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Aberdeen New India (ANII)

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Wednesday 27 November, 2019

Aberdeen New India

Half Yearly Financial Report

RNS Number : 7579U
Aberdeen New India Invest Trust PLC
27 November 2019
 

ABERDEEN NEW INDIA INVESTMENT TRUST PLC

Legal Entity Identifier (LEI): 549300D2AW66WYEVKF02

 

UNAUDITED HALF-YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2019

 

FINANCIAL SUMMARY AND PERFORMANCE

 

 

30 September 2019

31 March 2019

% change

Total shareholders' funds (£'000)

333,293

314,196

+ 6.1

Share price (mid-market)

494.00p

461.00p

+ 7.2

Net asset value per share

564.59p

531.90p

+ 6.1

Discount to net asset value{A}

12.5%

13.3%

 

Net gearing{A}

4.2%

3.1%

 

Ongoing charges ratio{A}

1.16%

1.17%

 

Rupee to Sterling exchange rate

87.3

90.3

+ 3.3

 

{A} Considered to be an Alternative Performance Measure.

 

 

Performance (total return)

Six months ended

Year ended

 

30 September 2019

31 March 2019

 

%

%

Share price{A}

+ 7.2

+ 8.2

Net asset value{A}

+ 6.1

+ 8.6

MSCI India Index (Sterling adjusted)

+ 0.8

+ 14.9

 

{A} Considered to be an Alternative Performance Measure.

Source: Aberdeen Standard Fund Managers Limited, Morningstar and Lipper. 

 

 

CHAIRMAN'S STATEMENT

 

Dear Shareholder

 

Performance

For the half-year to 30 September 2019 your Company's net asset value total return ("NAV") was 6.1%. The Ordinary share price gained 7.2% to close the period at 494.0 pence, as a result of which the discount to net asset value ("NAV") narrowed slightly to 12.5% from 13.3%. By comparison, the benchmark MSCI India Index (the "Index") increased by only 0.8% in sterling terms.

 

Your Company delivered a strong performance as your Manager's focus on quality companies with sound fundamentals and healthy balance sheets continued to serve the portfolio well, particularly in periods of short-term market turbulence.

 

Overview

Over the reporting period the small uplift in the Indian Index masked an eventful six months. Prime Minister Narendra Modi's resounding election win and the measures that followed to seek to arrest a slowing economy raised hopes of a return to more robust growth. However, the liquidity crunch in the non-banking financial company ("NBFC") sector continued to be felt throughout the economy.

 

Modi's margin of victory to secure his second straight term in office was bigger than expected, built on hopes that his reform agenda, as well as spending on infrastructure and affordable housing, would continue to drive domestic growth.

 

This, unfortunately, failed to materialise. The economy continued to lose steam posting its weakest growth in six years. Private investment remained muted. Weaker manufacturing activity was seen especially in the key automotive sector as sales over the peak festive season, starting in September, failed to gain traction. Infrastructure spending and the focus on affordable housing also did not achieve the desired effect as property sales declined.

 

The post-election euphoria faded following a fiscally austere Budget. Measures included higher taxes on the super-rich and on foreign investors, a stark contrast to expectations for more business friendly policies. Legacy social welfare schemes from the previous administration were expanded also increasing the strain on public finances.

 

Nevertheless the government's priority was clear as it announced a much-welcomed surprise cut in corporate tax. This was meant to support the economy and boost business confidence. The International Monetary Fund applauded the move, citing a positive impact on investment nationwide.

 

A key cause of the economic woes could be traced back to the third quarter of 2018. The spectre of cash-strapped NBFCs still cast a shadow as infrastructure-leasing firm IL&FS' debt defaults last September exposed the extent of poor lending practices within the industry. The ensuing liquidity crunch affected the wider housing and automotive sectors which are reliant on such loans for sales.

 

Given the systemic risks, the government and central bank tried to contain the crisis by ensuring that NBFCs and housing finance companies were sufficiently capitalised to provide housing, vehicle and working capital loans. Complementing liquidity injections were measures to prop up flagging automotive sales and raise consumption through increased infrastructure spending.

 

The silver lining in the NBFC fallout was that regulators focused on eliminating bad debt in the system by reviewing and strengthening governance standards.  This heightened scrutiny, when coupled with efforts to merge public sector banks, should help create a more robust and transparent financial industry in the longer term.

 

We also saw the government and central bank work in tandem to support the affected sectors and economy, a departure from previous years when skirmishes between the two institutions were the norm. The central bank has implemented five interest rate cuts over the course of 2019 already with inflation contained, and it has signalled more room to ease rates if necessary. This increasingly coordinated stance could assist the country's climb out of its current economic softness, but potentially with the loss of central bank independence.

 

Finally, for most of the period, the ebb and flow of geopolitical trade tensions was a key driver of market sentiment worldwide, although India's largely domestic-oriented economy was mostly shielded from the impact of the ongoing US-China trade friction.

 

Gearing

Over the period, your Manager saw the opportunity to add to certain positions in periods of market weakness.  An additional £4 million was drawn down from the existing bank facility.  As at 30 September 2019, £19 million had been drawn of the total available facility of £30 million indicating a net gearing level, after allowing for cash balances held, of 4.2%.

 

The ability to gear is one of the advantages of the closed ended company structure and your Manager continues to seek opportunities to use this facility.

 

Discount

The Board continues to actively monitor the discount of the Ordinary share price to the NAV per Ordinary share (including income) and pursues a policy of selective buybacks of shares where to do so, in the opinion of the Board, is in the best interests of shareholders, whilst also having regard to the overall size of the Company. During the period, the discount to NAV tightened from 13.3% to 12.5% and the Company bought back 37,500 Ordinary shares at a total cost of £176,420 having witnessed a wider discount for a short period of time. Between the period end and the date of this report a further 5,000 shares have been bought back.  These shares are held by the Company in its treasury account.

