TIDMFAS
FIDELITY ASIAN VALUES PLC
Final Results for the year ended 31 July 2023
Financial Highlights:
· The Board of Fidelity Asian Values PLC (the "Company") recommends an annual
dividend of 14.50 pence per share.
· The net asset value (NAV) total return increased by 11.4% for the year ended
31 July 2023, outperforming the Company's Comparative Index (MSCI All Countries
ex Japan Small Cap Index) which rose by 7.5% over the same period.
· The ordinary share price total return for the reporting year was an increase
of 17.3%.
· The Company maintains net gearing of approximately 4.9%, reflecting
opportunities found across the region.
Contacts
For further information, please contact:
Nira Mistry
Company Secretary
FIL Investments International
07778 354517
Chairman's Statement
This is my last Annual Report for the Company, having served as your Chairman
for nine years this December. During that time, your Company has gone through
significant changes. Having begun as a large-cap Asia fund, it now operates in a
very different area, primarily investing in smaller companies with a focus on
value stocks. As I prepare to retire from the Board, I have taken the
opportunity to look back at the impact of these changes, beginning with the
selection of Nitin Bajaj as your Portfolio Manager in April 2015. From Nitin's
appointment until 31July 2023, your Company has produced a Net Asset Value
("NAV") total return of 112.6% and a share price total return of 129.0%,
outperforming the Comparative Index (MSCI All Countries Asia ex Japan Small Cap
Index (net) total return (in sterling terms)) of 72.9% and also the peer group
average total returns of 87.5% (NAV) and 117.1% (share price). During this time,
the discount to NAV has narrowed from the mid-teens to low single digits
(occasionally trading at a premium, which is testament to a very clear and well
-supported investment proposition), and we have also been able to deliver a
significant increase in the dividend, both of which have been to the long-term
benefit of shareholders.
Coming back to the year just ended, it is pleasing to report a year of strong
performance, in which your Portfolio Manager's strong stock selection has been
complemented by a market environment that has favoured the Company's quality and
value-focused investment approach. In the year to 31 July 2023, the NAV total
return was 11.4%, while the Comparative Index total return was 7.5% over the
same period. After experiencing negative performance in the last financial year,
the share price has rebounded strongly, producing a total return of 17.3% as the
discount to NAV has narrowed from 9.8% at the start of the year to 5.3% at the
end. This is particularly notable given the general widening in investment trust
discounts during the year. Nitin talks more on the drivers for the positive
performance in his Portfolio Manager's Review below.
Due Diligence 2023
In March 2023, your Board took an in-person due diligence trip to Asia for the
first time since 2018. We travelled first to Singapore, where the portfolio
management team is based, and spent time with Nitin, Ajinkya Dhavale, who has
now been the Assistant Portfolio Manager of the Company for three years, and
colleagues, including Fidelity's Head of Equities for the Asia Pacific region.
We also met with some locally based companies to see how Fidelity's meetings
with them are run and how they form part of the stock picking process. We then
went to South Korea for three days of company visits. What stood out to us as a
Board was the quality of the management teams we met in Korea and the depth and
calibre of the businesses; although these companies are not the largest, their
global presence was really startling. One example was Hankook Tire, a provider
of e-vehicle tyres and a growing contributor to profits. It has recently taken
over from Michelin as the official supplier for the Formula E motor racing
competition. It was most interesting to observe Nitin and Ajinkya as they
interviewed companies, and to see during a process of incisive questioning, the
very obvious mutual respect in which they hold both management and each other.
This really underpins our continued confidence in the team that manages your -
and our - investment in the Company.
Discount management and share repurchases
After the spike in market volatility seen in the first half of 2022 when Russia
invaded Ukraine, conditions continued to be unsettled into the first half of the
Company's financial year ended 31 July 2023. Between August and November 2022,
the Board approved the repurchase of 569,000 ordinary shares (0.8% of the issued
share capital) for holding in Treasury, at a cost of £2,618,000. Since then and
up to the date of this report, no shares have been repurchased, given an
encouraging narrowing of the Company's discount even as peers' and broader
investment trust average discounts have widened.
Your Board closely monitors the Company's share price discount to NAV and will
undertake active discount management where necessary, the primary purpose of
which is to limit discount volatility. Repurchases of ordinary shares are made
at the discretion of the Board, within guidelines set by it and considering
prevailing market conditions. Shares will only be repurchased in the market at
prices below the prevailing NAV per ordinary share, thereby resulting in an
enhancement to the NAV per ordinary share. In order to assist in managing the
discount, the Board has shareholder approval to hold in Treasury any ordinary
shares repurchased by the Company, rather than cancelling them. Any shares held
in Treasury would only be reissued at NAV per ordinary share or at a premium to
NAV per ordinary share.
Dividend
Your Portfolio Manager invests principally for capital growth, but his value
-oriented investment style tends to lead him towards unleveraged, cash
-generative businesses that may themselves be able to pay rising dividends. As
such, the Company's revenue return was 15.17 pence per ordinary share (an
increase of 6.8% from the prior year revenue return of 14.21 pence per ordinary
share). Last year your Board declared a substantially increased dividend of
14.00 pence per share (2021: 8.80 pence). While we noted at the time that
shareholders should not assume that such dividends would continue in the future,
we are very pleased to be able to recommend another increase in the dividend for
2023, to 14.50 pence per share which will be paid to shareholders on 6 December
2023. The Board is again recommending that almost all of the income earned be
paid out as a dividend. We would reiterate, however, that income is an output
rather than an aim of the investment process, and that no guarantees can be
offered as to the level of any future dividends.
Gearing
As I noted in last year's Annual Report, the Company's level of gross gearing is
directly proportional to the investment opportunities that your Portfolio
Manager sees. When Nitin is optimistic about opportunities and he and his team
generate ideas in response to market conditions, then the Company will be more
geared. As such, it is notable that gearing during the year reached the highest
level we have seen during Nitin's tenure, ending the year with gross gearing at
11.7%, up from 4.4% as at 31 July 2022; net gearing was 4.9% (2022: nil). As
Nitin notes in his review below, gearing has been increased largely in response
to a number of particularly interesting investment opportunities in China, which
have been out of favour with investors. The Company's gearing is achieved using
contracts for difference ("CFDs"); we have no bank borrowings or structural long
-term debt. We regularly review the use of CFDs and have again concluded that
they remain a more efficient and flexible form of financing than either secured
or unsecured debt, as well as enabling your Portfolio Manager to be fleet of
foot in the deployment of gearing. We are fortunate that Fidelity has the
infrastructure and capability to allow the use of CFDs in the portfolio; few
other management groups can offer this.
Use of Short positions
A few years ago, the Board approved giving your Portfolio Manager the ability to
`short' stocks, and we are pleased to report that this approach is adding value
and has been a positive contributor during the year. A short position is taken
on the view that the price of a stock or the value of an index will go down
rather than up. Ajinkya has extensive experience in shorting, and Nitin is
encouraged by the availability of such opportunities in the market today, given
a real disparity between the prospects of the smaller value stocks that he
favours and some of the large and mega-cap stocks in Asia that he thinks are
vulnerable. Short positions are limited to a maximum of 10% of the portfolio and
do not usually exceed ten stocks. While there is no intention to increase the
limit, the combination of Ajinkya's (and Fidelity's) competence and the current
market environment means that Nitin may maintain and even opportunistically
increase the short exposure, within the investment limits. Total short exposure
as at 31 July 2023 was 3.4% (2022: 2.2%).
Environmental, Social & Governance (ESG)
There has been something of an ESG backlash in recent times. Your Company is not
an `ESG fund', but good governance and social behaviour and a strong regard for
the environment have always been fundamental to the way Nitin invests. Assessing
ESG in Asia can be quite different from that in developed economies. Smaller
Asian companies may not have the resources to report on ESG as companies do in
the West, so the strength and depth of Fidelity's large analyst team in the
region is invaluable in making properly thought-through assessments in the
process, both on a fundamental and an ESG basis.
In the Portfolio Manager's Review, Nitin shares the example of Shriram Finance
as a position that has not only added value to the portfolio, but is also a well
-governed company doing social good as well as mitigating environmental impact.
Shriram Finance was formed from the merger of two companies offering affordable
finance on used commercial vehicles and two-wheelers. It serves communities and
micro, small and medium enterprises that would otherwise face high interest
costs from unregulated lending, enabling them to grow their businesses without
the unaffordable expense or the environmental impact of scrapping old vehicles
and building new ones.
Board of Directors and Board Succession
Grahame Stott, having served nine years on the Board, retired as a non-executive
Director and Chairman of the Audit Committee at the Company's AGM in November
2022. At the same time, we welcomed Hussein Barma as a new non-executive
Director and Chairman of the Audit Committee. Hussein is both a qualified lawyer
and a chartered accountant and has considerable experience in the listed company
sector in the UK and long familiarity with Asia, as well as a good eye for
detail. Clare Brady will be stepping up as Chairman as I step down and will
continue to bring her invaluable experience and skills to the Board. She will be
replaced as Senior Independent Director by Matthew Sutherland.
As noted in last year's Annual Report, Michael Warren will shortly have served
nine years on the Board, but as part of the Board's succession plan, he has
agreed to stay on until the 2024 AGM in order to ensure a good handover of the
institutional and historical knowledge of the Company. We have already begun the
process of selecting his replacement and will make a further announcement in due
course. We will continue to maintain a Board with a diversity of backgrounds and
an appropriate mix of skills to ensure the Company's continued good governance.
Market outlook
The outlook for financial markets globally remains uncertain in light of the
ongoing war in Ukraine and US/China tensions. However, while the Western world
continues to struggle with the highest levels of inflation and interest rates in
nearly a generation, in many Asian markets, the economic environment is very
different, and on a relative basis there are particularly good opportunities
compared to the West. The structural case for investing in developing economies
remains extremely strong: attractive demographics, a burgeoning middle class
providing new markets for goods and services, and economies that can grow more
rapidly. This is the backdrop against which your Portfolio Manager looks to buy
companies, but it is not what drives the investment process, which is
fundamentally to buy good companies, run by good people and at attractive
valuations. As we enter our new financial year, Nitin continues to find good
companies he wants to buy and I am therefore optimistic that this, combined with
a positive market backdrop in Asia will continue to provide opportunities for
investors in the coming year.
I wish him, the team and the Board every success for the future and would also
like to thank all our shareholders for their continued support.
Annual General Meeting
The AGM of the Company will be held at 11.00 am on Wednesday, 29 November 2023
at 4 Cannon Street, London EC4M 5AB (nearest tube stations are St Paul's or
Mansion House) and virtually via the online Lumi AGM meeting platform. Full
details of the meeting are given in the Notice of Meeting in the Annual Report.
For those shareholders who are unable to attend in person, we will live-stream
the formal business and presentations of the meeting online.
Nitin Bajaj, the Portfolio Manager, will be making a presentation to
shareholders highlighting the achievements and challenges of the year past and
the prospects for the year to come. He and the Board will be very happy to
answer any questions that shareholders may have. Copies of his presentation can
be requested by email at investmenttrusts@fil.com or in writing to the Secretary
at FIL Investments International, Beech Gate, Millfield Lane, Lower Kingswood,
Tadworth, Surrey KT20 6RP.
Properly registered shareholders joining the AGM virtually, will be able to vote
on the proposed resolutions. Please see Note 9 to the Notes to the Notice of
Meeting in the Annual Report for details on how to vote virtually. Investors
viewing the AGM online will be able to submit live written questions to the
Board and the Portfolio Manager and we will answer as many of these as possible
at an appropriate juncture during the meeting.
Further information and links to the Lumi platform may be found on the Company's
website at www.fidelity.co.uk/asianvalues. On the day of the AGM, in order to
join electronically and ask questions via the Lumi platform, shareholders will
need to connect to the website https://web.lumiagm.com.
Please note that investors on platforms, such as Fidelity Personal Investing,
Hargreaves Lansdown, Interactive Investor or AJ Bell Youinvest, will need to
request attendance at the AGM in accordance with the policies of your chosen
platform. They may request that you submit electronic votes in advance of the
meeting. If you are unable to obtain a unique IVC and PIN from your nominee or
platform, we would welcome your online participation as a guest. Once you have
accessed https://web. lumiagm.com from your web browser on a tablet or computer,
you will need to enter the Lumi Meeting ID which is 109-975-634. You should then
select the `Guest Access' option before entering your name and who you are
representing, if applicable. This will allow you to view the meeting and ask
questions, but you will not be able to vote.
Kate Bolsover
Chairman
11 October 2023
Portfolio Manager's Review
Question
How has the investment Company performed in the year to 31 July 2023?
Answer
Over the year ended 31 July 2023, the Company's net asset value ("NAV") total
return was +11.4%, outperforming the Comparative Index, the MSCI All Countries
Asia ex Japan Small Cap Index (net) total return (in sterling terms) which rose
by +7.5%. The share price total return for the year was +17.3% due to a
narrowing of the Company's discount.
