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Aberdeen New India (ANII)

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Monday 26 November, 2018

Aberdeen New India

Half-Yearly Report

RNS Number : 4000I
Aberdeen New India Invest Trust PLC
26 November 2018
 

ABERDEEN NEW INDIA INVESTMENT TRUST PLC

Legal Entity Identifier (LEI): 549300D2AW66WYEVKF02

 

 

UNAUDITED HALF-YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018

 

FINANCIAL SUMMARY AND PERFORMANCE

 

 

30 September 2018

31 March 2018

% change

Total shareholders' funds (£'000)

296,515

289,444

+ 2.4

Share price (mid-market)

431.50p

426.00p

+ 1.3

Net asset value per share

501.97p

490.00p

+ 2.4

Discount to net asset value

14.0%

13.1%

 

Net gearing{A}

4.2%

-

 

Ongoing charges ratio{B}

1.17%

1.25%

 

Rupee to Sterling exchange rate

94.5

91.4

- 3.4

 

{A}        Considered to be an Alternative Performance Measure. Further details may be found below.

{B}        Considered to be an Alternative Performance Measure. Ongoing charges ratio calculated in accordance with guidance issued by the AIC as the total of the investment management fee and administrative expenses (annualised) divided by the average cum income net asset value throughout the year. The ratio for 30 September 2018 is based on forecast ongoing charges for the year ending 31 March 2019. Further details may be found below.

 

 

Performance (total return)

 Six months ended

 Year ended

 

 30 September 2018

 31 March 2018

 

 %

 %

Share price{A}

+ 1.3

- 3.5

Net asset value{A}

+ 2.4

+ 0.4

MSCI India Index (Sterling adjusted)

+ 4.5

- 1.7

 

{A} Considered to be an Alternative Performance Measure. Further details may be found below. 

 

 

CHAIRMAN'S STATEMENT

 

Dear Shareholder

 

Performance

For the six months ended 30 September 2018, your Company's net asset value ("NAV") rose by 2.4%. The Ordinary share price gained 1.3% to 431.5p while the discount to NAV widened to 14.0% from 13.1%. By comparison, the benchmark MSCI India Index increased by 4.5% in sterling terms. All figures are in total return terms.

 

Overview

Indian equities were resilient compared to most of their regional peers, which were affected by swings in sentiment. At the start of the period, the market traded narrowly higher, as it rebounded from a difficult start to 2018 that was caused by the reintroduction of a long term capital gains tax and a fraud scandal at state owned Punjab National Bank. Subsequently, solid company earnings, policy amendments and better than expected growth fuelled a robust rally, and helped the market overcome broader global worries. Notably, the largely domestic oriented economy provided insulation from the escalating US and China tariff war.

 

However, the wave of nervousness afflicting emerging markets globally eventually reached the subcontinent's shores, resulting in a sharp correction in September. The rupee suffered an extended decline on the back of elevated oil prices and a strengthening US dollar. Worries also grew about contagion risks from financial crises faced by Turkey and Argentina. A widening trade and current account deficit further eroded sentiment. Compounding these external factors were domestic concerns including fresh signs of trouble in the financial sector, as major infrastructure leasing firm IL&FS defaulted on its debt. Fears of similar funding issues dampened financial stocks, and may continue to pressure markets in the near term due to the tighter liquidity conditions, especially as loan growth from the sizable non bank financial sector may moderate. There could be a silver lining, however, if the shakeout reduces poor lending practices that have long been a problem associated with the banking sector. All this points to the uneven standards of governance and controls within the financial industry. It also reaffirms the benefits of your Manager's emphasis on quality, as the Company's exposure to better run and more retail focused private sector lenders fared better than the wider sector.

 

Political risks have also increased following the outcome of the recent Karnataka state election, in which the ruling Bharatiya Janata Party (BJP) was ousted by an alliance of opposition parties. There are growing worries that a similar scenario could play out at the national level. Investors will be particularly watchful of the impact of the elections on the continuity of the Modi administration's wide ranging reform programs.