 

Outlook

A more challenging period awaits India. Softening credit growth, due to the stress in the financial sector, could have further adverse effects across the economy, stifling the incipient consumption-led recovery. It could also weigh on industrial activity which has seen persistent weakness. Additionally, concerns over simmering trade tensions, a strengthening US dollar and decelerating global growth could all affect sentiment.

 

In Mr Modi's second term in office, his administration will face the unenviable task of driving change in highly-politicised areas such as land and labour regulations. The previous attempt at land reforms was poorly executed which resulted in a sizable portion of inhabitants being displaced. This has created some mistrust of the authorities on the subject. In order to reform the complex maze of outdated land and labour laws, Mr Modi will have to reach out to a number of stakeholders, including the trade unions, and persuade them to make the necessary concessions for the overall good of the economy. Meanwhile, the administration also needs to address the issue of persistent weak demand. Even though the corporate tax cut provided an incentive for private businesses to expand and invest in new production facilities, they are unlikely to do so if existing capacity is not fully utilised.

 

In spite of these issues, the country still possesses attractive structural advantages such as a large domestic market, attractive demographics with a sizeable young working population, and some of the best managed companies in Asia. As such we remain optimistic over the country's long-term potential and hence over our underlying companies' prospects and growth. Picking the right stocks is crucial and your Company remains well-positioned to navigate the possible adverse conditions. Your Manager has reviewed the holdings in the Company's portfolio to ensure that they have sound fundamentals, including robust balance sheets, pricing power, experienced management, clear growth prospects and stringent environmental, social and corporate governance ("ESG") standards.

 

Hence, while we expect to see some short-term volatility for stocks, we remain cautiously optimistic that the market's longer-term potential, coupled with your Manager's prudent investing philosophy, will continue to deliver steady growth for shareholders.

 

Electronic Communications for Registered Shareholders

The Board is proposing to move to more electronic-based forms of communication with its registered shareholders. Increased use of electronic communications should be a more cost effective, as well as faster and more environmentally friendly way of providing information to shareholders. Registered shareholders will therefore find enclosed, with the posted Half Yearly Report, a letter containing our electronic communications proposals and an opportunity to supply an email address to the Registrars, Computershare Investor Services plc. Registered shareholders who wish to continue to receive hard copies of documents and communications by post are encouraged to send back their replies in the enclosed prepaid envelope as soon as possible, but in any event by 10 January 2020.

 

Shareholders who hold their shares through the Aberdeen Standard Investment Trust Share Plan, ISA and Children's Plan (Planholders) will continue to receive all documentation by post in hard copy form for the time being.  Aberdeen Asset Managers Limited, the plan manager, is currently assessing how to adopt more electronically-based communications within these savings plans and planholders will be contacted directly with more detail in due course.

 

Hasan Askari

Chairman

 

26 November 2019

 

 

INTERIM BOARD REPORT

 

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.

 

Investment Policy

The Company primarily invests in Indian equity securities.

 

Principal Risks and Uncertainties

The principal risks and uncertainties associated with the Company are set out in detail on pages 9 and 10 of the Annual Report for the year ended 31 March 2019, which is published on the Company's website, and these are applicable for the remaining 6 months of the Company's financial year ended 31 March 2020 as they have been for the period under review.

 

The risks may be summarised under the following headings:

 

-      Market risk

-      Foreign Exchange risk

-      Discount risk

-      Depositary risk

-      Regulatory risk

 

Other financial risks are detailed in note 17 to the Financial Statements in the Company's Annual Report for the year ended 31 March 2019.

 

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 on pages 9 and 10 and in Note 17 to the financial statements for the year ended 31 March 2019.

 

The Company has a two year, £30 million revolving credit facility with Natwest Markets Plc (the "Facility") of which £19 million was drawn down at 30 September 2019. The Board has set limits for borrowing and regularly reviews the level of any gearing and compliance with banking covenants.

 

In advance of expiry of the Facility in July 2020, the Company will enter into negotiations with its bankers. If acceptable terms are available from the existing bankers, or any alternative, the Company would expect to continue to access a Facility. However, should these terms not be forthcoming, any outstanding borrowing would be repaid through the proceeds of equity sales.

 

The Directors' assessment of going concern also assumes that the Ordinary resolution for the Company's continuation is passed by shareholders at the next AGM of the Company in September 2020, 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.

 

After making enquiries, including a review of revenue forecasts, the Directors have a reasonable expectation that the Company possesses adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis of accounting in preparing the financial statements.

 

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Half Yearly Financial Report, in accordance with applicable law and regulations. The Directors confirm that, to the best of their knowledge:

 

-      the condensed set of Financial Statements has been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting);

-      the Half Yearly Board Report includes a fair review of the information required by rule 4.2.7R of the Disclosure Guidance and Transparency Rules (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of Financial Statements and a description of the principal risks and uncertainties for the remaining six months of the financial year); and

-      the Half Yearly Board Report includes a fair review of the information required by 4.2.8R of the Disclosure Guidance and Transparency Rules (being related party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could do so).

 

The Half Yearly Financial Report for the six months ended 30 September 2019 comprises the Interim Board Report, including the Statement of Directors' Responsibilities, and a condensed set of Financial Statements.

 

For and on behalf of the Board

 

Hasan Askari

Chairman

 

26 November 2019

 

 

INVESTMENT MANAGER'S REPORT

 

Overview

Indian equities were flat in the six months under review. Nevertheless, compared to the wider Asia Pacific ex Japan region, which fell against a backdrop of a slowing global economy and heightened trade tensions, they proved resilient.

 

The re-election of the Bharatiya Janata Party with a larger than expected majority initially lifted the market,as it signalled continuity of government policies. However, surprise tax hike proposals announced during the Federal Budget, together with a lack of any stimulus package to boost consumption, rattled investors and pared back these early gains. Throughout this period the financial storm in the shadow banking sector continued to rumble on, dampening the performance of financial stocks, as credit growth moderated and liquidity tightened. In particular, the default by non-banking financial company ('NBFC') Dewan Housing Finance Corporation and then fraud allegations against small lender Punjab and Maharashtra Co-operative Bank, renewed investor concerns.