Performance for the reporting year can be attributed primarily to stock picking,
with our country allocation being a headwind to performance.
Our investment process is driven by owning good businesses which are run by
management teams whom we trust and investing in them only when we have ample
margin of safety. This often leads us to take contrarian positions as it is
easier to find undervalued businesses in countries which are out of favour with
investors. Following this philosophy, we have a significant percentage of the
Company's portfolio in China and are underweight in Taiwan and India compared to
the Index. Accordingly, while country selection would be a headwind to
performance, this was more than offset by good stock selection in line with our
investment philosophy, especially in our three key markets of China, India and
Indonesia.
Over the longer-term (since 2015 when the Board changed the strategy of the
Company to invest more in smaller companies), the NAV (post fees) has risen by
+112.6% versus the MSCI All Countries Asia ex Japan Small Cap Index's (net)
total return of +72.9% and the MSCI Asia ex Japan Large Cap Index's total return
of +62.2%, both in sterling terms.
Question
China's reopening from COVID lockdowns has had a significant impact on the
performance of global markets this year. How do you feel about China and the
economic recovery?
Answer
When China reopened, there was a lot of optimism in the market, but it turned
out that the recovery has been uneven and softer than expected in many areas.
The property downcycle, geopolitics, the reining in of local government spending
and increasing centralisation of political power has resulted in China being one
of the few markets where profitability has not recovered post COVID.
Consequently, there is a heightened perception of risks around Chinese
companies, leading to a decline in stock prices. We agree with some of the
reasons for negative sentiment around China and understand that it is difficult
to predict when the economy will turn around.
However, we should also be cognisant of the strengths of the country's economy,
its people and its businesses. It is the second largest economy in the world and
consumption is expanding as a share of its GDP. It houses a significant part of
the global supply chains of most products we use in our daily lives. Hence, we
feel that these negative macro factors are transitory (as they were in the US
post the housing crises of 2007-10 or in India post the policy paralysis of 2012
-13). Good businesses will not only survive but are likely to be in a stronger
competitive position post this downturn and by taking market share from their
weaker peers. This is probably the best time to be investing in China as we are
able to buy good businesses when both expectations and valuations are low.
Thus, there are good opportunities in China at the moment, which in turn has
seen our combined exposure to China and Hong Kong increase to about 38%.
Question
Looking beyond China, where do you see value in stocks in the Asian region and
how are you reflecting this in the Company's portfolio?
Answer
Our investments are based on our bottom-up fundamental analysis of companies and
their businesses and our exposure to countries is primarily a result of our
stock selection.
Looking at the portfolio beyond China, we are excited about the opportunities we
see in Indonesia (around 14% exposure). Our holdings there are a mix of banks
and consumer-facing companies which are best-in-class operators with high
Returns on Equity ("ROEs") and reasonable valuations. For example, we own shares
in two banks - Bank Mandiri (Persero) and Bank Negara Indonesia (Persero). The
former has seen a sustained improvement in asset quality through better
underwriting and risk management since 2016 under a new management, while the
latter is going through restructuring with the same team of people who turned
around Bank Mandiri (Persero). The portfolio is invested in the country's
leading ceramic tiles manufacturer Arwana Citramulia, a business with long-term
growth potential and a strong management team. Among a few other positions, we
also have exposure to the country's KFC master franchisee, Fastfood Indonesia,
which again has structural growth opportunity to expand as well as enhance
operational efficiencies.
In India, while it has not been easy to find businesses with a suitable margin
of safety, we are still able to identify specific stocks that fit our criteria.
Our positions in India centre around financial sector companies as they are
growing more quickly, have strong balance sheets and are available at prices
which offer a good margin of safety. We have studied these businesses for over
15 years and trust the management teams who have delivered substantial
shareholder value over time.
Question
Your mandate is to look for smaller companies to invest in. Can you give some
examples of how smaller companies outperform?
Answer
We invest in a subset of these smaller companies - in what are popularly called
`value' stocks. Value stocks are classified as companies that are currently
trading below what they are worth and are thus expected to provide superior
returns. Almost 80% of the portfolio is invested in companies which fit this
description.
As shown in the charts in the Annual Report, over the long-term, this has been
an attractive place to invest as small value stocks have grown earnings faster
than the market and hence have delivered superior returns.
Despite this performance, the cohort of small value companies continues to trade
at a significant discount to the rest of the market and looks very attractive
today.
Question
How has the Company's portfolio's exposure to unlisted companies changed during
the year under review?
Answer
We have not added or sold any unlisted securities in the past year. It continues
to be a small part of the portfolio at less than 0.5% of the Company's invested
assets. We believe that there are sufficient opportunities in the listed space
in Asia and, therefore, would only want to invest in an unlisted company in
exceptional circumstances.
Question
You have increased gearing within the Company's portfolio in the reporting year.
What is the reason behind this?
Answer
We have always maintained that gearing is a function of the number of investment
ideas we find. The level of gearing increases when we find more ideas to invest
in than we have money and it reduces (or we keep a higher cash balance) when we
do not find as many ideas.
Over the past year, gearing has increased as we have found particularly
interesting investments in China given the market has fallen out of favour. At
the year end, gross gearing was 11.7% (2022: 4.4%) and net gearing was 4.9%
(2022: nil). See the charts in the Annual Report on the Company's gearing
history over my tenure.
Question
The rising cost of living continues to pressure consumers. How has higher
inflation and rising interest rates impacted Asian markets?
Answer
Inflation dynamics are different from country to country in Asia. China is now
in deflation whilst some of the South East Asian countries have seen a moderate
rise in inflation (albeit lower than that observed in Europe or the US). This
has led to higher interest rates and weakening consumption as governments have
behaved responsibly and not expanded fiscal spending (unlike the US).
We believe, therefore, that while there has been some consumer price inflation
in Asia, it is not as big an issue as it is in the West.
Question
Can you give an example of how your active management has added value to the
Company's portfolio this year?
Answer
As discussed earlier, our process is focused on finding misunderstood situations
where we can own a good business with a margin of safety. Shriram Finance is a
good example of this. It has become the largest retail non-banking financial
company (NBFC) in India caused by the merger of Shriram Transport Finance
Company, the largest financier of used commercial vehicles, and Shriram City
Union Finance, the largest financier of two-wheelers and the underserved micro,
small, and medium enterprises (MSME).
We have owned Shriram Transport Finance Company since late 2016 when we bought
it at an attractive valuation when Indian non-banking financials saw short-term
pressures due to tight liquidity. Over several decades, the company created its
niche in a segment where banks did not compete due to difficulty in valuing and
underwriting loans for second-hand trucks. It owned a quarter of the market
share in the segment while the rest of the market was dominated by local money
lenders, outside of the banking system, charging very high interest rates. We
also owned Shriram City Union Finance for its strong track record in segments
that have semi-formal and irregular sources of income and hence were credit
starved.
The merger last year has created a lender with a more diversified book while
also bringing benefits from synergies between the two businesses. The stock
rerated as a result.
Question
Can you explain to us how you integrate ESG considerations into the Company's
portfolio?
Answer
The Company's primary objective for shareholders is to achieve capital growth.
In order to achieve the best possible returns, we have always looked to invest
in good businesses, managed by efficient management teams and available at
reasonable valuations. Good businesses are those that solve a problem for their
consumers, and which are managed by efficient teams who are competent and which
respect laws, their employees, customers, the environment and shareholders, as
well as managing their businesses responsibly. ESG considerations have,
therefore, always been at the heart of our investment thinking, and well before
it became a buzz word.
Investing in smaller companies in Asia using the strength of Fidelity's research
team has always offered us the opportunity to identify quality companies on
fundamentals and ESG considerations ahead of other investors. Regulations are
constantly evolving and ESG is no exception to this. We believe this presents us
with opportunities. The development of ESG ratings covered by the external
rating agencies has not yet evolved to cover many of the smaller companies in
which we invest. This provides an exciting opportunity as the ESG credentials of
many of the smaller companies are best in class. They are in fact `double gems':
companies with good prospects, strong management and well-priced alongside their
strong ESG credentials.
Additionally, Fidelity as a firm is committed to principles that are consistent
with the stage of economic development of countries. As part of this process, we
have regular engagements with companies in the portfolio.
Examples of our ESG case studies are in the Annual Report.
Question
What do you view as the biggest risks and opportunities for the next twelve
months?
Answer
We think macro risks will eventually pass, especially if we own a diversified
set of leading businesses and own them at valuations which are below intrinsic
value. However, this does not mean that these stocks cannot decline in value -
to the contrary, forecasting price movements is impossible. But we believe that
the quality of our portfolio gives us holding power to go through head winds as
they emerge and come out stronger on the other side.
As can be seen from the chart in the Annual Report, the ROE of our portfolio is
at a premium to the market while the Price to Earnings ratio of our holdings is
at a significant discount. We own businesses which are of a better quality and
at cheaper market valuations. This has been the bedrock of our investment
process for over a decade and has served us well.
Our skills lie in business analysis, finding best in class management teams and
mispriced stocks. We are known to repeat the phrase below often and it is fair
to say that it has become known as something of a mantra for the Company:
Find good businesses run by good management and buy them at prices with a good
margin of safety.
We continue to focus on this.
NITIN BAJAJAJINKYA DHAVALE
Portfolio ManagerAssistant Portfolio Manager
11 October 2023
PRINCIPAL RISKS AND UNCERTAINTIES AND RISK MANAGEMENT
As required by provisions 28 and 29 of the 2018 UK Corporate Governance Code,
the Board has a robust ongoing process for identifying, evaluating and managing
the principal risks and uncertainties faced by the Company, including those that
could threaten its business model, future performance, solvency and liquidity.
The Board, with the assistance of the Alternative Investment Fund Manager (FIL
Investment Services (UK) Limited/ the "Manager"), has developed a risk matrix
which, as part of the risk management and internal controls process, identifies
the key existing and emerging risks and uncertainties that the Company faces.
The Audit Committee continues to identify any new emerging risks and take any
action necessary to mitigate their potential impact. The risks identified are
placed on the Company's risk matrix and appropriately graded. This process,
together with the policies and procedures for the mitigation of existing and
emerging risks, is updated and reviewed regularly in the form of comprehensive
reports by the Audit Committee. The Board determines the nature and extent of
any risks it is willing to take in order to achieve its strategic objectives.
Climate change, which refers to a large scale shift in the planet's weather
patterns and average temperatures, continues to be a key emerging issue as well
as a principal risk confronting asset managers and their investors. The Board
notes that the Manager has integrated ESG considerations, including climate
change, into the Company's investment process. Further details are in the Annual
Report. The Board will continue to monitor how this may impact the Company as a
risk to investment valuations and potentially to shareholder returns.
The Manager also has responsibility for risk management for the Company. It
works with the Board to identify and manage the principal and emerging risks and
uncertainties and to ensure that the Board can continue to meet its UK corporate
governance obligations.
The Board considers the risks listed below as the principal risks and
uncertainties faced by the Company.
Principal Risks Description and Risk Mitigation
Economic, Political and Market Risks The Company and its assets may be
affected by economic and market risks.
These are market downturns, interest
rate movements, deflation/inflation,
exchange rate movements and market
shocks, such as the post pandemic
economic recovery and volatility from
the war in Ukraine. Inflation remains
elevated across most economies driven
by a combination of increased demand
following pandemic restrictions being
lifted, global labour shortages in some
sectors and supply chain shortages,
including energy and food security.
The Company is exposed to a number of
geopolitical risks. The fast-changing
global geopolitical landscape is
largely shaped by the Russia and
Ukraine war effects, deglobalisation
trends and significant supply
disruption, as well as fears of global
recession amid inflationary pressures
and financial distress. Russia and
Ukraine are both significant net
exporters of oil, natural gas and a
variety of soft commodities and supply
limitations fuelled global inflation
and economic instability, specifically
within Western nations. Whilst the
direct impact of the war to APAC
markets has been less severe than
European counterparts, the prolonged
cost-of-living crisis risks continue to
impact Western investment appetite.
China's economy remains vulnerable to
risks related to the global outlook and
geopolitical tensions including US
-China trade war, South China sea
dispute and implications of China
-Taiwan relations.
Most of the Company's assets and income
are denominated in currencies other
than sterling which is the Company's
functional and presentation currency.
As a result, movements in exchange
rates may affect the sterling value of
its assets and income.
The Company's portfolio is made up
mainly of listed securities. The
Portfolio Manager's success or failure
to protect and increase the Company's
assets against the above background is
core to the Company's continued
success. His investment philosophy of
stock-picking and investing in
attractively valued companies aims to
outperform the Comparative Index over
time.
The Board is provided with a detailed
investment review which covers material
economic, political and market risks
and legislative changes at each Board
meeting.
