Annual Financial Report
ASHOKA INDIA EQUITY INVESTMENT TRUST PLC
LEGAL ENTITY IDENTIFIER ('LEI'): 213800KX5ZS1NGAR2J89
Investment Objective, Financial Information and Performance Summary
INVESTMENT OBJECTIVE
The investment objective of the Ashoka India Equity Investment Trust plc (the "Company") is to achieve long-term capital appreciation, mainly through investments in securities listed in India and listed securities of companies with a significant presence in India.
FINANCIAL INFORMATION
|
|
As at 30 June 2020 |
As at 30 June 2019 |
|
Net asset value ("NAV") per Ordinary Share (cum income) |
104.1p |
108.8p |
|
Ordinary Share price |
98.5p |
109.0p |
|
Ordinary Share price (discount)/premium to NAV1 |
(5.4%) |
0.2% |
|
Net assets |
£70.5million |
£54.5 million |
|
|
========== |
========== |
PERFORMANCE SUMMARY
|
|
30 June 2020 |
30 June 2019 |
|
Share price total return per Ordinary Share1 |
(9.6%) |
9.0% |
|
NAV total return per Ordinary Share1 |
(4.3%) |
11.0% |
|
MSCI India IMI Index |
(16.0%) |
10.1% |
|
|
====== |
====== |
1 These are Alternative Performance Measures.
2 Total returns in Sterling for the year/period ended 30 June 2020 and 2019.
3 Source: Bloomberg
ALTERNATIVE PERFORMANCE MEASURES ("APMS")
The disclosures as indicated in the footnote above represent the Company's APMs. Definitions of these APMs and other performance measures used by the Company, together with how these measures have been calculated, can be found on pages 70 and 71 of the Annual Report and Accounts.
STRATEGIC REPORT
Chairman's Statement
I am pleased to present the second annual results of Ashoka India Equity Investment Trust plc for the period to 30 June 2020. Tragically, this occurs against a backdrop of the whole world coping with the challenge of how to deal with the COVID-19 virus. Global action in mitigation has been unprecedented and suspended normal life for almost everyone as the world went into lockdown. As we take steps towards regaining some normality in our daily lives, my fellow Directors and I sincerely hope that you and your families have remained well in these difficult circumstances.
From a pragmatic perspective, I can assure all Shareholders that the Company's portfolio has continued to be actively managed throughout this period with contingency plans being successfully introduced at an early stage by both Acorn Asset Management Ltd, the Investment Manager, and by Praxis IFM Fund Services (UK) Limited, the Company's Administrator and Secretary. In addition, steps have been taken to ensure the continued efficient operation of all service providers to the Company, including the registrar, depositary, custodian, auditor and corporate adviser.
Moreover, the Board convened an additional three times between scheduled meetings from March onwards with attendance by the Investment Manager, Company Secretary and Corporate Adviser. The holding of these formal meetings provided the Board with the level of assurance required and, I hope, gives you further confidence that all matters were being attended to during a testing period for everyone.
PERFORMANCE
It is gratifying to report that, for the second year running, the Company comfortably outperformed both its benchmark and the listed closed-ended fund peer group. Whilst the Company's Net Asset Value (NAV) decreased slightly in the period under review, it reflected a good performance by the Investment Manager during a most difficult time for world stock markets. The NAV total return fell by 4.3% during the year under review against a fall of 16.0% by the MSCI India IMI Index, the Company's benchmark. As you will read in the Investment Manager's report that follows, this out-performance of 11.7% was again due to strong stock selection across the market and by staying true to the principles of disciplined risk management leading to investment in great businesses at attractive valuations. The Company's share price stood at 98.5p at the year end, a 5.4% discount to NAV. As at 24 September 2020, the latest realistic date before publication of this Report, the share price stood at 113.75p.
SHARE ISSUANCE
The Company responded to further demand from Shareholders to issue new shares, at a small premium to the prevailing net asset value. In total, 17,525,414 new Ordinary Shares were issued during the year under review. There were 67,648,500 Ordinary Shares in issue at the year end.
REVENUE AND DIVIDENDS
The Company's principal objective is to provide returns through long-term capital appreciation, with income being a secondary consideration. Therefore, Shareholders should not expect that the Company will pay an annual dividend, under normal circumstances. Whilst the portfolio does generate a small amount of income, this is used to defray running costs. However, if a sufficient surplus is generated, the Company may declare an annual dividend to maintain UK investment trust status. In the year under review, total surplus income amounted to £14,000. No dividend has been declared.
REDEMPTION FACILITY
The Company has a redemption facility through which Shareholders will be entitled to request the redemption of all or part of their holding of Ordinary Shares on an annual basis. The Redemption Point for the Ordinary Shares will be 30 September 2020. Given the volatility in world markets during the second half of the period under review, it is pleasing that, as announced on 3 September 2020, the total number of ordinary shares in respect of which valid redemption requests were received for this Redemption Point was only 367,616.
ANNUAL GENERAL MEETING
The Company will hold its Annual General Meeting on 9 December 2020. However, current UK emergency measures mean that this will be a closed meeting and Shareholders will be unable to attend in person. I would therefore strongly encourage Shareholders to vote instead by proxy. Full details of the Annual General Meeting, the resolutions proposed and how to vote by proxy are described in the Notice of Meeting and supporting explanatory notes. If Shareholders have questions they wish the Board to answer, they are encouraged to email ASHOKACOSEC@PraxisIFM.com. These questions will receive replies as soon as practicable after the AGM.
OUTLOOK
Stock markets around the world have remained remarkably buoyant in 2020 given the existence of the COVID-19 virus for much of the year to date. Following an understandable fall in March, they have recovered much of their losses. This, in part, has been down to an appreciation that the global economy was effectively closed not by a systemic failure but through voluntary action taken by governments and thus, it is to be hoped, recovery in economic activity and growth can occur relatively quickly. Stock markets always anticipate events but there can be little doubt that life will be different. Technology has proved that people can work from home far more effectively and productively than was traditionally believed to be possible and that consumer buying habits have changed astonishingly quickly, as seen with the increase in on-line purchases. Companies that adapt their business models accordingly are likely to be the winners in the future.
The Investment Manager's report that follows goes into some detail of the type of portfolio companies that have performed well and also those that have done less well. In line with most world economies, the Indian Government has implemented several rounds of economic stimulus aimed at supporting vulnerable categories of businesses and people. In addition, support has come in the shape of interest rate cuts and liquidity events. The Investment Manager also refers to agricultural reforms that, if implemented, could dramatically transform India's agricultural economy.
Perhaps understandably, given the immense population of India, there is growing belief that the "solution" to COVID-19 will be achieved through herd immunity, unless a vaccine becomes available. The notion of another total lockdown - one of the world's most severe early in the crisis - is increasingly discounted. India's remains a vibrant economy and, whilst it was showing signs of slowing pre-virus, there are many reasons to be cautiously optimistic. India is well placed - perhaps uniquely - to increase its share of global manufacturing as other countries seek to diversify their supply chains and it is to be expected that your Investment Manager will concentrate its attention on companies that will benefit accordingly.
In the expectation that life will find a way, India remains an attractive, long-term investment case. The Board's confidence in the Investment Manager's ability to deliver outperformance and avoid many of the pitfalls associated with investment in a developing market remains undiminished.
ANDREW WATKINS
Chairman
25 September 2020
Investment Manager's Report
MARKET REVIEW
The MSCI India Investable Market Index (MSCI India IMI) was down 16.0% this year, underperforming global, developed, and emerging markets. The S&P 500 has returned (in GBP) +9.6%, MSCI World +5.5%, and the MSCI Emerging Markets was down 0.9%. Crude oil prices declined by 36.6% and the Indian rupee depreciated by 5.8% during the year. Among sectors, communication services and healthcare outperformed whilst industrials and financials underperformed.
