Fidelity China Special Situations Plc - Annual Financial Report
Final Results for the year ended
Financial Highlights:
-- The Board of Fidelity China Special Situations PLC (the “Company”)
recommends an annual dividend of 6.40 pence per share.
-- During the year ended 31 March 2024 , the Company reported a Net Asset
Value (“NAV”) total return of -16.3% and an ordinary share price total
return of -16.4%.
-- This was ahead of the Benchmark Index, the MSCI China Index, which
returned a total return of -18.8% (in UK sterling terms) over the same
period.
-- Four of the top ten relative performers were in the consumer
discretionary space, while the Portfolio Manager continues to find
opportunities in the industrials sector.
Contacts
For further information, please contact:
Company Secretary
0207 961 4240
CHAIRMAN’S STATEMENT
With global uncertainties and geopolitical concerns remaining heightened, as well as a softer-than-expected economy recovery in the wake of COVID restrictions being lifted, investors in
In the reporting year to
The current Chinese Year of the Dragon marks Dale Nicholls’ 10th anniversary as your Portfolio Manager. While there have undoubtedly been ups and downs for investors during this time (particularly during 2021 and 2022), Dale has built an impressive record, with the NAV outperforming the Benchmark Index over one, five and 10 years. Over his tenure, he has generated a total shareholder return of 125.7% (NAV total return of 123.0%), some 75 percentage points ahead of the Benchmark Index return of 49.3%.
A notable event during the year was the transaction by your Company with the abrdn China Investment Company Limited (“ACIC”). The transaction was concluded on
The main driving force of the Chinese economy in the past 10 years has been investment – whether at the government, business or household level – leading to improvements in infrastructure, strong export growth and a property boom. In the current environment, export growth has weakened as a result of
global supply chain diversification away from
Meanwhile, the Chinese stock market remains one of the most lowly-valued large, liquid markets in the world. Market-level performance has been disappointing for three years now, and it is always difficult to know when share prices will start to reflect intrinsic value rather than being marked down on poor sentiment. However, the companies in the portfolio continue to show strong earnings growth, and we remain confident that the market will come to appreciate the value on offer in the future; it may already have started to happen. As ever, having a large research team on the ground in
Being structured as a closed-ended investment company means that your Company does not have the liquidity constraints of an open-ended fund, and it can use this flexibility to invest in less liquid assets with a longer-term view of returns. Up to 15% of Net Assets plus Borrowings may be invested in unquoted companies (those not yet listed on a stock exchange), allowing the Manager to take advantage of the faster growth trajectory of earlier-stage businesses before they are potentially listed on the public markets. During the period under review, the number of unquoted companies held in the portfolio reduced from nine to six, following the IPOs of Beisen, Cutia Therapeutics and Tuhu Car in April, June and
We have confidence in the strength of the detailed process for the valuation of our unlisted holdings. They are assessed regularly by Fidelity’s dedicated Fair Value Committee (“FVC”), with advice from Kroll, a third-party valuation specialist, as well as from the Fidelity analysts who follow the companies and the sectors in which they operate. The valuation process is set out in more detail in the Annual Report. The Board receives regular updates from the FVC, with
The Board is mindful of the risks of investing in a single emerging market, however large and diverse it may be, and monitors both current risks and its perception of emerging risks. Dale’s focus on consumption and the domestic economy mitigates much of the geopolitical risk that has increased in the last few years. In particular, a greater focus on the opportunities in the domestic market generated by industrial and technology companies is helping Chinese businesses continue to innovate and grow, even in a period of continued strain in the relationship between
ESG
While your Company is not a ‘green’ or ‘ethical’ fund, ESG factors remain an important part of the work of the Portfolio Manager, as continuing deterioration in the climate and other social and governance concerns present a potential investment risk to your portfolio. Chinese businesses are under increasing pressure to ensure that their activities are environmentally sustainable and demonstrate social responsibility and good corporate governance. Although there is progress in the form of commitments and initiatives across a wide range of areas, more needs to be done. Fidelity has a sustainable investing approach, including engagement and voting principles and guidelines, as well as having developed its own proprietary forward-looking ESG ratings. The ratings of the companies in the portfolio are ahead of the broader market and continue to improve. Details of ESG engagements by the management team in the year under review are included in the Portfolio Manager’s Review below, and an explanation of how Fidelity has embedded ESG factors in its investment decision-making can be found in the Annual Report.
GEARING
During the year, the Company repaid its
DIVIDEND
Although the Company’s investment objective is to achieve long-term capital growth, it has paid an increased dividend each year since its inception, growing from
The Board is pleased to recommend once again an increased final dividend of
This represents an increase of 2.4% over the
The revenue per share earned by the Company during the year was
DISCOUNT MANAGEMENT
The Board believes that investors are best served when the share price trades close to the Company’s NAV per share. However, we recognise that the share price is affected by the interaction of supply and demand in the market based on investor sentiment towards
The Company’s discount was broadly stable during the reporting year, widening marginally from 9.7% on
At the forthcoming AGM, the Board is seeking to renew the annual authority to repurchase up to 14.99% of the Company’s shares, to be either cancelled or held in
ONGOING CHARGES RATIO
The Ongoing Charges Ratio (the costs of running the Company) for the year was 0.98% (2023: 0.98%). The variable element of the management fee (due to outperformance of the Benchmark Index) was a charge of 0.15% (2023: 0.20%). Therefore, the Ongoing Charges Ratio, including this variable element, for the year was 1.13% (2023: 1.18%).
MANAGEMENT FEE
Your Board continues to focus on achieving good value for the Company’s shareholders. During the year under review, the management fee paid to the Manager,
CONTINUATION VOTE
Following the completion of the transaction with abrdn China Investment Company Limited, your Board has committed to give shareholders the opportunity to vote on the continuation of the Company. The first vote will be at the AGM in 2029 and every five years thereafter.
BOARD OF DIRECTORS
After a programme of Board refreshment in recent years (with all the Directors, including myself, having been appointed since 2020 as the Company’s founding Directors retired), there have been no changes to the Board of Directors in the year under review. We are pleased that your Company’s Board includes a real diversity and balance of relevant skills and experience, covering
In accordance with the
ANNUAL GENERAL MEETING
The Company’s AGM is at
OUTLOOK
While the Chinese economy remains sluggish, having failed to reap fully the benefits from the post-COVID reopening, there are undoubtedly signs of improvement. The March PMI figure – a measure of the economic health of the manufacturing sector – moved into positive territory (a reading above 50) for the first time in six months, reaching its highest level since
Perhaps the major risk to our cautiously positive outlook is the forthcoming US Presidential election. US relations with
In Chinese culture, the Year of the Dragon is associated with great change, good fortune and prosperity, to such an extent that Dragon years have historically experienced ‘baby booms’. While there can be no certainty that the Chinese equity market is itself on the verge of a boom, the structural trends at play in the economy, coupled with Dale and his team’s focus on selecting the stocks best positioned to deliver value to shareholders, should continue to support our positive medium to long-term view.
Meanwhile, we hope to see you, in person or virtually, at our Annual General Meeting on
Chairman
ANNUAL GENERAL MEETING – TUESDAY,
The AGM of the Company will be held at
For those shareholders who are unable to attend in person, we will live-stream the formal business and presentations of the meeting online.
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/china . 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 will also 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 134-206-210 . 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.
PORTFOLIO MANAGER’S REVIEW
QUESTION
How has the investment company performed in the year to
ANSWER
The Company’s NAV delivered a total return of -16.3% for the financial year ended
QUESTION
What stocks have been the main drivers of performance during the period and why?
ANSWER
Four of our top 10 relative performers are consumer discretionary stocks, the best of which has been
Elsewhere in the consumer space, two clothing companies – Crystal International Group and JNBY Design – were also notable contributors. Crystal International is an apparel manufacturer, with strong growth in sportswear, supported by excellent relationships with the likes of Adidas and lululemon. JNBY is a designer fashion brand offering a good value proposition for its niche higher-end customers, and has been posting resilient sales numbers despite economic headwinds. Its loyal and sophisticated customer base with high fashion awareness helps mitigate macro risks.
Logistics firm Sinotrans falls into the industrial sector, but also benefits from consumer trends, with an increase in international e-commerce transportation leading to strong performance. Disruption in the
HollySys Automation Technologies, a firm engaged in industrial automation, was also among the largest contributors to positive returns in the year. The company is in the process of being taken private after a bid from a
The portfolio does not have heavy exposure to Chinese auto makers, mostly on the back of competition concerns, but, as a global leader in the electric vehicle (EV) market,
Relative returns were also hurt by not holding state-owned banks, China Construction Bank and Bank of China. We preferred not to own these stocks given a poor outlook for their net interest margins, due to falling lending rates, weak loan growth and the potential impact on credit quality, if the government steps up policies to encourage more lending. The portfolio did include China Merchants Bank to mitigate this risk and for its consumer lending franchise.
QUESTION
The expected recovery of the Chinese consumer has been somewhat disappointing. Could 2024 see a change in both consumer confidence and retail sales?
ANSWER
Consumer confidence has indeed been weak but there are reasons to anticipate an improvement. Bank deposits saw huge growth during COVID and household balance sheets are very strong, so there is spending power available, but people need confidence to unlock it. Deposit growth has slowed down more recently, which suggests a more optimistic outlook on spending. There has been a bifurcation in confidence, with the white-collar area suffering most, presumably hurt by bigger redundancies. In general, lower-end products have performed better. Job cuts by the big technology companies may now be largely behind us, and a slowly improving employment picture could bring back some confidence.
Consumer services have also outperformed consumer goods, for example in the growth of travel since the lifting of COVID restrictions. For now, we believe service-led consumption will continue to dominate the recovery in
Weakness in the property sector has clearly been a significant drag on overall economic growth, including the obvious impact on consumer sentiment. Although retail sales have been more volatile in the post-COVID period than previously, they continue on a broadly upward trend, indicating some resilience in the face of falling property sales. We feel confident that we will continue to see ongoing policy loosening to support the property sector.
QUESTION
We are reading about challenges in the region with potential higher tariffs being explored in the US and
ANSWER
With regard to US executive orders and sanctions, we are working closely with Fidelity International’s legal and regulatory experts to understand the policy direction and potential policy response. In general, we believe that
In terms of corporate-level geopolitical risk, it is something we look at on a stock by stock basis. For example, we try to incorporate sanction risks on companies with any significant technology exporting from
QUESTION
How have you utilised the investment company structure this year? Has it been beneficial?