 

In response, the Reserve Bank of India cut rates five times and proposed stricter regulations for NBFCs. The government unveiled measures to support investor and consumer sentiment including the consolidation of public-sector banks. To combat a slowdown in auto sales, it also deferred the increase in new registration fees and encouraged the scrapping of old vehicles. Near the end of the review period, stocks clawed back some losses, as the government slashed corporate tax rates. The stimulus measures propelled consumer staples stocks to put them among the biggest gains for the year while healthcare equities lagged the most.

 

Performance

For the half year under review, the portfolio's net asset value rose by 6.1%, well ahead of the benchmark MSCI India Index's return of 0.8%. The pleasing performance was driven primarily by the choice of stocks as investors sought out quality names amid persistent financial sector woes. The results are testament to the quality approach of the stock-picking process, and the defensiveness of the portfolio's consumer-oriented holdings.

 

The Company's financial holdings were, unsurprisingly, the top contributors to performance. Private-sector lenders Kotak Mahindra Bank and HDFC Bank emerged intact from a torrid environment. Their share price resilience stemmed from their experienced management, solid deposit bases and robust balance sheets which set them apart from their peers. We believe they are well-positioned to take advantage of the liquidity challenges faced by the beleaguered state banks and NBFCs, capturing greater market share. The recent corporate tax cuts will also bolster future earnings, due to the tax rate pass-through for their securities and asset management subsidiaries.

 

The portfolio further benefited from avoiding the worst of those affected by the shadow banking crisis. The price of Indiabulls Housing Finance, the second largest home lender, tumbled on accusations of fraud. Yes Bank, which has  significant exposure to Indiabulls, was similarly dragged down. The lack of exposure to both stocks boosted our relative returns. On the other hand, financial services and healthcare conglomerate Piramal Enterprises was a laggard for the Company. Investors feared it would be exposed to defaults in the real estate sector, which accounts for the lion's share of its loan book. We take comfort in how it has reduced risks on its loan book and raised sufficient funds to bolster capital, which should position the firm well for an eventual recovery.

 

Elsewhere in the financial sector, SBI Life, which we recently initiated, fared well. The largest private life insurer in the country posted solid earnings growth on the back of improving profit margins. It remains well placed to expand quickly, especially as the burgeoning middle class switches from public-sector insurers to private ones, which often adopt better customer practices.

 

In the meantime, given macroeconomic uncertainty, our preference for exposure to stocks tied to domestic consumption served the portfolio well. The Company's consumer staples holdings outpaced their smaller peers amid weak consumer sentiment. Nestle India rose on solid fundamentals and ahead of its inclusion into the Nifty 50 Index. Hindustan Unilever, which is growing faster than the market thanks to its distribution reach and wide brand portfolio, continued to deliver good performance.

 

Further helping to boost returns was the portfolio's exposure to the real estate sector. Though the broader sector was under pressure, Godrej Properties and Prestige Estates advanced on good earnings reports, as well as expectations that they would benefit from reforms in the affordable housing sector. Both companies also stand to gain from tighter regulation that we believe will encourage further consolidation in the sector. Likewise, Ultratech Cement and Asian Paints delivered positive returns as both are likely to profit from the boost to affordable housing.

 

On the flipside, healthcare holding Biocon was under pressure over competition concerns.  We continue to favour the firm which has a solid market position. It has invested early and partnered with US drugmakers Mylan and Pfizer, and is also poised to gain from the push for biosimilars in regulated markets. As we are increasingly positive on the medium-term opportunities in the biosimilars space and contract research outsourcing sector, we also initiated a position in Biocon's subsidiary Syngene. Its contract research outsourcing capabilities offer a more stable earnings stream.

 

Portfolio Activity

Aside from the aforementioned Syngene, we introduced into the portfolio Tech Mahindra, a software-engineering consultancy, with a leading position in the telecommunications sector. Started as a joint venture between carmaker Mahindra & Mahindra and UK-listed British Telecom, it has since expanded internationally, with a significant portion of its sales now coming from the US and Europe. We believe Tech Mahindra will benefit from the rollout of 5G technology in the telco sector.

 

We also initiated Lemon Tree Hotels, a hotel owner and operator in India's two- to four-star hospitality segment where demand far outstrips supply. Led by capable management since it was established over 15 years ago, it has a successful growth track record with a solid expansion plan.

 

Against this, we exited Cognizant Technology Solutions after it disappointed with volatile margins and returns that were consistently below those of its peers. Industry consolidation in the healthcare sector, which it services, was hurting its margins, and showed little signs of abating. We also divested Thermax which builds boilers for mega power plants, as a turnaround in the capital-expenditure cycle remained elusive.

 

Outlook

In the near term, concerns over the liquidity and solvency of the shadow banking sector, as well as slowing domestic growth and global macroeconomic uncertainty, will continue to affect the market. These factors were reflected in the cautious note struck by many of the Company's holdings for the short term in the most recent earnings reporting season. On a brighter note, above-average monsoon rains will likely boost rural incomes and, along with the recent Diwali festival, bode well for consumer spending. Recent corporate tax cuts have made valuations more attractive, and will help support a recovery, particularly in the financials and consumer staples sectors.

 

Notwithstanding its present challenges, India still has many structural drivers of long-term growth. It maintains a big domestic economy and an entrepreneurial culture. Furthermore, it stands to benefit from still-low oil prices and multinationals looking to relocate their factories out of China to avoid US trade tariffs. Its prowess in computer engineering makes it an increasingly important force as industries, ranging from automotive to finance, embrace digitalisation. The portfolio is geared towards these long-term growth sectors. In the meantime, the Company's holdings should continue to be supported by their robust balance sheets and steady cash flows.