 

That said, several encouraging themes have emerged, including continued signs of recovering domestic consumption. In particular, demand in rural areas appeared to pick up steam after an extended period in the doldrums, aided by a better monsoon season. This was positive for your Company, given the underlying portfolio's bias towards consumer staples, which tends to be more closely tied to rural consumption and less reliant on credit financing. Encouragingly, this trend seems sustainable, given rural consumers' rising employment, income levels and financial access, and an evolving appetite for premium products.  At the same time, demand in the near term may be supported by favourable policy amendments, including Goods and Services Tax ("GST") rate cuts and increases to the minimum support price for key crops. Increased pre-election government spending could provide a further boost.

 

More broadly, the economy has started to normalise from the disruptions caused by GST and the demonetisation exercise. Other initiatives, such as affordable housing and healthcare programs, and more efficient resolution and recovery of bad debts since the 2016 bankruptcy law was passed, also augur well for India over the longer run.

 

Gearing

A particular advantage of closed ends funds, as compared to other financial products, is their ability to borrow for investment purposes. Gearing can improve returns in rising stockmarkets but also give rise to reduced returns in falling stockmarkets. In July 2018, the Company entered into a two year, £30 million revolving credit facilty with Natwest Markets Plc (the "Facility"). £15 million of the Facility had been drawn down as at 30 September 2018 which was equivalent to net gearing of 4.2%. Further information on the calculation of the gearing figure may be found in the Alternative Performance Measures section below.

 

Outlook

Nonetheless, a more testing period awaits India. Moderating credit growth, due to the troubles in the financial sector, could have wide reaching implications across the economy, including the incipient consumption recovery. It could also dampen industrial activity, which has remained stubbornly sluggish despite robust headline growth. The outlook for corporate earnings has also diminished. Companies are turning more cautious as higher energy prices add to cost pressures. Politics is another concern, and not just due to uncertainty over the 2019 general election outcome. Prevailing global worries, including an intensifying trade war, strengthening US dollar and tighter monetary conditions, will also sway sentiment.

 

Against such a backdrop, picking the right stocks is crucial, and your Company remains well positioned to navigate the difficult terrain. Your Manager has assessed the holdings in the underlying portfolio to ensure they possess robust fundamentals, including solid balance sheets, pricing power, experienced management, clear growth prospects and high governance standards. These companies also provide exposure to India's continuing structural advantages, including a growing middle class and expanding infrastructure development. Thus, while there will be bumps along the way, the Board remains cautiously optimistic that the market's long term potential, coupled with your Manager's prudent investing philosophy, will continue to deliver steady, attractive long term returns for shareholders.

 

Hasan Askari

Chairman

 

23 November 2018

 

 

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 8 and 9 of the Annual Report for the year ended 31 March 2018, 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 2019 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 15 to the Financial Statements in the Company's Annual Report for the year ended 31 March 2018.

 

In addition, due to the introduction of a bank loan during the six months ended 30 September 2018, a new principal risk and uncertainty for the Company is gearing risk.

 

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 8 and 9 and in Note 15 to the financial statements for the year ended 31 March 2018.

 

In July 2018, the Company entered into a two year, £30 million revolving credit facility with Natwest Markets Plc (the "Facility") of which £15 million was drawn down at 30 September 2018. 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 2019, 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 2018 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

 

23 November 2018

 

 

INVESTMENT MANAGER'S REPORT

Overview

Indian equities rose to touch new highs in the six months under review. This was despite concerns over rising US interest rates, the higher oil price and emerging market currency weakness.

 

In India, the initial shock of the introduction of the Goods and Services Tax ("GST"), which followed demonetisation in the latter half of 2017, had weakened economic growth. However, changes to the new tax regime helped the economy in subsequent quarters. This was reflected in improving corporate earnings as well, especially in the consumer sectors which benefited from a pickup in rural demand.

 

In contrast, the high oil price and the flight of capital to safer havens led to a decline in the rupee.  The Reserve Bank of India raised rates to support the currency and curb rising inflation. In addition to global worries, domestic financial sector concerns, caused by debt defaults by infrastructure lender IL&FS, unsettled the market.