ANSWER
Our approach to managing the gearing of the Company mostly reflects the opportunity set that we see at any one time. Gearing will naturally be higher when that opportunity set is plentiful and vice versa. Given the significant swings in sentiment towards the
We like to utilise all the tools the investment company structure gives us, with historically a working maximum net exposure of around 25% and a hard limit of 30% of gross assets. At the start of the period under review, net gearing was 21.1%, which rose over the following months, peaking at 25.5% by the end of
Because gearing increases market exposure, it magnifies returns in strong market conditions, but also acts as a drag in times of poor returns. As such, it was a negative contributor to relative performance in the period under review, detracting by 3.75 percentage points. Nevertheless, we continue to believe that the judicious use of gearing can be accretive to long-term capital and income returns, allowing us the opportunity to capitalise on the volatility in the Chinese market.
QUESTION
Looking longer-term, what do you see as the drivers of returns for
ANSWER
At a basic level, returns will be driven by a Company’s earnings and the multiple that the market is willing to put on those earnings. As mentioned, this multiple can swing significantly depending on sentiment, which is often influenced by factors such as geopolitics, which in many cases bear little influence on a company’s earnings outlook. This is why we spend most of our efforts analysing company fundamentals, and looking to capitalise at times when these fundamentals are underappreciated.
While China’s economy is forecast to slow from its current growth rate of around 5%, it is expected to remain one of the fastest growing major economies in the world. Its gradual shift towards consumption-driven growth, fuelled by an expanding middle class, rising incomes and technological innovation, provides a solid backdrop for companies to thrive.
However, China’s financial markets in the shorter-term are often heavily influenced by geopolitics and macro decisions, which have been more of an issue in the last few years, amid one of the longest and harshest regulatory environments. Despite this, regulation trends are typically somewhat cyclical, and the government is now increasingly focused on economic growth.
What is often not appreciated is the level of change that is apparent on the ground, with winners emerging and innovation flourishing across sectors, reflecting companies’ commitment to building a competitive edge. Coupled with trends such as rapid automation implementation driven by an aging population and the energy transition, this continues to create interesting investment opportunities. Consumer trends like experience-based spending, health consciousness and premiumisation continue to grow. There is also an increasing preference among Chinese consumers and corporates for Chinese brands and local suppliers, resulting in domestic companies taking ever greater market share in what remains one of the world’s largest markets.
At the same time, and importantly, companies are increasingly rewarding shareholders through dividends and share buybacks, supported by recent government policy reforms and shareholders demands. This trend is particularly prominent in the financial sector, where state-owned enterprise companies have increased dividend payout ratios, while smaller financial companies have engaged in buybacks or boosted dividends.
Companies have started to recognise the potential value accretion when valuations are at extreme levels. Internet companies like Alibaba Group Holding and Tencent Holdings have been some of the most aggressive in hiking both dividends and buybacks. For many of these companies, we are seeing shares outstanding decline for the first time.
The Japanese equity market has been in the headlines in the past year as a similar focus on boosting shareholder returns has helped the main index to finally regain highs last seen more than 30 years ago. We have been closely monitoring Chinese companies’ dividend payouts, buybacks and restricted share units (RSU) for many years and believe that across the board – be it state-owned or private companies, large or small-cap, utilities, internet stocks or consumer names – management teams are emphasising returns for minority shareholders.
In addition to this encouraging trend towards increasing shareholder value, the Chinese stock markets also offer earnings growth opportunities that compare well to other markets. However, there will be differences across sectors and companies, which underscores the importance of bottom-up stock selection. Identifying companies with good long-term growth prospects, that are cash generative and have strong management teams, remains key to constructing a resilient portfolio that compounds growth over the long-term.
QUESTION
Which sectors are you particularly excited about?
ANSWER
We continue to find companies offering compelling long-term growth prospects within the industrial sector, driven by factors such as ongoing industry consolidation and the continued fast pace of innovation. China’s share of global patent applications is approaching 50%, and companies are investing ever more into research and development (R&D), which over time should feed through into improved competitiveness, pricing power and returns on capital. This is clear in areas like robotics and the related supply chain. Fragmented industries like building materials, including paint, pipes and waterproofing, are poised for further consolidation, following the trajectory seen in more developed markets. Moreover, many businesses are also benefiting from the re-orientation of global supply chains and an increasing preference for local suppliers.
In emerging sectors such as EVs and renewable energy, we are finding opportunities among enablers in the EV value chain, particularly those providing key components and services, such as EV battery manufacturers or auto parts suppliers. Healthcare also presents opportunities, especially in areas with low penetration like medical devices. Chinese companies also now have the third-largest number of innovative drugs in development globally, and are fast catching up with
In addition, despite macroeconomic challenges, many companies will continue to benefit from China’s long-term shift from export and investment-led growth towards higher-quality growth driven by consumption. Urbanisation and a growing middle class are important factors underlying stronger consumer purchasing power, offering notable structural growth opportunities for under-penetrated products and services. Therefore, we are equally excited about long-term structural beneficiaries in the consumption space, with an abundance of investment opportunities given many companies have seen their valuations dragged down by weak overall market sentiment.
QUESTION
You have just reached the milestone of 10 years managing the Trust. With strong NAV and share price comparative performance versus the Benchmark Index, outperforming by over 76% since your tenure, what has been the key to that success over the longer-term?
ANSWER
For me, the past 10 years has underlined how important it is for us to stay focused on company level fundamentals. We operate in a volatile market with significant swings in sentiment. Even through tough markets of the last few years, we have had huge winners driven by great market opportunities supported by great management execution.
Supporting this is the calibre of the team of people we have on the ground in
The main driver of the Company’s performance has always been – and will always be – the individual stocks that we invest in, the ability to choose from the whole market cap spectrum, from tech giants through to entrepreneurial small and medium-sized companies, and even new businesses yet to launch on the stock market. This all-cap strategy allows me to unearth and invest in a multitude of stocks that play into the growth and development of the domestic consumer. While confidence remains weak, spending power is significant, and we see the ongoing emergence of strong domestic brands leveraging a deep understanding of the local consumer and operating environment.
QUESTION
Environmental, social and governance (“ESG”) themes are very topical among investors. How do you approach ESG, and can you outline specific examples where engagement has resulted in good outcomes for stakeholders?
ANSWER
Chinese companies have not historically performed well in third-party ESG assessments, but a great deal of this is about disclosure. If a company is not transparent about its supply chains or its emissions, then the market will tend to assume the worst. We have been working with the companies in our portfolio to improve their disclosures, and this is resulting in good progress on the governance front.
One such example through the review period was our engagement with Medlive Technology, one of the largest online physician platforms. The engagement focused on their cybersecurity and data privacy practices, which had been lacking in the past. We found that while the company places a strong emphasis on data systems and policies, this was not adequately reflected in their disclosures. Therefore, we recommended that the company improves its transparency for all stakeholders, strengthens cybersecurity privacy practices and increases engagements with rating agencies. Subsequently, Medlive took proactive steps, leading to enhanced cybersecurity, privacy management and disclosures. These efforts were recognised by rating agencies, contributing to an upgrade of the company’s ESG rating. Additionally, Medlive established a board-level committee to oversee key areas of information and data security.
Other noteworthy progress included our multi-year engagement with leading Chinese sports equipment company ANTA Sports Products. We encouraged enhancements in sustainable supply chain management, an area that we identified as lagging global best practices. By explaining essential aspects of industry leading supply chain practices during our discussions, the company was open to suggestions and proactively made improvements and new commitments. For example, the company committed to further measures for improving labour supply chain management, workforce disclosure, publishing health and safety practices, and supporting suppliers in obtaining ISO/
As discussed in the question above on the drivers of returns for
QUESTION
Finally, with the completion of the combining of assets with abrdn China Investment Company Limited (ACIC), how have you allocated these assets within the portfolio?
ANSWER
The transaction of with ACIC was a real team effort and thank you to all involved. From a portfolio management perspective, I was involved in the transition of assets throughout the transaction process, making sure individual companies that I already owned or would own came across ‘in-specie’ and the residual cash from the ACIC portfolio was implemented into my best ideas. This cash was invested as soon as the transaction was completed.
The key benefits of the transaction for the Company were greater scale, an enhanced profile and increased liquidity. While we were already by some way the largest in our
Portfolio Manager
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 or liquidity. The Board, with the assistance of the
Climate change, which refers to a large scale shift in the planet’s weather patterns and average temperatures, continues to be a key emerging as well as a principal risk confronting asset managers and their investors. Globally, climate change effects are already being experienced in the form of changing weather patterns. Extreme weather events can potentially impact the operations of investee companies, their supply chains and their customers. 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 shareholder returns.
Other emerging risks may continue to evolve from unforeseen geopolitical and economic events.
The Board, together with the Manager, is also monitoring the emerging risks posed by the rapid advancement of artificial intelligence (“AI”) and technology and how it may threaten the Company’s activities and its potential impact on the portfolio and investee companies. Although advances in computing power mean that AI is a powerful tool that will impact society, there are risks from its increasing use and manipulation with the potential to harm, including a heightened threat to cybersecurity.
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
The Board considers the risks listed below as the principal risks and uncertainties faced by the Company.
Principal Risks Risk Description and Risk Mitigation Trend
Impact
· Impact on the value
of investments and the
Manager’s ability to
access markets freely.
· Continuing political
and trade tensions
between China and the
US, e.g. trade
sanctions.
· Challenging
regulatory environment
hindering foreign
investment, including
US Executive Orders
prohibiting
transactions by US
persons in certain
publicly traded
Chinese companies.
· The ongoing
Ukraine/Russia
conflict remains a
driver of uncertainty
impacting the global
geopolitical
landscape, consumer · The Board receives
spending and insights and
industrial activity information, including
with the potential for research notes, from
increased energy the Manager and
costs, rising food independent sources on
prices and currency a regular basis.
instability.
· The portfolio is
· The escalation of tilted to domestic
the Middle East Chinese markets.
Geopolitical Risk conflict has added Increasing
another source of · The Board receives
geopolitical risks and and reviews reports
economic instability, from the Portfolio
elevating oil supply Manager on a regular
concerns and driving basis.
prices upwards. China
is a major trading · Major adverse market
partner with countries events are
in the region and any stress-tested for
disruption in trade operational resilience
may have an impact on and financial impact.
exports/imports and
the shipping sector.
· A South China Sea
dispute could have a
negative impact on
Chinese companies,
including reduced
access to global
markets and
technology, potential
sanctions and
retaliatory measures
and possible weakening
of investment and
confidence in Chinese
companies.