PERFORMANCE REVIEW
The Company has delivered a sterling NAV total return of -4.3% during the year, outperforming the benchmark MSCI India IMI by 11.7%.
Overall, despite the recent turbulent environment, the portfolio has held up well as the stock market has rewarded companies delivering growth with resilience and we anticipate this continuing to be a feature of future returns.
MAJOR CONTRIBUTORS TO PERFORMANCE
|
|
Ending Weight |
Total Return |
Contribution to Return |
|
Muthoot Finance Limited |
2.1 |
63.3 |
207 |
|
Navin Fluorine International Limited |
3.3 |
117.7 |
201 |
|
Nestle India Limited |
6.2 |
39.1 |
177 |
|
HDFC Asset Management Co Limited |
1.0 |
17.5 |
123 |
|
Cipla Limited |
3.2 |
53.2 |
117 |
|
|
====== |
====== |
====== |
Muthoot Finance is India's dominant gold loan finance company with a pan-India presence consisting of more than 5,100 branches. It has a secured book of loans collateralized by gold at a comfortable LTV (loan to value) of 70% at origination. The highly liquid nature of the collateral, and the fact that it always remains in Muthoot's possession, has resulted in negligible credit costs through cycles historically. The company's stock has done well during the year given healthy operating performance, excellent asset liability management and sustained strong performance in subsidiaries.
Navin Fluorine is a specialty chemicals company, specialising in fluorine chemistry. It is present across the fluorine value chain starting from inorganic fluorides to speciality chemicals and contract research and manufacturing services ("CRAMS"). The company, under its new leadership, is embarking on aggressive expansion plans with incremental capital being deployed in higher ROCE segments like specialty chemicals and CRAMS.
Additionally, the increasing use of fluorine in new pharma and agro-chem molecules provides strong visibility for long term growth. The company announced its first long-term multi-million-dollar deal this year, and we believe there are opportunities for similar deals in the near to medium term future.
Nestle India , a subsidiary of the Switzerland based parent Nestle S.A, is India's largest packaged food products company. With marquee brands like Maggi, KitKat, Nescafe, Cerelac and Nan in its portfolio, it is a market leader in most of the categories that it operates in. Under the leadership of its new CEO, Suresh Narayanan, it has significantly increased focus on volume growth driven by new product development and distribution. It has launched more than 40 products in various categories over the past two years following a cluster-based approach to enhance distribution. We expect Nestle to continue to deliver strong performance led by increasing penetration and new product introductions.
MAJOR DETRACTORS TO PERFORMANCE
|
|
Ending Weight |
Total Return |
Contribution to Return |
|
Bajaj Finance Limited |
1.3 |
-27.3 |
-356 |
|
Bajaj Finserv Limited |
4.6 |
-35.4 |
-344 |
|
Axis Bank Limited |
0.8 |
-52.6 |
-190 |
|
L&T Technology Services Limited |
2.7 |
-29.9 |
-174 |
|
Intellect Design Arena Limited |
0.7 |
-60.4 |
-126 |
|
|
====== |
====== |
====== |
Bajaj Finance is India's leading consumer lending franchise. Leveraging its industry leading technology deployment, it straddles across consumer, SME, commercial, rural and mortgage segments. In consumer, it primarily caters to mass affluent customers. It has steadily grown at rates higher than that of its peers (well managed retail focused private banks and Non-Banking Financial Companies ('NBFCs') included), while maintaining stellar asset quality. Concerns around growth rates and credit costs due to the disruptions caused by COVID-19 have led to a decline in the stock price during the year.
We continue to remain invested in the business with a reduced position size.
Bajaj Finserv is a leading diversified financial services firm that owns three businesses: consumer lending NBFC, general insurance (BAGIC), and life insurance (BALIC). The consumer lending NBFC, Bajaj Finance, is an industry leading franchise (discussed above) and drives approximately half the value of Bajaj Finserv. The general insurance business (BAGIC) is the second largest and the most profitable private general insurance company in India. The general insurance industry in India is still significantly underpenetrated and leading private general insurers have consistently gained market share from weaker public sector general insurance companies over the past decade. The company has consistently delivered peer leading combined ratios and RoEs. BAGIC has a structural multi-decade opportunity for profitable growth driven by increasing penetration, newer product adoptions and continued market share gains led by superior execution. The life insurance business (BALIC) is relatively small but continues to see improvement in growth and profitability parameters and has the potential to scale up multi-fold over time.
We continue to remain invested in the business and the position size has been largely maintained.
Axis bank is the third largest private sector bank in India with industry leading CASA (current and saving accounts) metrics and one of the lowest cost of funds across private Indian banks, demonstrating the strength of its retail liability franchise. It benefits from the large opportunity for financial inclusion in India, coupled with a structural shift of market share from public sector to private sector banks. The bank underwent a leadership change in early 2019. The new leadership brought in renewed focus, restructured the top management, strengthened credit underwriting and risk functions and put the bank on a path to deliver strong performance over the coming years. The stock price declined during the year due to concerns around potentially increased credit losses in the wake of a worsening economic environment as a result of the pandemic.
We continue to remain invested in the business with a trimmed position size.
INVESTMENT OUTLOOK
The past six months have witnessed one of the most volatile markets in at least a decade. A precipitous decline in March was followed by a sharp recovery during the second quarter not only in India but globally.
India underwent one of the most stringent nationwide lockdowns in the months of March and April. During May these restrictions were gradually relaxed due to the severe impact on India's economy. Subsequently, June saw further major relaxations of restrictions. A gradual normalisation of economic activity is currently underway in most of the country. At the same time, we now live with the sobering reality that the number of infections is steadily rising, with India having the second largest case count following the US. As is the case globally, the government and policymakers continue to face a difficult choice between lives and livelihoods.
Over the last three months, the COVID-19 pandemic has morphed from being an unknown unknown to a known unknown; from being an unknowable risk factor that took the world by surprise to one that we are now aware of but don't fully understand yet. With each passing day the world is learning more about the virus. COVID-19 has proven to be far more contagious than initially thought, affecting an ever-increasing number of people across hemispheres. However, mortality rates seem to be lower than previously feared, partly aided by an increased understanding of the disease and of the several ways to mitigate its impact on those affected.
By now it is generally agreed that the actual case count of infections might be far higher than the reported numbers in most countries. We believe India is no exception. There are a set of numbers and projections based on reported case counts, hospitalisations, recoveries, mortality, and their past and projected growth rates. On the other hand, there is a certain absolute reality of all these parameters and their trends that could be widely different from the reported numbers.
The uncertainty is still too high to have any reasonable degree of confidence on how things are likely to evolve over the next 12-18 months. In our loosely defined base case scenario, we believe either herd immunity will be achieved in India in the next 6-12 months or a vaccine would become widely available and administered in the latter part of next year. We do not expect a re-imposition of any large-scale lockdowns as these failed to effectively contain the spread even as they aggravated economic hardships.
Under such base case scenarios, it is possible that the Indian economy contracts mid-single digits and corporate earnings may further decline during the current year, broadly in line with consensus.
The Indian government announced several rounds of economic stimulus amounting to circa 2% of GDP, primarily aimed at providing income support to vulnerable segments of the population and addressing survival needs of small businesses. The Central Bank simultaneously stepped in with large liquidity infusions and multiple interest rate cuts. India's benchmark policy rate stands at 4.0%, down 115 bps since the outbreak of COVID-19.
In addition, the government announced several initiatives to garner a greater share of global manufacturing as corporates around the world look to diversify their supply chain beyond China. This can further accelerate the growth trends in manufacturing industries such as consumer durables, electronics, and speciality chemicals amongst others.
