Investments |
||||||
|
|
|
|
In subsidiaries |
Overseas |
Total |
In subsidiaries |
Overseas |
Total |
||
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||
|
|
|
Closing book cost |
50,150 |
5,040 |
55,190 |
50,150 |
6,717 |
56,867 |
||
|
|
|
Closing investment holdings fair value gains |
166,466 |
4,042 |
170,508 |
96,712 |
1,861 |
98,573 |
||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
||
|
|
|
Closing valuation |
216,616 |
9,082 |
225,698 |
146,862 |
8,578 |
155,440 |
||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
||
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
As at |
As at |
||||||
|
|
|
|
31 March 2015 |
31 March 2014 |
||||||
|
|
|
|
|
(restated) |
||||||
|
|
|
Gains/(losses) on investments |
£'000 |
£'000 |
||||||
|
|
|
Realised gains on sales of investments |
319 |
- |
||||||
|
|
|
Increase/(decrease) in investment holdings fair value gains |
71,935 |
(2,833) |
||||||
|
|
|
|
_______ |
_______ |
||||||
|
|
|
|
72,254 |
(2,833) |
||||||
|
|
|
|
_______ |
_______ |
||||||
|
|
|
|
|
|
||||||
|
|
|
As at 31 March 2015, all of the overseas investments held are in listed stocks (2014 - same). |
||||||||
|
|
|
|
||||||||
|
|
|
The Company owns 100% of the Ordinary share capital of its subsidiary, New India Investment Company (Mauritius) Limited, an investment holding company registered in Mauritius. |
||||||||
|
|
|
|
||||||||
|
|
(b) |
Transaction costs |
||||||||
|
|
|
During the year, expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through the capital column of the Statement of Comprehensive Income, and are included within gains/(losses) on investments at fair value through profit or loss in the Statement of Comprehensive Income. The total costs were as follows: |
||||||||
|
|
|
|
|
|
||||||
|
|
|
|
Year ended |
Year ended |
||||||
|
|
|
|
31 March 2015 |
31 March 2014 |
||||||
|
|
|
|
|
(restated) |
||||||
|
|
|
|
£'000 |
£'000 |
||||||
|
|
|
Purchases |
- |
- |
||||||
|
|
|
Sales |
1 |
- |
||||||
|
|
|
|
_______ |
_______ |
||||||
|
|
|
|
1 |
- |
||||||
|
|
|
|
_______ |
_______ |
||||||
|
|
|
2015 |
2014 |
|
|
|
|
(restated) |
|
10. |
Receivables |
£'000 |
£'000 |
|
|
Prepayments and accrued income |
127 |
52 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
None of the above amounts are past their due date or impaired (2014 - nil). |
||
|
|
|
2015 |
2014 |
|
|
|
|
(restated) |
|
11. |
Payables |
£'000 |
£'000 |
|
|
Other payables |
134 |
166 |
|
|
|
_______ |
_______ |
|
|
|
2015 |
2014 |
||
|
12. |
Ordinary share capital |
Number |
£'000 |
Number |
£'000 |
|
|
Issued and fully paid |
|
|
|
|
|
|
Ordinary shares of 25p each |
59,070,140 |
14,768 |
59,070,140 |
14,768 |
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
The Ordinary shares give shareholders voting rights, the entitlement to all of the capital growth in the Company's assets, and to all the income from the Company that is resolved to be distributed. |
||||
|
|
|
||||
|
|
Ownership of Subsidiaries |
||||
|
|
At the year end, the Company's wholly-owned Subsidiary, New India Investment Company (Mauritius) Limited ('the Subsidiary') had share capital of 4,275,000 (2014 - 4,275,000) Redeemable Participating Preference shares of £0.10 each ('Preference shares') and 50 Management shares of £1 each. The Company holds 100% of the share capital of the Subsidiary. |
||||
|
|
|
||||
|
|
In January 2005 the Subsidiary issued a Warrant instrument to the Company for a consideration of £37,270,000, giving the Company the right to purchase up to 38,350,900 Preference shares, at an exercise price per share of £20 per share ('the 2015 Warrant'). The 2015 Warrant has now been extended and is exercisable until 26 August 2020. |
||||
|
|
|
||||
|
|
In August 2010, the Subsidiary issued a further Warrant instrument to the Company for a consideration of £9,000,000, giving the Company the right to purchase up to 1,321,417 Preference shares, at an exercise price per share of £40 per share ('the 2020 Warrant'). The 2020 Warrant is exercisable until 26 August 2020. |
||||
|
|
|
||||
|
|
Following the above, there are two separate Warrants issued by the Subsidiary. The Subsidiary has the right to repurchase both Warrants in part or in whole at any time for a consideration to be determined in the market at that time by an independent valuer. |
||||
|
|
|
||||
|
|
The Company incorporated a wholly-owned subsidiary, registered in Singapore, on 27 November 2013 which is considered by the Directors to be dormant as at the year end (2014 - dormant). |
||||
|
|
|
||||
|
|
Partial repurchase of Subsidiary Warrant |