 

Aberdeen Standard Investments (Asia) Limited

Investment Manager

 

26 November 2019

 

 

 

INVESTMENT PORTFOLIO

As at 30 September 2019

 

 

 

 

Valuation

Net assets

Company

Sector

£'000

%

Housing Development Finance Corporation

Financials

31,560

8.8

Tata Consultancy Services

Information Technology

27,117

7.6

Infosys

Information Technology

20,962

5.9

Hindustan Unilever

Consumer Staples

19,898

5.6

Kotak Mahindra Bank

Financials

18,377

5.1

ITC

Consumer Staples

16,543

4.6

Ultratech Cement{A}

Materials

14,676

4.1

Nestlé India

Consumer Staples

14,593

4.1

Container Corporation of India

Industrials

13,993

3.9

SBI Life Insurance

Financials

13,019

3.6

Top ten investments

 

190,738

53.3

HDFC Bank

Financials

12,782

3.6

Asian Paints

Materials

10,806

3.0

MphasiS

Information Technology

10,115

2.8

Piramal Enterprises

Healthcare

9,368

2.6

Godrej Consumer Products

Consumer Staples

8,797

2.5

Gruh Finance

Financials

7,023

2.0

Hero MotoCorp

Consumer Discretionary

6,750

1.9

Prestige Estates Projects

Real Estate

6,566

1.9

Godrej Properties

Real Estate

6,412

1.8

Jyothy Laboratories

Consumer Staples

6,406

1.8

Top twenty investments

 

275,763

77.2

Maruti Suzuki India

Consumer Discretionary

6,075

1.7

Bosch

Consumer Discretionary

5,796

1.6

Sanofi India

Healthcare

5,236

1.5

Biocon

Healthcare

5,118

1.4

Syngene International

Healthcare

5,005

1.4

Shree Cement

Materials

4,787

1.3

Gujarat Gas

Utilities

4,721

1.3

Aegis Logistics

Industrials

4,698

1.3

Godrej Agrovet

Consumer Staples

4,226

1.2

Kansai Nerolac Paints

Materials

4,096

1.2

Top thirty investments

 

325,521

91.1

Tech Mihandra

Information Technology

3,853

1.1

ABB India

Industrials

3,608

1.0

Lemon Tree Hotels

Consumer Discretionary

3,462

1.0

Bandhan Bank

Financials

3,375

0.9

Bharti Infratel

Consumer Discretionary

2,869

0.8

Grasim Industries

Materials

2,840

0.8

Ambuja Cements{A}

Materials

2,501

0.7

Max Financial Services

Financials

1,761

0.5

Castrol India

Materials

1,652

0.5

Cyient

Information Technology

1,406

0.4

GlaxoSmithKline Pharmaceuticals

Healthcare

73

-

Total portfolio investments

 

352,921

98.8

Net current assets (before deducting prior charges){B}

4,320

1.2

Total assets{C}

 

357,241

100.0

 

{A}   Comprises equity and listed or tradeable Global Depository Receipts ("GDR") holdings.

{B}   Excluding loan balances.

{C}   Total assets per the Balance Sheet less current liabilities excluding bank loans. Excludes non-current liabilities.

 

 

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

 

 

 

Six months ended

Six months ended

 

 

30 September 2019

30 September 2018

 

 

(unaudited)

(unaudited)

 

 

Revenue

Capital

Total

Revenue

Capital

Total

 

Notes

£'000

£'000

£'000

£'000

£'000

£'000

Income

 

 

 

 

 

 

 

Income from investments and other income

3

3,496

-

3,496

2,646

-

2,646

Gains on investments held at fair value through profit or loss

 

-

20,599

20,599

-

9,264

9,264

Currency losses

 

-

(121)

(121)

-

(242)

(242)

 

 

_______

_______

_______

_______

_______

_______

 

 

3,496

20,478

23,974

2,646

9,022

11,668

 

 

_______

_______

_______

_______

_______

_______

Expenses

 

 

 

 

 

 

 

Investment management fees

 

(1,485)

-

(1,485)

(1,428)

-

(1,428)

Administrative expenses

 

(396)

-

(396)

(425)

-

(425)

 

 

_______

_______

_______

_______

_______

_______

Profit before finance costs and taxation

 

1,615

20,478

22,093

793

9,022

9,815

 

 

 

 

 

 

 

 

Finance costs

 

(145)

-

(145)

(81)

-

(81)

 

 

_______

_______

_______

_______

_______

_______

Profit/(loss) before taxation

 

1,470

20,478

21,948

712

9,022

9,734

 

 

 

 

 

 

 

 

Taxation

4

(2)

(2,672)

(2,674)

(4)

(2,659)

(2,663)

 

 

_______

_______

_______

_______

_______

_______

Profit/(loss) for the period

 

1,468

17,806

19,274

708

6,363

7,071

 

 

_______

_______

_______

_______

_______

_______

 

 

 

 

 

 

 

 

Return/(loss) per Ordinary share (pence)

5

2.49

30.14

32.63

1.20

10.77

11.97

 

 

_______

_______

_______

_______

_______

_______

 

 

 

 

 

 

 

 

The Company does not have any income or expense that is not included in profit/(loss) for the period, and therefore the "Profit/(loss) for the period" is also the "Total comprehensive income for the period".

 

The total columns of this statement represent the Condensed Statement of Comprehensive Income, 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.

 

All of the profit/(loss) and total comprehensive income is attributable to the equity holders of Aberdeen New India Investment Trust PLC. There are no non-controlling interests.

 

The accompanying notes are an integral part of these financial statements.