Risks to which the Company is exposed
to in the market and currency risk
category are included in Note 17 to the
Financial Statements below together
with summaries of the policies for
managing these risks.
Investment Performance Risk The achievement of the Company's
(including the use of Derivatives and investment performance objective
Gearing) relative to the market requires the
taking of risk, such as investment
strategy, asset allocation and stock
selection, and may lead to NAV and
share price underperformance compared
to the Comparative Index and/or peer
group companies. Continued
underperformance could lead to the
Company and its objective becoming
unattractive to investors. The
Investment Manager is responsible for
actively monitoring the portfolio
selected in accordance with the asset
allocation parameters and seeks to
ensure that individual stocks meet an
acceptable risk/reward profile.
In order to manage this risk, the Board
reviews Fidelity's compliance with
agreed investment restrictions;
investment performance and risk;
relative performance; the portfolio's
risk profile; and whether appropriate
strategies are employed to mitigate any
negative impact of substantial changes
in the markets. The Board also
regularly canvasses major shareholders
for their views with respect to company
matters.
Derivative instruments are used to
protect and enhance investment returns.
There is a risk that the use of
derivatives may lead to higher
volatility in the NAV and the share
price than might otherwise be the case.
The Board has put in place policies and
limits to control the Company's use of
derivatives and exposures. These are
monitored on a daily basis by the
Manager's Compliance team and regular
reports are provided to the Board.
Further detail on derivative
instruments risk is included in Note 17
to the Financial Statements below.
The Company gears through the use of
long CFDs which provide greater
flexibility and are generally cheaper
than bank loans. The principal risk is
that the Portfolio Manager fails to use
gearing effectively, resulting in a
failure to outperform in a rising
market or to underperform in a falling
market. The Board regularly considers
the level of gearing and gearing risk
and sets limits within which the
Manager must operate.
Cybercrime and Information Security The operational risk from cybercrime is
Risks significant. Cybercrime threats evolve
rapidly and consequently the risk is
regularly re-assessed and the Board
receives regular updates from the
Manager in respect of the type and
possible scale of cyberattacks. The
Manager's technology team has developed
a number of initiatives and controls in
order to provide enhanced mitigating
protection to this ever-increasing
threat. The risk is frequently re
-assessed by Fidelity's information
security teams and has resulted in the
implementation of new tools and
processes, as well as improvements to
existing ones. Fidelity has a dedicated
cybersecurity team which provides
regular awareness updates and best
practice guidance.
Risks are increased due to the
Russia/Ukraine conflict and the trend
to more working from home following the
pandemic. These primarily relate to
phishing, remote access threats,
extortion and denial of services
attacks. The Manager has dedicated
detect and respond resources
specifically to monitor the cyber
threats associated within the workplace
and increased cyber activity following
Russia's invasion of Ukraine. There are
a number of mitigating actions in place
including, control strengthening, geo
-blocking and phishing mitigants,
combined with enhanced resilience and
recovery options.
The Company's third-party service
providers also have similar measures in
place.
Level of Discount to the Net Asset Due to the nature of investment
Value companies, the price of the Company's
shares and its discount to NAV are
factors which are not totally within
the Company's control. The Board has a
discount management policy in place and
some short-term influence over the
discount may be exercised by the use of
share repurchases at acceptable prices
and within the parameters set by the
Board. In considering the risk that the
discount to NAV poses to shareholder
value and returns, both the absolute
level of the discount and the amount
relative to the Company's peer group
and the wider market are considered.
The Company's share price, NAV and
discount volatility are monitored daily
by the Manager and the Company's Broker
and considered by the Board on a
regular basis. The demand for shares
can be influenced through good
performance and an active investor
relations programme.
Key Person Risk The Portfolio Manager, Nitin Bajaj, has
a differentiated style in relation to
his peers. This style is intrinsically
linked with the Company's investment
philosophy and strategy and, therefore,
the Company has a key person dependency
on him. The Company has an Assistant
Portfolio Manager, Ajinka Dhavale, who
supports the Portfolio Manager, and has
extensive experience in the Asian
markets and companies and shares a
common investment approach and
complementary investment experience
with the Portfolio Manager. The
Portfolio Manager is also supported by
an Investment Director, Catherine
Yeung, as a primary spokesperson for
the Company. This helps strengthen the
investment process.
There is also a risk that the Manager
has inadequate succession plans for
other key operational individuals. The
Manager identifies key dependencies
which are then addressed through
succession plans, particularly for
portfolio managers.
Environmental, Social and Governance There is a risk that the value of the
("ESG") Risks assets of the Company are negatively
impacted by ESG related risks,
including climate change risk. ESG
risks include investor expectations and
how the Company is positioned from a
marketing perspective and whether it is
compliant with its ESG disclosure
requirements. Fidelity has embedded ESG
factors in its investment decision-
making process. ESG integration is
carried out at the fundamental research
analyst level within its investment
teams, primarily through Fidelity's
Proprietary Sustainability Rating which
is designed to generate a forward
-looking and holistic assessment of a
company's ESG risks and opportunities
based on sector-specific key
performance indicators across 127
individual and unique sub-sectors. The
Portfolio Manager is also active in
analysing the effects of ESG when
making investment decisions. The Board
continues to monitor developments in
this area and reviews the positioning
of the portfolio considering ESG
factors.
ESG ratings and carbon emissions of the
companies within the Company's
portfolio compared to the Index are
provided in the Annual Report. Further
detail on ESG considerations in the
investment process and sustainable
investing is set out in the Annual
Report.
Business Continuity and Operational There continues to be increased focus
Risks from financial services regulators
around the world on the contingency
plans of regulated financial firms. The
top risks globally are cybersecurity
and geopolitical events. There are also
ongoing risks following Russia's
invasion into Ukraine, specifically
regarding the potential loss of power
and/or broadband services. Variants of
COVID continue to evolve and some risks
remain.
The Manager continues to take all
reasonable steps to meet its regulatory
obligations, assess its ability to
continue operating and the steps it
needs to take to support its clients,
including the Board and has an
appropriate control environment in
place. The Manager has provided the
Board with assurance that the Company
has appropriate business continuity
plans and the provision of services has
continued to be supplied without
interruption.
Specific risks posed by the pandemic
continue to ease with increasing levels
of staff returning to routine office
-based working, albeit under hybrid
working arrangements which allows
greater flexibility on remote working
as part of the new operating model.
The Company relies on a number of third
-party service providers, principally
the Registrar, Custodian and
Depositary. They are all subject to a
risk-based programme of internal audits
by the Manager and their own internal
controls reports are received by the
Manager on behalf of the Board on an
annual basis and any concerns are
investigated. The third-party service
providers have also confirmed the
implementation of appropriate measures
to ensure no business disruption.
Risks associated with these services
are generally rated as low, but the
financial consequences could be
serious, including reputational damage
to the Company.
Shareholder Relationships There is a risk that the Board has
insufficient access to shareholders or
that the Portfolio Manager's investment
style is not appealing for investors.
There is also a risk that continued
weak investment performance may
potentially make the Company less
attractive to retail and wealth
managers.
The shareholder register and
shareholder activity are reviewed at
each Board meeting and regular
shareholder meetings are organised by
the Broker with the Board and Fidelity,
including the Portfolio Manager and
Investment Director. Fidelity has an
investment companies' website which has
dedicated pages for the Company and
regular updates are provided for
investors.
Other risks facing the Company include:
TAX AND REGULATORY RISKS
There is a risk of the Company not complying with tax and regulatory
requirements. A breach of Section 1158 of the Corporation Tax Act 2010 could
lead to a loss of investment trust status resulting in the Company being subject
to tax on capital gains.
The Board monitors tax and regulatory changes at each Board meeting and through
active engagement by the Manager with regulators and trade bodies.
The Company has a full risk register which includes less material risks which
the Board reviews at least annually.
GOING CONCERN STATEMENT
The Directors have considered the Company's investment objective, risk
management policies, liquidity risk, credit risk, capital management policies
and procedures, the nature of its portfolio and its expenditure and cash flow
projections. The Directors, having considered the liquidity of the Company's
portfolio of investments (being mainly securities which are readily realisable)
and the projected income and expenditure, are satisfied that the Company is
financially sound and has adequate resources to meet all of its liabilities and
ongoing expenses and continue in operational existence for the foreseeable
future. The Board has, therefore, concluded that the Company has adequate
resources to continue to adopt the going concern basis for the period to 31
October 2024 which is at least twelve months from the date of approval of the
Financial Statements. This conclusion also takes into account the Board's
assessment of the ongoing risks from the war in Ukraine, China's tensions with
the US and Taiwan and significant market events.
Accordingly, the Financial Statements of the Company have been prepared on a
going concern basis.
The prospects of the Company over a period longer than twelve months can be
found in the Viability Statement below.
VIABILITY STATEMENT
In accordance with provision 31 of the 2018 UK Corporate Governance Code, the
Directors have assessed the prospects of the Company over a longer period than
the twelve month period required by the "Going Concern" basis above. The Company
is an investment trust with the objective of achieving long-term capital growth.
The Board considers long-term to be at least five years, and accordingly, the
Directors believe that five years is an appropriate investment horizon to assess
the viability of the Company, although the life of the Company is not intended
to be limited to this or any other period.
In making an assessment on the viability of the Company, the Board has
considered the following:
-The ongoing relevance of the investment objective in prevailing market
conditions;
-The Company's level of gearing;
-The Company's NAV and share price performance versus its Comparative Index;
-The principal and emerging risks and uncertainties facing the Company and their
potential impact as set out above;
-The future demand for the Company's shares;
-The Company's share price discount to the NAV;
-The liquidity of the Company's portfolio;
-The level of income generated by the Company; and
-Future income and expenditure forecasts.
The Company's performance for the five year reporting period to 31 July 2023
lagged the Comparative Index, with a NAV total return of +45.4%, a share price
total return of +41.1% compared to the Comparative Index total return of +50.7%.
The Board regularly reviews the investment policy and considers it remains
appropriate. The Board has concluded that there is a reasonable expectation that
the Company will be able to continue in operation and meet its liabilities as
they fall due over the next five years based on the following considerations:
-The Investment Manager's compliance with the Company's investment objective and
policy, its investment strategy and asset allocation;
-The Company's portfolio mainly comprises readily realisable securities which
can be sold to meet funding requirements if necessary;
-The Board's discount management policy; and
-The ongoing processes for monitoring operating costs and income which are
considered to be reasonable in comparison to the Company's total assets.
In preparing the Financial Statements, the Directors have considered the impact
of climate change, as detailed above. The Board has also considered the impact
of regulatory changes, continuing tensions between the US and China, tensions
with Taiwan and the ongoing global implications of the Ukraine and Russia war,
and how this may affect the Company.
In addition, the Directors' assessment of the Company's ability to operate in
the foreseeable future is included in the Going Concern Statement above.
A continuation vote takes place every five years. There is a risk that
shareholders do not vote in favour of the continuation of the Company during
periods when performance of the Company's NAV and share price is poor. The last
continuation vote was at the Company's AGM held on 3 December 2021. The next
continuation vote will take place at the AGM in 2026.
PROMOTING THE SUCCESS OF THE COMPANY
Under Section 172(1) of the Companies Act 2006, the Directors of a company must
act in a way they consider, in good faith, would be most likely to promote the
success of the Company for the benefit of its members as a whole, and in doing
so have regard (amongst other matters) to the likely consequences of any
decision in the long-term; the need to foster relationships with the Company's
suppliers, customers and others; the impact of the Company's operations on the
community and the environment; the desirability of the Company maintaining a
reputation for high standards of business conduct; and the need to act fairly as
between members of the Company.
As an externally managed Investment Trust, the Company has no employees or
physical assets, and a number of the Company's functions are outsourced to third
parties. The key outsourced function is the provision of investment management
services by the Manager, but other professional service providers support the
Company by providing administration, custodial, banking and audit services. The
Board considers the Company's key stakeholders to be the existing and potential
shareholders, the external appointed Manager and other third-party professional
service providers. The Board considers that the interest of these stakeholders
is aligned with the Company's objective of delivering long-term capital growth
to investors, in line with the Company's stated investment objective and
strategy, while providing the highest standards of legal, regulatory and
commercial conduct.
The Board, with the Portfolio Manager, sets the overall investment strategy and
reviews this at an annual strategy day which is separate from the regular cycle
of board meetings. In order to ensure good governance of the Company, the Board
has set various limits on the investments in the portfolio, whether in the
maximum size of individual holdings, the use of derivatives, the level of
gearing and others. These limits and guidelines are regularly monitored and
reviewed and are set out in the Annual Report.