Unlike most other emerging markets, India benefits from the fall in oil prices, given that it imports over 80% of its requirements. At current levels, with Brent crude prices of around $40/bbl, India is expected to save approximately US$30 billion annually, and consequently the Current Account Deficit (CAD) is expected to turn positive. The fiscal deficit is expected to inch up to 7.1% in 2021 from 4.5% in 2020, largely on account of revenue shortfalls and a smaller denominator effect due to GDP contraction. However, a low external debt to GDP and over $500 billion of forex reserves are supportive of a stable macroeconomic environment.
Despite the uncertainty, several companies were able to raise large sums of capital from the equity markets. Collectively, Reliance ($22 billion), HUL ($3.4 billion), Kotak Bank ($2 billion) and Bharti Airtel ($1 billion) have seen over $25 billion of transactions.
Another development was Moody's downgrade of India's sovereign rating by a notch to Baa3, bringing it at par with S&P and Fitch which are both rated BBB-. Empirical evidence suggests no observed historical correlation between a country's sovereign rating downgrade and subsequent equity market returns or investment flows.
In geo-political developments, tensions escalated between Indian and Chinese troops along the northern border with several casualties on both sides even without any shots being fired. As we write this, the situation appears to be de-escalating after several rounds of high-level talks on a roadmap to disengagement.
In continuation of its reform agenda over the years, the government has announced some major agricultural and labour reforms. The agricultural reforms entail substantial deregulation of production, supply, distribution, and prices for agricultural commodities, in essence liberalising India's agricultural markets that have long been shackled by regulations that hitherto remained untouched due to political sensitivity. If implemented as announced, this reform will go a long way in transforming India's agricultural economy.
Our investment philosophy of seeking compelling combinations of great businesses at attractive valuations with strong portfolio risk management has placed us in good stead in the current environment. For the most part, our portfolio comprises of industry leaders, dominant players or companies that are gaining market share in their respective industries on the back of strong execution. These businesses typically have superior returns on invested capital, robust cash flow generation, and resultantly strong balance sheets. We place great credence on the resilience of their operating models and ability to quickly adapt and thrive in the altered paradigm caused by COVID-19. During a crisis, when weaker competitors may struggle to survive, we expect our companies to emerge stronger through it.
In closing, we remain cautiously optimistic and continue to believe that the structural growth drivers of the Indian economy are deep rooted and, near-term challenges notwithstanding, India presents an attractive long-term investment opportunity.
ACORN ASSET MANAGEMENT LTD
25 September 2020
Top Ten Holdings
|
|
|
% of net |
|
HDFC Bank Limited |
Financials |
6.3 |
|
Nestle India Limited |
Consumer Staples |
6.2 |
|
Infosys Limited |
Information Technology |
5.6 |
|
ICICI Bank Limited |
Financials |
5.3 |
|
Bharti Airtel Limited |
Communication Services |
5.3 |
|
Asian Paints Limited |
Materials |
5.0 |
|
Bajaj Finserv Limited |
Financials |
4.6 |
|
NIIT Technologies Limited |
Information Technology |
4.2 |
|
Navin Fluorine International Limited |
Materials |
3.3 |
|
Cipla Limited |
Health Care |
3.2 |
|
|
|
---------- |
|
Top ten holdings |
|
49.0 |
|
Other holdings |
|
53.4 |
|
|
|
---------- |
|
Total holdings in companies |
|
102.4 |
|
Cash and other net assets |
|
(2.4) |
|
|
|
---------- |
|
Total Net assets |
|
100.0 |
|
|
|
====== |
Risk and Risk Management
PRINCIPAL AND EMERGING RISKS AND UNCERTAINTIES
Together with the issues discussed in the Chairman's Statement and the Investment Manager's Report, the Board considers that the principal and emerging risks and uncertainties faced by the Company fall into the following main categories:
|
Description |
Mitigation |
|
Market risks |
The Investment Manager has a proven track record of investment in Indian securities. |
|
Economic conditions
Sectoral diversification |
The Company's investment policy states that no single holding will represent more than 15% of the Company's Gross Assets and no more than 40% of Gross Assets will be invested in any single sector (calculated at the time of investment). The portfolio will have between 25 to 50 holdings (although there is no guarantee that this will be the case and it may contain a lesser or greater number of holdings at any time). Whilst the Company does not have a benchmark, the Board measures performance for reference purposes against the MSCI India IMI Index (in Sterling). The Board also monitors performance relative to the Company's peer group over a range of periods, taking into account the differing investment policies and objectives. |
|
Corporate governance and internal control risks (including cyber security The main risk areas arising from the above contracts relate to allocation of the Company's assets by the Investment Manager, and the performance of administrative company secretarial, registration and custodial services. These could lead to various consequences including the loss of the Company's assets, inadequate returns to Shareholders and loss of investment trust status. Cyber security risks could lead to breaches of confidentiality, loss of data records and inability to make investment decisions. |
Each of these contracts were entered into after full and proper consideration of the quality and cost of services offered, including the financial control systems in operation in so far as they relate to the affairs of the Company. All of the above services are subject to ongoing oversight of the Board and the performance of the principal service providers is reviewed on a regular basis. The Board monitors key personnel risks as part of its oversight of the Investment Manager. The Company's key service providers report periodically to the Board on their control procedures including those in respect of cyber security risks. |
|
Regulatory risks
Financial risks |
The Company has contracted out relevant services to appropriately qualified professionals. The Investment Manager and the Company Secretary report on regulatory matters to the Board on a quarterly basis. The assessment of regulatory risks forms part of the Board's risk assessment programme.
|
|
Emerging risks
Climate Change |
|
|
Pandemic (COVID-19) |
The Board and the Investment Manager have regular discussions to assess this impact on both the investment portfolio and on its ability to generate income for Shareholders. Specifically, the market and operational risks associated with the COVID-19 pandemic, and the ongoing economic impact of measures introduced to combat its spread are discussed in depth with the Investment Manager and are continually monitored by the Board. The Investment Manager and other key service providers provide regular updates on operational resilience in light of the pandemic. The Board is satisfied that the key service providers have the ability to continue their operations efficiently in a remote or virtual working environment. |
VIABILITY STATEMENT
The Board have assessed the viability of the Company for the period to 30 June 2023 (the 'Period'). The Board believes that the Period, being three years, is an appropriate time frame over which to assess the viability of the Company, particularly when taking into account the long-term nature of the Company's investment strategy, which is modelled over three years and the principal and emerging risks outlined above. Based on this assessment, the Board have a reasonable expectation that the Company will be able to continue to operate and to meet its liabilities as they fall due over the Period.
In their assessment of the prospects of the Company, the Board have considered each of the principal and emerging risks and uncertainties set out above and the liquidity and solvency of the Company. The Board have considered the Company's income and expenditure projections and the fact that the Company's investments comprise readily realisable securities, which could, if necessary, be sold to meet the Company's funding requirements including buying back shares in order for the Company's discount control policy to be achieved.
Portfolio changes, market developments, level of premium / discount to NAV and share buybacks / share issues are discussed at quarterly Board meetings. The internal control framework of the Company is subject to a formal review on at least an annual basis.
The Board do not expect there to be any material increase in the annual ongoing charges of the Company over the Period and as the Company grows the annual ongoing charges ratio is expected to decrease. The Company's income from investments and cash realisable from the sale of its investments provide substantial cover to the Company's operating expenses, and any other costs likely to be faced by the Company over the Period of the assessment.
This assessment has included a detailed review of the issues arising from the COVID-19 pandemic as discussed in the Chairman's Statement, the Investment Manager's Report and in the Principle and Emerging Risks section.
FOR AND ON BEHALF OF THE BOARD
ANDREW WATKINS
Chairman of the Board
25 September 2020
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable laws and regulations.