 

 

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (Cont'd)

 

 

 

Year ended

 

 

31 March 2019

 

 

(audited)

 

 

Revenue

Capital

Total

 

Notes

£'000

£'000

£'000

Income

 

 

 

 

Income from investments and other income

3

3,602

-

3,602

Gains on investments held at fair value through profit or loss

 

-

27,826

27,826

Currency losses

 

-

(349)

(349)

 

 

_______

_______

_______

 

 

3,602

27,477

31,079

 

 

_______

_______

_______

Expenses

 

 

 

 

Investment management fees

 

(2,774)

-

(2,774)

Administrative expenses

 

(805)

-

(805)

 

 

_______

_______

_______

Profit before finance costs and taxation

 

23

27,477

27,500

 

 

 

 

 

Finance costs

 

(223)

-

(223)

 

 

_______

_______

_______

Profit/(loss) before taxation

 

(200)

27,477

27,277

 

 

 

 

 

Taxation

4

(8)

(2,517)

(2,525)

 

 

_______

_______

_______

Profit/(loss) for the period

 

(208)

24,960

24,752

 

 

_______

_______

_______

 

 

 

 

 

Return/(loss) per Ordinary share (pence)

5

(0.35)

42.25

41.90

 

 

_______

_______

_______

 

 

 

CONDENSED BALANCE SHEET

 

 

 

As at

As at

As at

 

 

30 September

30 September

31 March

 

 

2019

2018

2019

 

 

(unaudited)

(unaudited)

(audited)

 

Notes

£'000

£'000

£'000

Non-current assets

 

 

 

 

Investments held at fair value through profit or loss

 

352,921

311,948

326,626

Subsidiary held at fair value through profit or loss

12

-

27

43

 

 

_______

_______

_______

 

 

352,921

311,975

326,669

 

 

 

 

 

Current assets

 

 

 

 

Cash at bank

 

4,760

3,581

4,227

Receivables

 

265

190

2,583

 

 

_______

_______

_______

Total current assets

 

5,025

3,771

6,810

 

 

_______

_______

_______

 

 

 

 

 

Current liabilities

 

 

 

 

Bank loan

8

(19,000)

(15,000)

(15,000)

Other payables

 

(705)

(1,615)

(1,933)

 

 

_______

_______

_______

Total current liabilities

 

(19,705)

(16,615)

(16,933)

 

 

_______

_______

_______

Net current liabilities

 

(14,680)

(12,844)

(10,123)

 

 

_______

_______

_______

 

 

 

 

 

Non-current liabilities

 

 

 

 

Deferred tax liability on Indian capital gains

4

(4,948)

(2,616)

(2,350)

 

 

_______

_______

_______

Net assets

 

333,293

296,515

314,196

 

 

_______

_______

_______

Share capital and reserves

 

 

 

 

Ordinary share capital

9

14,768

14,768

14,768

Share premium account

 

25,406

25,406

25,406

Special reserve

 

15,601

15,778

15,778

Capital redemption reserve

 

4,484

4,484

4,484

Capital reserve

10

272,662

236,259

254,856

Revenue reserve

 

372

(180)

(1,096)

 

 

_______

_______

_______

Equity shareholders' funds

 

333,293

296,515

314,196

 

 

_______

_______

_______

 

 

 

 

 

Net asset value per Ordinary share (pence)

11

564.59

501.97

531.90

 

 

_______

_______

_______

 

 

 

 

 

The accompanying notes are an integral part of these financial statements.

 

 

CONDENSED STATEMENT OF CHANGES IN EQUITY

 

Six months ended 30 September 2019 (unaudited)

 

 

 

 

 

 

 

 

 

Share

 

Capital

 

 

 

 

Share

premium

Special

redemption

Capital

Revenue

 

 

capital

account

reserve

reserve

reserve

reserve

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 31 March 2019

14,768

25,406

15,778

4,484

254,856

(1,096)

314,196

Profit for the period

-

-

-

-

17,806

1,468

19,274

Purchase of Ordinary shares to be held in treasury

-

-

(177)

-

-

-

(177)

 

______

______

______

______

______

______

_______

Balance at 30 September 2019

14,768

25,406

15,601

4,484

272,662

372

333,293

 

______

______

______

______

______

______

_______

 

 

 

 

 

 

 

 

Six months ended 30 September 2018 (unaudited)

 

 

 

 

 

 

 

 

 

Share

 

Capital

 

 

 

 

Share

premium

Special

redemption

Capital

Revenue

 

 

capital

account

reserve

reserve

reserve

reserve

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 31 March 2018

14,768

25,406

15,778

4,484

229,896

(888)

289,444

Profit for the period

-

-

-

-

6,363

708

7,071

 

______

______

______

______

______

______

_______

Balance at 30 September 2018

14,768

25,406

15,778

4,484

236,259

(180)

296,515

 

______

______

______

______

______

______

_______

 

 

 

 

 

 

 

 

Year ended 31 March 2019 (audited)

 

 

 

 

 

 

 

 

 

Share

 

Capital

 

 

 

 

Share

premium

Special

redemption

Capital

Revenue

 

 

capital

account

reserve

reserve

reserve

reserve

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 31 March 2018

14,768

25,406

15,778

4,484

229,896

(888)

289,444

Profit/(loss) for the year

-

-

-

-

24,960

(208)

24,752

 

______

______

______

______

______

______

_______

Balance at 31 March 2019

14,768

25,406

15,778

4,484

254,856

(1,096)

314,196

 

______

______

______

______

______

______

_______

 

 

 

 

 

 

 

 

The Special reserve and the Revenue reserve represent the amount of the Company's distributable reserves.