 

Performance

For the six months under review, the portfolio's net asset value rose by 2.4%, against the benchmark MSCI India Index's rise of 4.5%, both figures in total return terms. However, the Company's performance continues to be ahead of the MSCI India Index on a longer term basis, particularly over three and five years.

 

The key detractor over the past six months was the lack of exposure to the energy sector, in particular to Reliance Industries which rallied on higher oil prices and continued growth of Jio, its telecom business. Despite its outperformance, we retain our reservations about the conglomerate due to its weak governance standards at the promoter level, aggressive capital spending, as well as weak free cash flow generation and returns.

 

The materials sector also dampened performance on concerns of higher input costs and low pricing power. Our holding Kansai Nerolac Paints was further affected by lower demand from the automotive sector.

 

In contrast, the portfolio's exposure to consumers, IT and financials contributed positively, thanks to our choice of quality stocks with prudent management and robust balance sheets, even though the sectors came under stress in the recent pull back.

 

Most financial stocks retreated as company specific events kept investors on the edge. More recently, the debt default by IL&FS triggered liquidity and credit risk concerns around non banking financial companies ("NBFCs"). Financial institutions, which are reliant on wholesale funding, are more susceptible than commercial banks. However, your Company's holdings in HDFC and Gruh Finance are well positioned, given their robust funding franchise, ability to take consumer deposits and disciplined asset liability management. In the banking sector, HDFC Bank and Kotak Mahindra Bank are well capitalised and have solid deposit bases. They are expected to continue gaining market share and should benefit from reduced competition from NBFCs. In addition, the lack of exposure to Yes Bank and Indiabulls Housing Finance benefited performance.

 

Similarly, while consumer discretionary stocks retreated, our choice of holdings was positive. Within the automotive industry, demand remained muted amid tighter liquidity conditions, elevated oil prices, and rate hikes leading to higher financing costs. Our long standing decision not to hold Tata Motors proved beneficial, and we view its acquisition of Jaguar Land Rover as aggressive and value destructive. In addition, Maruti Suzuki, which we introduced during the review period, was a positive contributor. The company is a market leader and combines Japanese technology with local know how. It should benefit from rising demand for passenger vehicles as wealth levels rise. Conversely, holding Hero Motocorp fell because of lower productivity from higher input costs.

 

Within the IT sector, TCS and Mphasis boosted performance as the sector benefited from a weaker rupee and rising demand in its key US markets.

 

Portfolio Activity

Aside from the above mentioned introduction of Maruti Suzuki, we also initiated a position in life insurer SBI Life. The company is well positioned to take advantage of the low penetration within the sector, amid an expanding middle class and a stabilising regulatory environment. In addition, we took a fresh position in outsourcing company Cyient, which is benefiting from a weaker rupee as its earnings are mainly in US dollars. And finally, we initiated a holding in Godrej Properties, a property developer with a good reputation and solid track record in key segments of the market. We have been monitoring the companies for some time, and the recent market volatility provided an opportunity to invest in them at attractive valuations.

 

Meanwhile, we exited pharmaceutical company Lupin as its earnings disappointed amid continued declines in its US generics business. We also sold ICICI Bank, given our concern over the quality of its balance sheet, as well as uncertainty over its management.

 

Outlook

In the near term, geopolitical and trade tensions will continue to test both Indian equities and the currency, which has depreciated significantly on global and domestic concerns. At home, tighter liquidity conditions, a weaker rupee and higher oil prices could hamper capital investment and growth. In such an environment, companies with pricing power and solid balance sheets should emerge stronger.

 

Meanwhile, growth in this large domestic focused economy should help buffer it against external shocks. Rural growth remains healthy and a consolidation in the financial sector should help the economy in the longer term. In addition, the weaker currency has helped the export oriented sectors and earnings upgrades are gradually broadening out across most industries.

 

Looking ahead, we are more cautious in light of the emergent political concerns and we may see market volatility in the run up to the election. While the current ruling party BJP is expected to stay, a reduced majority could force the government into a coalition. However, this should not derail reform agendas.  We continue to remain optimistic about the portfolio's holdings, given their solid fundamentals and experienced management. This should bode well for over the long term.