· Implications of
tensions in the Taiwan
Strait region for
China include
potential military
conflict and increased
tensions over trade
and economic issues
over competing
territorial claims.
· Whilst China’s
outlook for
“controlled
stabilisation” is
supported by targeted
policy measures, the
property sector is a
source of increased
uncertainty. Growth in
consumption remains
subdued.
· The momentum from
the growth in size and
wealth of the middle
class depends on
China’s ability to
generate sustained
productivity gains.
· China’s economy is
vulnerable to
uncertain world growth
prospects, tightening · Growth may still
in global financial exceed economic targets
conditions, energy as the stable policy
costs, rising food setting may help
prices, currency restore private sector
instability and confidence after a
challenging regulatory policy-induced slowdown
environment. in the prior year.
· China faces several · The Portfolio Manager
economic headwinds, and the Manager’s
including an aging ability to understand
population, and predict events in
Market and Economic environmental China. Independent risk
Risks (including pollution, isolation management insight is Stable
Currency Risk) of the financial provided on a regular
system and debt basis.
concerns in its
corporate and local · The Company holds a
government sectors. diversified portfolio
emphasising sectors of
· China’s economy is strategic importance to
vulnerable to China.
uncertain world growth
prospects, tightening · Current projections
in global financial are for China’s GDP to
conditions, energy continue to grow at
costs, rising food above the global
prices and currency average.
instability.
· The ability of
China’s centralised
government system to
enact regulation
rapidly can adversely
affect sectors or
individual companies
and as a result affect
their stock market
prices negatively.
· The currency in
which the Company
reports its results is
sterling and its
ordinary shares trade
in sterling, whilst
the underlying
investments are in
different currencies.
The Company does not
hedge currencies.
· An investment
strategy overseen by
the Board to optimise
returns from investing
in China.
· The Portfolio
Manager may fail to · Diversification of
outperform the investments through
Benchmark Index and investment restrictions
peers over the and guidelines which
longer-term. are monitored and
reported upon by the
Investment Performance · High gearing levels Investment Manager.
Risk (including in a falling market Stable
Gearing Risk) accentuates share · A well-resourced team
price weakness. NAV of experienced analysts
performance can be covering the market.
affected by selling
stock in a falling · Board scrutiny of the
market to keep the Manager and the ability
gearing level within in extreme
pre-agreed limits. circumstances to change
the Manager.
· Limit on gearing and
oversight of the
Manager’s use of
gearing by the Board.
· The Board may fail · The Company’s
to implement its discount management
discount management policy is aimed at
policy successfully to keeping the discount in
keep the level of the single digits during
discount in single normal market
digits and in the face conditions.
of heavy selling
pressure, may exhaust · Continuing scrutiny
its authorised buyback by the Board, the
facility. The impact Manager and the
Discount Management of excessive market Company’s Broker within Stable
Risk volatility on the parameters set.
Company’s NAV may also
lead to a widening of · Maintaining a
the discount. reputation for standing
in the marketplace when
· If investor required in order to
perception towards keep the discount in
China is negative, single digits.
then the shares in the
Company may trade at · Maintaining close
an increasing discount communications with
to its underlying NAV. major shareholders.
· Valuations of
unlisted securities · The Company has set a
may be adversely limit on the level of
affected by market investments in unlisted
conditions. companies and the
Manager has a track
· Initial public record of identifying
offering (IPO) of the profitable
unlisted companies may opportunities.
face delays leading to
Unlisted Securities longer holding · The Board’s Audit and
Risk periods. Risk Committee Stable
scrutinises the
· Potential for less carrying value of
stringent standards of unlisted investments,
governance compared and this is supported
with those of listed by the Manager,
entities. Fidelity’s unlisted
investments specialist
· The valuation of and an external
unlisted shares relies advisor.
on third-party
judgements.
· The Board is provided
with insights and
reports by the
investment management
team.
· Impact on investment
valuations, business · Fidelity uses a
operations, the supply proprietary climate
chain of investee rating designed to
companies and complement broader
shareholder sustainability ratings
expectations. and is considered in
the investment process
· China’s climate where appropriate.
change credentials are
Climate Change Risk likely to be less · Fidelity’s climate Stable
favourable when rating analyses
compared to similar companies in three core
economies in developed areas - net zero target
western markets. alignment, climate
governance and capital
· Reputational impact allocation to the
may arise by being transition - which are
invested in a company in line with the
with poor climate guidance from the Task
change performance. Force on
Climate-related
Financial Disclosures
(TCFD) and the
Institutional Investors
Group on Climate Change
(IIGCC).
· Whilst the investment
portfolio does not
target or employ any
set limit on ESG
investments, the
Manager is expected to
engage with companies
where sustainability
issues arise.
· Investor
expectations and/or · Fidelity carries out
regulatory ESG considerations at
requirements related the fundamental
to ESG factors of the research level.
underlying investee
Environmental, Social companies and the · The Portfolio Manager
and Governance (“ESG”) portfolio are not and analysts carry out Stable
Risk perceived to be met. additional quantitative
and qualitative
· Reputational damage analysis of potential
to the Company may investments to form a
arise from perception view on ESG
in the marketplace. characteristics of
every investee company.
· The Manager has
developed an ESG
investment risk
oversight framework to
reinforce its
Investment Risk Policy
to set minimum
controls.
· The Manager has
· Loss of the succession plans for
Portfolio Manager or key dependencies.
other key individuals
Key Person Risk could lead to · The depth of the team Stable
potential performance within Fidelity.
and/or operational
issues. · The experience of the
analysts covering
China.
· The risk is monitored
by the Board with the
· Cybersecurity risk help of the Manager’s
from cyberattacks or global cybersecurity
threats to the team and their
functioning of global extensive Strategic
markets and to the Cyber and Information
Manager’s own business Security program and
model, including its assurances from
Cybercrime and and the Company’s outsourced suppliers.
Information Security outsourced suppliers. Stable
Risks · Key performance
· Risk of cybercrime indicators and metrics
such as phishing, have been developed by
remote access threats, the Manager to monitor
extortion and the overall efficacy of
denial-of-services cybersecurity processes
attacks from and controls and to
geopolitically further enhance the
motivated attacks. Manager’s cybersecurity
strategy and
operational resilience.
· Business process
disruption risk from
continued threats of
cyberattacks, · Fidelity has Business
geopolitical threats Continuity and Crisis
Business Continuity and natural events, Management Frameworks
Risk such as earthquakes, in place to deal with Stable
resulting in financial business disruption and
and/or reputational assure operational
impact to the Company resilience.
affecting the
functioning of the
business.
· Fidelity’s
Operational Risk
Management Framework is
designed to
pro-actively prevent,
· Financial losses or identify and manage
reputationaldamage operational risks
from inadequate or inherent in most
failed internal activities.
Operational Risk processes, people and Decreasing
systems or from · Fidelity uses robust
external parties and systems and procedures
events. dedicated to its
operational processes.
Its risk management
structure is designed
according to the FCA’s
three lines of defence
model.
· The Company’s
exposure to a number
of companies with all
or part of their
businesses in Variable
Interest Entities
(“VIEs”) is expected
to remain significant.
The ability of · Whilst it is not
overseas investors to expected that China
Variable Interest invest in VIEs could will change the rules
Entity Structures Risk be amended. to the extent that it Stable
will ban foreign
· Regulatory risk from investment, this risk
the China Security is closely monitored.
Regulatory Commission
(“CSCR”) guidelines
that companies with
VIE structures require
CSCR approval to list
overseas and are
required to comply
with Chinese laws.
Other risks facing the Company include:
Tax and Regulatory Risks
There is a risk of the Company not complying with the tax and regulatory requirements in the
The Board monitors tax and regulatory changes at each Board meeting and through active engagement with regulators and trade bodies by the Manager.
Third-Party Operational Risks
The Company relies on a number of third-party service providers, principally the Manager, Registrar, Custodian and Depositary. It is dependent on the effective operation of the Manager’s control systems and those of its service providers with regard to the security of the Company’s assets, dealing procedures, accounting records and the maintenance of regulatory and legal requirements. The Registrar, Custodian and Depositary are all subject to a risk-based programme of internal audits by the Manager. In addition, service providers’ own internal control reports are received by the Board on an annual basis and any concerns are investigated. Risks associated with these service providers is rated as low, but the financial consequences could be serious, including reputational damage to the Company.
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. 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 compared to its Benchmark 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;
· Future income and expenditure forecasts; and
· Introduction of a continuation vote with effect from 2029 and every five years thereafter.
The Company’s performance for the five year reporting period to
· The Investment Manager’s compliance with the Company’s investment objective and policy, its investment strategy and asset allocation;
· The portfolio comprises sufficient readily realisable securities which can be sold to meet funding requirements if necessary; 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
In addition, the Directors’ assessment of the Company’s ability to operate in the foreseeable future is included in the Going Concern Statement which is included below.
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), stress testing performed, 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
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 above.
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
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 receives regular reports from the Company’s Broker which covers market activity, how the Company compares with its peers in the
The Board places great importance on communication with shareholders. The Annual General Meeting 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 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
The Portfolio Manager meets with major shareholders, potential investors, stock market analysts, journalists and other commentators throughout 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 Company’s investment objective to deliver long-term growth in both capital and income, and the Board’s review of the Manager includes an assessment of their ESG approach, which is set out 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:
·
The decision to combine assets with abrdn China Investment Company Limited on
· The decision to introduce a continuation vote with effect from 2029 and every five years thereafter;
· The decision to hold a hybrid AGM in 2023 (and again this year) in order to make the AGM more accessible and improve the shareholder experience;
·
Authorising the repurchase of 2,900,696 shares into
·
The decision not to renew the Company’s credit facility for
·
Following discussions with the Manager, the reduction in the first tier of the management fee from 0.90% to 0.85% with effect from
·
The decision to carry out an external Board evaluation using the services of
·
The decision to pay a final dividend of
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable
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
In preparing these Financial Statements the Directors are required to:
· Select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors, and then apply them consistently;
· Make judgements and estimates that are reasonable and prudent;
· Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
· Provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Company’s financial position and financial performance;
· State whether applicable IFRS and IFRIC interpretations 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 assume that the Company will continue in business.
The Directors are responsible for ensuring that adequate accounting records are kept which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that 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/china
. Visitors to the website need to be aware that legislation in the
The Directors confirm that to the best of their knowledge:
·
The Financial Statements, prepared in accordance with
· The Annual 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.
The Directors consider that 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.