 

 

CONDENSED CASH FLOW STATEMENT

 

 

Six months ended

Six months ended

Year
ended

 

 

30 September 2019

30 September 2018

31 March 2019

 

 

(unaudited)

(unaudited)

(audited)

 

 

£'000

£'000

£'000

 

Cash flows from operating activities

 

 

 

 

Dividend income received

3,453

2,519

3,559

 

Interest income received

9

6

15

 

Investment management fee paid

(1,228)

(1,454)

(2,780)

 

Overseas withholding tax

(2)

(4)

(8)

 

Other cash expenses

(393)

(405)

(774)

 

 

__________

__________

__________

 

Cash inflow from operations

1,839

662

12

 

Interest paid

(149)

(50)

(212)

 

 

__________

__________

__________

 

Net cash inflow/(outflow) from operating activities

1,690

612

(200)

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Purchase of investments

(33,428)

(42,992)

(67,814)

 

Sales of investments

28,643

26,811

53,321

 

Indian capital gains tax on sales

(74)

(44)

(167)

 

 

__________

__________

__________

 

Net cash outflow from investing activities

(4,859)

(16,225)

(14,660)

 

 

__________

__________

__________

 

Cash flows from financing activities

 

 

 

 

Share buy backs

(177)

-

-

 

Drawdown of loan

4,000

15,000

15,000

 

 

__________

__________

__________

 

Net cash inflow from financing activities

3,823

15,000

15,000

 

 

__________

__________

__________

 

Net increase/(decrease) in cash and cash equivalents

654

(613)

140

 

Cash and cash equivalents at the start of the period

4,227

4,436

4,436

 

Effect of foreign exchange rate changes

__________

__________

__________

 

 

 

 

 

 

Cash and cash equivalents at the end of the period

4,760

3,581

4,227

 

 

__________

__________

__________

 

 

 

 

 

 

There were no non-cash transactions during the period (six months ended 30 September 2018 - £nil; year ended 31 March 2019 - £nil).

 
 

 

 

NOTES TO THE FINANCIAL STATEMENTS

 

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.

 

2.

Accounting policies

 

The Company's financial statements have been prepared in accordance with International Accounting Standard ('IAS') 34 - 'Interim Financial Reporting', as adopted by the International Accounting Standards Board (IASB), and interpretations issued by the International Reporting Interpretations Committee of the IASB (IFRIC). The Company's financial statements have been prepared using the same accounting policies applied for the year ended 31 March 2019 financial statements, which received an unqualified audit report.

 

 

 

The financial statements have been prepared on a going concern basis. In accordance with the Financial Reporting Council's guidance on 'Going Concern and Liquidity Risk' the Directors have undertaken a review of the Company's assets which primarily consist of a diverse portfolio of listed equity shares which, in most circumstances, are realisable within a short timescale.

 

 

 

Six months ended

Six months ended

Year ended

 

 

30 September 2019

30 September 2018

31 March 2019

3.

Income

£'000

£'000

£'000

 

Income from investments

 

 

 

 

Overseas dividends

3,487

2,640

3,587

 

 

 

 

 

 

Other operating income

 

 

 

 

Deposit interest

9

6

15

 

 

__________

__________

__________

 

Total income

3,496

2,646

3,602

 

 

__________

__________

__________

 

 

 

 

Six months ended

Six months ended

Year ended

 

 

 

30 September 2019

30 September 2018

31 March 2019

 

 

 

Revenue

Capital

Total

Revenue

Capital

Total

Revenue

Capital

Total

4.

Taxation

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

(a)

Analysis of charge for the period

 

 

 

 

 

 

 

 

 

 

 

Indian capital gains tax charge on sales

-

74

74

-

43

43

-

167

167

 

 

Overseas taxation

2

-

2

4

-

4

8

-

8

 

 

 

______

______

______

______

______

______

______

______

______

 

 

Total current tax charge for the period

2

74

76

4

43

47

8

167

175

 

 

Deferred tax liability on Indian capital gains

-

2,598

2,598

-

2,616

2,616

-

2,350

2,350

 

 

 

______

______

______

______

______

______

______

______

______

 

 

Total tax charge for the period

2

2,672

2,674

4

2,659

2,663

8

2,517

2,525

 

 

 

______

______

______

______

______

______

______

______

______

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Company is liable to Indian capital gains tax under Section 115 AD of the Indian Income Taxes Act 1961.

 

 

 

 

 

On 1 April 2018, the Indian Government withdrew an exemption from capital gains tax on disposals of investments held for twelve months or longer. Accordingly, the Company has recognised a deferred tax liability of £4,948,000 (30 September 2018 - £2,616,000; 31 March 2019 - £2,350,000) on capital gains which may arise if the Company's Indian investments are sold.

 

 

 

 

 

At 30 September 2019 the Company had surplus management expenses and loan relationship deficits with a tax value of £2,959,000 (30 September 2018 - £2,301,000; 31 March 2019  - £2,618,000) in respect of which a deferred tax asset has not been recognised. This is due to the Company having sufficient excess management expenses available to cover the potential liability and the Company is not expected to generate taxable income in the future in excess of deductible expenses.

 

 

 

 

(b)

Factors affecting the tax charge for the year or period

 

 

The tax charged for the period can be reconciled to the profit per the Statement of Comprehensive Income as follows:

 

 

 

 

 

 

Six months ended

Six months ended

Year ended

 

 

 

30 September 2019

30 September 2018

31 March 2019

 

 

 

Revenue

Capital

Total

Revenue

Capital

Total

Revenue

Capital

Total

 

 

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

Profit/(loss) before tax

1,470

20,478

21,948

712

9,022

9,734

(200)

27,477

27,277

 

 

 

______

______

______

______

______

______

______

______

______

 

 

UK corporation tax on profit/(loss) at the standard rate of 19%

279

3,891

4,170

135

1,714

1,849

(38)

5,221

5,183

 

 

Effects of:

 

 

 

 

 

 

 

 

 

 

 

Gains on investments held at fair value through profit or loss not taxable

-

(3,914)

(3,914)

-

(1,760)

(1,760)

-

(5,287)

(5,287)

 

 

Currency losses not taxable

-

23

23

-

46

46

-

66

66

 

 

Movement in excess expenses

381

-

381

364

-

364

720

-

720

 

 

Expenses not deductible for tax purposes

3

-

3

3

-

3

-

-

-

 

 

Indian capital gains tax charge on sales

-

74

74

-

43

43

-

167

167

 

 

Movement in deferred tax liability on Indian capital gains

-

2,598

2,598

-

2,616

2,616

-

2,350

2,350

 

 

Irrecoverable overseas withholding tax

2

-

2

4

-

4

8

-

8

 

 

Non-taxable dividend income

(663)

-

(663)

(502)

-

(502)

(682)

-

(682)

 

 

 

______

______

______

______

______

______

______

______

______

 

 

Total tax charge

2

2,672

2,674

4

2,659

2,663

8

2,517

2,525

 

 

 

______

______

______

______

______

______

______

______

______

 

 

 

 

 

 

 

 

 

 

 

 

                             

 

 

 

Six months ended

Six months ended

Year ended

 

 

30 September 2019

30 September 2018

31 March
2019

5.