Company law requires the Directors to prepare accounts for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company as at the end of the year and of the net return for the year. In preparing these accounts, the Directors are required to:
● select suitable accounting policies and then apply them consistently;
● make judgements and estimates which are reasonable and prudent; and
● state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the accounts.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and which disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the accounts comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The accounts are published on the Company's website at https://www.ashokaindiaequity.com, which is maintained by the Investment Manager. The work carried out by the auditors does not involve consideration of the maintenance and integrity of this website and, accordingly, the auditors accept no responsibility for any changes that have occurred to the accounts since being initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
DIRECTORS' CONFIRMATION STATEMENT
The Directors each confirm to the best of their knowledge that:
(a) the financial statements, prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company as required by DTR 4.1.12R; and
(b) this Annual Report comprising the Strategic Report and Governance Statements includes a fair review of the development and performance of the business and position of the Company, together with a description of the principal and emerging risks and uncertainties that it faces as required by DTR 4.1.8R and DTR 4.1.9R.
Having taken advice from the Audit Committee, the Directors consider that the Annual Report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company's performance, business model and strategy.
FOR AND ON BEHALF OF THE BOARD
ANDREW WATKINS
Chairman
25 September 2020
FINANCIAL STATEMENTS
STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 30 JUNE 2020
|
|
|
For the year ended 30 June 2020 |
Period from 11 May 2018 to 30 June 2019 |
||||
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
||
|
(Losses)/gains on investments |
4 |
- |
(48) |
(48) |
- |
6,075 |
6,075 |
|
(Losses)/gains on currency movements |
|
- |
(66) |
(66) |
- |
364 |
364 |
|
|
|
--------- |
--------- |
--------- |
---------- |
--------- |
--------- |
|
Net investment (losses)/ gains |
|
- |
(114) |
(114) |
- |
6,439 |
6,439 |
|
Income |
5 |
586 |
- |
586 |
279 |
- |
279 |
|
|
|
--------- |
--------- |
--------- |
---------- |
--------- |
--------- |
|
Total income |
|
586 |
(114) |
472 |
279 |
6,439 |
6,718 |
|
Performance fees |
7 |
- |
(2,835) |
(2,835) |
- |
(52) |
(52) |
|
Operating expenses |
8 |
(554) |
- |
(554) |
(474) |
- |
(474) |
|
|
|
--------- |
--------- |
--------- |
---------- |
--------- |
--------- |
|
Operating (loss)/profit before taxation |
|
32 |
(2,949) |
(2,917) |
(195) |
6,387 |
6,192 |
|
Taxation |
9 |
(18) |
(460) |
(478) |
- |
(811) |
(811) |
|
|
|
--------- |
--------- |
--------- |
---------- |
--------- |
--------- |
|
(Loss)/profit for the year/period |
|
14 |
(3,409) |
(3,395) |
(195) |
5,576 |
5,381 |
|
|
|
--------- |
--------- |
--------- |
---------- |
--------- |
--------- |
|
(Loss)/earnings per Ordinary Share |
10 |
0.02p |
(5.55)p |
(5.53)p |
(0.41)p |
11.84p |
11.43p |
|
|
|
====== |
====== |
====== |
====== |
====== |
====== |
There is no other comprehensive income and therefore the '(Loss)/profit for the year/period' is the total comprehensive income for the year ended June 2020 and period from 11 May 2018 to 30 June 2019.
The total column of the above statement is the profit and loss account of the Company. The supplementary revenue and capital columns, including the earnings per Ordinary Share, are prepared under guidance from the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing operations.
STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2020
|
|
|
30 June |
30 June |
|
Non-current assets |
|
|
|
|
Investments held at fair value through profit or loss |
4 |
72,120 |
54,234 |
|
|
|
---------- |
---------- |
|
Current assets |
|
|
|
|
Cash and cash equivalents |
|
1,629 |
1,128 |
|
Sales for Settlement |
|
623 |
- |
|
Dividend receivable |
|
56 |
33 |
|
Other receivables |
|
38 |
118 |
|
|
|
---------- |
---------- |
|
|
|
2,346 |
1,279 |
|
|
|
---------- |
---------- |
|
Total assets |
|
74,466 |
55,513 |
|
|
|
====== |
====== |
|
Current liabilities |
|
|
|
|
Other payables |
6 |
(128) |
(120) |
|
Non-Current liabilities |
|
|
|
|
Performance fee provision |
7 |
(2,887) |
(52) |
|
Capital gains tax provision |
|
(1,001) |
(811) |
|
|
|
---------- |
---------- |
|
Total liabilities |
|
(4,016) |
(983) |
|
|
|
---------- |
---------- |
|
Net assets |
|
70,450 |
54,530 |
|
|
|
====== |
====== |
|
Equity |
|
|
|
|
Share capital |
12 |
676 |
501 |
|
Share premium account |
|
23,512 |
4,372 |
|
Special distributable reserve |
13 |
44,276 |
44,276 |
|
Capital reserve |
|
2,167 |
5,576 |
|
Revenue reserve |
|
(181) |
(195) |
|
|
|
---------- |
---------- |
|
Total equity |
|
70,450 |
54,530 |
|
|
|
====== |
====== |
|
Net asset value per Ordinary Share |
14 |
104.1p |
108.8p |
|
|
|
====== |
====== |
Approved by the Board of Directors on 25 September 2020 and signed on its behalf by:
ANDREW WATKINS
Director
Ashoka India Equity Investment Trust plc incorporated in England and Wales with registered number 11356069.
STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED JUNE 2020
|
|
|
|
Share |
Special |
|
|
|
|
Opening balance as at 1 July 2019 |
|
501 |
4,372 |
44,276 |
5,576 |
(195) |
54,530 |
|
(Loss)/profit for the year |
|
- |
- |
- |
(3,409) |
14 |
(3,395) |
|
Issue of Ordinary Shares |
12 |
175 |
19,602 |
- |
- |
- |
19,777 |
|
Share issue costs |
|
- |
(462) |
- |
- |
- |
(462) |
|
|
|
--------- |
--------- |
--------- |
---------- |
--------- |
--------- |
|
Closing balance as at 30 June 2020 |
|
676 |
23,512 |
44,276 |
2,167 |
(181) |
70,450 |
|
|
|
====== |
====== |
====== |
====== |
====== |
====== |
FOR THE PERIOD FROM INCORPORATION ON 11 MAY 2018 TO 30 JUNE 2019
|
|
|
|
Share |
Special |
|
|
|
|
Opening balance as at 11 May 2018 |
|
- |
- |
- |
- |
- |
- |
|
Profit/(loss) for the year |
|
- |
- |
- |
5,576 |
(195) |
5,381 |
|
Issue of Ordinary Shares |
12 |
501 |
49,535 |
- |
- |
- |
50,036 |
|
Share issue costs |
|
- |
(887) |
- |
- |
- |
(887) |
|
Transfer between share premium and special distributable reserve upon cancellation |
13 |
- |
(44,276) |
44,276 |
- |
- |
- |
|
|
|
--------- |
--------- |
--------- |
---------- |
--------- |
--------- |
|
Closing balance as at 30 June 2019 |
|
501 |
4,372 |
44,276 |
5,576 |
(195) |
54,530 |
|
|
|
====== |
====== |
====== |
====== |
====== |
====== |
The Company's distributable reserves consist of the special distributable reserve, capital reserve and revenue reserve.
STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2020
|
|
Note |
For the year |
Period from |
|
Cash flows from operating activities |
|
|
|
|
Operating (loss)/profit before taxation |
|
(2,917) |
6,192 |
|
Taxation paid |
|
(288) |
- |
|
Decrease/(increase) in receivables |
|
57 |
(152) |
|
Increase in payables |
|
2,843 |
171 |
|
Losses/(gains) on investments |
4 |
48 |
(6,075) |
|
|
|
----------- |
----------- |
|
Net cash flow (used in)/from operating activities |
|
(257) |
136 |
|
|
|
====== |
====== |
|
Cash flows from investing activities |
|
|
|
|
Purchase of investments |
|
(84,694) |
(82,846) |
|
Sale of investments |
|
66,096 |
34,689 |
|
Capital distributions received |
|
41 |
- |
|
|
|
----------- |
----------- |
|
Net cash flow used in investing activities |
|
(18,557) |
(48,157) |
|
|
|
====== |
====== |
|
Cash flows from financing activities |
|
|
|
|
Proceeds from issue of Ordinary Shares |
12 |
19,777 |
50,036 |
|
Ordinary Share issue costs |
|
(462) |
(887) |
|
|
|
----------- |
----------- |
|
Net cash flow from financing activities |
|
19,315 |
49,149 |
|
|
|
====== |
====== |
|
Increase in cash and cash equivalents |
|
501 |
1,128 |
|
Cash and cash equivalents at start of year/period |
|
1,128 |
- |
|
|
|
----------- |
----------- |
|
Cash and cash equivalents at end of year/period |
|
1,629 |
1,128 |
|
|
|
====== |
====== |
NOTES TO THE FINANCIAL STATEMENTS
1. REPORTING ENTITY
Ashoka India Equity Investment Trust plc is a closed-ended investment company, registered in England and Wales on 11 May 2018. The Company's registered office is 1st Floor, Senator House, 85 Queen Victoria Street, London, EC4V 4AB. Business operations commenced on 6 July 2018 when the Company's Ordinary Shares were admitted to trading on the LSE. The financial statements of the Company are presented for the year from 1 July 2019 to 30 June 2020 and comparative period from incorporation 11 May 2018 to 30 June 2019.
The Company primarily invests in securities listed on any stock exchange in India and can invest in the securities of companies with a significant presence in India that are listed on stock exchanges outside India.
2. BASIS OF PREPARATION
Statement of compliance
These financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union, the Disclosure Guidance and Transparency Rules ('DTRs') of the UK's Financial Conduct Authority, Article 4 of the IAS Regulation and the Companies Act 2006 as applicable to companies using IFRS.
When presentational guidance set out in the Statement of Recommended Practice ('SORP') for Investment Companies issued by the Association of Investment Companies ('the AIC') issued in October 2019 is consistent with the requirements of 'IFRS', the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.
Going concern
The Directors have concluded that there is a reasonable expectation that the Company will have adequate liquidity and cash balances to meet its liabilities as they fall due and continue in operational existence for the foreseeable future, being at least twelve months from the date of signing these financial statements. As such the Directors have adopted the going concern basis in preparing the financial statements.
Use of estimates and judgements
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. The resulting accounting estimates and assumptions will, by definition, seldom equal the related actual results.
Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
The Indian capital gains tax provision represents an estimate of the amount of tax payable by the Company. Tax amounts payable may differ from this provision depending when the Company disposes of investments. The current provision on Indian capital gains tax is calculated based on the long term or short-term nature of the investments and the applicable tax rate at the year end. The short-term tax rates are 15% and the long term tax rates are 10%. The estimated tax charge is subject to regular review including a consideration of the likely period of ownership, tax rates and market valuation movements.
As disclosed in the statement of financial position, the Company made a capital gains tax provision of £1,001,000 (30 June 2019: £811,000) in respect of unrealised gains on investments held.
The Directors do not believe that any accounting judgements or estimates have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year.
Basis of measurement
The financial statements have been prepared on the historical cost basis except for financial instruments at fair value through profit or loss, which are measured at fair value.
Functional and presentation currency
The Company's investments are denominated in Indian Rupees. However, the Company's shares are issued in Sterling and the majority of its investors are UK based. The Company's expenses and dividends are also paid in Sterling. Therefore, the financial statements are presented in Sterling, which is the Company's functional currency. All financial information has been rounded to the nearest thousand pounds.
3. ACCOUNTING POLICIES
(a) Investments
Upon initial recognition, investments are classified by the Company "at fair value through profit or loss" as they are equity instruments. They are accounted for on the date they are traded and are included initially at fair value which is taken to be their cost. Subsequently quoted investments are valued at fair value which is the bid market price, or if bid price is unavailable, last traded price on the relevant exchange.
Changes in the fair value of investments held at fair value through profit or loss and gains or losses on disposal are included in the capital column of the Statement of Comprehensive Income within "(losses)/gains on investments".
Investments are derecognised on the trade date of their disposal, which is the point where the Company transfers substantially all the risks and rewards of the ownership of the financial asset.
Transaction costs directly attributable to the acquisition of investments at fair value through profit or loss are recognised under (losses)/gains on investments.
(b) Foreign currency
Transactions denominated in foreign currencies are translated into Sterling at actual exchange rates as at the date of the transaction. Monetary assets and liabilities, and non-monetary assets held at fair value denominated in foreign currencies are translated into Sterling using applicable foreign exchange rates at the year end. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss and is charged to the capital column or revenue column in the Statement of Comprehensive Income as appropriate. Foreign exchange movements on investments are included in the Statement of Comprehensive Income within "(losses)/gains on currency movements".
(c) Income from investments
Dividend income from shares is accounted for on the basis of ex-dividend dates. Overseas income is grossed up at the appropriate rate of tax.
Special dividends are assessed on their individual merits and may be credited to the Statement of Comprehensive Income as a capital item if considered to be closely linked to reconstructions of the investee company or other capital transactions. All other investment income is credited to the Statement of Comprehensive Income as a revenue item.
Interest on fixed income instruments is accounted on an accrual basis.
(d) Capital reserves
Profits achieved in cash by selling investments and changes in fair value arising upon the revaluation of investments that remain in the portfolio are all charged to the capital column of the Statement of Comprehensive Income and allocated to the capital reserve.
Company's redemption facility is subject to approval by the board and as such the redemption facility does not represent a contractual obligation on the Company and the shares are accordingly classified as equity.
(e) Expenses
All expenses are accounted for on an accruals basis. Expenses are recognised through the Statement of Comprehensive Income as revenue items except as follows:
Performance fees
Performance fees, if any, are payable directly by reference to the capital performance of the Company as per the Investment Management Agreement and are therefore charged to the Statement of Comprehensive Income as a capital item. No other management fees are payable.
(f) Cash and cash equivalents
Cash comprises cash at hand and demand deposits. For purposes of the statement of cash flows, cash equivalents, including bank overdrafts, are short term, highly liquid investments that are readily convertible to known amounts of cash, are subject to insignificant risks of changes in value, and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.
(g) Taxation
Irrecoverable taxation on dividends is recognised on an accruals basis in the Statement of Comprehensive Income. Indian tax rates for dividends with ex-dividend dates post 1 April 2020 are subject to 20% withholding tax.
The tax charges on Indian capital gains taxes are shown in the Statement of Comprehensive Income, recognised on an accrual basis. The Company is not subject to UK capital gains tax.
Deferred taxation
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the statement of financial position liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Investment trusts which have approval as such under Section 1158 of the Corporation Tax Act 2010 are not liable for taxation on capital gains.
(h) Segmental reporting
The Chief Operating Decision Maker, which is the Board, is of the opinion that the Company is engaged in a single segment of business, being investment in listed securities in India to achieve long-term capital appreciation. The financial information used by the Chief Operating Decision Maker to manage the Company presents the business as a single segment.
(i) Adoption of new IFRS standards
A number of new standards, amendments to standards and interpretations are effective for the annual periods beginning after 1 January 2019 and have been applied in preparing these financial statements. None of these have had a significant effect on the measurement of the amounts recognised in the financial statements of the Company.
