Fidelity Asian Values Plc - Final Results
FINAL RESULTS FOR THE YEAR ENDED
Highlights:
-- During the twelve-month period ended 31 July 2024 , Fidelity Asian Values
PLC reported a Net Asset Value (NAV) return of +3.2% and ordinary share
price total return of -1.7%.
-- The benchmark index, the MSCI All Countries Asia ex Japan Small Cap
Index, produced a total return of +13.7% over the same timeframe.
-- The Board has announced a final dividend of 14.5 pence per share.
Contacts
For further information, please contact:
Company Secretary
0207 961 4240
Financial Highlights
Assets as at 31 July 2024 2023
Gross Asset Exposure £442.9m £440.8m
Net Market Exposure £416.2m £413.7m
Total Shareholders’ Funds £392.0m £394.6m
NAV per Ordinary Share1 551.66p 549.33p
Gross Gearing1 13.0% 11.7%
Net Gearing1 6.2% 4.9%
--------------- ---------------
Share Price and Discount data at 31 July
Ordinary Share Price at year end 496.00p 520.00p
Year high 542.00p 534.00p
Year low 476.00p 423.00p
Discount to NAV per Ordinary Share at year end1 (10.1%) (5.3%)
(Discount) year low/Premium (2.2%) 0.8%
(Discount) year high (11.9%) (12.9%)
--------------- ---------------
Results for the year ended 31 July
Revenue Return per Ordinary Share1 14.24p 15.17p
Capital Return per Ordinary Share1 2.06p 39.95p
--------------- ---------------
Total Return per Ordinary Share1 16.30p 55.12p
========= =========
Ongoing Charges for the year to 31 July 0.95% 0.96%
Variable Element of Management Fee3 0.19% 0.07%
Ongoing Charges including Variable Element of 1.14% 1.03%
Management Fee for the year to 31 July1
========= =========
1 Alternative Performance Measures. See below
2 The variable element of the management fee is calculated over a rolling three year period with reference to the Benchmark Index.
Chairman’s Statement
This is my first Annual Report for the Company, having taken over as Chairman from
In the year under review, the Net Asset Value (“NAV”) total return was +3.2%, while the Comparative Index (the MSCI All Countries Asia ex Japan Small Cap Index (net) total return (in sterling terms)) returned +13.7%. The total return to shareholders was -1.7% owing to a widening in the share price discount to NAV, which moved from 5.3% on
During the period, Ajinkya Dhavale was appointed as the Company’s Co-Portfolio Manager to support and closely work alongside the Portfolio Manager,
Nitin and Ajinkya’s investment style is bottom-up, contrarian and value-focused. In simple terms this means they focus on individual company fundamentals and seek to avoid crowded trades where high company valuations may limit further upside. While this style has historically delivered differentiated investment returns, it can also lead to periods of underperformance when extreme momentum is driven by investors focusing on a narrow range of areas, as has been the case recently in countries, sectors and themes such as
You will find detailed information on the portfolio and its performance in the Portfolio Managers’ Review in the following section. In brief, however, your Portfolio Managers feel that many Indian companies, and technology stocks – particularly those related to AI – are overvalued, and they have been focusing their attention more on
As a Board, we are cognisant of the geopolitical risks around investing in
Board strategy day
As incoming Chairman of what is a relatively ‘new’ Board following a number of retirements and appointments in recent years, I was keen that we should ‘get back to basics’ and explore the factors that the independent non-executive directors of an investment company can and should be influencing. To this end, we undertook a strategy day earlier in 2024, where we reassessed discount management, competitor analysis, the rationale and mechanics of the variable management fee and its allocation to capital or revenue reserves, trading policy and liquidity considerations, and the implementation of and compliance with investment limits. One of the outcomes of the strategy day was the abovementioned decision to combine
Due diligence trip
The whole Board normally visits
Discount management and share repurchases
With geopolitical tensions remaining high in a year also filled with notable global election activity, market conditions have continued to be unsettled, leading to a degree of volatility in the Company’s share price discount to NAV, which ranged during the period between 2.2% at its narrowest and 11.9% at its widest, finishing the year at 10.1%. Between
The timing of repurchases of ordinary shares are made at the discretion of the Broker, within guidelines set by the Board and considering prevailing market conditions. Shares will only be repurchased in the market at prices below the prevailing NAV per ordinary share, thereby resulting in an accretive enhancement to the NAV per ordinary share. The shares repurchased are currently held in
Marketing and promotion
Your Board is keenly aware that share buybacks alone are unlikely to eliminate a persistent discount to NAV; discounts are a function of supply and demand and, as such, increasing demand is at least as important as absorbing excess supply. As well as appointing a new director,
Dividend
Your Portfolio Managers invest principally for long-term capital growth, but their value-oriented investment style tends to lead them towards unleveraged, cash-generative businesses that may themselves be able to pay rising dividends. In the last two years your Board has declared substantially higher dividends (
The Board is recommending a final dividend of
Gearing
Use of short positions
Fidelity’s capability in derivative instruments is also what allows your Portfolio Managers to ‘short’ stocks, which has again had a positive impact on returns in the year under review. A short position is taken on the view that the price of a stock or the value of an index will go down rather than up. Short positions are limited to a maximum of 10% of the portfolio and do not usually exceed 10 stocks; however, while relatively small in scope, this additional tool has materially added to performance since its introduction in late 2019. Total short exposure as at 31
BOARD OF DIRECTORS
As I noted above, there has been a significant number of retirements from and appointments to the Board in the past few years. Following Michael Warren’s retirement, I will be the longest-serving director, at five years, and we should now be entering a period of board stability. Your Board has a diversity of backgrounds and, we feel confident that we have an appropriate mix of skills to ensure the Company’s continued good governance.