Return per Ordinary share

£'000

£'000

£'000

 

Based on the following figures:

 

 

 

 

Revenue return

1,468

708

(208)

 

Capital return

17,806

6,363

24,960

 

 

__________

__________

__________

 

Total return

19,274

7,071

24,752

 

 

__________

__________

__________

 

Weighted average number of Ordinary shares in issue

59,063,872

59,070,140

59,070,140

 

 

__________

__________

__________

 

6.

Dividends on equity shares

 

No interim dividend has been declared in respect of either the six months ended 30 September 2019 or 30 September 2018.

 

7.

Transaction costs

 

During the period expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Statement of Comprehensive Income. The total costs were as follows:

 

 

 

 

 

 

 

Six months ended

Six months ended

Year ended

 

 

30 September 2019

30 September 2018

31 March
2019

 

 

£'000

£'000

£'000

 

Purchases

68

81

129

 

Sales

38

47

105

 

 

__________

__________

__________

 

 

106

128

234

 

 

__________

__________

__________

 

 

 

 

 

 

The above transaction costs are calculated in line with the AIC SORP. The transaction costs in the Company's Key Information Document, provided by the Manager, are calculated on a different basis and in line with the PRIIPs regulations.

 

8.

Bank loan

 

In July 2018, the Company entered into a two year £30 million multi-currency revolving credit facility with Natwest Markets Plc. At 30 September 2019 £19 million (30 September 2018 and 31 March 2019 - £15 million) had been drawn down at an all-in interest rate of 1.49375%, which matures on 29 November 2019.

 

9.

Ordinary share capital

 

During the period 37,500 Ordinary shares were bought back by the Company for holding in treasury, at a cost of £177,000 (period to 30 September 2018 and 31 March 2019 - nil). As at 30 September 2019 there were 59,070,140 (30 September 2018 and 31 March 2019 - 59,070,140) Ordinary shares in issue, of which 37,500 (30 September 2018 and 31 March 2019 - nil) Ordinary shares were held in treasury.

 

 

 

Following the period end a further 5,000 Ordinary shares were bought back for treasury by the Company at a cost of £24,000, resulting in there being 59,070,140 (30 September 2018 and 31 March 2019 - 59,070,140) Ordinary shares in issue, of which 42,500 Ordinary shares were held in treasury at the date this Report was approved.

 

10.

Capital reserve

 

The capital reserve reflected in the Balance Sheet at 30 September 2019 includes gains of £112,846,000 (30 September 2018 - £60,665,000; 31 March 2019 - £79,516,000) which relate to the revaluation of investments held at the reporting date after deduction of the deferred Indian capital gains tax liability.

 

11.

Net asset value per Ordinary share

 

The net asset value per Ordinary share is based on a net asset value of £333,293,000 (30 September 2018 - £296,515,000; 31 March 2019 - £314,196,000) and on 59,032,640 (30 September 2018 and 31 March 2019 - 59,070,140) Ordinary shares, being the number of Ordinary shares in issue at the period end.

 

12.

Fair value hierarchy

 

IFRS 13 'Fair Value Measurement' requires an entity to classify fair value measurements using a fair value hierarchy that reflects the subjectivity of the inputs used in making measurements. The fair value hierarchy has the following levels: 

 

 

 

Level 1: quoted (unadjusted) market prices in active markets for identical assets or liabilities;

 

Level 2: valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; and

 

Level 3: valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

 

 

 

The financial assets and liabilities measured at fair value in the Balance Sheet are grouped into the fair value hierarchy at the Balance Sheet date as follows:

 

 

 

 

 

 

 

 

 

 

Level 1

Level 2

Level 3

Total

 

As at 30 September 2019

Note

£'000

£'000

£'000

£'000

 

Financial assets at fair value through profit or loss

 

 

 

 

 

 

Quoted equities

a)

349,722

3,199

-

352,921

 

 

 

_______

_______

_______

_______

 

Net fair value

 

349,722

3,199

-

352,921

 

 

 

_______

_______

_______

_______

 

 

 

 

 

 

 

 

 

 

Level 1

Level 2

Level 3

Total

 

As at 30 September 2018

Note

£'000

£'000

£'000

£'000

 

Financial assets at fair value through profit or loss

 

 

 

 

 

 

Quoted equities

a)

311,948

-

-

311,948

 

Investment in Subsidiary

b)

-

27

-

27

 

 

 

_______

_______

_______

_______

 

Net fair value

 

311,948

27

-

311,975

 

 

 

_______

_______

_______

_______

 

 

 

 

 

 

 

 

 

 

Level 1

Level 2

Level 3

Total

 

As at 31 March 2019

Note

£'000

£'000

£'000

£'000

 

Financial assets at fair value through profit or loss

 

 

 

 

 

 

Quoted equities

a)

321,165

5,461

-

326,626

 

Investment in Subsidiary

b)

-

43

-

43

 

 

 

_______

_______

_______

_______

 

Net fair value

 

321,165

5,504

-

326,669

 

 

 

_______

_______

_______

_______

 

 

 

 

 

 

 

 

 

a)

Quoted equities

 

 

The fair value of the Group's investments in quoted equities has been determined by reference to their quoted bid prices at the reporting date. Quoted equities included in Fair Value Level 1 are actively traded on recognised stock exchanges. Quoted entities included in Fair Value Level 2 are GDR holdings in Ultratech Cement and Ambuja Cements, which are not considered to trade actively on recognised stock exchanges.