The Board places great importance on communication with shareholders. The Annual
General Meeting ("AGM") provides the key forum for the Board and the Portfolio
Manager to present to the shareholders on the Company's performance and future
plans and the Board encourages all shareholders to attend either in person or
virtually and raise any questions or concerns. The Chairman and other Board
members are available to meet shareholders as appropriate. Shareholders may also
communicate with Board members at any time by writing to them at the Company's
registered office at FIL Investments International, Beech Gate, Millfield Lane,
Tadworth, Surrey KT20 6RP or via the Company Secretary in writing at the same
address or by email at investmenttrusts@fil.com. The Portfolio Manager meets
with major shareholders, potential investors, stock market analysts, journalists
and other commentators during the year. These communication opportunities help
inform the Board in considering how best to promote the success of the company
over the long-term.
The Board seeks to engage with the Manager and other service providers and
advisers in a constructive and collaborative way, promoting a culture of strong
governance, while encouraging open and constructive debate, in order to ensure
appropriate and regular challenge and evaluation. This aims to enhance service
levels and strengthen relationships with service providers, with a view to
ensuring shareholders' interests are best served, by maintaining the highest
standards of commercial conduct while keeping cost levels competitive.
Whilst the Company's direct operations are limited, the Board recognises the
importance of considering the impact of the Company's investment strategy on the
wider community and environment. The Board believes that a proper consideration
of ESG issues aligns with the investment objective to deliver long-term capital
growth, and the Board's review of the Manager includes an assessment of their
ESG approach, which is set out in detail in the Annual Report.
In addition to ensuring that the Company's investment objective was being
pursued, key decisions and actions taken by the Directors during the reporting
year, and up to the date of this report, have included:
-As part of the Board's succession plans:
-The appointment of Hussein Barma to the Board as Chairman of the Audit
Committee and non-executive Director with effect from 24 November 2022;
-The decision to appoint Clare Brady as Chairman of the Board when the current
Chairman, Kate Bolsover, steps down at the conclusion of the AGM on 29 November
2023; and
-The decision to appoint Matthew Sutherland as Senior Independent Director with
effect from 29 November 2023 from the change in Clare Brady's role from Senior
Independent Director to Chairman.
-Authorising the repurchase of 569,000 ordinary shares up to the date of this
Annual Report when the Company's discount widened, in line with the Board's
discount management policy;
-The decision to recommend the payment of a final dividend of 14.50 pence per
ordinary share; and
-The decision to once again hold a hybrid AGM in 2023 in order to make it more
accessible to those investors who are unable to or prefer not to attend in
person.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and Financial
Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each
financial period. Under that law they have elected to prepare the Financial
Statements in accordance with UK Generally Accepted Accounting Practice (UK
Accounting Standards and applicable law), including Financial Reporting Standard
FRS 102: The Financial Reporting Standard applicable in the UK and Republic of
Ireland ("FRS 102"). Under company law, the Directors must not approve the
Financial Statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or loss for the
reporting period.
In preparing these Financial Statements, the Directors are required to:
-Select suitable accounting policies in accordance with Section 10 of FRS 102
and then apply them consistently;
-Make judgements and accounting estimates that are reasonable and prudent;
-Present information, including accounting policies, in a manner that provides
relevant, reliable, comparable and understandable information;
-State whether applicable UK Accounting Standards, including FRS 102, have been
followed, subject to any material departures disclosed and explained in the
Financial Statements; and
-Prepare the Financial Statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time, the financial position of the Company and to
enable them to ensure that the Company and the Financial Statements 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.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, a Directors' Report, a Corporate Governance
Statement and a Directors' Remuneration Report that comply with that law and
those regulations.
The Directors have delegated to the Manager the responsibility for the
maintenance and integrity of the corporate and financial information included on
the Company's pages of the Manager's website at www.fidelity.co.uk/asianvalues.
Visitors to the website need to be aware that legislation in the UK governing
the preparation and dissemination of the Financial Statements may differ from
legislation in their own jurisdictions.
The Directors confirm that to the best of their knowledge:
-The Financial Statements, prepared in accordance with UK Generally Accepted
Accounting Practice, including FRS 102, give a true and fair view of the assets,
liabilities, financial position and profit of the Company;
-The Annual Report, including the Strategic Report, includes a fair review of
the development and performance of the business and the position of the Company,
together with a description of the principal risks and uncertainties it faces;
and
-The Annual Report and Financial Statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for
shareholders to assess the Company's performance, business model and strategy.
The Statement of Directors' Responsibilities was approved by the Board on 11
October 2023 and signed on its behalf by:
KATE BOLSOVER
Chairman
FINANCIAL STATEMENTS
Income Statement for the year ended 31 July 2023
Year Year
ended 31 ended 31
July 2023 July 2022
Notes Revenue Capital Total Revenue Capital
Total
£'000 £'000 £'000 £'000 £'000
£'000
Gains on 10 - 29,025 29,025 - 2,708
2,708
investments
Gains/(losse 11 - 1,781 1,781 - (1,815)
(1,815)
s)
on
derivative
instruments
Income 3 17,773 - 17,773 15,256 -
15,256
Investment 4 (2,644) (281) (2,925) (2,564) 732
(1,832)
management
fees
Other 5 (988) - (988) (905) -
(905)
expenses
Foreign - 1,089 1,089 - 2,609
2,609
exchange
gains
--------- --------- --------- --------- --------- ----
-----
------ ------ ------ ------ ------ ----
--
Net return 14,141 31,614 45,755 11,787 4,234
16,021
on
ordinary
activities
before
finance
costs and
taxation
Finance 6 (1,997) - (1,997) (331) -
(331)
costs
--------- --------- --------- --------- --------- ----
-----
------ ------ ------ ------ ------ ----
--
Net return 12,144 31,614 43,758 11,456 4,234
15,690
on
ordinary
activities
before
taxation
Taxation on 7 (1,238) (2,882) (4,120) (1,079) (1,085)
(2,164)
return on
ordinary
activities
--------- --------- --------- --------- --------- ----
-----
------ ------ ------ ------ ------ ----
--
Net return 10,906 28,732 39,638 10,377 3,149
13,526
on
ordinary
activities
after
taxation
for the
year
========= ========= ========= ========= =========
=========
Return per 8 15.17p 39.95p 55.12p 14.21p 4.31p
18.52p
ordinary
share
========= ========= ========= ========= =========
=========
The Company does not have any other comprehensive income. Accordingly, the net
return on ordinary activities after taxation for the year is also the total
comprehensive income for the year and no separate Statement of Comprehensive
Income has been presented.
The total column of this statement represents the Income Statement of the
Company. The revenue and capital columns are supplementary and presented for
information purposes as recommended by the Statement of Recommended Practice
issued by the AIC.
No operations were acquired or discontinued in the year and all items in the
above statement derive from continuing operations.
The Notes below form an integral part of these Financial Statements.
Statement of Changes in Equity for the year ended 31 July 2023
Notes Share Share Capital Other non- Other
Capital Revenue Total
capital premium redemption distributable reserve
reserve reserve shareholders'
£'000 account reserve reserve £'000
£'000 £'000 funds
£'000 £'000 £'000
£'000
Total 18,895 50,501 3,197 7,367 -
273,448 14,215 367,623
shareholders'
funds at
31 July 2022
Net return on - - - - -
28,732 10,906 39,638
ordinary
activities
after
taxation
for
the year
Repurchase of 14 - - - - -
(2,618) - (2,618)
ordinary
shares
Dividend paid 9 - - - - -
- (10,066) (10,066)
to
shareholders
--------- --------- ---------- ------------- ---------
--------- --------- -------------
------ ------ ----- -- ------
------ ------ --
Total 18,895 50,501 3,197 7,367 -
299,562 15,055 394,577
shareholders'
funds at
31 July 2023
========= ========= ========= ========= =========
========= ========= =========
Total 18,895 50,501 3,197 7,367 719
273,107 10,278 364,064
shareholders'
funds at
31 July 2021
Net return on - - - - -
3,149 10,377 13,526
ordinary
activities
after
taxation
for
the year
Repurchase of 14 - - - - (719)
(2,808) - (3,527)
ordinary
shares
Dividend paid 9 - - - - -
- (6,440) (6,440)
to
shareholders
--------- --------- ---------- ------------- ---------
--------- --------- -------------
------ ------ ----- -- ------
------ ------ --
Total 18,895 50,501 3,197 7,367 -
273,448 14,215 367,623
shareholders'
funds at
31 July 2022
========= ========= ========= ========= =========
========= ========= =========
The Notes below form an integral part of these Financial Statements.
Balance Sheet as at 31 July 2023
Company number 3183919
Notes 2023 2022
£'000 £'000
Fixed assets
Investments 10 377,631 338,845
--------------- ---------------
Current assets
Derivative instruments 11 1,758 972
Debtors 12 3,556 4,568
Amounts held at futures 3,820 2,997
clearing houses and
brokers
Cash at bank 13,029 25,368
--------------- ---------------
22,163 33,905
========= =========
Current liabilities
Derivative instruments 11 (1,665) (1,302)
Other creditors 13 (3,552) (3,825)
--------------- ---------------
(5,217) (5,127)
========= =========
Net current assets 16,946 28,778
========= =========
Net assets 394,577 367,623
========= =========
Capital and reserves
Share capital 14 18,895 18,895
Share premium account 15 50,501 50,501
Capital redemption 15 3,197 3,197
reserve
Other non-distributable 15 7,367 7,367
reserve
Other reserve 15 - -
Capital reserve 15 299,562 273,448
Revenue reserve 15 15,055 14,215
--------------- ---------------
Total shareholders' funds 394,577 367,623
========= =========
Net asset value per 16 549.33p 507.78p
ordinary share
========= =========
The Financial Statements above and below were approved by the Board of Directors
on 11 October 2023 and were signed on its behalf by:
KATE BOLSOVER
Chairman
The Notes below form an integral part of these Financial Statements.
Notes to the Financial Statements
1 Principal Activity
Fidelity Asian Values PLC is an Investment Company incorporated in England and
Wales with a premium listing on the London Stock Exchange. The Company's
registration number is 3183919, and its registered office is Beech Gate,
Millfield Lane, Lower Kingswood, Tadworth, Surrey KT20 6RP. The Company has been
approved by HM Revenue & Customs as an Investment Trust under Section 1158 of
the Corporation Tax Act 2010 and intends to conduct its affairs so as to
continue to be approved.
2 Accounting Policies
The Company has prepared its Financial Statements in accordance with UK
Generally Accepted Accounting Practice ("UK GAAP"), including FRS 102 "The
Financial Reporting Standard applicable in the UK and Republic of Ireland",
issued by the Financial Reporting Council ("FRC"). The Financial Statements have
also been prepared in accordance with the Statement of Recommended Practice:
Financial Statements of Investment Trust Companies and Venture Capital Trusts
("SORP") issued by the Association of Investment Companies ("AIC"), in July
2022. The Company is exempt from presenting a Cash Flow Statement as a Statement
of Changes in Equity is presented and substantially all of the Company's
investments are highly liquid and are carried at market value.
a) Basis of accounting - The Financial Statements have been prepared on a going
concern basis and under the historical cost convention, except for the
measurement at fair value of investments and derivative instruments. The
Directors have a reasonable expectation that the Company has adequate resources
to continue in operational existence up to 31 October 2024 which is at least
twelve months from the date of approval of these Financial Statements. In making
their assessment the Directors have reviewed income and expense projections,
reviewed the liquidity of the investment portfolio and considered the Company's
ability to meet liabilities as they fall due. This conclusion also takes into
account the Director's assessment of the risks faced by the Company as detailed
in the Going Concern Statement above.
In preparing these Financial Statements the Directors have considered the impact
of climate change risk as a principal and an emerging risk as set out above, and
have concluded that there was no further impact of climate change to be taken
into account as the investments are valued based on market pricing. In line with
FRS 102 investments are valued at fair value, which for the Company are quoted
bid prices for investments in active markets at the balance sheet date.
Investments which are unlisted are priced using market-based valuation
approaches. All investments, therefore, reflect the market participants' view of
climate change risk on the investments held by the Company.
The Company's Going Concern Statement above takes account of all events and
conditions up to 31 October 2024 which is at least twelve months from the date
of approval of these Financial Statements.
b) Significant accounting estimates and judgements - The preparation of the
Financial Statements requires the use of estimates and judgements. These
estimates and judgements affect the reported amounts of assets and liabilities
at the reporting date. While estimates are based on best judgement using
information and financial data available, the actual outcome may differ from
these estimates.
The key sources of estimation and uncertainty relate to the fair value of the
unlisted investments.
Judgements
The Directors consider whether each fair value is appropriate following detailed
review and challenge of the pricing methodology. The judgement applied in the
selection of the methodology used (see Note 2 (k) below) for determining the
fair value of each unlisted investment can have a significant impact upon the
valuation.