Approved by the Board on
Chairman
FINANCIAL STATEMENTS
INCOME STATEMENT for the year ended
Year ended 31 March 2024 Year ended 31 March 2023
Revenue Capital Total Revenue Capital Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
Revenue
Investment 3 26,123 – 26,123 32,704 – 32,704
income
Derivative 3 11,154 – 11,154 11,566 – 11,566
income
Other income 3 1,659 – 1,659 409 – 409
--------------- --------------- --------------- --------------- --------------- ---------------
Total income 38,936 – 38,936 44,679 – 44,679
========= ========= ========= ========= ========= =========
Losses on
investments at
fair value 10 – (155,001) (155,001) – (6,912) (6,912)
through profit
or loss
(Losses)/gains
on derivative 11 – (54,790) (54,790) – 14,971 14,971
instruments
Foreign
exchange – (3,858) (3,858) – 8,167 8,167
(losses)/gains
Foreign
exchange – 1,517 1,517 – (4,814) (4,814)
gains/(losses)
on bank loan
--------------- --------------- --------------- --------------- --------------- ---------------
Total income
and 38,936 (212,132) (173,196) 44,679 11,412 56,091
(losses)/gains
========= ========= ========= ========= ========= =========
Expenses
Investment
management 4 (2,430) (8,991) (11,421) (3,012) (11,715) (14,727)
fees
Other expenses 5 (1,203) (35) (1,238) (1,097) (4) (1,101)
--------------- --------------- --------------- --------------- --------------- ---------------
Profit/(loss)
before finance 35,303 (221,158) (185,855) 40,570 (307) 40,263
costs and
taxation
Finance costs 6 (6,699) (20,098) (26,797) (3,956) (11,869) (15,825)
--------------- --------------- --------------- --------------- --------------- ---------------
Profit/(loss)
before 28,604 (241,256) (212,652) 36,614 (12,176) 24,438
taxation
Taxation 7 (812) – (812) (1,149) – (1,149)
--------------- --------------- --------------- --------------- --------------- ---------------
Profit/(loss)
after taxation 27,792 (241,256) (213,464) 35,465 (12,176) 23,289
for the year
--------------- --------------- --------------- --------------- --------------- ---------------
Earnings/
(loss) per 8 5.78p (50.18p) (44.40p) 7.05p (2.42p) 4.63p
ordinary share
========= ========= ========= ========= ========= =========
The Company does not have any income or expenses that are not included in the profit/(loss) after taxation for the year. Accordingly, the profit/(loss) 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.
All the profit/(loss) and total comprehensive income is attributable to the equity shareholders of the Company. There are no minority interests.
On
The Notes below form an integral part of these Financial Statements.
Statement of Changes in Equity for the year ended
Share Share Capital Other
capital premium redemption reserve Capital Revenue Total
£’000 account reserve £’000 reserve reserve equity
Notes £’000 £’000 £’000 £’000 £’000
Total equity
at 31 March 5,710 211,569 917 186,794 877,782 55,649 1,338,421
2023
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
New ordinary
shares issued
in respect of 15 590 126,198 – – – – 126,788
the
transaction
with ACIC
Contribution
in respect of
the – 400 – – – – 400
transaction
with ACIC by
the Manager
Repurchase of
ordinary 15 – – – (6,965) – – (6,965)
shares into
Treasury
Repurchase of
ordinary 15 (187) – 187 (38,968) – – (38,968)
shares for
cancellation
(Loss)/profit
after – – – – (241,256) 27,792 (213,464)
taxation for
the year
Dividend paid
to 9 – – – – – (30,198) (30,198)
shareholders
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total equity
at 31 March 6,113 338,167 1,104 140,861 636,526 53,243 1,176,014
2024
========= ========= ========= ========= ========= ========= =========
Total equity
at 31 March 5,710 211,569 917 244,043 889,958 48,424 1,400,621
2022
Repurchase of
ordinary 15 – – – (57,249) – – (57,249)
shares
(Loss)/profit
after – – – – (12,176) 35,465 23,289
taxation for
the year
Dividend paid
to 9 – – – – – (28,240) (28,240)
shareholders
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total equity
at 31 March 5,710 211,569 917 186,794 877,782 55,649 1,338,421
2023
========= ========= ========= ========= ========= ========= =========
The Notes below form an integral part of these Financial Statements.
Balance Sheet as at
Company number 7133583
31 March 31 March
2024 2023
Notes £’000 £’000
Non-current assets
Investments at fair value 10 1,162,265 1,318,764
through profit or loss
--------------- --------------- ---------------
Current assets
Derivative instruments 11 7,103 22,313
Amounts held at futures clearing 24,589 34,813
houses and brokers
Other receivables 12 10,066 11,939
Cash at bank 7,858 72,943
--------------- ---------------
49,616 142,008
========= =========
Current liabilities
Derivative instruments 11 (13,307) (20,892)
Bank loan 13 – (80,857)
Other payables 14 (9,802) (20,602)
Bank overdrafts (12,758) –
--------------- ---------------
(35,867) (122,351)
========= =========
Net current assets 13,749 19,657
========= =========
Net assets 1,176,014 1,338,421
========= =========
Equity attributable to equity
shareholders
Share capital 15 6,113 5,710
Share premium account 16 338,167 211,569
Capital redemption reserve 16 1,104 917
Other reserve 16 140,861 186,794
Capital reserve 16 636,526 877,782
Revenue reserve 16 53,243 55,649
--------------- ---------------
Total equity 1,176,014 1,338,421
========= =========
Net asset value per ordinary 17 223.71p 274.08p
share
========= ========= =========
The Financial Statements above and below were approved by the Board of Directors on
Chairman
The Notes below form an integral part of these Financial Statements.
Cash Flow Statement for the year ended
Year ended Year ended
31 March 31 March
2024 2023
£’000 £’000
Operating activities
Cash inflow from investment income 26,240 30,352
Cash inflow from derivative income 10,891 11,484
Cash inflow from other income 1,659 409
Cash outflow from Directors’ fees (236) (195)
Cash outflow from other payments (13,104) (15,638)
Cash outflow from the purchase of investments (592,266) (429,715)
Cash outflow from the purchase of derivatives (1,910) (7,957)
Cash outflow from the settlement of derivatives (301,285) (485,760)
Cash inflow from the sale of investments 703,150 480,407
Cash inflow from the settlement of derivatives 260,351 510,263
Cash outflow from amounts held at futures 10,224 (2,593)
clearing houses and brokers
--------------- ---------------
Net cash inflow from operating activities before 103,714 91,057
servicing of finance
========= =========
Financing activities
Cash inflow from the issuance of ordinary shares 5,156 –
in respect of the transaction with ACIC
Cash inflow from the Fidelity contribution in 400 –
respect of the transaction with ACIC
Cash outflow from loan interest paid (5,138) (2,242)
Cash outflow from the settlement of the bank (79,340) –
loan
Cash outflow from CFD interest paid (22,695) (12,099)
Cash outflow from short CFD dividends paid – (254)
Cash outflow from the repurchase of ordinary (7,095) (57,119)
shares into Treasury
Cash outflow from the repurchase of ordinary (38,789) –
shares for cancellation
Cash outflow from dividends paid to shareholders (30,198) (28,240)
--------------- ---------------
Cash outflow from financing activities (177,699) (99,954)
========= =========
Decrease in cash at bank (73,985) (8,897)
Cash at bank at the start of the year 72,943 73,673
Effect of foreign exchange movements (3,858) 8,167
--------------- ---------------
Cash at bank at the end of the year (4,900) 72,943
========= =========
Represented by:
Cash at bank 7,858 72,943
Bank overdrafts (12,758) –
--------------- ---------------
(4,900) 72,943
========= =========
NOTES TO THE FINANCIAL STATEMENTS
1. Principal Activity
2. Accounting Policies
The Company’s Financial Statements have been prepared in accordance with
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
In preparing these Financial Statements the Directors have considered the impact of climate change risk as an emerging and a principal 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 IFRS 13, 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
Issue of Ordinary Shares in respect of the transaction with abrdn China Investment Company Limited (“ACIC”)
On
The Directors have considered the substance of the assets and activities of ACIC in determining whether the acquisition represents the acquisition of a business. In this case, the acquisition is not considered to be an acquisition of a business, and therefore, has not been treated as a business combination. Rather, the cost to acquire the assets and liabilities of ACIC has been allocated between the acquired identifiable assets and liabilities based on their relative fair values on the acquisition date without attributing any amount to goodwill or to deferred taxes. A total of £126,789,000 of assets were acquired as a result of the transaction with ACIC. This comprised investments (£120,754,000), cash (£5,156,000) and receivables (£879,000).
The Manager agreed to contribute towards the transaction with ACIC, as described below.
A contribution of £715,000, representing eight months of management fees, in respect of the assets transferred by ACIC to the Company, that would otherwise be payable by the enlarged Company to the Manager in the year to
Additionally, the Manager agreed to make a cash contribution to the Company equal to £500,000. In the year to
The Company has recognised the contribution from the Manager in the Share premium account as described in Note 16.
Furthermore, the Manager has agreed that following the transaction with ACIC, the base management fee payable by the Company under the Management Agreement will reduce from 0.70% to 0.65% on the Company’s Net Assets in excess of £1.5 billion. This is expected to lower the ongoing costs of the Company as it grows over the longer-term.
b) Adoption of new and revised International Accounting Standards – the accounting policies adopted are consistent with those of the previous financial year.
At the date of authorisation of these Financial Statements, the following revised IAS were in issue but not yet effective:
· IAS 1 Presentation of Financial Statements (amendments);
· IAS 7 Statement of Cash Flows;
· IAS 8 Accounting Policies, Changes in Accounting estimates and errors (amendments); and
· IAS 12 Income Taxes (amendments).
The Directors do not expect that the adoption of the above Standards will have a material impact on the Financial Statements of the Company in future periods.
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 revenue profit 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) Significant accounting estimates, assumptions and judgements – The preparation of the Financial Statements requires the use of estimates, assumptions and judgements. These estimates, assumptions 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 (l) 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 18 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.
Assumptions
The determination of fair value by the FVC involves key assumptions dependent upon the valuation techniques used. The valuation process recognises that the price of a recent investment may be an appropriate starting point for estimating fair value. The Multiples approach involves subjective inputs and therefore presents a greater risk of over or under estimation, particularly in the absence of a recent transaction.
f) Income – Income from equity investments and long contracts for difference (“CFDs”) is credited to the revenue column of the Income Statement 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. 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 as income. Any excess in the value of the shares received over the amount of the cash dividend foregone is recognised as a gain 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.