||||
|
|
On 15 May 2008, the Subsidiary repurchased part of the 2015 Warrant, in relation to 405,900 Preference shares, at a valuation based on the subscription price of £20. In aggregate, proceeds of £3,004,000 were received by the Company in the form of a partial capital redemption. These proceeds were credited to the capital reserve of the Company. |
||||
|
|
|
||||
|
|
At the year end there were two (2014 - two) Warrants in issue carrying the right for the Company to subscribe for 37,945,000 (2014 - 37,945,000) and 1,321,417 (2014 - 1,321,417) new Preference shares of 10p in the Subsidiary at £20 and £40 per share respectively. |
||||
|
|
|
2015 |
2014 |
|
13. |
Capital reserves |
£'000 |
£'000 |
|
|
At 1 April 2014 |
94,695 |
97,528 |
|
|
Currency gains |
4 |
- |
|
|
Movement in investment holdings fair value gains |
71,935 |
(2,833) |
|
|
Gains on sales of investments |
319 |
- |
|
|
|
_______ |
_______ |
|
|
At 31 March 2015 |
166,953 |
94,695 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
The capital reserve includes gains of £170,508,000 (2014 - gains of £98,573,000) which relate to the revaluation of investments held at the reporting date. |
||
|
14. |
Net asset value per Ordinary share |
|
|
The net asset value per Ordinary share is based on a net asset value of £227,708,000 (2014 - £155,680,000) and on 59,070,140 (2014 - 59,070,140) Ordinary shares, being the number of Ordinary shares in issue at the year end. |
|
15. |
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 AFML under the terms of its management agreement with AFML (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. |
|||||||||||||
|
|
|
|||||||||||||
|
|
Risk management framework |
|||||||||||||
|
|
The directors of Aberdeen Fund Managers Limited collectively assume responsibility for AFML's obligations under the AIFMD including reviewing investment performance and monitoring the Company's risk profile during the year. |
|||||||||||||
|
|
|
|||||||||||||
|
|
AFML is a fully integrated member of the Aberdeen Group, which provides a variety of services and support to AFML in the conduct of its business activities, including in the oversight of the risk management framework for the Company. The AIFM has delegated the day to day administration of the investment policy to Aberdeen Asset Management Asia Limited, which is responsible for ensuring that the Company is managed within the terms of its investment guidelines and the limits set out in its pre-investment disclosures to investors (details of which can be found on the Company's website). The AIFM has retained responsibility for monitoring and oversight of investment performance, product risk and regulatory and operational risk for the Company. |
|||||||||||||
|
|
|
|||||||||||||
|
|
The Manager conducts its risk oversight function through the operation of the Group's risk management processes and systems which are embedded within the Group's operations. The Group's Risk Division supports management in the identification and mitigation of risks and provides independent monitoring of the business. The Division includes Compliance, Business Risk, Market Risk, Risk Management and Legal. The team is headed up by the Group's Head of Risk, who reports to the Chief Executive Officer of the Group. The Risk Division achieves its objective through embedding the Risk Management Framework throughout the organisation using the Group's operational risk management system ("SWORD"). |
|||||||||||||
|
|
|
|||||||||||||
|
|
The Group's Internal Audit Department is independent of the Risk Division and reports directly to the Group CEO and to the Audit Committee of the Group's Board of Directors. The Internal Audit Department is responsible for providing an independent assessment of the Group's control environment. |
|||||||||||||
|
|
|
|||||||||||||
|
|
The Group's corporate governance structure is supported by several committees to assist the board of directors of Aberdeen, its subsidiaries and the Company to fulfil their roles and responsibilities. The Group's Risk Division is represented on all committees, with the exception of those committees that deal with investment recommendations. The specific goals and guidelines on the functioning of those committees are described on the committees' terms of reference. |
|||||||||||||
|
|
|
|||||||||||||
|
|
Risk management |
|||||||||||||
|
|
The main risks the Company faces from its financial instruments are (i) market risk (comprising interest rate risk, currency risk and price risk), (ii) liquidity risk and (iii) credit risk. |