 

Aberdeen Standard Investments (Asia) Limited

Investment Manager

 

23 November 2018

 

 

 

INVESTMENT PORTFOLIO

As at 30 September 2018

 

 

 

Valuation

Net assets

Company

Sector

£'000

%

Tata Consultancy Services

Information Technology

28,028

9.0

Housing Development Finance Corporation

Financials

25,806

8.3

ITC

Consumer Staples

15,295

4.9

Infosys

Information Technology

14,614

4.7

Kotak Mahindra Bank

Financials

14,149

4.5

Hindustan Unilever

Consumer Staples

12,612

4.0

MphasiS

Information Technology

11,379

3.7

Container Corporation of India

Industrials

11,092

3.6

Godrej Consumer Products

Consumer Staples

10,769

3.5

Piramal Enterprises

Healthcare

10,458

3.4

Top ten investments

 

154,202

49.6

Hero MotoCorp

Consumer Discretionary

9,677

3.1

HDFC Bank

Financials

9,658

3.1

Sun Pharmaceutical Industries

Healthcare

9,377

3.0

Nestlé India

Consumer Staples

9,355

3.0

Ultratech Cement{A}

Materials

9,038

2.9

Grasim Industries{A}

Materials

8,742

2.8

Bosch

Consumer Discretionary

8,566

2.7

Gruh Finance

Financials

7,106

2.4

Kansai Nerolac Paints

Materials

5,801

1.9

Asian Paints

Materials

5,790

1.9

Top twenty investments

 

237,312

76.4

Sanofi India

Healthcare

5,137

1.6

Cognizant Technology Solutions

Information Technology

5,088

1.6

Shree Cement

Materials

4,657

1.5

Biocon

Healthcare

4,553

1.5

Jyothy Laboratories

Consumer Staples

4,330

1.4

Bandhan Bank

Financials

4,188

1.3

Ambuja Cements{A}

Materials

3,911

1.3

ABB India

Industrials

3,857

1.2

Bharti Airtel

Telecommunication Services

3,632

1.2

Godrej Properties

Real Estate

3,367

1.1

Top thirty investments

 

280,032

90.1

Gujarat Gas

Utilities

3,267

1.0

Maruti Suzuki India

Consumer Discretionary

2,862

0.9

Bharti Infratel

Telecommunication Services

2,820

0.9

Max Financial Services

Financials

2,812

0.9

Aegis Logistics

Energy

2,520

0.8

Godrej Agrovet

Consumer Staples

2,442

0.8

Emami

Consumer Staples

2,440

0.8

Thermax

Industrials

2,239

0.6

Prestige Estates Projects

Real Estate

2,105

0.7

GlaxoSmithKline Pharmaceuticals

Healthcare

2,097

0.7

Top forty investments

 

305,636

98.2

SBI Life Insurance

Financials

1,914

0.6

Castrol India

Materials

1,595

0.5

Aditya Birla Capital

Financials

1,417

0.5

Cyient

Information Technology

1,386

0.4

Total portfolio investments

 

311,948

100.2

Other net current assets held in subsidiaries

 

27

-

Total investments

 

311,975

100.2

Net current liabilities{B}

 

(460)

(0.2)

Total assets{C}

 

311,515

100.0

 

 

 

{A} Comprises equity and listed or tradeable GDR holdings.

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

 

 

 

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

 

 

 

Six months ended

Six months ended

 

 

30 September 2018

30 September 2017

 

 

(unaudited)

(unaudited)

 

 

Revenue

Capital

Total

Revenue

Capital

Total

 

Notes

£'000

£'000

£'000

£'000

£'000

£'000

Income

 

 

 

 

 

 

 

Income from investments and other income

3

2,646

-

2,646

2,606

-

2,606

Gains on investments held at fair value through profit or loss

 

-

9,264

9,264

-

1,235

1,235

Currency losses

 

-

(242)

(242)

-

(17)

(17)

 

 

_______

_______

_______

_______

_______

_______

 

 