Interest on securities, interest for 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.
g) Functional currency and foreign exchange
– The functional and reporting currency of the Company is
h) Investment management and other expenses – These are accounted for on an accruals basis and are charged as follows:
· The base investment management fee is allocated 25% to revenue and 75% to capital;
· 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.
i) Finance costs – Finance costs comprise interest on the bank loan and overdrafts 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 allocated 25% to revenue and 75% to capital.
j) Taxation – The taxation charge represents the sum of current taxation and deferred taxation.
Taxation currently payable is based on the taxable profit for the year. Taxable profit differs from profit before taxation, as reported in the Income Statement, because it excludes items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company’s liability for current taxation is calculated using taxation rates that have been enacted or substantially enacted by the Balance Sheet date.
Deferred taxation is the taxation expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the Financial Statements and the corresponding taxation bases used in the computation of taxable profit based on tax rates that have been enacted or substantively enacted when the taxation is expected to be payable or recoverable, and is accounted for using the balance sheet liability method. Deferred taxation liabilities are recognised for all taxable temporary differences and deferred taxation assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
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
k) Dividend paid to shareholders – Dividends payable to equity shareholders are recognised when the Company’s obligation to make payment is established.
l) Investments – The portfolio of financial assets 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. Under IFRS 9 investments are held at fair value through profit or loss, which is initially taken to be their cost, and is subsequently measured at bid or last traded prices, depending upon the convention of the exchange on which they are listed, where available, or otherwise at fair value based on published price quotations.
Investments which are not quoted, or are not frequently traded, 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, and with support from the external valuer and Fidelity’s unlisted investments specialist, provides recommended fair values to the Directors. These are based on the principles outlined in Note 2 (e). 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 techniques applied by the FVC when valuing the unlisted investments are predominantly market-based approaches. The market-based approaches are set out below and are followed by an explanation of how they are applied to the Company’s unlisted portfolio:
· Multiples;
· Industry Valuation Benchmarks; and
· Available Market Prices.
The nature of the unlisted investment will influence the valuation technique applied. The valuation approach recognises that the price of a recent investment, if resulting from an orderly transaction, generally represents fair value as at the transaction date and may be an appropriate starting point for estimating fair value at subsequent measurement dates. However, consideration is given to the facts and circumstances as at the subsequent measurement date, including changes in the market or performance of the investee company. Milestone analysis and future cash flows are used where appropriate to incorporate the operational progress of the investee company into the valuation. Consideration is also given to the input received from the
The unlisted investments are valued according to a three month cycle of measurement dates. The fair value of the unlisted investments will be reviewed before the next scheduled three monthly measurement date on the following occasions:
· At the year end and half year end of the Company; and
· Where there is an indication of a change in fair value (commonly referred to as ‘trigger’ events).
In accordance with the AIC SORP, the Company includes transaction costs, incidental to the purchase or sale of investments within losses on investments held at fair value through profit or loss in the capital column of the Income Statement and has disclosed them in Note 10 below.
m) Derivative instruments – When appropriate, permitted transactions in derivative instruments are used. Derivative transactions into which the Company may enter include CFDs, futures, options, warrants and forward currency contracts. Under IFRS 9 derivatives are classified at fair value through profit or loss – held for trading, 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:
· CFDs – the difference between the strike price and the value of the underlying shares in the contract, calculated in accordance with accounting policy 2 (l);
· Futures – the difference between contract price and the quoted trade price; and
· Options – the quoted trade price for the contract.
Where such transactions are used to protect or enhance income, if the circumstances support this, the income derived is included in derivative 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 gains and losses derived are included in (losses)/gains on derivative instruments held at fair value through profit or loss 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.
The Company obtains equivalent exposure to equities through the use of CFDs. All gains and losses in the fair value of the CFDs are included in (losses)/gains on derivative instruments held at fair value through profit or loss in the capital column of the Income Statement.
n) Amounts held at futures clearing houses and brokers – Cash deposits are held in segregated accounts on behalf of brokers as collateral against open derivative contracts. These are carried at amortised cost.
o) Other receivables – Other receivables include securities sold for future settlement, amounts receivable on 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. Other receivables are recognised initially at fair value and, where applicable, subsequently measured at amortised cost using the effective interest rate method and as reduced by appropriate allowance for estimated irrecoverable amounts.
p) Bank loans – Loans are initially included in the Financial Statements at cost, being the fair value of the consideration received net of any issue costs relating to the borrowing. After initial recognition, the loans are measured at amortised cost using the effective interest rate method. The amortised cost is calculated by taking into account any issue costs and any discount or premium on settlement.
q) Other payables – Other payables include securities purchased for future settlement, amounts payable on settlement of derivatives, investment management fees, loan interest payable, amounts payable for repurchase of shares, finance costs payable and expenses accrued in the ordinary course of business. Other payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business, if longer). If not, they are presented as non-current liabilities. Other payables are recognised initially at fair value and, where applicable, subsequently measured at amortised cost using the effective interest rate method.
r) Other reserve
– The full cost of ordinary shares repurchased and held in
s) Capital reserve – The following are transferred to capital reserve:
· Gains and losses on the disposal of investments and derivatives 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;
· 75% of base investment management fees;
· 75% of finance costs;
· Dividends receivable which are capital in nature;
· Taxation charged or credited relating to items which are capital in nature; and
· Other expenses which are capital in nature.
Technical guidance issued by the
3. INCOME
Year ended Year ended
31 March 31 March
2024 2023
£’000 £’000
Investment income
Overseas dividends 26,052 31,949
Overseas scrip dividends – 755
Interest on securities 71 –
--------------- ---------------
26,123 32,704
========= =========
Derivative income
Dividends received on long CFDs 10,525 11,282
Interest received on CFDs 629 284
--------------- ---------------
11,154 11,566
========= =========
Other income
Interest received on collateral, deposits and 1,659 409
money market funds
--------------- ---------------
Total income 38,936 44,679
========= =========
Special dividends of £1,458,000 (2023: £1,155,000) have been recognised in capital.
4. INVESTMENT MANAGEMENT FEES
Year ended 31 March 2024 Year ended 31 March 2023
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Investment
management 2,430 7,289 9,719 3,012 9,037 12,049
fee – base
Investment
management – 1,702 1,702 – 2,678 2,678
fee –
variable
--------------- --------------- --------------- --------------- --------------- ---------------
2,430 8,991 11,421 3,012 11,715 14,727
========= ========= ========= ========= ========= =========
The base investment management fee for the period from 1 April to
In addition, there is a +/-0.20% variable fee based on the Company’s NAV per share performance relative to the Company’s Benchmark Index measured daily over a three-year rolling basis.
Fees are payable monthly in arrears and are calculated on a daily basis. The base investment management fee has been allocated 75% to capital reserve in accordance with the Company’s accounting policies.
Further details of the terms of the Management Agreement are given in the Directors’ Report in the Annual Report.
5. OTHER EXPENSES
Year ended Year ended
31 March 31 March
2024 2023
£’000 £’000
Allocated to revenue:
AIC fees 21 21
Custody fees 101 157
Depositary fees 52 57
Directors’ expenses 79 13
Directors’ fees1 240 202
Legal and professional fees 143 77
Marketing expenses 269 263
Printing and publication expenses 39 50
Registrars’ fees 63 69
Other expenses 125 131
Fees payable to the Company’s Independent
Auditor for the audit of the Financial 71 57
Statements
--------------- ---------------
1,203 1,097
========= =========
Allocated to capital:
Legal and professional fees 35 4
--------------- ---------------
Other expenses 1,238 1,101
========= =========
1 Details of the breakdown of Directors’ fees are provided within the Directors’ Remuneration Report in the Annual Report.
6. Finance Costs
Year ended 31 March 2024 Year ended 31 March 2023
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Interest
paid on
bank loan 1,117 3,352 4,469 663 1,989 2,652
and
overdrafts
Interest
paid on 5,582 16,746 22,328 3,230 9,689 12,919
CFDs
Dividends
paid on – – – 63 191 254
short CFDs
--------------- --------------- --------------- --------------- --------------- ---------------
6,699 20,098 26,797 3,956 11,869 15,825
========= ========= ========= ========= ========= =========
Finance costs have been allocated 75% to capital reserve in accordance with the Company’s accounting policies.
7. TAXATION
Year ended 31 March 2024 Year ended 31 March 2023
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
a)
Analysis
of the
taxation
charge
for the
year
Overseas 812 – 812 1,149 – 1,149
taxation
--------------- --------------- --------------- --------------- --------------- ---------------
Taxation
charge
for the 812 – 812 1,149 – 1,149
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
Year ended 31 March 2024 Year ended 31 March 2023
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Profit/
(loss) 28,604 (241,256) (212,652) 36,614 (12,176) 24,438
before
taxation
Profit/
(loss)
before
taxation
multiplied
by the 7,151 (60,314) (53,163) 6,957 (2,313) 4,644
standard
rate of UK
corporation
tax of 25%
(2023: 19%)
Effects of:
Capital
losses/ – 53,033 53,033 – (2,168) (2,168)
(gains) not
taxable1
Income not (6,406) – (6,406) (6,116) – (6,116)
taxable
Expenses
not – 4,604 4,604 – 1,987 1,987
deductible
Excess (745) 2,677 1,932 (841) 2,494 1,653
expenses
Overseas 812 – 812 1,149 – 1,149
taxation
--------------- --------------- --------------- --------------- --------------- ---------------
Taxation
charge 812 – 812 1,149 – 1,149
(Note 7a)
========= ========= ========= ========= ========= =========
1
The Company is exempt from
c)
Deferred taxation
A deferred tax asset of £39,515,000 (2023: £37,583,000), in respect of excess expenses of £158,059,000 (2023: £150,330,000) has not been recognised as it is unlikely that there will be sufficient future taxable profits to utilise these expenses.