|||||||||||||
|
|
|
|
||||||||||||
|
|
(i) |
Market risk |
||||||||||||
|
|
|
The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, foreign currency risk and price risk. |
||||||||||||
|
|
|
|
||||||||||||
|
|
|
Interest rate risk |
||||||||||||
|
|
|
Interest rate movements may affect the level of income receivable on cash deposits. |
||||||||||||
|
|
|
|
||||||||||||
|
|
|
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. |
||||||||||||
|
|
|
|
||||||||||||
|
|
|
Financial assets |
||||||||||||
|
|
|
The interest rate risk profile of the Company's financial assets, excluding equity shares and short-term debtors which are non-interest bearing, as at 31 March 2015 and 31 March 2014 was as follows: |
||||||||||||
|
|
|
|
||||||||||||
|
|
|
|
Total (per Balance Sheet) |
Floating rate |
||||||||||
|
|
|
|
2015 |
2014 |
2015 |
2014 |
||||||||
|
|
|
Type |
£'000 |
£'000 |
£'000 |
£'000 |
||||||||
|
|
|
Cash at bank - Sterling |
2,017 |
354 |
2,017 |
354 |
||||||||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||||
|
|
|
|
|
|
|
|
||||||||
|
|
|
The floating rate assets consist of cash deposits on call earning interest at prevailing market rates, and are classified as having maturity dates of less than one year. |
||||||||||||
|
|
|
|
||||||||||||
|
|
Financial liabilities |
|||||||||||||
|
|
The Company had no financial liabilities as at 31 March 2015 and 31 March 2014 which were exposed to interest rate risk. |
|||||||||||||
|
|
|
|||||||||||||
|
|
Interest rate sensitivity |
|||||||||||||
|
|
Movements in interest rates would not significantly affect net assets and total profit attributable to the Company's shareholders (2014 - same). |
|||||||||||||
|
|
|
|||||||||||||
|
|
Foreign currency risk |
|||||||||||||
|
|
The Company's total return and net assets can be significantly affected by currency translation movements as the majority of the assets and income of the Company and its Subsidiaries are denominated in currencies other than Sterling, which is the Company's functional currency. |
|||||||||||||
|
|
|
|||||||||||||
|
|
Management of the risk |
|||||||||||||
|
|
It is not the Company's policy to hedge this risk but it reserves the right to do so, to the extent possible. |
|||||||||||||
|
|
|
|||||||||||||
|
|
The revenue account is subject to currency fluctuation arising on dividends paid in foreign currencies. The Company does not hedge this currency risk. |
|||||||||||||
|
|
|
|||||||||||||
|
|
Foreign currency exposure by currency of denomination: |
|||||||||||||
|
|
|
|||||||||||||
|
|
|
31 March 2015 |
31 March 2014 (restated) |
|||||||||||
|
|
|
|
Net |
Total |
|
Net |
Total |
|||||||
|
|
|
Overseas |
monetary |
currency |
Overseas |
monetary |
currency |
|||||||
|
|
|
investments |
assets |
exposure |
investments |
assets |
exposure |
|||||||
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|||||||
|
|
US Dollar |
9,082 |
- |
9,082 |
8,578 |
- |
8,578 |
|||||||
|
|
Indian Rupee |
216,616 |
- |
216,616 |
146,862 |
- |
146,862 |
|||||||
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|||||||
|
|
|
225,698 |
- |
225,698 |
155,440 |
- |
155,440 |
|||||||
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
At 31 March 2015, the exchange rate of the Indian Rupee against the reporting currency Sterling was £1: INR 92.902 compared with an exchange rate of £1: INR 99.566 at 31 March 2014. Based on continuing to hold the same investments in the same quantities from 1 April 2014 to 31 March 2015, all other things being equal, the impact of the exchange rate movement over the year would be to increase the value of the investments by £10,535,000 (2014 restated - decrease by £25,131,000). |
|||||||||||||
|
|
|
|||||||||||||
|
|
At 31 March 2015, the exchange rate of the US Dollar against the reporting currency Sterling was £1: US$1.4845 compared with an exchange rate of £1: US$1.6672 at 31 March 2014. Based on continuing to hold the same investments in the same quantities from 1 April 2014 to 31 March 2015, all other things being equal, the impact of the exchange rate movement over the year would be to increase the value of the investments by £1,056,000 (2014 restated - decrease by £765,000). |
|||||||||||||
|
|
|
|||||||||||||
|
|
The exposure noted in the above table is representative of the exposure across the year as a whole. |
|||||||||||||
|
|
|
|||||||||||||
|
|
Foreign currency sensitivity |
|||||||||||||
|
|