2,646

9,022

11,668

2,606

1,218

3,824

 

 

_______

_______

_______

_______

_______

_______

Expenses

 

 

 

 

 

 

 

Investment management fees

 

(1,428)

-

(1,428)

(1,498)

-

(1,498)

Administrative expenses

 

(425)

-

(425)

(384)

-

(384)

 

 

_______

_______

_______

_______

_______

_______

Profit/(loss) before finance costs and taxation

 

793

9,022

9,815

724

1,218

1,942

 

 

 

 

 

 

 

 

Finance costs

 

(81)

-

(81)

-

-

-

 

 

_______

_______

_______

_______

_______

_______

Profit/(loss) before taxation

 

712

9,022

9,734

724

1,218

1,942

 

 

 

 

 

 

 

 

Taxation

4

(4)

(2,659)

(2,663)

(3)

-

(3)

 

 

_______

_______

_______

_______

_______

_______

Profit/(loss) for the period

 

708

6,363

7,071

721

1,218

1,939

 

 

_______

_______

_______

_______

_______

_______

 

 

 

 

 

 

 

 

Return/(loss) per Ordinary share (pence)

5

1.20

10.77

11.97

1.22

2.06

3.28

 

 

_______

_______

_______

_______

_______

_______

 

 

 

 

 

 

 

 

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 2018

 

 

(audited)

 

 

Revenue

Capital

Total

 

Notes

£'000

£'000

£'000

Income

 

 

 

 

Income from investments and other income

3

3,318

-

3,318

Gains on investments held at fair value through profit or loss

 

-

1,781

1,781

Currency losses

 

-

(110)

(110)

 

 

_______

_______

_______

 

 

3,318

1,671

4,989

 

 

_______

_______

_______

Expenses

 

 

 

 

Investment management fees

 

(3,015)

-

(3,015)

Administrative expenses

 

(714)

-

(714)

 

 

_______

_______

_______

Profit/(loss) before finance costs and taxation

 

(411)

1,671

1,260

 

 

 

 

 

Finance costs

 

-

-

-

 

 

_______

_______

_______

Profit/(loss) before taxation

 

(411)

1,671

1,260

 

 

 

 

 

Taxation

4

(6)

-

(6)

 

 

_______

_______

_______

Profit/(loss) for the period

 

(417)

1,671

1,254

 

 

_______

_______

_______

 

 

 

 

 

Return/(loss) per Ordinary share (pence)

5

(0.71)

2.83

2.12

 

 

_______

_______

_______

 

 

 

CONDENSED BALANCE SHEET

 

 

 

As at

As at

As at

 

 

30 September 2018

30 September 2017

31 March
2018

 

 

(unaudited)

(unaudited)

(audited)

 

Notes

£'000

£'000

£'000

Non-current assets

 

 

 

 

Investments held at fair value through profit or loss

 

311,948

284,471

285,357

Subsidiary held at fair value through profit or loss

 

27

35

27

 

 

_______

_______

_______

 

 

311,975

284,506

285,384

 

 

 

 

 

Current assets

 

 

 

 

Cash at bank

 

3,581

5,070

4,436

Receivables

 

190

984

27

 

 

_______

_______

_______

Total current assets

 

3,771

6,054

4,463

 

 

_______

_______

_______

Current liabilities

 

 

 

 

Bank loan

8

(15,000)

 -

 -

Other payables

 

(4,231)

(431)

(403)

 

 

_______

_______

_______

Total current liabilities

 

(19,231)

(431)

(403)

 

 

_______

_______

_______

Net current (liabilities)/assets

 

(15,460)

5,623

4,060

 

 

_______

_______

_______

Net assets

 

296,515

290,129

289,444

 

 

_______

_______

_______

 

 

 

 

 

Capital and reserves

 

 

 

 

Ordinary share capital

9

14,768

14,768

14,768

Share premium account

 

25,406

25,406

25,406

Special reserve

 

15,778

15,778

15,778

Capital redemption reserve

 

4,484

4,484

4,484

Capital reserve

10

236,259

229,443

229,896

Revenue reserve

 

(180)

250

(888)

 