 

 

 

 

b)

Investment in Subsidiary

 

 

The Company's investment in its Subsidiary was categorised in Fair Value Level 2 as its fair value was determined by reference to the Subsidiary company's net asset value at the liquidation date. During the period, the Subsidiary was liquidated and proceeds of £45,000 were received from the Subsidiary.

               

 

13.

Related party transactions

 

The Company has an agreement with Aberdeen Standard Fund Managers Limited (the "Manager") for the provision of management, secretarial, accounting and administration services and for carrying out promotional activity services in relation to the Company.

 

 

 

During the period, the management fee was payable monthly in arrears and was based on 0.9% up to £350m and 0.75% thereafter of the net assets of the Company. The management agreement is terminable by either the Company or the Manager on six months' notice. The amount payable in respect of the Company for the period was £1,485,000 (six months ended 30 September 2018 - £1,428,000; year ended 31 March 2019 - £2,774,000) and the balance due to the Manager at the period end was £498,000 (period end 30 September 2018 - £219,000; year end 31 March 2019 - £240,000). All investment management fees are charged 100% to the revenue column of the Statement of Comprehensive Income.

 

 

 

The Company has an agreement with the Manager for the provision of promotional activities in relation to the Company's participation in the Aberdeen Standard Investment Trust Share Plan and ISA. The total fees paid and payable under the agreement during the period were £78,000 (six months ended 30 September 2018 - £78,000; year ended 31 March 2019 - £156,000) and the balance due to the Manager at the period end was £39,000 (period ended 30 September 2018 - £39,000; year ended 31 March 2019 - £39,000).

 

14.

Segmental information

 

For management purposes, the Company is organised into one main operating segment, which invests in equity securities. All of the Company's activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based upon analysis of the Company as one segment. The financial results from this segment are equivalent to the financial statements of the Company as a whole.

 

15.

Half-Yearly Report

 

The financial information contained in this Half-Yearly Report does not constitute statutory accounts as defined in Sections 434 - 436 of the Companies Act 2006. The financial information for the six months ended 30 September 2019 and 30 September 2018 has not been audited.

 

 

 

The information for the year ended 31 March 2019 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the Independent Auditor on those accounts contained no qualification or statement under Section 237 (2), (3) or (4) of the Companies Act 2006.

 

 

 

The Half-Yearly Report has not been reviewed or audited by the Company's Independent Auditor.

 

16.

Approval

 

This Half-Yearly Report was approved by the Board on 26 November 2019.

 

 

ALTERNATIVE PERFORMANCE MEASURES

 

Alternative performance measures are numerical measures of the Company's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Company's applicable financial framework includes IFRS and the AIC SORP. The Directors assess the Company's performance against a range of criteria which are viewed as particularly relevant for closed-end investment companies.

 

Total return

Total return is considered to be an alternative performance measure. NAV and share price total returns show how the NAV and share price has performed over a period of time in percentage terms, taking into account both capital returns and dividends paid to shareholders. NAV total return involves investing the net dividend in the NAV of the Company with debt at fair value on the date on which that dividend goes ex-dividend. Share price total return involves reinvesting the net dividend in the share price of the Company on the date on which that dividend goes ex-dividend.

 

The tables below provide information relating to the NAVs and share prices of the Company on the dividend reinvestment dates during the six months ended 30 September 2019 and the year ended 31 March 2019. No dividends were declared during these years.

 

 

 

 

 

Share

Six months ended 30 September 2019

NAV

price

31 March 2019

531.90p

461.00p

30 September 2019

564.59p

494.00p

 

________

________

Total return

+6.1%

+7.2%

 

________

________

 

 

 

 

 

Share

Year ended 31 March 2019

NAV

price

31 March 2018

490.00p

426.00p

31 March 2019

531.90p

461.00p

 

________

________

Total return

+8.6%

+8.2%

 

________

________

 

 

 

Discount to net asset value

 

 

The discount is the amount by which the share price of 494.00p (31 March 2019 - 461.00p) is lower than the net asset value per share (including income) of 564.59p (31 March 2019 - 531.90p), expressed as a percentage of the net asset value (including income).

 

Net gearing 

Net gearing measures the total borrowings of £19,000,000 (31 March 2019 - £15,000,000) less cash and cash equivalents of £4,927,000 (31 March 2019 - £5,261,000) divided by shareholders' funds of £333,293,000 (31 March 2019 - £314,196,000), expressed as a percentage. Under AIC reporting guidance cash and cash equivalents includes amounts due to and from brokers at the period end as well as cash at bank and short term deposits.

 

Ongoing charges 

Ongoing charges is considered to be an alternative performance measure. The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC as the total of investment management fees and administrative expenses and expressed as a percentage of the average net asset values throughout the year. The ratio for 30 September 2019 is based on forecast ongoing charges for the year ending 31 March 2020.

 

 

 

 

30 September 2019

31 March 2019

Investment management fees (£'000)

2,989

2,774

Administrative expenses (£'000)

820

805

Less: non-recurring charges (£'000)

-

(9)

 

________

________

Ongoing charges (£'000)

3,809

3,570

 

________

________

Average net assets (£'000)

328,903

305,133

 

________

________

Ongoing charges ratio

1.16%

1.17%

 

________

________

 

 

 

The ongoing charges ratio provided in the Company's Key Information Document is calculated in line with the PRIIPs regulations which amongst other things, includes the cost of borrowings and transaction costs.

         

 

Stuart Reid

Aberdeen Asset Management PLC

Secretaries

 

Tel. 0131 372 2200

 

26 November 2019


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