There is no sensitivity analysis included as the Company's significant foreign currency financial instruments are in the form of equity investments. The exposure to market risk, from movements in the value of equity investments has been included within the other price risk sensitivity analysis so as to show the overall level of exposure. |
|||||||||||||
|
|
|
|||||||||||||
|
|
Price risk |
|||||||||||||
|
|
Price risks (ie, changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments. |
|||||||||||||
|
|
|
|||||||||||||
|
|
Management of the risk |
|||||||||||||
|
|
It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a sector. Both the allocation of assets and the stock selection process act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. The investments held by the Company are all listed on the Bombay (Mumbai) Stock Exchange and/or The Indian National Stock Exchange, with the exception of the Gail (India) GDR, whose primary exchange is London, Grasim Industries GDR, Ultratech Cement GDR and Ambuja Cements GDR, whose primary exchange is Luxembourg. Subsidiaries, New India Investment Company (Mauritius) Limited and New India Investment Company (Singapore) Pte Ltd are both unlisted. |
|||||||||||||
|
|
|
|||||||||||||
|
|
Price risk sensitivity |
|||||||||||||
|
|
If market prices at the Balance Sheet date had been 15% higher or lower while all other variables remained constant, the return attributable to Ordinary shareholders for the year ended 31 March 2015 would have increased /(decreased) by £33,855,000 (2014 restated - increased/(decreased) by £23,316,000) and equity reserves would have increased /(decreased) by the same amount. |
|||||||||||||
|
|
|
|||||||||||||
|
(ii) |
Liquidity risk |
|||||||||||||
|
|
This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. |
|||||||||||||
|
|
|
|||||||||||||
|
|
Management of the risk |
|||||||||||||
|
|
All liabilities are payable on demand for a cash consideration equivalent to the balances shown in note 12, and therefore liquidity risk is not considered to be significant, as the Company's assets mainly comprise readily realisable securities which can, in normal circumstances, be sold to meet funding requirements, if necessary. |
|||||||||||||
|
|
|
|||||||||||||
|
(iii) |
Credit risk |
|||||||||||||
|
|
This is failure of the counterparty to a transaction to discharge its obligations under that transaction, which could result in the Company suffering a loss. |
|||||||||||||
|
|
|
|||||||||||||
|
|
Management of the risk |
|||||||||||||
|
|
- investment transactions are carried out with a large 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 (2014 - same). |
|||||||||||||
|
|
|
|||||||||||||
|
|
Credit risk exposure |
|||||||||||||
|
|
In summary, compared to the amounts included in the Balance Sheet, the maximum exposure to credit risk at 31 March was as follows: |
|||||||||||||
|
|
|
|||||||||||||
|
|
|
2015 |
2014 (restated) |
|||||||||||
|
|
|
Balance |
Maximum |
Balance |
Maximum |
|||||||||
|
|
|
Sheet |
exposure |
Sheet |
exposure |
|||||||||
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|||||||||
|
|
Non-current assets |
|
|
|
|
|||||||||
|
|
Investments designated at fair value through profit or loss |
225,698 |
- |
155,440 |
- |
|||||||||
|
|
Current assets |
|
|
|
|
|||||||||
|
|
Cash at bank |
2,017 |
2,017 |
354 |
354 |
|||||||||
|
|
Receivables |
127 |
127 |
52 |
52 |
|||||||||
|
|
|
_______ |
_______ |
_______ |
_______ |
|||||||||
|
|
|
227,842 |
2,144 |
155,846 |
406 |
|||||||||
|
|
|
_______ |
_______ |
_______ |
_______ |
|||||||||
|
|
|
|
|
|
|
|||||||||
|
|
The exposure noted in the above table is representative of the exposure across the year as a whole. |
|||||||||||||
|
|
|
|||||||||||||
|
|
None of the Company's financial assets are past due or impaired (2014 - same). |
|||||||||||||
|
|
|
|||||||||||||
|
|
Fair values of financial assets and financial liabilities |
|||||||||||||
|
|
Investments held at fair value through profit or loss are valued at their quoted bid prices which equate to their fair values. The Directors are of the opinion that the other financial assets and liabilities are stated at fair value in the Balance Sheet and considered that this is equal to the carrying amount. |
|||||||||||||
|
16. |
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. |
||
|
|
|
|
|
|
|
|
2015 |
2014 |
|
|
|
£'000 |
£'000 |
|
|
Debt |
- |
- |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
Equity |
|
|
|
|
Equity share capital |
14,768 |
14,768 |
|
|
Retained earnings and other reserves |
212,940 |
140,912 |
|
|
|
_______ |
_______ |
|
|
|
227,708 |
155,680 |
|
|
|
_______ |
_______ |
|
|
Debt as a % of net assets |