The
8. Earnings/(Loss) per Ordinary Share
Year ended Year ended
31 March 31 March
2024 2023
Revenue earnings per ordinary share 5.78p 7.05p
Capital loss per ordinary share (50.18p) (2.42p)
--------------- ---------------
Total (loss)/earnings per ordinary share (44.40p) 4.63p
========= =========
The earnings/(loss) per ordinary share is based on the profit/(loss) after taxation for the year divided by the weighted average number of ordinary shares held outside of
£’000 £’000
Revenue profit after taxation for the year 27,792 35,465
Capital loss after taxation for the year (241,256) (12,176)
--------------- ---------------
Total (loss)/profit after taxation for the year (213,464) 23,289
========= =========
Number Number
Weighted average number of ordinary shares held outside 480,806,725 503,045,428
of Treasury
========= =========
9. Dividends Paid to Shareholders
Year ended Year ended
31 March 31 March
2024 2023
£’000 £’000
Dividend paid
Dividend of 6.25 pence per ordinary share paid 30,198 –
for the year ended 31 March 2023
Dividend of 5.50 pence per ordinary share paid – 28,240
for the year ended 31 March 2022
--------------- ---------------
30,198 28,240
========= =========
Dividend proposed
Dividend proposed of 6.40 pence per ordinary 33,471 –
share for the year ended 31 March 2024
Dividend proposed of 6.25 pence per ordinary – 30,199
share for the year ended 31 March 2023
--------------- ---------------
33,471 30,199
========= =========
The Directors have proposed the payment of a dividend for the year ended
10. Investments at Fair Value through Profit or Loss
2024 2023
£’000 £’000
Total investments1 1,162,265 1,318,764
Opening book cost 1,514,572 1,630,492
Opening investment holding losses (195,808) (265,007)
Opening fair value of investments 1,318,764 1,365,485
--------------- ---------------
Movements in the year
Purchases at cost 586,707 440,666
Assets acquired in respect of the transaction 120,754 –
with ACIC
Sales – proceeds (708,959) (480,475)
Losses on investments (155,001) (6,912)
--------------- ---------------
Closing fair value 1,162,265 1,318,764
========= =========
Closing book cost 1,398,894 1,514,572
Closing investment holding losses (236,629) (195,808)
--------------- ---------------
Closing fair value of investments 1,162,265 1,318,764
========= =========
1 The fair value hierarchy of the investments is shown in Note 18.
The Company received £708,959,000 (2023: £480,475,000) from investments sold in the year. The book cost of these investments when they were purchased was £823,139,000 (2023: £556,586,000). 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 incurred in the acquisition and disposal of investments, which are included in the losses on investments were as follows:
Year ended Year ended
31 March 31 March
2024 2023
£’000 £’000
Purchases transaction costs 720 599
Sales transaction costs 740 742
--------------- ---------------
1,460 1,341
========= =========
The portfolio turnover rate for the year was 57.7%, excluding the ACIC transaction (2023: 35.5%). The portfolio turnover rate measures the Company’s trading activity. It is calculated by taking the average of the total amount of securities purchased and the total amount of securities sold in the reporting year divided by the average fair value of investments.
11. DERIVATIVE INSTRUMENTS
Year ended Year ended
31 March 31 March
2024 2023
£’000 £’000
Net change to (losses)/gains on derivative
instruments
Realised (losses)/gains on CFDs (74,311) 6,913
Realised gains on futures 27,951 16,590
Realised losses on options (4,632) (2,645)
Movement in investment holding (losses)/gains on (11,900) 353
CFDs
Movement in investment holding gains/(losses) on 6,382 (4,466)
futures
Movement in investment holding gains/(losses) on 1,720 (1,774)
options
--------------- ---------------
(54,790) 14,971
========= =========
2024 2023
Fair value Fair value
£’000 £’000
Fair value of derivative instruments recognised
on the Balance Sheet1
Derivative instrument assets 7,103 22,313
Derivative instrument liabilities (13,307) (20,892)
--------------- ---------------
(6,204) 1,421
========= =========
1 The fair value hierarchy of the derivative instruments is shown in Note 18.
2024 2023
Fair value Asset Fair value Asset
£’000 exposure £’000 exposure
£’000 £’000
At the year end
the Company held
the following
derivative
instruments
Long CFDs (4,483) 412,237 7,409 512,674
Short CFDs (1,246) 14,766 (1,238) 19,086
Futures (hedging (475) (138,402) (6,857) (172,890)
exposure)
Call options – – 204 2,161
Put options – – (414) 5,097
(long exposure)
Put options – – 29 188
(short exposure)
Put options
(hedging – – 2,288 (26,013)
exposure)
--------------- --------------- --------------- ---------------
(6,204) 288,601 1,421 340,303
========= ========= ========= =========
12. OTHER RECEIVABLES
2024 2023
£’000 £’000
Securities sold for future settlement 5,957 148
Amounts receivable on settlement of derivatives 2,161 10,135
Accrued income 1,726 1,513
Taxation recoverable 12 13
Other receivables 210 130
--------------- ---------------
10,066 11,939
========= =========
13.
2024 2023
£’000 £’000
Fixed rate unsecured US dollar loan
US dollar 100,000,000 fixed at a rate of 6.335%1 – 80,857
--------------- ---------------
– 80,857
========= =========
1
The unsecured loan with The Bank of Nova Scotia,
14. OTHER PAYABLES
2024 2023
£’000 £’000
Securities purchased for future settlement 6,843 12,402
Amounts payable on settlement of derivatives 1,078 4,731
Investment management fees 678 1,266
Finance costs payable 610 977
Accrued expenses 414 1,096
Amounts payable for repurchase of shares for 179 –
cancellation
Amounts payable for repurchase of shares into – 130
Treasury
--------------- ---------------
9,802 20,602
========= =========
15. SHARE CAPITAL
2024 2023
Nominal Nominal
Number of value Number of value
shares £’000 shares £’000
Issued, allotted
and fully paid
Ordinary shares
of 1 pence each
held outside of
Treasury
Beginning of the 488,325,628 4,884 513,957,409 5,140
year
New ordinary
shares issued in
respect of the 59,005,997 590 – –
transaction with
ACIC
Ordinary shares
repurchased into (2,900,696) (29) (25,631,781) (256)
Treasury
Ordinary shares
repurchased for (18,749,495) (187) – –
cancellation
--------------- --------------- --------------- ---------------
End of the year 525,681,434 5,258 488,325,628 4,884
========= ========= ========= =========
Ordinary shares
of 1 pence each
held in
Treasury1
Beginning of the 82,728,852 826 57,097,071 570
year
Ordinary shares
repurchased into 2,900,696 29 25,631,781 256
Treasury
--------------- --------------- --------------- ---------------
End of the year 85,629,548 855 82,728,852 826
========= ========= ========= =========
Total share 6,113 5,710
capital
========= =========
1
The ordinary shares held in
On
During the year, the Company repurchased 2,900,696 (2023: 25,631,781) ordinary shares and held them in
The Company also repurchased 18,749,495 (2023: nil shares) ordinary shares for cancellation. The cost of repurchasing these shares of £38,968,000 (2023: £nil) was charged to the Other Reserve.
16. Capital and Reserves
Share Capital
Share Premium redemption Other Capital Revenue Total
capital account reserve reserve reserve reserve equity
£’000 £’000 £’000 £’000 £’000 £’000 £’000
At 1 April 5,710 211,569 917 186,794 877,782 55,649 1,338,421
2023
Losses on
investments – – – – (155,001) – (155,001)
(see Note
10)
Losses on
derivative
instruments – – – – (54,790) – (54,790)
(see Note
11)
Foreign
exchange – – – – (3,858) – (3,858)
losses
Foreign
exchange – – – – 1,517 – 1,517
gains on
bank loan
Investment
management – – – – (8,991) – (8,991)
fees (see
Note 4)
Other
expenses – – – – (35) – (35)
(see Note 5)
Finance
costs (see – – – – (20,098) – (20,098)
Note 6)
Revenue
profit after – – – – – 27,792 27,792
taxation for
the year
Dividend
paid to – – – – – (30,198) (30,198)
shareholders
(see Note 9)
New ordinary
shares
issued in
respect of
the 590 126,198 – – – – 126,788
transaction
with ACIC
(see Note
15)
Contribution
in respect
of the
transaction
with
ACIC by the
Manager (see – 400 – – – – 400
Note 2 (a))
Repurchase
of ordinary
shares into – – – (6,965) – – (6,965)
Treasury
(see Note
15)
Repurchase
of ordinary
shares for (187) – 187 (38,968) – – (38,968)
cancellation
(see Note
15)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 March 6,113 338,167 1,104 140,861 636,526 53,243 1,176,014
2024
========= ========= ========= ========= ========= ========= =========
At 1 April 5,710 211,569 917 244,043 889,958 48,424 1,400,621
2022
Losses on
investments – – – – (6,912) – (6,912)
(see Note
10)
Gains on
derivative
instruments – – – – 14,971 – 14,971
(see Note
11)
Foreign
exchange – – – – 8,167 – 8,167
gains
Foreign
exchange – – – – (4,814) – (4,814)
losses on
bank loan
Investment
management – – – – (11,715) – (11,715)
fees (see
Note 4)
Other
expenses – – – – (4) – (4)
(see Note 5)
Finance
costs (see – – – – (11,869) – (11,869)
Note 6)
Revenue
profit after – – – – – 35,465 35,465
taxation for
the year
Dividend
paid to – – – – – (28,240) (28,240)
shareholders
(see Note 9)
Repurchase
of ordinary – – – (57,249) – – (57,249)
shares (see
Note 15)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 March 5,710 211,569 917 186,794 877,782 55,649 1,338,421
2023
========= ========= ========= ========= ========= ========= =========
The capital reserve balance at
17. Net Asset Value per Ordinary Share
The calculation of the net asset value per ordinary share is based on the net assets divided by the number of ordinary shares held outside of
2024 2023
Net assets £1,176,014,000 £1,338,421,000
Ordinary shares held outside of Treasury at year 525,681,434 488,325,628
end
Net asset value per ordinary share 223.71p 274.08p
========= =========
It is the Company’s policy that shares held in
18. 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 Investment 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 geopolitical, market and economic (including currency), investment performance (including gearing), discount management, unlisted securities, climate change, environmental, social and governance (“ESG”), key person, cybercrime and information security, business continuity, operational and variable interest entity structures. Other risks identified are tax and regulatory and operational risks, including those relating to third-party service providers covering investment management, marketing and business development, company secretarial, fund administration and operations and support functions. Risks are identified and graded in this process, together with steps taken in mitigation, and are updated and reviewed on an ongoing basis. Risks identified are shown above.
This Note is incorporated in accordance with IFRS 7: Financial Instruments: Disclosures and refers to the identification, measurement and management of risks potentially affecting the value of financial instruments.
The Company’s financial instruments may comprise:
· Equity shares (listed and unlisted), equity linked notes, convertible bonds and rights issues;
· Derivative instruments including CFDs, warrants, futures and options written or purchased on stocks and equity indices and forward currency contracts;
· Cash, liquid resources and short-term receivables and payables that arise from its operations; and
· Bank borrowings.