 

_______

_______

_______

Equity shareholders' funds

 

296,515

290,129

289,444

 

 

_______

_______

_______

 

 

 

 

 

Net asset value per Ordinary share (pence)

11

501.97

491.16

490.00

 

 

_______

_______

_______

 

 

CONDENSED STATEMENT OF CHANGES IN EQUITY

 

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

 

______

______

______

______

______

______

_______

 

 

 

 

 

 

 

 

Six months ended 30 September 2017 (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 2017

14,768

25,406

15,778

4,484

228,225

(471)

288,190

Profit for the period

-

-

-

-

1,218

721

1,939

 

______

______

______

______

______

______

_______

Balance at 30 September 2017

14,768

25,406

15,778

4,484

229,443

250

290,129

 

______

______

______

______

______

______

_______

 

 

 

 

 

 

 

 

Year ended 31 March 2018 (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 2017

14,768

25,406

15,778

4,484

228,225

(471)

288,190

Profit/(loss) for the year

-

-

-

-

1,671

(417)

1,254

 

______

______

______

______

______

______

_______

Balance at 31 March 2018

14,768

25,406

15,778

4,484

229,896

(888)

289,444

 

______

______

______

______

______

______

_______

 

 

 

 

 

 

 

 

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 2018

30 September 2017

31 March 2018

 

(unaudited)

(unaudited)

(audited)

 

£'000

£'000

£'000

Cash flows from operating activities

 

 

 

Dividend income received

2,519

2,657

3,470

Interest income received

6

-

2

Investment management fee paid

(1,454)

(1,505)

(3,014)

Overseas withholding tax

(4)

(3)

(6)

Other cash expenses

(405)

(375)

(727)

 

__________

__________

__________

Cash inflow/(outflow) from operations

662

774

(275)

Interest paid

(50)

-

-

 

__________

__________

__________

Net cash inflow/(outflow) from operating activities

612

774

(275)

 

 

 

 

Cash flows from investing activities

 

 

 

Purchase of investments

(42,992)

(21,392)

(38,311)

Sales of investments

26,811

22,280

39,707

Indian capital gains tax on sales

(44)

-

-

 

__________

__________

__________

Net cash flow from investing activities

(16,225)

888

1,396

 

__________

__________

__________

Cash flows from financing activities

 

 

 

Drawdown of loan

15,000

-

-

 

__________

__________

__________

Net cash inflow from financing activities

15,000

-

-

 

__________

__________

__________

Net (decrease)/increase in cash and cash equivalents

(613)

1,662

1,121

Cash and cash equivalents at the start of the period

4,436

3,425

3,425

Effect of foreign exchange rate changes

(242)

(17)

(110)

 

__________

__________

__________

Cash and cash equivalents at the end of the period

3,581

5,070

4,436

 

__________

__________

__________

 

 

 

 

There were no non-cash transactions during the half period (six months ended 30 September 2017 - £nil; year ended 31 March 2018 - £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.

 

 

 

The Company has a wholly-owned subsidiary, New India Investment Company (Mauritius) Limited (in liquidation) ("the Company's Subsidiary"). The Company's Subsidiary was placed into solvent liquidation on 15 November 2017.

 

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 2018 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.

 

 

 

During the period the Company adopted the following amendments to standards;

 

IFRS  9 - Financial Instruments

 

 

 

Six months ended

Six months ended

Year ended

 

 

30 September 2018

30 September 2017

31 March 2018

3.

Income

£'000

£'000

£'000

 

Income from investments

 

 

 

 

Overseas dividends

2,640

2,606

3,316

 

 

 

 

 

 

Other operating income

 

 

 

 

Deposit interest

6

-

2

 

 

__________

__________

__________

 

Total income

2,646

2,606

3,318

 

 

__________

__________

__________

 

 

 

Six months ended

Six months ended

Year ended

 

 

30 September 2018

30 September 2017

31 March 2018

 

 

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

-

43

43

-

-

-

-

-

-

 

 

Overseas taxation

4

-

4

3

-

3

6

-

6

 

 

 