0.0% |
0.0% |
|
|
|
_______ |
_______ |
|
|
|
||
|
|
The Board, with the assistance of the Manager monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes: |
||
|
|
- the planned level of gearing, which takes account of the Manager's views on the market; |
||
|
|
- the need to buy back equity shares for cancellation, which takes account of the difference between the net asset value per share and the share price (ie the level of share price discount or premium); |
||
|
|
- the need for new issues of equity shares; and |
||
|
|
- the extent to which revenue in excess of that which is required to be distributed should be retained. |
||
|
|
|
||
|
|
The Company's objectives, policies and processes for managing capital are unchanged from the preceding accounting period. |
||
|
|
|
||
|
|
The Company had no loan gearing at the year end (2014 - nil). |
||
|
17. |
Fair value hierarchy |
|
||||||
|
|
IFRS 7 'Financial Instruments: Disclosures' requires an entity to classify fair value measurements using a fair value hierarchy that reflects the subjectivity of the inputs used in making measurements. The fair value hierarchy has the following levels: |
|
||||||
|
|
|
|
||||||
|
|
Level 1: quoted (unadjusted) market prices in active markets for identical assets or liabilities; |
|
||||||
|
|
Level 2: valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; and |
|
||||||
|
|
Level 3: valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. |
|
||||||
|
|
|
|
||||||
|
|
The financial assets and liabilities measured at fair value in the Balance Sheet are grouped into the fair value hierarchy at the Balance Sheet date are as follows: |
|
||||||
|
|
|
|
||||||
|
|
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
||
|
|
As at 31 March 2015 |
Note |
£'000 |
£'000 |
£'000 |
£'000 |
||
|
|
Financial assets at fair value through profit or loss |
|
|
|
|
|
||
|
|
Quoted equities |
a) |
9,082 |
- |
- |
9,082 |
||
|
|
Investment in Subsidiaries |
b) |
- |
216,616 |
- |
216,616 |
||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
||
|
|
Net fair value |
|
9,082 |
216,616 |
- |
225,698 |
||
|
|
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
|
As at 31 March 2014 |
Note |
£'000 |
£'000 |
£'000 |
£'000 |
||
|
|
Financial assets at fair value through profit or loss |
|
|
|
|
|
||
|
|
Quoted equities |
a) |
8,578 |
- |
- |
8,578 |
||
|
|
Investment in Subsidiaries |
b) |
- |
146,862 |
- |
146,862 |
||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
||
|
|
Net fair value |
|
8,578 |
146,862 |
- |
155,440 |
||
|
|
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
|
|
|
|
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. |
|
|||||
|
|
b) |
Investment in Subsidiary |
|
|||||
|
|
|
The Company's investments in its Subsidiaries are categorised in Fair Value Level 2 as their fair value have been determined by reference to the Subsidiary companies' net asset value at the reporting date. The net asset value is predominantly made up of quoted equities traded on recognised stock exchanges. |
|
|||||
|
18. |
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. |
|
19. |
Subsequent events |
|
|
As at 10 June 2015, the latest practicable date prior to approval of this Report, the net asset value per share of the Company (including income) was 347.61p. |
|
This Annual Financial Report announcement is not the Company's statutory accounts. The above results for the year ended 31 March 2015 are an abridged version of the Company's full accounts. The 2015 and 2014 statutory accounts received unqualified reports from the Company's Auditor and did not include any reference to matters to which the Auditor drew attention by way of emphasis without qualifying the reports, and did not contain a statement under s.498 of the Companies Act 2006. The financial information for 2014 is derived from the statutory accounts for 2014 which have been delivered to the Registrar of Companies. The 2015 statutory accounts will be filed with the Registrar of Companies in due course. |
|
|
|
The Annual Report will be posted to shareholders in June 2014. Further copies may be obtained from the registered office, Bow Bells House, 1 Bread Street, London EC4M 9HH or from the Company's website, www.newindia-trust.co.uk. |
|
|
|
The Annual General Meeting will be held at Bow Bells House, 1 Bread Street, London EC4M 9HH at 12.30 p.m. on 9 September 2015. |
|
|
|
By Order of the Board Aberdeen Asset Management PLCSecretaries
11 June 2015 |
This information is provided by RNS
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