The risks identified by IFRS 7 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 instrument 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 in addition, the Company has derivative instruments. The unsecured fixed rate loan facility for
Interest rate risk exposure
The values of the Company’s financial instruments that are exposed to movements in interest rates are shown below:
2024 2023
£’000 £’000
Exposure to financial instruments that bear
interest
Long CFDs – exposure less fair value 416,720 505,265
Bank overdrafts 12,758 –
Bank loan – 80,857
--------------- ---------------
429,478 586,122
========= =========
Exposure to financial instruments that earn
interest
Short CFDs – exposure plus fair value 13,520 17,848
Amounts held at futures clearing houses and 24,589 34,813
brokers
Cash at bank 7,858 72,943
--------------- ---------------
45,967 125,604
========= =========
Net exposure to financial instruments that bear 383,511 460,518
interest
========= =========
Foreign currency risk
The Company’s profit/(loss) after taxation and its net assets can be affected by foreign exchange movements because the Company has income, assets and liabilities which are denominated in currencies other than the Company’s functional currency which is
Three principal areas have been identified where foreign currency risk could impact the Company:
· Movements in currency exchange rates affecting the value of investments;
· Movements in currency exchange rates affecting short-term timing differences, for example, between the date when an investment is bought or sold and the date when settlement of the transaction occurs; and
· Movements in currency exchange rates affecting income received.
Currency exposure of financial assets
The Company’s financial assets comprise of investments, long positions on derivative instruments, short-term debtors and cash at bank. The currency exposure profile of these financial assets is shown below:
Investments Asset 2024
held at exposure of
fair value long
through derivative Other Cash
profit or loss instruments1 receivables2 at bank Total
Currency £’000 £’000 £’000 £’000 £’000
Chinese 92,336 – – 1,372 93,708
renminbi
Euro 10,903 – – – 10,903
Hong
Kong 704,175 148,557 18,153 – 870,885
dollar
Japanese 5,787 22,134 125 341 28,387
yen
Taiwan 7,603 – 12 – 7,615
dollar
Thai 439 – – – 439
baht
UK 17,752 – 209 – 17,961
sterling
US 323,270 103,144 16,156 6,145 448,715
dollar
--------------- --------------- --------------- --------------- ---------------
1,162,265 273,835 34,655 7,858 1,478,613
========= ========= ========= ========= =========
1 The asset exposure of long CFDs after the netting of hedging exposures.
2 Other receivables include amounts held at futures clearing houses and brokers.
Investments Asset 2023
held at exposure of
fair value long
through derivative Other Cash
profit or loss instruments1 receivables2 at bank Total
Currency £’000 £’000 £’000 £’000 £’000
Chinese 170,913 – – 21,221 192,134
renminbi
Euro 10,432 – – – 10,432
Hong
Kong 601,107 270,181 34,483 24,043 929,814
dollar
Japanese 35,111 – 84 – 35,195
yen
South
Korean – – – 1 1
won
Taiwan 19,621 – 72 8 19,701
dollar
UK 16,221 – 130 – 16,351
sterling
US 465,359 50,848 11,983 27,670 555,860
dollar
--------------- --------------- --------------- --------------- ---------------
1,318,764 321,029 46,752 72,943 1,759,488
========= ========= ========= ========= =========
1 The asset exposure of long CFDs and options after the netting of hedging exposures.
2 Other receivables include amounts held at futures clearing houses and brokers.
Currency exposure of financial liabilities
The Company finances its investment activities through its ordinary share capital, reserves and borrowings. The Company’s financial liabilities comprise short positions on derivative instruments, other payables, bank overdrafts and US dollar denominated bank loan. The currency profile of these financial liabilities is shown below:
Asset 2024
exposure of
short
derivative Other Bank
instruments1 payables overdrafts Total
Currency £’000 £’000 £’000 £’000
Hong Kong dollar – 5,994 12,744 18,738
UK sterling – 1,271 14 1,285
US dollar 14,766 2,537 – 17,303
--------------- --------------- --------------- ---------------
14,766 9,802 12,758 37,326
========= ========= ========= =========
Asset 2023
exposure of
short
derivative Other US dollar
instruments1 payables bank loan Total
Currency £’000 £’000 £’000 £’000
Hong Kong dollar 13,842 13,658 – 27,500
UK sterling – 1,823 – 1,823
US dollar 5,432 5,121 80,857 91,410
--------------- --------------- --------------- ---------------
19,274 20,602 80,857 120,733
========= ========= ========= =========
1 The asset exposure of short derivative instruments excluding hedging exposures.
Other price risk
Other price risk arises mainly from uncertainty about future prices of financial instruments. It represents the potential loss the Company might suffer through price movements in its investment positions. 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 Investment Manager is responsible for actively monitoring the portfolio selected in accordance with the overall asset allocation parameters 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 assessed by the Investment Manager’s specialist derivative instruments team.
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 is achieved by the use of a bank overdraft, if required.
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 Investment Manager employs, this risk is minimised 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 evaluates derivative instrument credit risk exposure.
Collateral
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
Offsetting
To mitigate counterparty risk for OTC derivative transactions, the ISDA legal documentation is in the form of a master agreement between the Company and the broker. This allows enforceable netting arrangements in the event of a default or termination event. Derivative instrument assets and liabilities that are subject to netting arrangements have not been offset in preparing the Balance Sheet.
The Company’s derivative instrument financial assets and liabilities recognised in the Balance Sheet and amounts that could be subject to netting in the event of a default or termination are shown below:
Related amounts not set
Gross amount off
of recognised Net amount on balance sheet 2024
of financial
financial
liabilities assets Margin
set off on presented on account
Gross the balance Financial received as Net
Financial amount sheet the balance instruments amount
assets £’000 £’000 sheet collateral ’000
£’000 £’000 £’000
CFDs 7,103 – 7,103 (3,844) (2,389) 870
========= ========= ========= ========= ========= =========
Related amounts not set off
Gross amount on balance sheet 2024
of recognised Net amount
financial of financial
assets liabilities
set off on presented on Margin
Gross the balance the balance account Net
amount sheet sheet Financial pledged as amount
Financial £’000 £’000 £’000 instruments collateral £’000
liabilities £’000 £’000
CFDs (12,832) – (12,832) 3,844 8,900 (88)
Futures
(exchange (475) – (475) – 475 –
traded)
--------------- --------------- --------------- --------------- --------------- ---------------
(13,307) – (13,307) 3,844 9,375 (88)
========= ========= ========= ========= ========= =========
Related amounts not set off
Gross amount on balance sheet 2023
of recognised Net amount
financial of financial
liabilities assets
set off on presented on Margin
Gross the balance the balance account Net
amount sheet sheet Financial received as amount
Financial £’000 £’000 £’000 instruments collateral £’000
assets £’000 £’000
CFDs 19,792 – 19,792 (9,040) (9,704) 1,048
Options 2,521 – 2,521 (414) (2,107) –
--------------- --------------- --------------- --------------- --------------- ---------------
22,313 – 22,313 (9,454) (11,811) 1,048
========= ========= ========= ========= ========= =========
Related amounts not set off
Gross amount on balance sheet 2023
of recognised Net amount
financial of financial
assets liabilities
set off on presented on Margin
Gross the balance the balance account Net
amount sheet sheet Financial pledged as amount
Financial £’000 £’000 £’000 instruments collateral £’000
liabilities £’000 £’000
CFDs (13,621) – (13,621) 9,040 4,581 –
Futures
(exchange (6,857) – (6,857) – 6,857 –
traded)
Options (414) – (414) 414 – –
--------------- --------------- --------------- --------------- --------------- ---------------
(20,892) – (20,892) 9,454 11,438 –
========= ========= ========= ========= ========= =========
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 Investment 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 Investment Manager. Exposure to credit risk arises on outstanding security transactions and derivative instrument contracts and cash at bank.
Derivative instrument risk
A Derivative Instrument Charter, including an appendix entitled Derivative Risk Measurement and Management, details the risks and risk management processes used by the Investment Manager. This Charter was approved by the Board and allows the use of derivative instruments for the following purposes:
· To gain exposure to equity markets, sectors or individual investments;
· To hedge equity market risk in the Company’s investments with the intention of mitigating losses in the events market falls;
· To enhance portfolio returns by writing call and put options; and
· To take short positions in equity markets, which would benefit from a fall in the relevant market price, where the Investment Manager believes the investment is overvalued. These positions distinguish themselves from other short exposures held for hedging purposes since they are expected to add risk to the portfolio.
The risk and investment performance of these instruments are managed by an experienced, specialist derivative team of the Investment Manager using portfolio risk assessment tools for portfolio construction.
RISK SENSITIVITY ANALYSIS
Interest rate risk sensitivity analysis
Based on the financial instruments held and interest rates at the Balance Sheet date, an increase of 1.00% in interest rates throughout the year, with all other variables held constant, would have increased the loss after taxation for the year and decreased the net assets of the Company by £3,835,000 (2023: decreased the profit after taxation and decreased the net assets by £3,797,000). 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 assets and liabilities held and currency exchange rates ruling at the Balance Sheet date, a strengthening of the
2024 2023
Currency £’000 £’000
Chinese renminbi 8,519 17,467
Euro 991 948
Hong Kong dollar 77,468 82,028
Japanese yen 2,581 3,200
Taiwan dollar 692 1,791
Thai baht 40 –
US dollar 39,219 42,223
--------------- ---------------
129,510 147,657
========= =========
Based on the financial assets and liabilities held and the exchange rates ruling at the Balance Sheet date, a weakening of the
2024 2023
Currency £’000 £’000
Chinese renminbi 10,412 21,348
Euro 1,211 1,159
Hong Kong dollar 94,683 100,257
Japanese yen 3,154 3,911
Taiwan dollar 846 2,189
Thai baht 49 –
US dollar 47,935 51,606
--------------- ---------------
158,290 180,470
========= =========
Other price risk sensitivity analysis
Changes in market prices affect the profit/(loss) after taxation for the year and the net assets of the Company. Details of how the Board sets risk parameters and performance objectives are disclosed in the Strategic Report in the Annual Report.
An increase of 10% in the share prices of the listed investments held at the Balance Sheet date would have decreased the loss after taxation for the year and increased the net assets of the Company by £100,526,000 (2023: increased the profit after taxation and increased the net assets by £112,588,000). A decrease of 10% in share prices of the investments designated at fair value through profit or loss would have had an equal but opposite effect.
An increase of 10% in the valuation of unlisted investments held at the Balance Sheet date would have decreased the loss after taxation for the year and increased the net assets of the Company by £15,701,000 (2023: increased the profit after taxation and increased the net assets by £19,288,000). A decrease of 10% in the valuation would have had an equal but opposite effect.