_____

_____

____

_____

_____

____

_____

_____

_____

 

 

Total current tax charge for the period

4

43

47

3

-

3

6

-

6

 

 

Deferred tax liability on Indian capital gains

-

2,616

2,616

-

-

-

-

-

-

 

 

 

_____

_____

____

_____

_____

____

_____

_____

_____

 

 

Total tax charge for the period

4

2,659

2,663

3

-

3

6

-

6

 

 

 

_____

_____

____

_____

_____

____

_____

_____

_____

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 September 2018 the Company had surplus management expenses and loan relationship deficits with a tax value of £2,301,000 (30 September 2017 - £1,668,000; 31 March 2018 - £1,976,000) 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 2018

30 September 2017

31 March 2018

 

 

 

Revenue

Capital

Total

Revenue

Capital

Total

Revenue

Capital

Total

 

 

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

Profit before tax

712

9,022

9,734

724

1,218

1,942

(411)

1,671

1,260

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporation tax on profit at the standard rate of 19% (30 September 2017 and 31 March 2018 - 19%)

135

1,714

1,849

138

231

369

(78)

317

239

 

 

Effects of:

 

 

 

 

 

 

 

 

 

 

 

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

-

(1,760)

(1,760)

-

(234)

(234)

-

(338)

(338)

 

 

Currency losses not taxable

-

46

46

-

3

3

-

21

21

 

 

Movement in excess expenses

364

-

364

357

-

357

707

-

707

 

 

Expenses not deductible for tax purposes

3

-

3

-

-

-

1

-

1

 

 

Capital gains tax charge

-

43

43

-

-

-

-

-

-

 

 

Movement in deferred tax liability on Indian capital gains

-

2,616

2,616

-

-

-

-

-

-

 

 

Irrecoverable overseas withholding tax

4

-

4

3

-

3

6

-

6

 

 

Non-taxable dividend income

(502)

-

(502)

(495)

-

(495)

(630)

-

(630)

 

 

 

_____

_____

____

_____

_____

____

_____

_____

_____

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total tax charge

4

2,659

2,663

3

-

3

6

-

6

 

 

 

_____

_____

____

_____

_____

____

_____

_____

____

                             

 

 

 

Six months ended

Six months ended

Year ended

 

 

30 September 2018

30 September 2017

31 March 2018

5.

Return per Ordinary share

£'000

£'000

£'000

 

Based on the following figures:

 

 

 

 

Revenue return

708

721

(417)

 

Capital return

6,363

1,218

1,671

 

 

________

________

________

 

Total return

7,071

1,939

1,254

 

 

________

________

________

 

Weighted average number of Ordinary shares in issue

59,070,140

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 2018 or 30 September 2017.

 

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 2018

30 September 2017

31 March 2018

 

 

£'000

£'000

£'000

 

 Purchases

81

34

69

 

 Sales

47

46

78

 

 

________

________

________

 

 

128

80

147

 

 

 

 

 

 

The above transaction costs are calculated in line with the AIC SORP. The transaction costs in the Company's Key Information Document 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 2018 £15 million (30 September 2017 - nil; 31 March 2018 - nil) had been down at an all-in interest rate of 1.473%, which matured on 29 October 2018. As at the date of approval of this Report, the £15 million loan has been rolled over to 29 November 2018 at an all-in interest rate of 1.475%.

 

9.

Ordinary share capital

 

As at 30 September 2018 there were 59,070,140 (30 September 2017 and 31 March 2018 - 59,070,140) Ordinary 25p shares in issue.

 

10.