Estimates
The key estimate in the Financial Statements is the determination of the fair
value of the unlisted investments by the Manager's Fair Value Committee ("FVC"),
with support from an external valuer and Fidelity's unlisted investments
specialist, for detailed review and appropriate challenge by the Directors. This
estimate is key as it significantly impacts the valuation of the unlisted
investments at the Balance Sheet date. When no recent primary or secondary
transaction in the company's shares have taken place, the fair valuation process
involves estimation using subjective inputs that are unobservable (for which
market data is unavailable). The estimates involved in the valuation process may
include the following:
(i)the selection of appropriate comparable companies. Comparable companies are
chosen on the basis of their business characteristics and growth patterns;
(ii)the selection of a revenue metric (either historical or forecast);
(iii)the selection of an appropriate illiquidity discount factor to reflect the
reduced liquidity of unlisted companies versus their listed peers;
(iv)the estimation of the likelihood of a future exit of the position through an
initial public offering ("IPO") or a company sale;
(v)the selection of an appropriate industry benchmark index to assist with the
valuation; and
(vi)the calculation of valuation adjustments derived from milestone analysis and
future cash flows (i.e. incorporating operational success against the
plans/forecasts of the business into the valuation).
As the valuation outcomes may differ from the fair value estimates a price
sensitivity analysis is provided in Other Price Risk Sensitivity in Note 17
below to illustrate the effect on the Financial Statements of an over or under
estimation of fair value.
The risk of an over or under estimation of fair value is greater when
methodologies are applied using more subjective inputs.
c) Segmental reporting - The Company is engaged in a single segment business
and, therefore, no segmental reporting is provided.
d) Presentation of the Income Statement - In order to reflect better the
activities of an investment company and in accordance with guidance issued by
the AIC, supplementary information which analyses the Income Statement between
items of a revenue and capital nature has been prepared alongside the Income
Statement. The net revenue return after taxation for the year is the measure the
Directors believe appropriate in assessing the Company's compliance with certain
requirements set out in Section 1159 of the Corporation Tax Act 2010.
e) Income - Income from equity investments is accounted for on the date on which
the right to receive the payment is established, normally the ex-dividend date.
Overseas dividends are accounted for gross of any tax deducted at source.
Amounts are credited to the revenue column of the Income Statement. Where the
Company has elected to receive its dividends in the form of additional shares
rather than cash, the amount of the cash dividend foregone is recognised in the
revenue column of the Income Statement. Any excess in the value of the shares
received over the amount of the cash dividend is recognised in the capital
column of the Income Statement. Special dividends are treated as a revenue
receipt or a capital receipt depending on the facts and circumstances of each
particular case.
Derivative instrument income received from dividends on long contracts for
difference ("CFDs") are accounted for on the date on which the right to receive
the payment is established, normally the ex-dividend date. The amount net of tax
is credited to the revenue column of the Income Statement.
Interest received on CFDs, collateral and bank deposits are accounted for on an
accruals basis and credited to the revenue column of the Income Statement.
Interest received on CFDs represent the finance costs calculated by reference to
the notional value of the CFDs.
f) Investment management fees and other expenses - Investment management fees
and other expenses are accounted for on an accruals basis and are charged as
follows:
-The base investment management fee is allocated in full to revenue;
-The variable investment management fee, is charged/credited to capital as it is
based on the performance of the net asset value per share relative to the
Benchmark Index; and
-All other expenses are allocated in full to revenue with the exception of those
directly attributable to share issues or other capital events.
g) Functional currency and foreign exchange - The functional and reporting
currency of the Company is UK sterling, which is the currency of the primary
economic environment in which the Company operates. Transactions denominated in
foreign currencies are reported in UK sterling at the rate of exchange ruling at
the date of the transaction. Assets and liabilities in foreign currencies are
translated in the rates of exchange ruling at the Balance Sheet date. Foreign
exchange gains and losses arising on the translation are recognised in the
Income Statement as a revenue or a capital item depending on the nature of the
underlying item to which they relate.
h) Finance costs - Finance costs comprise interest on bank overdrafts and
collateral and finance costs paid on CFDs, which are accounted for on an
accruals basis, and dividends paid on short CFDs, which are accounted for on the
date on which the obligation to incur the cost is established, normally the ex
-dividend date. Finance costs are charged in full to the revenue column of the
Income Statement.
i) Taxation - The taxation charge represents the sum of current taxation and
deferred taxation.
Current taxation is taxation suffered at source on overseas income less amounts
recoverable under taxation treaties. Taxation is charged or credited to the
revenue column of the Income Statement, except where it relates to items of a
capital nature, in which case it is charged or credited to the capital column of
the Income Statement. Where expenses are allocated between revenue and capital
any tax relief in respect of the expenses is allocated between revenue and
capital returns on the marginal basis using the Company's effective rate of
corporation tax for the accounting period. The Company is an approved Investment
Trust under Section 1158 of the Corporation Tax Act 2010 and is not liable for
UK taxation on capital gains.
Deferred taxation is the taxation expected to be payable or recoverable on
timing differences between the treatment of certain items for accounting
purposes and their treatment for the purposes of computing taxable profits.
Deferred taxation is based on tax rates that have been enacted or substantively
enacted when the taxation is expected to be payable or recoverable. Deferred tax
assets are only recognised if it is considered more likely than not that there
will be sufficient future taxable profits to utilise them.
j) Dividend paid - Dividends payable to equity shareholders are recognised when
the Company's obligation to make payment is established.
k) Investments - The Company's business is investing in financial instruments
with a view to profiting from their total return in the form of income and
capital growth. This portfolio of investments is managed and its performance
evaluated on a fair value basis, in accordance with a documented investment
strategy, and information about the portfolio is provided on that basis to the
Company's Board of Directors. Investments are measured at fair value with
changes in fair value recognised in profit or loss, in accordance with the
provisions of both Section 11 and Section 12 of FRS 102. The fair value of
investments is initially taken to be their cost and is subsequently measured as
follows:
-Listed investments are valued at bid prices, or last market prices, depending
on the convention of the exchange on which they are listed; and
-Unlisted investments are not quoted, or are not frequently traded, and are
stated at the best estimate of fair value. The Manager's Fair Value Committee
("FVC"), which is independent of the Portfolio Manager's team, meets quarterly
to determine the fair value of unlisted investments. These are based on the
principles outlined in Note 2 (b) above.
The unlisted investments are valued at fair value following a detailed review
and appropriate challenge by the Directors of the pricing methodology proposed
by the FVC.
The FVC provide a recommendation of fair values to the Directors based on
recognised valuation techniques that take account of the cost of the investment,
recent arm's length transactions in the same or similar investments and
financial performance of the investment since purchase. Consideration is given
to the input received from the Fidelity International analyst that covers the
company, the external valuer and Fidelity's unlisted investments specialist.
In accordance with the AIC SORP, the Company includes transaction costs,
incidental to the purchase or sale of investments, within gains on investments
in the capital column of the Income Statement and has disclosed these costs in
Note 10 below.
l) Derivative instruments - When appropriate, permitted transactions in
derivative instruments are used. Derivative transactions into which the Company
may enter include long and short CFDs, futures, options and forward currency
contracts. Derivatives are classified as other financial instruments and are
initially accounted and measured at fair value on the date the derivative
contract is entered into and subsequently measured at fair value as follows:
-Long and short CFDs - the difference between the strike price and the value of
the underlying shares in the contract;
-Futures - the difference between the contract price and the quoted trade price;
-Forward currency contracts - valued at the appropriate quoted forward foreign
exchange rate ruling at the Balance Sheet date; and
-Options - the quoted trade price for the contract.
Where transactions are used to protect or enhance income, if the circumstances
support this, the income and expenses derived are included in net income in the
revenue column of the Income Statement. Where such transactions are used to
protect or enhance capital, if the circumstances support this, the income and
expenses derived are included in gains on derivative instruments in the capital
column of the Income Statement. Any positions on such transactions open at the
year end are reflected on the Balance Sheet at their fair value within current
assets or current liabilities.
m) Debtors - Debtors include securities sold for future settlement, amounts
receivable on the settlement of derivatives, accrued income, taxation
recoverable and other debtors and prepayments incurred in the ordinary course of
business. If collection is expected in one year or less (or in the normal
operating cycle of the business, if longer) they are classified as current
assets. If not, they are presented as non-current assets. They are recognised
initially at fair value and, where applicable, subsequently measured at
amortised cost using the effective interest rate method.
n) Amounts held at futures clearing houses and brokers - These are amounts held
in segregated accounts as collateral on behalf of brokers and are carried at
amortised cost.
o) Other creditors - Other creditors include securities purchased for future
settlement, amounts payable on share repurchases, capital gains tax payable,
investment management fees, secretarial and administration fees and other
creditors and expenses accrued in the ordinary course of business. If payment is
due within one year or less (or in the normal operating cycle of the business,
if longer) they are classified as current liabilities. If not, they are
presented as non-current liabilities. They are recognised initially at fair
value and, where applicable, subsequently measured at amortised cost using the
effective interest rate method.
p) Capital reserve - The following are accounted for in the capital reserve:
-Gains and losses on the disposal of investments and derivative instruments;
-Changes in the fair value of investments and derivative instruments held at the
year end;
-Foreign exchange gains and losses of a capital nature;
-Variable investment management fees;
-Dividends receivable which are capital in nature;
-Other expenses which are capital in nature; and
-Taxation charged or credited relating to items which are capital in nature.
Technical guidance issued by the Institute of Chartered Accountants in England
and Wales in TECH 02/17BL, guidance on the determination of realised profits and
losses in the context of distributions under the Companies Act 2006, states that
changes in the fair value of investments which are readily convertible to cash,
without accepting adverse terms at the Balance Sheet date, can be treated as
realised. Capital reserves realised and unrealised are shown in aggregate as
capital reserve in the Statement of Changes in Equity and the Balance Sheet. At
the Balance Sheet date, the portfolio of the Company consisted of investments
listed on a recognised stock exchange and derivative instruments contracted with
counterparties having an adequate credit rating, and the portfolio was
considered to be readily convertible to cash, with the exception of the level 3
investments which had unrealised investment holding losses of £899,000 (2022:
losses of £188,000). See Note 17 below for further details on the level 3
investments.
3. Income
Year ended Year ended
31.07.23 31.07.22
£'000 £'000
Investment income
Overseas dividends 14,847 13,905
Overseas scrip dividends 266 114
Interest on securities 164 -
--------------- ---------------
15,277 14,019
========= =========
Derivative income
Dividends received on 1,743 1,200
long CFDs
Interest received on 258 20
CFDs
--------------- ---------------
2,001 1,220
========= =========
Other interest
Interest received on 495 17
collateral and bank
deposits
--------------- ---------------
Total income 17,773 15,256
========= =========
A special dividend of £420,000 has been recognised in capital during the year
(2022: £97,000).
4 INVESTMENT MANAGEMENT FEES
Year Year
ended 31 ended 31
July 2023 July 2022
Revenue Capital1 Total Revenue Capital1 Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment 2,644 281 2,925 2,564 (732) 1,832
management
fees
========= ========= ========= ========= ========= =========
1For the calculation of the variable management fee, the Company's NAV return
was compared to the Benchmark Index return on a rolling three year basis.
FIL Investment Services (UK) Limited is the Company's Alternative Investment
Fund Manager and has delegated portfolio management to FIL Investments
International ("FII"). Both companies are Fidelity group companies.
The Company charges base investment management fees to revenue at an annual rate
of 0.70% of net assets. In addition, there is +/-0.20% variation fee based on
the Company's NAV per ordinary share performance relative to the Company's
Benchmark Index which is charged/credited to capital. Fees are payable monthly
in arrears and are calculated on a daily basis.
5 Other Expenses
Year Year ended
ended 31.07.22
31.07.23 £'000
£'000
Allocated to revenue:
AIC fees 21 20
Custody fees 85 148
Depositary fees 30 31
Directors' expenses 35 23
Directors' fees1 193 162
Legal and professional fees 161 109
Marketing expenses 195 157
Printing and publication expenses 86 79
Registrars' fees 38 37
Secretarial and administration fees payable 75 75
to the Investment Manager
Sundry other expenses 21 19
Fees payable to the Company's Independent 48 45
Auditor for the audit of the Financial
Statements
--------- ---------------
------
988 905
========= =========
1Details of the breakdown of Directors' fees are disclosed in the Directors'
Remuneration Report in the Annual Report.
6 FINANCE COSTS
Year ended Year ended
31.07.23 31.07.22
£'000 £'000
Interest on bank overdrafts and collateral 2 5
Interest paid on CFDs1 1,788 255
Dividends paid on short CFDs 207 71
--------------- ---------------
1,997 331
========= =========
1Increased compared to prior year due to an increase in both exposure to CFDs
and interest rates.