Derivative instruments exposure sensitivity analysis
The Company invests in derivative instruments to gain or reduce exposure to the equity market. An increase of 10% in the share prices of the investments underlying the derivative instruments at the Balance Sheet date would have decreased the loss after taxation for the year and increased the net assets of the Company by £25,907,000 (2023: increased the profit after taxation and increased the net assets by £30,176,000). A decrease of 10% in share prices of the investments underlying the derivative instruments would have had an equal but 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 (l) and (m), 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. The exception is the US dollar denominated bank loan, its fair value having been calculated by discounting future cash flows at current US dollar interest rates.
2024 2023
Fair value Book value Fair value Book value
£’000 £’000 £’000 £’000
Fixed rate unsecured loan of US – – 81,092 80,857
dollar 100,000,0001
========= ========= ========= =========
1
The unsecured fixed rate loan facility for
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
Valued by reference to inputs other than quoted prices included
Level 2 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 (e), (l) and (m). The table below sets out the Company’s fair value hierarchy:
2024
Financial assets Level 1 Level 2 Level 3 Total
at fair value £’000 £’000 £’000 £’000
through profit
or loss
Investments 980,975 24,282 157,008 1,162,265
Derivative
instrument – 7,103 – 7,103
assets
--------------- --------------- --------------- ---------------
980,975 31,385 157,008 1,169,368
========= ========= ========= =========
Financial
liabilities at
fair value
through profit
or loss
Derivative
instrument (475) (12,832) – (13,307)
liabilities
========= ========= ========= =========
2023
Financial assets Level 1 Level 2 Level 3 Total
at fair value £’000 £’000 £’000 £’000
through profit
or loss
Investments 1,081,458 44,428 192,878 1,318,764
Derivative
instrument 2,492 19,821 – 22,313
assets
--------------- --------------- --------------- ---------------
1,083,950 64,249 192,878 1,341,077
========= ========= ========= =========
Financial
liabilities at
fair value
through profit
or loss
Derivative
instrument (7,271) (13,621) – (20,892)
liabilities
--------------- --------------- --------------- ---------------
Financial
liabilities at
fair value
Bank loan – (81,092) – (81,092)
========= ========= ========= =========
Level 3 investments (unlisted and delisted investments)
2024 2023
£’000 £’000
Pony.ai 42,805 48,272
DJI International 30,769 30,475
Chime Biologics 27,312 29,064
Venturous Holdings 25,602 26,015
ByteDance 24,724 24,035
Tuhu Car (moved into Level 1) – 14,024
Cutia Therapeutics (moved into Level 1) – 11,575
Beisen (moved into Level 1) – 9,418
Shanghai Yiguo – –
4 listed investments whose listings are 5,796 –
currently suspended
--------------- ---------------
157,008 192,878
========= =========
Pony.ai
Pony.ai develops artificial intelligence and autonomous driving technology solutions for transportation and is an unlisted company. The valuation at
Chime Biologics
Chime Biologics is a
ByteDance
ByteDance develops applications for smart phones and is an unlisted company. The valuation at
Shanghai Yiguo
Shanghai Yiguo operates an e-commerce platform, selling fruit and vegetables online to customers in
Companies whose listings are suspended
Four listed companies in the portfolio have had their listing suspended:
Significant holdings
Details of significant holdings are noted below in accordance with the disclosure requirements of paragraph 82 of the AIC SORP. The Company is required to provide a list of all investments at the balance sheet date with a value greater than 5% of its portfolio and at least the ten largest investments, including the value of each investment and for unlisted investments included in the list, additional detail is required as shown below. This disclosure includes turnover, pre-tax profits and net assets attributable to investors, as reported within the most recently audited financial statements of the investee companies.
Income
recognised Net assets
Pre-tax attributable to
Latest from the Turnover profit/(loss)
Financial holding in shareholders
Statements £’000 £’000 £’000
the year
Pony.ai n/a nil Information not publicly available
DJI International n/a nil Information not publicly available
Chime Biologics n/a nil Information not publicly available
========= ========= =========
2024 2023
Level 3 Level 3
Movements in level 3 investments during the year £’000 £’000
Level 3 investments at the beginning of the year 192,878 194,650
Purchases at cost – –
Sales proceeds - Venturous Holdings (2,943) –
Sales gain - Venturous Holdings 615 –
Transfers into level 3 at cost – China 17,316 –
Renaissance Holdings
Transfers out of level 3 at cost1 (35,153) (9,971)
Unrealised (loss)/profit recognised in the (15,705) 8,199
Income Statement
--------------- ---------------
Level 3 investments at the end of the year 157,008 192,878
========= =========
1 Financial instruments are transferred out of level 3 when they become listed. See above for more information.
19. Capital Resources and Gearing
The Company does not have any externally imposed capital requirements. The financial resources of the Company comprise its share capital, reserves and gearing, which are disclosed on the Balance Sheet. The Company is managed in accordance with its investment policy and in pursuit of its investment objective, both of which are detailed in the Strategic Report on in the Annual Report. The principal risks and their management are disclosed above and in Note 18 above.
The Company’s gearing at the year-end is set out below:
2024
Gross gearing Net gearing
Exposure Exposure
£’000 %1 £'000 %1
Investments 1,162,265 98.8 1,162,265 98.8
Long CFDs 412,237 35.1 412,237 35.1
--------------- --------------- --------------- ---------------
Total long
exposures before 1,574,502 133.9 1,574,502 133.9
hedges
========= ========= ========= =========
less: short
derivative
instruments (138,402) (11.8) (138,402) (11.8)
hedging the
above
--------------- --------------- --------------- ---------------
Total long
exposures after 1,436,100 122.1 1,436,100 122.1
the netting of
hedges
========= ========= ========= =========
Short CFDs 14,766 1.3 (14,766) (1.3)
Gross Asset
Exposure/net 1,450,866 123.4 1,421,334 120.8
market exposure*
--------------- --------------- --------------- ---------------
Net Assets 1,176,014 1,176,014
========= =========
Gearing2 23.4% 20.8%
========= =========
2023
Gross gearing Net gearing
Exposure Exposure
£’000 %1 £'000 %1
Investments 1,318,764 98.5 1,318,764 98.5
Long CFDs 512,674 38.3 512,674 38.3
Call options 2,161 0.2 2,161 0.2
Put options 5,097 0.4 5,097 0.4
(long exposure)
--------------- --------------- --------------- ---------------
Total long
exposures before 1,838,696 137.4 1,838,696 137.4
hedges
========= ========= ========= =========
less: short
derivative
instruments (198,903) (14.9) (198,903) (14.9)
hedging the
above
--------------- --------------- --------------- ---------------
Total long
exposures after 1,639,793 122.5 1,639,793 122.5
the netting of
hedges
========= ========= ========= =========
Short CFDs 19,086 1.4 (19,086) (1.4)
Put options 188 – (188) –
(short exposure)
--------------- --------------- --------------- ---------------
Gross Asset
Exposure/net 1,659,067 123.9 1,620,519 121.1
market exposure*
========= ========= ========= =========
Net Assets 1,338,421 1,338,421
--------------- ---------------
Gearing2 23.9% 21.1%
========= =========
* Defined in the Glossary of Terms in the Annual Report.
1 Exposure to the market expressed as a percentage of Net Assets.
2 Gearing is the amount by which Gross Asset Exposure/net market exposure exceeds Net Assets expressed as a percentage of Net Assets.
20 Transactions with the Managers and Related Parties
Details of the current fee arrangements are given in the Directors’ Report in the Annual Report. During the year, management fees of £11,421,000 (2023: £14,727,000) were payable to Fidelity. At the Balance Sheet date, management fees of £678,000 (2023: £1,266,000) were accrued and included in other payables. Fidelity also provides the Company with marketing services. The total amount payable for these services was £269,000 (2023: £263,000). At the Balance Sheet date, marketing services of £91,000 (2023: £43,000) were accrued and included in other payables.
Disclosures of the Directors’ interests in the shares of the Company and 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, £23,000 (2023: £22,000) of employers’
ALTERNATIVE PERFORMANCE MEASURES
Discount/Premium
The discount/premium is considered to be an Alternative Performance Measure. It is the difference between the Net Asset Value (“NAV”) per Ordinary Share of the Company and the Ordinary Share price expressed as a percentage of the NAV per Ordinary Share. Details of the Company’s discount/premium are in the Financial Highlights 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 19 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 17 above for further details.
Ongoing Charges Ratio
The ongoing charges ratio is considered to be an Alternative Performance Measure. It 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.
2024 2023
Investment management fees (£’000) 9,719 12,049
Other expenses (£’000) 1,238 1,101
--------------- ---------------
Ongoing charges (£’000) 10,957 13,150
========= =========
Variable management fees (£’000) 1,702 2,678
Average net assets (£’000) 1,122,589 1,338,770
--------------- ---------------
Ongoing charges ratio 0.98% 0.98%
--------------- ---------------
Ongoing charges ratio including variable 1.13% 1.18%
management fees
========= =========
The ongoing charges ratio represents the total expenses of the Company, excluding transaction costs, interest payments, tax and non-recurring expenses expressed, as a percentage of the average daily net asset value, in accordance with guidance issued by the AIC. The ongoing charges ratio, excluding the variable management fee, for the year ended
Revenue, Capital and Total Earnings per Share
Revenue, capital and total earnings 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. NAV per share total return includes reinvestment of the dividend in the NAV of the Company on the ex-dividend date. Share price total return includes the reinvestment of the net dividend in the month that the share price goes ex-dividend.
The tables below provide information relating to the NAV per share and share prices of the Company, the impact of the dividend reinvestments and the total returns for the years ended
Net asset
value per Share
2024 share price
31 March 2023 274.08p 247.50p
31 March 2024 223.71p 201.00p
Change in the year -18.4% -18.8%
Impact of dividend reinvestment +2.1% +2.4%
--------------- ---------------
Total return for the year -16.3% -16.4%
========= =========
Net asset
value per Share
2023 share Price
31 March 2022 272.52p 252.00p
31 March 2023 274.08p 247.50p
Change in the year +0.6% -1.8%
Impact of dividend reinvestment +2.0% +2.1%
--------------- ---------------
Total return for the year +2.6% +0.3%
========= =========
The Annual Financial Report Announcement is not the Company's statutory accounts. The above results for the year ended
A copy of the above results announcement will be available on the Company's website at www.fidelity.co.uk/china 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/china 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