Capital reserve

 

The capital reserve reflected in the Balance Sheet at 30 September 2018 includes gains of £60,665,000 (30 September 2017 - £64,784,000; 31 March 2018 - £61,195,000) 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 £296,515,000 (30 September 2017 - £290,129,000; 31 March 2018 - £289,444,000) and on 59,070,140 (30 September 2017 and 31 March 2018 - 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 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 30 September 2017

Note

£'000

£'000

£'000

£'000

 

Financial assets at fair value through profit or loss

 

 

 

 

 

 

Quoted equities

a)

284,471

-

-

284,471

 

Investment in Subsidiary

b)

-

35

-

35

 

 

 

________

________

________

________

 

Net fair value

 

284,471

35

-

284,506

 

 

 

________

________

________

________

 

 

 

 

 

 

 

 

 

 

Level 1

Level 2

Level 3

Total

 

As at 31 March 2018

Note

£'000

£'000

£'000

£'000

 

Financial assets at fair value through profit or loss

 

 

 

 

 

 

Quoted equities

a)

285,357

-

-

285,357

 

Investment in Subsidiary

b)

-

27

-

27

 

 

 

________

________

________

________

 

Net fair value

 

285,357

27

-

285,384

 

 

 

 

________

________

________

________

 

 

 

 

 

 

 

 

 

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.

 

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. The net asset value is predominantly made up of cash and receivables.

 

13.

Related party transactions

 

The Company has agreements with Standard Life Aberdeen Group (the "Manager") for the provision of investment management, secretarial, accounting and administration and promotional activity services.

 

 

 

During the period, the management fee was payable monthly in arrears and was based on 0.9% per annum on the first £350 million of net assets and 0.75% per annum on net assets in excess of £350 million. 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 £1,428,000 (six months ended 30 September 2017 - £1,498,000; year ended 31 March 2018 - £3,015,000) and the balance due to the Manager at the period end was £219,000 (period end 30 September 2017 - £238,000; year end 31 March 2018 - £246,000).  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 2017 - £71,000; year ended 31 March 2018 - £148,000) and the balance due to the Manager at the period end was £39,000 (period ended 30 September 2017 - £35,000; year ended 31 March 2018 - £35,000).

 

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 2018 and 30 September 2017 has not been audited.

 

 

 

The information for the year ended 31 March 2018 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 23 November 2018.

 

 

 

ALTERNATIVE PERFORMANCE MEASURES

 

 

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 total return involves investing the same net dividend in the NAV of the Company on the date on which that dividend was earned. Share price total return involves reinvesting the net dividend in the month that the share price goes ex-dividend.

 

 

 

The tables below provide information relating to the NAVs and share prices of the Company during the six months ended 30 September 2018 and 30 September 2017. No dividends were declared during these periods.

 

 

 

 

 

Share

 

30 September 2018

NAV

price

 

31 March 2017

490.00p

426.00p

 

30 September 2018

501.97p

431.50p

 

 

________

________

 

Total return

+2.4%

+1.3%

 

 

________

________

 

 

 

 

 

 

 

Share

 

30 September 2017

NAV

price

 

31 March 2017

487.88p

441.50p

 

30 September 2017

491.16p

444.75p

 

 

________

________

 

Total return

+0.7%

+0.7%

 

 

________

________

 

 

 

 

 

Net Gearing

 

 

 

Net gearing measures the total borrowings of £15,000,000 (30 September 2017 - £nil) less cash and cash equivalents of £2,434,000 (30 September 2017 - £4,345,000) divided by shareholders' funds of £296,515,000 (31 March 2018 - £290,129,000), expressed as a percentage. As the Company was in a net cash position at 30 September 2017, the net gearing percentage is assumed to be nil.

 

 

 

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 of the Company and its Subsidiary and expressed as a percentage of the average net asset values throughout the year.

 

 

 

 

30 September

 

31 March

 

 

2018

2018

 

Investment management fees (£'000)

2,759

3,015

 

Administrative expenses (£'000)

815

759

 

Less: non-recurring charges (£'000)

(8)

(3)

 

 

________

________

 

Ongoing charges (£'000)

3,566

3,771

 

 

________

________

 

Average net assets (£'000)

305,610

302,670

 

 

________

________

 

Ongoing charges ratio

1.17%

1.25%

 

 

________

________

 

 

 

 

 

The ratio for 30 September 2018 is based on forecast ongoing charges for the year ending 31 March 2019.

 

 

 

The ongoing charges ratio provided in the Company's Key Information Document is calculated in line with the PRIIPs regulations.

 

 

Aberdeen Asset Management PLC

Secretaries

 

23 November 2018


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
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