IFRS 16 - Leases (effective 1 January 2019) specifies accounting for leases and removes the distinction between operating and finance leases. This standard is not applicable to the Company as it has no leases.
IFRIC 23 (effective 1 January 2019) - Uncertainty over Income Tax Treatments seeks to provide clarity on how to account for uncertainty over income tax treatments and specifies that an entity must consider whether it is probable that the relevant tax authority will accept each tax treatment or group of tax treatments, that it plans to use in its income tax filing. The interpretation also requires companies to reassess the judgements and estimates applied if facts and circumstances change. The interpretation would require the Company to recognise uncertain tax positions which are more than probable within its financial statements. The interpretation has not had any impact on the financial statements of the Company.
Standards issued but not yet effective
There are no standards or amendments to standards not yet effective that are relevant to the Company and should be disclosed.
4. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
(a) Investments held at fair value through profit or loss
|
|
As at |
As at |
|
Listed investments in India |
72,120 |
54,234 |
|
|
-------------- |
-------------- |
|
Closing valuation |
72,120 |
54,234 |
|
|
======== |
======== |
(b) Movements in valuation
|
|
As at |
As at |
|
Opening valuation |
54,234 |
- |
|
Opening unrealised gains on investments |
8,079 |
- |
|
|
-------------- |
-------------- |
|
Opening book cost |
46,155 |
- |
|
Additions, at cost |
84,539 |
82,687 |
|
Disposals, at cost |
(65,415) |
(36,532) |
|
|
-------------- |
-------------- |
|
Closing book cost |
65,279 |
46,155 |
|
Revaluation of investments |
6,841 |
8,079 |
|
|
-------------- |
-------------- |
|
Closing valuation |
72,120 |
54,234 |
|
|
======== |
======== |
Transaction costs on investment purchases for the year ended 30 June 2020 amounted to £156,000 (30 June 2019: £159,677) and on investment sales for the financial year to 30 June 2020 amounted to £110,000 (30 June 2019: £65,171).
(c) (Losses)/gains on investments
|
|
Year ended |
Period ended |
|
Realised gains/(losses) on disposal of investments |
1,415 |
(1,779) |
|
Transaction costs |
(266) |
(225) |
|
Movements in unrealised (losses)/gains on investments held |
(1,238) |
8,079 |
|
Capital distributions received |
41 |
- |
|
|
-------------- |
-------------- |
|
Total (losses)/gains on investments |
(48) |
6,075 |
|
|
======== |
======== |
Under IFRS 13 'Fair Value Measurement', an entity is required to classify investments using a fair value hierarchy that reflects the significance of the inputs used in making the measurement decision.
The following shows the analysis of financial assets recognised at fair value based on:
Level 1
The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.
Level 2
Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly.
Level 3
Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.
The classification of the Company's investments held at fair value is detailed in the table below:
|
|
As at 30 June 2020 |
As at 30 June 2019 |
||||||
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
Level 1 |
Level 2 |
Level 3 |
Total |
|
Investments at fair value through profit and loss - Listed investments in India |
72,120 |
- |
- |
72,120 |
54,234 |
- |
- |
54,234 |
|
|
======== |
======== |
======== |
======== |
======== |
======== |
======== |
======== |
There were no transfers between levels during the year ended 30 June 2020 (30 June 2019: nil).
Fair values of financial assets and financial liabilities
Financial assets and liabilities are held at fair value in the financial statements with the exception of short-term assets and liabilities where their carrying value approximates to fair value.
5. INCOME
|
|
Year ended |
Period ended |
|
Income from investments |
|
|
|
Overseas dividends |
586 |
279 |
|
|
-------------- |
-------------- |
|
Total income |
586 |
279 |
|
|
======== |
======== |
6. OTHER PAYABLES
|
|
As at 30 June 2020 |
As at 30 June 2019 |
|
Accrued expenses |
128 |
120 |
|
|
-------------- |
-------------- |
|
Total other payables |
128 |
120 |
|
|
======== |
======== |
7. PERFORMANCE FEES
|
|
Year ended 30 June 2020 |
Period ended 30 June 2019 |
||||
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
Performance fee provision |
- |
2,835 |
2,835 |
- |
52 |
52 |
|
|
======== |
======== |
======== |
======== |
======== |
======== |
The Investment Manager does not receive a fixed management fee in respect of its portfolio management services to the Company. The Investment Manager will become entitled to a performance fee subject to the Company delivering excess returns versus the MSCI India IMI Index in the medium-term. The performance fee will be measured over periods of three years, with the first period ending (approximately three years from the date of Admission) on 30 June 2021.
The performance fee is calculated at a rate of 30% of the excess returns between adjusted NAV per share on the last day of the performance period and the MSCI India IMI Index (Sterling) over the performance period, adjusted for the weighted average number of Ordinary Shares in issue during the performance period.
8. EXPENSES
|
|
Year ended |
Period ended |
|
Administration & secretarial fees |
111 |
106 |
|
Auditor's remuneration* |
|
|
|
- Statutory audit fee |
30 |
30 |
|
Broker fees |
30 |
30 |
|
Custody services |
11 |
6 |
|
Directors' fees |
113 |
111 |
|
Board trip to India costs |
6 |
6 |
|
Board meeting costs |
3 |
3 |
|
Tax compliance and advice |
36 |
16 |
|
Printing and public relations |
75 |
49 |
|
Registrar fees |
16 |
9 |
|
Legal Fees |
41 |
29 |
|
UKLA and other regulatory fees |
18 |
16 |
|
Other expenses |
64 |
63 |
|
|
-------------- |
-------------- |
|
Total |
554 |
474 |
|
|
======== |
======== |
* Auditor's remuneration excludes VAT.
The Auditor performed reporting accountant services in connection with the Company's new prospectus and fees of £23,000 (30 June 2019: £51,000) were paid during the year, which have been treated as a capital expenses and included in 'share issue costs' in the Statement of Changes in Equity. Prior year Non ‑ audit IPO services were provided before the Company was listed in July 2018 and before the auditor was appointed in March 2019.
9. TAXATION
(a) Analysis of charge in the year:
|
|
Year ended 30 June 2020 |
Period ended 30 June 2019 |
||||
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
Capital gains tax provision |
- |
190 |
190 |
- |
811 |
811 |
|
Realised Indian capital gains tax |
|
270 |
270 |
- |
- |
- |
|
Indian withholding tax paid |
18 |
- |
18 |
- |
- |
- |
|
|
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
|
Total tax charge for the period (note 9b) |
18 |
460 |
478 |
- |
811 |
811 |
|
|
======== |
======== |
======== |
======== |
======== |
======== |
A tax provision on Indian capital gains is calculated based on the long term(securities held more than one year) or short term(securities held less than one year) nature of the investments and the applicable tax rate at the period end. The short term tax rates are 15% and the long term tax rates are 10%.