7 Taxation on Return on Ordinary Activities
Year Year
ended 31 ended 31
July 2023 July 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
a) Analysis
of the
taxation
charge for
the
year
Overseas 1,238 - 1,238 1,079 - 1,079
taxation
Indian - 2,882 2,882 - 1,085 1,085
capital
gains
tax
--------- --------- --------- --------- --------- ---------
------ ------ ------ ------ ------ ------
Taxation 1,238 2,882 4,120 1,079 1,085 2,164
charge for
the
year (see
Note 7b)
========= ========= ========= ========= ========= =========
b) Factors affecting the taxation charge for the year
The taxation charge for the year is lower than the standard rate of UK
corporation tax for an investment trust company of 25.00% (2022: 19.00%). A
reconciliation of the standard rate of UK corporation tax to the taxation charge
for the year is shown below:
Year Year
ended 31 ended 31
July 2023 July 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Net return on 12,144 31,614 43,758 11,456 4,234 15,690
ordinary
activities
before
taxation
Net return on 2,551 6,642 9,193 2,177 804 2,981
ordinary
activities
before
taxation
multiplied by
the blended
rate of UK
corporation
tax of 21.01%
(2022:19.00%)
Effects of:
Capital gains - (6,701) (6,701) - (665) (665)
not taxable1
Income not (3,137) - (3,137) (2,617) - (2,617)
taxable
Excess 586 59 645 441 - 441
management
expenses
Excess - - - - (139) (139)
interest paid
Expense - - - (1) - (1)
relief for
overseas
taxation
Overseas 1,238 - 1,238 1,079 - 1,079
taxation
Indian - 2,882 2,882 - 1,085 1,085
capital gains
tax
--------- --------- --------- --------- --------- ---------
------ ------ ------ ------ ------ ------
Taxation 1,238 2,882 4,120 1,079 1,085 2,164
charge for
the year (see
Note 7a)
========= ========= ========= ========= ========= =========
1The Company is exempt from UK corporation tax on capital gains as it meets the
HM Revenue & Customs criteria for an investment company set out in Section 1159
of the Corporation Tax Act 2010.
c) Deferred taxation
A deferred tax asset of £8,626,000 (2022: £7,858,000), in respect of excess
management expenses of £32,235,000 (2022: £29,162,000) and excess interest paid
of £2,271,000 (2022: £2,271,000), has not been recognised as it is unlikely that
there will be sufficient future taxable profits to utilise these expenses.
The UK corporation tax rate increased from 19.00% to 25.00% from 1 April 2023.
The rate of 25.00% has been applied to calculate the unrecognised deferred tax
asset for the current year (2022: 25.00%).
8 Return per Ordinary Share
Year ended Year ended
31.07.23 31.07.22
Revenue return per ordinary share 15.17p 14.21p
Capital return per ordinary share 39.95p 4.31p
--------------- ---------------
Total return per ordinary share 55.12p 18.52p
========= =========
The return per ordinary share is based on the net return on ordinary activities
after taxation for the year divided by the weighted average number of ordinary
shares in issue during the year, as shown below:
£'000 £'000
Net revenue return on ordinary activities after taxation 10,906 10,377
Net capital return on ordinary activities after taxation 28,732 3,149
Net total return on ordinary activities after taxation 39,638 13,526
========= =========
Number Number
Weighted average number of 71,912,335 73,039,011
ordinary shares held outside of
Treasury
========= =========
9 Dividends Paid to Shareholders
Year ended Year ended
31.07.23 31.07.22
£'000 £'000
Dividend paid
Dividend of 14.00 pence per ordinary 10,066 -
share paid for the year ended 31 July
2022
Dividend of 8.80 pence per ordinary share - 6,440
paid for the year ended 31 July 2021
--------------- ---------------
10,066 6,440
========= =========
Dividend proposed
Dividend proposed of 14.50 pence per 10,415 -
ordinary share for the year ended 31 July
2023
Dividend proposed of 14.00 pence per - 10,086
ordinary share for the year ended 31 July
2022
--------------- ---------------
10,415 10,086
========= =========
The Directors have proposed the payment of a dividend for the year ended 31 July
2023 of 14.50 pence per ordinary share which is subject to approval by
shareholders at the Annual General Meeting on 29 November 2023 and has not been
included as a liability in these Financial Statements. The dividend will be paid
on 6 December 2023 to shareholders on the register at the close of business on 3
November 2023 (ex-dividend date 2 November 2023).
10 Investments at Fair Value through Profit or Loss
2023 2022
£'000 £'000
Listed investments 376,751 337,254
Unlisted investments 880 1,591
--------------- ---------------
Investments at fair value 377,631 338,845
========= =========
Opening book cost 336,727 321,813
Opening investment holding gains 2,118 28,412
--------------- ---------------
Opening fair value 338,845 350,225
========= =========
Movements in the year
Purchases at cost 209,419 165,463
Sales - proceeds (199,658) (179,551)
Gains on investments 29,025 2,708
--------------- ---------------
Closing fair value 377,631 338,845
========= =========
Closing book cost 374,514 336,727
Closing investment holding gains 3,117 2,118
--------------- ---------------
Closing fair value 377,631 338,845
========= =========
The Company received £199,658,000 (2022: £179,551,000) from investments sold in
the year. The book cost of these investments when they were purchased was
£171,632,000 (2022: £150,549,000). These investments have been revalued over
time and until they were sold any unrealised gains/losses were included in the
fair value of the investments.
Investment transaction costs
Transaction costs incurred in the acquisition and disposal of investments, which
are included in the gains on the investments above, were as follows:
Year ended Year ended
31.07.23 31.07.22
£'000 £'000
Purchases transaction costs 311 245
Sales transaction costs 416 390
--------------- ---------------
727 635
========= =========
The portfolio turnover rate of the year was 56.6% (2022: 49.6%).
11 Derivative Instruments
Year ended Year ended
31.07.23 31.07.22
£'000 £'000
Gains/(losses) on derivative
instruments
Realised gains/(losses) on long 393 (3,796)
CFD positions closed
Realised (losses)/gains on short (876) 2,584
CFD positions closed
Realised losses on futures (109) (1,222)
contracts closed
Realised gains on options 951 193
contracts closed
Realised gains on forward 118 126
currency contracts
Movement in investment holding 1,016 464
gains on long CFDs
Movement in investment holding (261) (451)
losses on short CFDs
Movement in investment holding 270 184
gains on futures
Movement in investment holding 233 49
gains on options
Movement in investment holding 46 54
gains on forward currency
contracts
--------------- ---------------
1,781 (1,815)
========= =========
2023 2022
Fair value Fair value
£'000 £'000
Derivative instruments
recognised on the Balance
Sheet
Derivative instrument 1,758 972
assets
Derivative instrument (1,665) (1,302)
liabilities
--------------- ---------------
93 (330)
========= =========
2023 2022
Fair Asset Fair Asset
value exposure value exposure
£'000 £'000 £'000 £'000
At the year end the Company held
the following derivative
instruments:
Long CFDs 798 44,089 (218) 29,861
Long future 172 4,061 (88) 3,997
Put options (156) 1,466 - -
Short CFDs (536) 10,586 (275) 7,277
Short future (10) 1,292 (20) 682
Call options (175) 1,705 317 3,034
Forward currency contracts - - (46) -
--------- --------- --------- ---------
------ ------ ------ ------
93 63,199 (330) 44,851
========= ========= ========= =========
12 Debtors
2023 2022
£'000 £'000
Securities sold for 1,366 1,848
future settlement
Amounts receivable on 162 -
settlement of
derivatives
Accrued income 1,572 1,991
Taxation recoverable 315 640
Other debtors and 141 89
prepayments
--------------- ---------------
3,556 4,568
========= =========
13 Other Creditors
2023 2022
£'000 £'000
Securities purchased for future settlement 598 948
Amount payable on share repurchases - 276
Indian capital gains tax payable 2,355 2,170
Creditors and accruals 599 431
--------------- ---------------
3,552 3,825
========= =========
14 Share Capital
2023 2022
Number of £'000 Number of £'000
shares shares
Issued, allotted and fully
paid
Ordinary shares of 25 pence
each held outside of
Treasury
Beginning of the year 72,398,336 18,100 73,178,879 18,295
Ordinary shares repurchased (569,000) (142) (780,543) (195)
into Treasury
---------- --------- ---------- ---------
----- ------ ----- ------
End of the year 71,829,336 17,958 72,398,336 18,100
========= ========= ========= =========
Ordinary shares of 25 pence
each held in Treasury1
Beginning of the year 3,182,553 795 2,402,010 600
Ordinary shares repurchased 569,000 142 780,543 195
into Treasury
---------- --------- ---------- ---------
----- ------ ----- ------
End of the year 3,751,553 937 3,182,553 795
========= ========= ========= =========
Total share capital 18,895 18,895
========= =========
1Ordinary shares held in Treasury carry no rights to vote, to receive a dividend
or to participate in a winding up of the Company.
The cost of ordinary shares repurchased into Treasury during the year was
£2,618,000 (2022: £3,527,000).
15 Capital and Reserves
Share Share Capital Other non- Other
Capital Revenue Total
capital premium redemption distributable reserve
reserve reserve shareholders'
£'000 account reserve reserve £'000 £'000
£'000 funds
£'000 £'000 £'000
£'000
At 1 August 18,895 50,501 3,197 7,367 -
273,448 14,215 367,623
2022
Gains on - - - - - 29,025
- 29,025
investments
(see
Note
10)
Gains on - - - - - 1,781
- 1,781
derivative
instruments
(see Note
11)
Foreign - - - - - 1,089
- 1,089
exchange
gains
Investment - - - - - (281)
- (281)
management
fees
(see
Note 4)
Indian - - - - -
(2,882) - (2,882)
capital
gains tax
(see
Note 7)
Revenue - - - - - -
10,906 10,906
return
on ordinary
activities
after
taxation for
the year
Dividend - - - - - -
(10,066) (10,066)
paid to
shareholders
(see Note 9)
Repurchase - - - - -
(2,618) - (2,618)
of
ordinary
shares
(see Note
14)
--------- --------- ---------- ------------- --------- ------
--- --------- -------------
------ ------ ----- -- ------ ------
------ --
At 31 July 18,895 50,501 3,197 7,367 -
299,562 15,055 394,577
2023
========= ========= ========= ========= =========
========= ========= =========
At 1 August 18,895 50,501 3,197 7,367 719
273,107 10,278 364,064
2021
Gains on - - - - - 2,708
- 2,708
investments
(see
Note
10)
Losses on - - - - -
(1,815) - (1,815)
derivative
instruments
(see Note
11)
Foreign - - - - - 2,609
- 2,609
exchange
gains
Investment - - - - - 732
- 732
management
fees
(see
Note 4)
Indian - - - - -
(1,085) - (1,085)
capital
gains tax
(see
Note 7)
Revenue - - - - - -
10,377 10,377
return
on ordinary
activities
after
taxation for
the year
Dividend - - - - - -
(6,440) (6,440)
paid to
shareholders
(see Note 9)
Repurchase - - - - (719)
(2,808) - (3,527)
of
ordinary
shares
(see Note
14)
--------- --------- ---------- ------------- --------- ------
--- --------- -------------
------ ------ ----- -- ------ ------
------ --
At 31 July 18,895 50,501 3,197 7,367 -
273,448 14,215 367,623
2022
========= ========= ========= ========= =========
========= ========= =========
The capital reserve balance at 31 July 2023 includes investment holding gains of
£3,117,000 (2022: gains of £2,118,000) as detailed in Note 10 above. See Note 2
(p) above for further details. The revenue and capital reserves are
distributable by way of dividend.
16 Net Asset Value per Ordinary Share
The calculation of the net asset value per ordinary share is based on the total
shareholders' funds divided by the number of ordinary shares held outside of
Treasury.
2023 2022
Total shareholders' funds £394,577,000 £367,623,000
Ordinary shares held outside 71,829,336 72,398,336
of Treasury at the year end
Net asset value per ordinary 549.33p 507.78p
share
=========== ===========
It is the Company's policy that shares held in Treasury will only be reissued at
net asset value per ordinary share or at a premium to net asset value per
ordinary share and, therefore, shares held in Treasury have no dilutive effect.
17 Financial Instruments
Management of risk
The Company's investing activities in pursuit of its investment objective
involve certain inherent risks. The Board confirms that there is an ongoing
process for identifying, evaluating and managing the risks faced by the Company.
The Board with the assistance of the Manager, has developed a risk matrix which,
as part of the internal control process, identifies the risks that the Company
faces. Principal risks identified are: economic, political and market;
investment performance (including the use of derivatives and gearing);
cybercrime and information security; discount management; key person;
environmental, social and governance ("ESG"); business continuity and
operational; and shareholder relationships. Other risks identified are tax and
regulatory risks. Risks are identified and graded in this process, together with
steps taken in mitigation, and are updated and reviewed on an ongoing basis.
These risks and how they are identified, evaluated and managed are shown above.