(b) Factors affecting the tax charge for the year/period:
The effective UK corporation tax rate for the year is 19%. The tax charge differs from the charge resulting from applying the standard rate of UK corporation tax for an investment trust company. The differences are explained below:
|
|
Year ended |
Period ended |
|
Operating (loss)/ profit before taxation |
(2,917) |
6,192 |
|
UK Corporation tax at 19% (2019: 19.00%) |
(554) |
1,176 |
|
Effects of: |
|
|
|
Indian capital gains tax provision |
460 |
811 |
|
Gains/(losses) on investments not taxable |
22 |
(1,223) |
|
Overseas dividends not taxable |
(111) |
(53) |
|
Unutilised management expenses |
643 |
100 |
|
Indian withholding tax paid |
18 |
- |
|
|
-------------- |
-------------- |
|
Total tax charge |
478 |
811 |
|
|
======== |
======== |
The Company is not liable to UK Corporation tax on capital gains due to its status as an investment trust. The Company has an unrecognised deferred UK Corporation tax asset of £744,000 (2019: £89,000) based on the UK corporation tax rate of 19% in 2020 (2019: 17%). The main rate of corporation tax was due to reduce to 17% from 1 April 2020, however the Finance Bill 2020, substantively enacted on 17 March, amended the rate to keep it at 19%. This rate change is reflected in the unrecognised deferred tax balances in these accounts. This asset has accumulated because deductible expenses exceeded taxable income for the year ended 30 June 2020. No asset has been recognised in the accounts because, given the composition of the Company's portfolio, it is not likely that this asset will be utilised in the foreseeable future.
10. EARNINGS PER ORDINARY SHARE
|
|
As at June 2020 |
As at 30 June 2019 |
||||
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
(Loss)/profit for the year (£'000) |
14 |
(3,409) |
(3,395) |
(195) |
5,576 |
5,381 |
|
Earnings per Ordinary Share |
0.02p |
(5.55)p |
(5.53)p |
(0.41)p |
11.84p |
11.43p |
|
|
======== |
======== |
======== |
======== |
======== |
======== |
Earnings per Ordinary Share is based on the loss for the year of £3,395,000 (30 June 2019: profit of £5,381,000) attributable to the weighted average number of Ordinary Shares in issue during the year ended 30 June 2020 of 61,425,509 (30 June 2019: 47,104,531). Revenue profit and capital losses are £14,000 (30 June 2019: revenue loss of £195,000) and £3,409,000 (30 June 2019: capital profit of £5,576,000) respectively.
11. DIVIDEND
The Company's objective is to provide shareholder returns through capital growth with income being a secondary consideration. It should not be expected that the Company will pay a significant annual dividend, but the Board intends to declare such annual dividends as are necessary to maintain the Company's UK investment trust status. The Company generated a revenue profit in the year ended 30 June 2020, however as per the amended ITC regulations by the Investment Trust (Approved Company) (Tax) (Amendment) Regulations 2013 (SI 2013/1406) which allows an investment trust with an accumulated deficit on revenue reserves brought forward, to utilise this against a current year profit in an accounting period, therefore the Directors do not recommend the payment of a final dividend in respect of the year.
12. SHARE CAPITAL
|
|
As at 30 June 2020 |
As at 30 June 2019 |
||
|
|
No. of shares |
£'000 |
No. of shares |
£'000 |
|
Allotted, issued and fully paid: |
|
|
|
|
|
Redeemable Ordinary Shares of 1p each ('Ordinary Shares') |
67,648,500 |
676 |
50,123,086 |
501 |
|
|
--------------- |
--------------- |
--------------- |
--------------- |
|
Total |
67,648,500 |
676 |
50,123,086 |
501 |
|
|
========= |
========= |
========= |
========= |
Ordinary Shares
On incorporation, the issued share capital of the Company was 1 Ordinary Share of £0.01.
Between 1 July 2019 and 30 June 2020, 17,525,414 Ordinary Shares have been issued; raising aggregate gross proceeds of £19,777,000 (30 June 2019: £50,036,000).
As at the date of this Annual Report, the total number of Ordinary Shares in issue is 67,648,500.
The Ordinary Shares have attached to them full voting, dividend and capital distribution rights. They confer rights of redemption. The Company's special distribution reserve will also be used for share repurchases, both into treasury or for cancellation.
Management shares
In addition to the above, on incorporation the Company issued 50,000 Management Shares of nominal value of £1.00 each.
The holder of the Management Shares undertook to pay or procure payment of, one quarter of the nominal value of each Management share on or before the fifth anniversary of the date of issue of the Management Shares. The Management Shares are held by an associate of the Investment Manager.
The Management Shares do not carry a right to attend or vote at general meetings of the Company unless no other shares are in issue at that time. The Management Shares have been treated as equity in accordance with IFRS.
13. SPECIAL DISTRIBUTABLE RESERVE
As indicated in the Company's prospectus dated 19 June 2018, following admission of the Company's Ordinary Shares to trading on the LSE, the Directors applied to the Court and obtained a judgement on 4 December 2018 to cancel the amount standing to the credit of the share premium account of the Company. The amount of the share premium account cancelled and credited to a special distributable reserve was £44,275,898. This reserve may also be used to fund dividend payments.
14. NET ASSET VALUE ('NAV') PER ORDINARY SHARE
Net assets per ordinary share as at 30 June 2020 is based on £70,450,000 (30 June 2019: £54,530,000) of net assets of the Company attributable to the 67,648,500 (30 June 2019: 50,123,086) Ordinary Shares in issue as at 30 June 2020.
15. FINANCIAL INSTRUMENTS AND CAPITAL DISCLOSURES
(i)
Market risks
The Company is subject to a number of market risks in relation to economic conditions in India.
The Company's financial assets and liabilities comprised:
|
|
As at 30 June 2020 |
As at 30 June 2019 |
||||
|
|
Interest |
Non-interest |
|
Interest |
Non-interest |
|
|
Investments |
- |
72,120 |
72,120 |
- |
54,234 |
54,234 |
|
|
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
|
Total investment |
- |
72,120 |
72,120 |
- |
54,234 |
54,234 |
|
|
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
|
Cash and cash equivalent |
|
1,629 |
1,629 |
- |
1,128 |
1,128 |
|
Short term debtors |
- |
717 |
717 |
- |
151 |
151 |
|
Short term creditors |
- |
(128) |
(128) |
- |
(120) |
(120) |
|
Long term creditors |
- |
(3,888) |
(3,888) |
- |
(863) |
(863) |
|
|
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
|
Other net assets |
|
(1,670) |
(1,670) |
- |
296 |
296 |
|
|
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
|
Net assets |
- |
70,450 |
70,450 |
- |
54,530 |
54,530 |
|
|
======== |
======== |
======== |
======== |
======== |
======== |
Market price risk sensitivity
The effect on the portfolio of a 10.0% increase or decrease in market prices would have resulted in an increase or decrease of £7,212,000 (30 June 2019:£5,423,000) in the investments held at fair value through profit or loss at the period end date, which is equivalent to 10.2% (30 June 2019: 9.9%) in the net assets attributable to equity holders. This analysis assumes that all other variables remain constant.
(ii)
Liquidity risks
Liquidity risk is that the Company will not be able to meet its obligations when its due.
Portfolio by maturity at the year end are shown below:
|
|
30 June 2020 |
30 June 2019 |
|
Within one to seven days |
95.1 |
92.3 |
|
Between seven days to one month |
3.2 |
7.4 |
|
Between one and three months |
1.7 |
0.3 |
|
|
--------- |
--------- |
|
Total |
100.0 |
100.0 |
|
|
===== |
===== |
Financial liabilities by maturity at the period end are shown below:
|
|
30 June 2020 |
30 June 2019 |
|
Between one and three months |
128 |
120 |
|
More than one year |
3,888 |
863 |
|
|
--------- |
--------- |
|
Total |
4,016 |
983 |
|
|
===== |
===== |
Management of liquidity risks
The Company has a diversified portfolio and its readily realisable. The liquidity of the portfolio is reviewed regularly by the Investment Manager and the Board.
(iii) Currency risks
Although the Company's performance is measured in Sterling, a high proportion of the Company's assets are denominated in Indian Rupees. Change in the exchange rate between Sterling and Indian Rupees may lead to a depreciation of the value of the Company's assets as expressed in Sterling and may reduce the returns to the Company from its investments.
Currency sensitivity
The below table shows the foreign currency profile of the Company.
Foreign currency risk profile
|
|
30 June 2020 |
30 June 2019 |
||||
|
|
|
Net |
Total |
|
Net |
Total |
|
Indian Rupees |
72,120 |
488 |
72,608 |
54,234 |
263 |
54,497 |
|
|
--------- |
--------- |
--------- |
--------- |
--------- |
--------- |
|
Total investment |
72,120 |
488 |
72,608 |
54,234 |
263 |
54,497 |
|
|
===== |
===== |
===== |
===== |
===== |
===== |
Based on the financial assets and liabilities at 30 June 2020 and all other things being equal, if Sterling had weakened against the local currencies by 10%, the impact on the Company's net assets at 30 June 2020 would have been as follows:
|
|
30 June 2020 |
30 June 2019 |
||
|
|
Increase in |
Decrease in |
Increase in |
Decrease in |
|
Indian Rupees |
7,212 |
(7,212) |
5,423 |
(5,423) |
|
|
--------- |
--------- |
--------- |
--------- |
Management of currency risks
The Company's Investment Manager monitors the currency risk of the Company's portfolio on a regular basis. Foreign currency exposure is regularly reported to the Board by the Investment Manager.
Currency risk will not be hedged using any sort of foreign currency transactions, forward transactions or derivative instruments.
(iv) Credit risks
Credit risk is the risk that the issuer of a financial instrument will fail to fulfil an obligation or commitment that it has entered into with the Company.
Cash and other assets are held by the custodian.
Management of credit risks
The Company has appointed Kotak Mahindra Bank Limited (Kotak) as its depositary. The credit rating of (Kotak) was reviewed at the time of appointment and will be reviewed on a regular basis by the Investment Manager and/or the Board.
The Investment Manager monitors the Company's exposure to its counterparties on a regular basis and trades in equities are performed on a delivery versus payment basis. Impairment assessment based on credit loss model is not considered material to the Company.
At 30 June 2020, the Depository held £72,120,000 (30 June 2019: £54,234,000) in respect of quoted investments and £1,433,000 (30 June 2019: £1,041,000) in respect of cash on behalf of the Company.
(v)
Capital management policies and procedures
The Company considers its capital to consist of its share capital of Ordinary Shares of 1p each, Management Shares of £1 each, and reserves totalling £70,450,000 (30 June 2019: £54,530,000).
The Company is not subject to any externally imposed capital requirements.
The Investment Manager and the Company's broker monitor the demand for the Company's shares and the Directors review the position at Board meetings.
16. RELATED PARTY TRANSACTIONS
Performance fees payable to the Investment Manager are disclosed in Note 7.
White Oak Capital Management Consultants LLP provides investment advisory services to the Investment Manager and no fees are paid to them from the Company.
Since commencement of operations on 6 July 2018 fees have been payable at an annual rate of £35,000 to the Chairman, £27,500 to the Chair of the Audit Committee, and £25,000 to the other Directors.
The Directors had the following shareholdings in the Company, all of which are beneficially owned.
|
|
As at 30 June 2020 |
As at 30 June 2019 |
|
Andrew Watkins |
82,542 |
63,174 |
|
Jamie Skinner |
64,603 |
46,660 |
|
Rita Dhut |
62,032 |
44,063 |
|
Dr Jerome Booth |
40,017 |
19,962 |
|
|
--------- |
--------- |
17. POST BALANCE SHEET EVENTS
On 3 September 2020, the Company announced that 367,616 valid redemption requests had been received at the Redemption Point (representing 0.54% of the issued share capital at that point).
OTHER INFORMATION
ALTERNATIVE PERFORMANCE MEASURES
ALTERNATIVE PERFORMANCE MEASURES 30 JUNE 2020
Ordinary share price to NAV discount
The amount, expressed as a percentage, by which the share price is less than the Net Asset Value per Ordinary Share.
|
As at 30 June 2020 |
|
|
|
|
NAV per Ordinary Share (p) |
a |
|
104.14 |
|
Share price (p) |
b |
|
98.50 |
|
|
---------- |
|
---------- |
|
Discount |
(b÷a)-1 |
|
5.4% |
|
|
====== |
|
====== |
Ongoing charges
A measure, expressed as a percentage of average net assets, of the regular, recurring annual costs of running an investment company.
|
Year ended 30 June 2020 |
|
|
|
|
Average NAV |
a |
|
63,637,102 |
|
Annualised expenses* |
b |
|
554,000 |
|
|
---------- |
|
--------------- |
|
Ongoing charges |
(b÷a) |
|
0.9% |
|
|
====== |
|
========= |
* Annualised expenses excludes performance fee expenses.
Share price/NAV total return
A measure of performance that includes both income and capital returns.
|
Year ended 30 June 2020 |
|
|
Share price |
NAV |
|
Opening at 1 July 2019 (p) |
a |
|
109.0 |
108.8 |
|
Closing at 30 June 2020 (p) |
b |
|
98.5 |
104.1 |
|
|
---------- |
|
---------- |
---------- |
|
Total return |
(b÷a)-1 |
|
(9.6%) |
(4.3%) |
|
|
====== |
|
====== |
====== |
n/a = not applicable.
ALTERNATIVE PERFORMANCE MEASURES 30 JUNE 2019
Ordinary share price to NAV premium
The amount, expressed as a percentage, by which the Ordinary Share price is more than the NAV per Ordinary Share.
|
As at 30 June 2019 |
|
|
|
|
NAV per Ordinary Share (p) |
a |
|
108.8 |
|
Ordinary Share price (p) |
b |
|
109.0 |
|
|
---------- |
|
---------- |
|
Premium |
(b÷a)-1 |
|
0.2% |
|
|
====== |
|
====== |
Ongoing charges
A measure, expressed as a percentage of average net assets, of the regular, recurring costs of running an investment company.
|
Period ended 30 June 2019 |
|
|
|
|
Average NAV |
a |
|
45,483,000 |
|
Expenses |
b |
|
474,000 |
|
|
---------- |
|
--------------- |
|
Ongoing charges |
(b÷a) |
|
1.0% |
|
|
====== |
|
========= |
Share price/NAV total return
A measure of performance that includes both income and capital returns.
|
|
|
|
Ordinary |
NAV per |
|
Opening at 6 July 2018 (p) |
a |
|
100.0 |
98.0 |
|
Closing at 30 June 2019 (p) |
b |
|
109.0 |
108.8 |
|
|
---------- |
|
---------- |
---------- |
|
Total return |
(b÷a)-1 |
|
9.0% |
11.0% |
|
|
====== |
|
====== |
====== |
1 Share price total return is based on an opening share price of 100p.
2 NAV total return is based on an opening NAV after launch expenses of 98.0p per Ordinary Share.
Financial information
This announcement does not constitute the Company's statutory accounts. The financial information is derived from the statutory accounts, which will be delivered to the registrar of companies and will be put forward for approval at the Company's Annual General Meeting. The auditors have reported on the accounts for the year ended 30 June 2020, their report was unqualified and did not include a statement under Section 498(2) or (3) of the Companies Act 2006.
The Annual Report for the year ended 30 June 2020 was approved on 25 September 2020. The report will be available in electronic format on the Company's website, www.ashokaindiaequity.com .
The Annual Report will be submitted to the National Storage Mechanism and will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
This announcement contains regulated information under the Disclosure Guidance and Transparency Rules of the FCA.
Annual General Meeting
The Annual General Meeting will be held at the offices PraxisIFM Fund Services (UK) Limited, 1st Floor, Senator House, 85 Queen Victoria Street, London, EC4V 4AB on 9 December 2020 at 10:45 am
Company Secretary and registered office:
PraxisIFM Fund Services (UK) Limited
1st Floor, Senator House
85 Queen Victoria Street
London, EC4V 4AB
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