This Note refers to the identification, measurement and management of risks
potentially affecting the value of financial instruments. The Company's
financial instruments comprise:
-Equity shares (listed and unlisted), equity linked notes and corporate bonds
held in accordance with the Company's investment objective and policies;
-Derivative instruments which comprise CFDs, forward currency contracts, futures
and options on listed stocks and equity indices; and
-Cash, liquid resources and short-term debtors and creditors that arise from its
operations.
The risks identified arising from the Company's financial instruments are market
price risk (which comprises interest rate risk, foreign currency risk and other
price risk), liquidity risk, counterparty risk, credit risk and derivative
instruments risk. The Board reviews and agrees policies for managing each of
these risks, which are summarised below. These policies are consistent with
those followed last year.
Market price risk
Interest rate risk
The Company finances its operations through its share capital and reserves. In
addition, the Company has gearing through the use of derivative instruments. The
level of gearing is reviewed regularly by the Board and the Portfolio Manager.
The Company is exposed to a financial risk arising as a result of any increases
in interest rates associated with the funding of the derivative instruments.
Interest rate risk exposure
The values of the Company's financial instruments that are exposed to movements
in interest rates are shown below:
2023 2022
£'000 £'000
Exposure to financial
instruments that bear interest
Long CFDs - exposure less fair 43,291 30,079
value
--------------- ---------------
Exposure to financial
instruments that earn interest
Cash at bank 13,029 25,368
Short CFDs - exposure plus fair 10,050 7,002
value
Amounts held at futures 3,820 2,997
clearing houses and brokers
--------------- ---------------
26,899 35,367
========= =========
Net exposure to financial (16,392) 5,288
instruments that (bear)/earn
interest
========= =========
Foreign currency risk
The Company's net return on ordinary activities after taxation for the year and
its net assets can be affected by foreign exchange rate movements because the
Company has income, assets and liabilities which are denominated in currencies
other than the Company's functional currency which is UK sterling. The Portfolio
Manager may seek to manage exposure to currency movements by using forward and
spot foreign exchange contracts. The Company can also be subject to short-term
exposure to exchange rate movements, for example, between the date when an
investment is purchased or sold and the date when settlement of the transaction
occurs.
Three principal areas have been identified where foreign currency risk could
impact the Company:
-Movements in currency exchange rates affecting the value of investments and
derivative instruments;
-Movements in currency exchange rates affecting short-term timing differences;
and
-Movements in currency exchange rates affecting income received.
Currency exposure of financial assets
The currency exposure profile of the Company's financial assets is shown below:
2023
Currency Investments Long Debtors2 Cash at Total
at fair exposure to £'000 bank £'000
value derivative £'000
£'000 instruments1
£'000
Hong Kong 105,426 28,575 1,517 89 135,607
dollar
Indian rupee 82,090 - 3,260 1,351 86,701
US dollar 27,358 14,980 2,077 11,289 55,704
Indonesian 51,868 - - - 51,868
rupiah
South Korean 33,540 12 7 - 33,559
won
Australian 19,017 3,303 - 213 22,533
dollar
Singapore 12,934 2,746 - - 15,680
dollar
Taiwan 14,861 - 377 - 15,238
dollar
Chinese 14,109 - - 87 14,196
renminbi
Philippine 4,361 - - - 4,361
peso
Malaysian 3,832 - - - 3,832
ringgit
Sri Lankan 3,423 - - - 3,423
rupee
Other 4,812 - 11 - 4,823
overseas
currencies
UK sterling - - 127 - 127
----------- ------------ --------- --------- ---------------
---- --- ------ ------
377,631 49,616 7,376 13,029 447,652
========= ========= ========= ========= =========
1The exposure to the market of long CFDs, long futures and put options.
2Debtors include amounts held at futures clearing houses and brokers.
2022
Currency Investments Long Debtors2 Cash at Total
at fair exposure to £'000 bank £'000
value derivative £'000
£'000 instruments1
£'000
Hong Kong 90,764 25,443 1,318 287 117,812
dollar
Indian rupee 87,206 - 3,783 620 91,609
US dollar 12,367 9,783 1,063 23,801 47,014
Indonesian 41,649 - 4 - 41,653
rupiah
South Korean 31,895 - 68 6 31,969
won
Taiwan 19,940 - 1,059 64 21,063
dollar
Australian 19,035 - - - 19,035
dollar
Chinese 13,063 - - 97 13,160
renminbi
Singapore 11,149 1,666 - - 12,815
dollar
Philippine 4,810 (46) 33 - 4,797
peso
Sri Lankan 3,109 - 148 - 3,257
rupee
Vietnamese 1,173 - - 493 1,666
dong
Other 2,685 - - - 2,685
overseas
currencies
UK sterling - - 89 - 89
----------- ------------ --------- --------- ---------------
---- --- ------ ------
338,845 36,846 7,565 25,368 408,624
========= ========= ========= ========= =========
1The exposure to the market of long CFDs, long futures and call option after the
netting of the forward currency contract.
2Debtors include amounts held at futures clearing houses and brokers.
Currency exposure of financial liabilities
The Company finances its investment activities principally through its ordinary
share capital and reserves. The Company's financial liabilities comprise short
positions on derivative instruments and other payables. The currency profile of
these financial liabilities is shown below:
2023
Currency Short Other Total
exposure to creditors £'000
derivative £'000
instruments1
£'000
US dollar 12,957 233 13,190
Indian rupee - 2,355 2,355
Hong Kong dollar 626 41 667
Korean won - 326 326
Indonesian rupiah - 64 64
Singapore dollar - 1 1
UK sterling - 532 532
--------------- --------------- ---------------
13,583 3,552 17,135
========= ========= =========
1The exposure to the market of short CFDs, short futures and call options.
2022
Currency Short Other Total
exposure to creditors £'000
derivative £'000
instruments1
£'000
US dollar 5,091 7 5,098
Indian rupee 682 2,744 3,426
Hong Kong dollar 2,186 311 2,497
Philippine peso - 27 27
Malaysian ringgit - 25 25
Taiwan dollar - 18 18
UK sterling - 693 693
--------------- --------------- ---------------
7,959 3,825 11,784
========= ========= =========
1The exposure to the market of short CFDs and short futures.
Other price risk
Other price risk arises mainly from uncertainty about future prices of financial
instruments used in the Company's business. It represents the potential loss the
Company might suffer through holding market positions in the face of price
movements.
The Board meets quarterly to consider the asset allocation of the portfolio and
the risk associated with particular industry sectors within the parameters of
the investment objective.
The Portfolio Manager is responsible for actively monitoring the existing
portfolio selected in accordance with the overall asset allocation parameters
described above and seeks to ensure that individual stocks also meet an
acceptable risk/reward profile. Other price risks arising from derivative
positions, mainly due to the underlying exposures, are estimated using Value at
Risk and Stress Tests as set out in the Company's internal Risk Management
Process Document.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulties in
meeting obligations associated with financial liabilities. The Company's assets
mainly comprise readily realisable securities and derivative instruments which
can be sold easily to meet funding commitments if necessary. Short-term
flexibility, if required, is achieved by the use of a bank overdraft.
Liquidity risk exposure
At 31 July 2023, the undiscounted gross cash outflows of the financial
liabilities were all repayable within one year and consisted of derivative
instrument liabilities of £1,665,000 (2022: £1,302,000) and other creditors of
£3,552,000 (2022: £3,825,000).
Counterparty risk
Certain derivative instruments in which the Company may invest are not traded on
an exchange but instead will be traded between counterparties based on
contractual relationships, under the terms outlined in the International Swaps
and Derivatives Association's ("ISDA") market standard derivative legal
documentation. These are known as Over the Counter ("OTC") trades. As a result,
the Company is subject to the risk that a counterparty may not perform its
obligations under the related contract. In accordance with the risk management
process which the Manager employs, the Manager will seek to minimise such risk
by only entering into transactions with counterparties which are believed to
have an adequate credit rating at the time the transaction is entered into, by
ensuring that formal legal agreements covering the terms of the contract are
entered into in advance, and through adopting a counterparty risk framework
which measures, monitors and manages counterparty risk by the use of internal
and external credit agency ratings and by evaluating derivative instrument
credit risk exposure.
For OTC and exchange traded derivative transactions, collateral is used to
reduce the risk of both parties to the contract. Collateral is managed on a
daily basis for all relevant transactions. At 31 July 2023, £793,000 (2022:
£254,000) was held by the brokers in cash denominated in US dollars in a
segregated collateral account on behalf of the Company, to reduce the credit
risk exposure of the Company. This collateral comprised: J.P. Morgan Securities
plc £436,000 (2022: £213,000), Goldman Sachs International £233,000 (2022:
£nil), HSBC Bank plc £124,000 (2022: £nil) and Morgan Stanley & Co International
plc £nil (2022: £41,000). £3,820,000 (2022: £2,997,000), shown as amounts held
at futures clearing houses and brokers on the Balance Sheet, was held by the
Company in a segregated collateral account, on behalf of the brokers, to reduce
the credit risk exposure of the brokers. This collateral is comprised of: UBS AG
£3,346,000 (2022: £2,574,000) in cash, Morgan Stanley & Co International plc
£474,000 (2022: £nil) in cash and HSBC Bank Plc £nil (2022: £423,000) in cash.
Credit risk
Financial instruments may be adversely affected if any of the institutions with
which money is deposited suffer insolvency or other financial difficulties. All
transactions are carried out with brokers that have been approved by the Manager
and are settled on a delivery versus payment basis. Limits are set on the amount
that may be due from any one broker and are kept under review by the Manager.
Exposure to credit risk arises on unsettled security transactions and derivative
instrument contracts and cash at bank.
Derivative instruments risk
The risks and risk management processes which result from the use of derivative
instruments, are set out in a documented Risk Management Process Document.
Derivative instruments are used by the Manager for the following purposes:
-to gain unfunded long exposure to equity markets, sectors or single stocks.
Unfunded exposure is exposure gained without an initial flow of capital;
-to hedge equity market risk using derivatives with the intention of at least
partially mitigating losses in the exposures of the Company's portfolio as a
result of falls in the equity market; and
-to position short exposures in the Company's portfolio. These uncovered
exposures benefit from falls in the prices of shares which the Portfolio Manager
believes to be over valued. These positions, therefore, distinguish themselves
from other short exposures held for hedging purposes since they are expected to
add risk to the portfolio.
RISK SENSITIVITY ANALYSIS
Interest rate risk sensitivity analysis
Based on the financial instruments held and interest rates at 31 July 2023, an
increase of 1.00% in interest rates throughout the year, with all other
variables held constant, would have decreased the net return on ordinary
activities after taxation for the year and decreased the net assets of the
Company by £164,000 (2022: increased the net return and increased the net assets
by £53,000). A decrease of 1.00% in interest rates throughout the year would
have had an equal but opposite effect.
Foreign currency risk sensitivity analysis
Based on the financial instruments held and currency exchange rates as at the
Balance Sheet date, with all other variables held constant, a 10% strengthening
of the UK sterling exchange rate against other currencies would have decreased
the Company's net return on ordinary activities after taxation for the year and
decreased the net assets (2022: decreased the net return and decreased the net
assets) by the following amounts:
Currency 2023 2022
£'000 £'000
Hong Kong dollar 12,267 10,483
Indian rupee 7,668 8,017
Indonesian rupiah 4,709 3,787
US dollar 3,865 3,811
South Korean won 3,021 2,906
Australian dollar 2,048 1,730
Singapore dollar 1,425 1,165
Taiwan dollar 1,385 1,913
Chinese renminbi 1,291 1,196
Philippine peso 396 434
Malaysian ringgit 348 70
Sri Lankan rupee 311 296
Other overseas currencies 438 322
--------------- ---------------
39,172 36,130
========= =========
Based on the financial instruments held and currency exchange rates as at the
Balance Sheet date, with all other variables held constant, a 10% weakening of
the UK sterling exchange rate against other currencies would have increased the
Company's net return on ordinary activities after taxation for the year and
increased the net assets (2022: increased the net return and increased the net
assets) by the following amounts:
Currency 2023 2022
£'000 £'000
Hong Kong dollar 14,993 12,813
Indian rupee 9,372 9,798
Indonesian rupiah 5,756 4,628
US dollar 4,724 4,657
South Korean won 3,693 3,552
Australian dollar 2,504 2,115
Singapore dollar 1,742 1,424
Taiwan dollar 1,693 2,338
Chinese renminbi 1,577 1,462
Philippine peso 485 530
Malaysian ringgit 426 86
Sri Lankan rupee 380 362
Other overseas currencies 535 395
--------------- ---------------
47,880 44,160
========= =========
Other price risk - exposure to investments sensitivity analysis
Based on the listed investments held and share prices at 31 July 2023, an
increase of 10% in share prices, with all other variables held constant, would
have increased the Company's net return on ordinary activities after taxation
for the year and increased the net assets of the Company by £37,675,000 (2022:
increased the net return and increased the net assets by £33,725,000). A
decrease of 10% in share prices would have had an equal and opposite effect.
An increase of 10% in the valuation of unlisted investments held at 31 July 2023
would have increased the Company's net return on ordinary activities after
taxation for the year and increased the net assets of the Company by £88,000
(2022: increased the net return and increased the net assets by £159,000). A
decrease of 10% in the valuation would have had an equal and opposite effect.
Other price risk - net exposure to derivative instruments sensitivity analysis
Based on the derivative instruments held and share prices at 31 July 2023, an
increase of 10% in the share prices underlying the derivative instruments, with
all other variables held constant, would have increased the Company's net return
on ordinary activities after taxation for the year and increased the net assets
of the Company by £3,603,000 (2022: increased the net return and increased the
net assets by £2,893,000). A decrease of 10% in share prices would have had an
equal and opposite effect.
Fair Value of Financial Assets and Liabilities
Financial assets and liabilities are stated in the Balance Sheet at values which
are not materially different to their fair values. As explained in Notes 2 (k)
and (l) above, investments and derivative instruments are shown at fair value.
In the case of cash at bank, book value approximates to fair value due to the
short maturity of the instruments.
Fair Value Hierarchy
The Company is required to disclose the fair value hierarchy that classifies its
financial instruments measured at fair value at one of three levels, according
to the relative reliability of the inputs used to estimate the fair values.
Classification Input
Level 1 Valued using quoted prices in active markets for identical
assets
Level 2 Valued by reference to inputs other than quoted prices
included in level 1 that are observable (i.e. developed using
market data) for the asset or liability, either directly or
indirectly
Level 3 Valued by reference to valuation techniques using inputs that
are not based on observable market data
Categorisation within the hierarchy has been determined on the basis of the
lowest level input that is significant to the fair value measurement of the
relevant asset. The valuation techniques used by the Company are explained in
Notes 2 (k) and (l) above. The table below sets out the Company's fair value
hierarchy:
2023
Financial assets at fair Level 1 Level 2 Level 3 Total
value through profit or loss £'000 £'000 £'000 £'000
Investments 367,312 9,439 880 377,631
Derivative instrument assets 172 1,586 - 1,758
--------- --------- --------- ---------
------ ------ ------ ------
367,484 11,025 880 379,389
========= ========= ========= =========
Financial liabilities at fair
value through profit or loss
Derivative instrument (341) (1,324) - (1,665)
liabilities
========= ========= ========= =========
2022
Financial assets at fair Level 1 Level 2 Level 3 Total
value through profit or loss £'000 £'000 £'000 £'000
Investments 330,119 7,135 1,591 338,845
Derivative instrument assets 317 655 - 972
--------- --------- --------- ---------
------ ------ ------ ------
330,436 7,790 1,591 339,817
========= ========= ========= =========
Financial liabilities at fair
value through profit or loss
Derivative instrument (108) (1,194) - (1,302)
liabilities
========= ========= ========= =========
The table below sets out the movements in level 3 financial instruments during
the year:
Year ended Year ended
31.07.23 31.07.22
£'000 £'000
Beginning of the year 1,591 1,722
Movement in investment holding losses (711) (131)
--------------- ---------------
End of the year 880 1,591
========= =========
Below are details of the four investments which fall into level 3 of which the
first three investments are unlisted and the last investment is suspended from
trading.
Eden Biologics
Eden Biologics develops biosimilars and is also engaged in providing process
development and contract manufacturing solutions to the biopharmaceutical
industry and is an unlisted company. On 26 February 2018, the company
voluntarily delisted from the Taipei Exchange. The valuation at 31 July 2023 is
based on the company's financial information, the macro-environment and a
weighted average following a scenario-based approach. As at 31 July 2023, its
fair value was £40,000 (2022: £317,000).
Chime Biologics
Chime Biologics is a China-based Contract Development and Manufacturing
Organization (CDMO) that provides a solution supporting customers from early
-stage biopharmaceutical development through to late-stage clinical and
commercial manufacturing and is an unlisted company. The valuation at 31 July
2023 is based on the company's financial information, the macro-environment and
the Probability-Weighted Expected Return Model (PWERM). As at 31 July 2023, its
fair value was £69,000 (2022: £73,000).
Tuhu Car
Tuhu Car is an online retailer of auto spare parts and is an unlisted company.
The valuation at 31 July 2023 is based on the company's financial information,
the macro-environment and benchmarking the position to a range of comparable
market data. As at 31 July 2023, its fair value was £771,000 (2022: £1,201,000).
Salt Lake Potash
Salt Lake Potash is a mineral exploration company. The company was suspended
from trading on the Australian Stock Exchange on 27 July 2021 and in October
2021 it announced that it would be entering voluntary administration. As at 31
July 2023, its fair value was £nil (2022: £nil).
18 Capital Resources and Gearing
The Company does not have any externally imposed capital requirements. The
financial resources of the Company comprise its share capital and reserves, as
disclosed in the Balance Sheet above and any gearing, which is managed by the
use of derivative instruments. Financial resources are managed in accordance
with the Company's investment policy and in pursuit of its investment objective,
both of which are detailed in the in the Annual Report. The principal risks and
their management are disclosed above and in Note 17 above.
The Company's gross and net gearing at the year end is set out below:
2023
Gross Net gearing
gearing
Asset %1 Asset %1
exposure exposure
£'000 £'000
Investments 377,631 95.7 377,631 95.7
Long CFDs 44,089 11.2 44,089 11.2
Long future 4,061 1.0 4,061 1.0
Put options 1,466 0.4 1,466 0.4
--------- --------- --------------- ---------------
------ ------
Total long exposures 427,247 108.3 427,247 108.3
========= ========= ========= =========
Short CFDs 10,586 2.7 (10,586) (2.7)
Call options 1,705 0.4 (1,705) (0.4)
Short future 1,292 0.3 (1,292) (0.3)
--------- --------- --------------- ---------------
------ ------
Gross asset 440,830 111.7 413,664 104.9
exposure/net market
exposure
========= ========= ========= =========
Shareholders' funds 394,577 394,577
========= =========
Gearing2 11.7% 4.9%
========= =========
1Asset exposure to the market expressed as a percentage of shareholders' funds.
2Gearing is the amount by which gross asset exposure/net market exposure exceeds
shareholders' funds expressed as a percentage of shareholders' funds.
2022
Gross Net gearing
gearing
Asset %1 Asset %1
exposure exposure
£'000 £'000
Investments 338,845 92.2 338,845 92.2
Long CFDs 29,861 8.1 29,861 8.1
Long future 3,997 1.1 3,997 1.1
Put options 3,034 0.8 3,034 0.8
--------- --------- --------------- ---------------
------ ------
Total long exposures 375,737 102.2 375,737 102.2
========= ========= ========= =========
Short CFDs 7,277 2.0 (7,277) (2.0)
Short future 682 0.2 (682) (0.2)
--------- --------- --------------- ---------------
------ ------
Gross asset 383,696 104.4 367,778 100.0
exposure/net market
exposure
========= ========= ========= =========
Shareholders' funds 367,623 367,623
========= =========
Gearing2 4.4% -
========= =========
1Asset exposure to the market expressed as a percentage of shareholders' funds.
2Gearing is the amount by which gross asset exposure/net market exposure exceeds
shareholders' funds expressed as a percentage of shareholders' funds.
19 Transactions with the Manager and Related Parties
FIL Investment Services (UK) Limited is the Company's Alternative Investment
Fund Manager and has delegated portfolio management and the role of company
secretary to FIL Investments International ("FII"). Both companies are Fidelity
group companies.
Details of the current fee arrangements are given in the Directors' Report in
the Annual Report. During the year, management fees of £2,925,000 (2022:
£1,832,000), and secretarial and administration fees of £75,000 (2022: £75,000)
were payable to FII. At the Balance Sheet date, management fees of £292,000
(2022: £156,000), and secretarial and administration fees of £25,000 (2022:
£25,000) were accrued and included in other creditors. FII also provides the
Company with marketing services. The total amount payable for these services
during the year was £195,000 (2022: £157,000). At the Balance Sheet date,
marketing services of £nil (2022: £20,000) were accrued and included in other
creditors.
Disclosures of the Directors' interests in the ordinary shares of the Company
and Director's fees and taxable expenses relating to reasonable travel expenses
payable to the Directors are given in the Directors' Remuneration Report in the
Annual Report. In addition to the fees and taxable expenses disclosed in the
Directors' Remuneration Report, £20,000 (2022: £18,000) of employers' National
Insurance contributions were paid by the Company. At the Balance Sheet date,
Directors' fees of £16,000 (2022: £15,000) were accrued and payable.
20 post balance sheet event
On 26 September 2023 following an initial public offering, Tuhu Car, which was
classified as a Level 3 investment as at 31 July 2023 as set out in Note 17
above, was listed on the Hong Kong Stock Exchange at a 2% premium to the Balance
Sheet valuation.
Alternative Performance Measures
Discount/Premium
The discount/premium is considered to be an Alternative Performance Measure. It
is the difference between the NAV per ordinary share of the Company and the
ordinary share price and is expressed as a percentage of the NAV per ordinary
share. Details of the Company's discount/premium are on the Financial Highlights
section in the Annual Report and are both defined in the Glossary of Terms in
the Annual Report.
Gearing
Gearing (both Gross and Net) is considered to be an Alternative Performance
Measure. See Note 18 above for details of the Company's gearing.
Net Asset Value ("NAV") per Ordinary Share
The NAV per ordinary share is considered to be an Alternative Performance
Measure. See the Balance Sheet and Note 16 above for further details.
Ongoing Charges Ratio
The ongoing charges ratio 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 management fees and other expenses
expressed as a percentage of the average net assets throughout the year.
2023 2022
£'000 £'000
Investment management fees 2,644 2,564
(£'000)
Other expenses (£'000) 988 905
--------------- ---------------
Ongoing charges (£'000) 3,632 3,469
========= =========
Variable management fees 281 (732)
(£'000)
Average net assets (£'000) 377,729 366,346
Ongoing charges ratio 0.96% 0.95%
Ongoing charges ratio 1.03% 0.75%
including variable
management fees
========= =========
Revenue, Capital and Total Returns per Share
Revenue, capital and total returns per share are considered to be Alternative
Performance Measures. See the Income Statement and Note 8 above for further
details.
Total Return Performance
Total return performance is considered to be an Alternative Performance Measure.
The NAV per ordinary share total return includes reinvestment of the dividend in
the NAV of the Company on the ex-dividend date. The ordinary share price total
return includes the reinvestment of the net dividend in the month that the
ordinary share price goes ex-dividend.
The tables below provide information relating to the NAV per ordinary share and
the ordinary share price of the Company and the impact of the dividend
reinvestments and the total returns for the years ended 31 July 2023 and 31 July
2022.
2023 Net asset Ordinary
value per share
ordinary price
share
31 July 2022 507.78p 458.00p
31 July 2023 549.33p 520.00p
Change in year +8.2% +13.5%
Impact of dividend reinvestment +3.2% +3.8%
--------------- ---------------
Total return for the year +11.4% +17.3%
========= =========
2022 Net asset Ordinary
value per share
ordinary price
share
31 July 2021 497.50p 483.00p
31 July 2022 507.78p 458.00p
Change in year +2.1% -5.2%
Impact of dividend reinvestment +1.8% +1.8%
--------------- ---------------
Total return for the year +3.9% -3.4%
========= =========
The Annual Financial Report Announcement is not the Company's statutory
accounts. The above results for the year ended 31 July 2023 are an abridged
version of the Company's full Annual Report and Financial Statements, which have
been approved and audited with an unqualified report. The 2022 and 2023
statutory accounts received unqualified reports from the Company's Auditor and
did not include any reference to matters to which the Auditor drew attention by
way of emphasis without qualifying the reports and did not contain a statement
under s.498 of the Companies Act 2006. The financial information for 2022 is
derived from the statutory accounts for 2022 which have been delivered to the
Registrar of Companies. The 2023 Financial Statements will be filed with the
Registrar of Companies in due course.
A copy of the above results announcement will be available on the Company's
website at www.fidelity.co.uk/asianvalues within two working days.
A copy of the Annual Report will shortly be submitted to the National Storage
Mechanism and will be available for inspection at: www.morningstar.co.uk/uk/NSM
The Annual Report will be posted to shareholders later this month and additional
copies will be available from the registered office of the Company and on the
Company's website: www.fidelity.co.uk/asianvalues where up to date
information on the Company, including daily NAV and share prices, factsheets and
other information can also be found.
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of, this announcement.
ENDS
This information was brought to you by Cision http://news.cision.com
https://news.cision.com/fidelity-asian-values-plc/r/annual-financial-report,c3852223
END
(END) Dow Jones Newswires
October 12, 2023 02:00 ET (06:00 GMT)
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