ANNUAL GENERAL MEETING
The AGM of the Company will be held at
Copies of their presentation can be requested by email at
investmenttrusts@fil.com
or in writing to the Secretary at FIL
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. If you are unable to obtain a unique IVC and PIN from your nominee or platform, we would welcome your online participation as a guest. Once you have accessed https://web.lumiagm.com from your web browser on a tablet or computer, you will need to enter the Lumi Meeting ID which is 159-339-971 . 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.
OUTLOOK
Although the year under review has been a difficult one performance-wise, Nitin and Ajinkya continue to see good prospects for their portfolio of undervalued, quality businesses. With much of the investing world continuing to be in thrall to all things AI, your Portfolio Managers’ positioning in unloved and overlooked areas arguably carries limited downside potential, compared to other areas of the market, with the possibility of significant upside, as has been seen in previous years. As a contrarian strategy, there may be times when the portfolio is sailing into the wind, but Nitin and Ajinkya remain very disciplined and are sticking to their proven long-term investment process. You can read below more on their views and how they are expressing them in the portfolio.
Chairman
PORTFOLIO MANAGERS’ REVIEW
Ajinkya Dhavale has been appointed as the Company’s Co-Portfolio Manager to support and closely work alongside
QUESTION 1
How has the Company performed in the year to
ANSWER
During the year ended
Overall, our stock selection contributed positively to the Company’s relative performance versus the Comparative Index. However, our market selection remained a drag against the backdrop of continued divergence in country performance.
Our investment process is driven by owning good businesses run by managements we trust and investing in them only when we have ample margin of safety – this often leads us to take contrarian positions as it is easier to find undervalued businesses in countries which are out of favour with investors. Following this philosophy, we have a significant percentage of our portfolio in
Chart 1: Country attribution over 12 months to
Average weight (%) Cumulative Contribution to relative returns (%)
returns
Company Index Relative Index Stock Market
(%) (%) (%) (%) selection selection Total
China + +40.6 +13.1 +27.5 -2.8 +4.6 -10.8 -6.2
Hong Kong
India +18.6 +31.0 -12.4 +49.9 -1.0 -3.6 -4.6
Indonesia +14.6 +2.2 +12.4 -14.9 +2.4 -3.8 -1.4
Korea +9.1 +15.6 -6.5 -3.4 +1.0 +1.2 +2.2
(South)
Australia +5.2 +0.0 +5.2 0.0 -0.4 0.0 -0.4
Singapore +3.3 +5.0 -1.7 0.0 +0.5 +0.2 +0.7
Taiwan +1.4 +25.8 -24.4 +18.0 +1.2 -1.0 +0.2
Other +10.3 +7.4 +2.9 +0.1 -0.8 +0.7 -0.1
Countries
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total
Primary +103.0 +100.0 +3.0 -9.6
Assets
Cash & -3.0 0.0 -3.0 -0.9
others
--------------- --------------- --------------- ---------------
Total 100.0 100.0 0.0 -10.5
========= ========= ========= =========
Note: The table above uses figures calculated as a percentage of net assets.
Source:
QUESTION 2
What stocks have been the main contributors and detractors to performance during the period and why?
ANSWER
It was not surprising that our top three contributors relative to the Index during the 12-month period were from
In
Most of the detractors in
While these companies have detracted from performance over the 12-month review period, their valuations reflect earnings expectations that are at trough levels providing us a significant margin of safety and upside potential.
QUESTION 3
The Company’s portfolio is overweight in
ANSWER
We do not invest in countries, we invest in businesses. Our higher exposure to
We understand the concerns investors have about China’s geopolitical issues, its property downcycle and weak consumption trends. In our opinion, the housing cycle downturn has been absorbed in a large measure and its negative impact on the economy will be felt to a lower extent next year. This is part of an economic cycle correction, but sound businesses will still be around, likely to be in better shape and emerge stronger as the cycle recovers. Given current valuations, there is significant upside on owning these businesses over a 3-year horizon. The cycle in
In our opinion,
QUESTION 4
Looking beyond
ANSWER
Beyond
We have also been adding exposure to businesses in
QUESTION 5
Small cap value stocks continue to outperform small cap growth stocks over the longer term. What has driven this and do you expect the pattern to continue?
ANSWER
Small cap value stocks have performed better than small cap growth stocks over the last 25+ years. This is essentially because the small cap value stocks have grown earnings faster than small cap growth stocks.
Over 80% of our portfolio remains in these value stocks as we believe they will continue to do better based on their superior earnings growth and higher cash returns in terms of dividends.
QUESTION 6
How do you view macro and geopolitical events and the effects they will have on your portfolio?
ANSWER
Macro and geopolitical events are not central to our decision-making but we realise we cannot ignore them entirely, as companies exist within business cycles and they are impacted by geopolitical events. So, we try to factor both into our decision-making predominantly at single stock level and at portfolio risk level. These give us guard rails rather than being the main driver of decision-making. Stock picking is the mainstay of the investment process. This has been its strength, and we feel we are better placed if we ‘stick to our knitting’.
For instance, we are aware of the tensions between the
At the same time, it is helpful to reiterate that macroeconomic factors are cyclical - they come and go – if we can construct a diversified portfolio of good businesses run by competent and honest management teams and invest at a price that leaves sufficient margin of safety, we should over time be able to generate returns for our investors over the medium to long term.
QUESTION 7
How does the Company consider governance and stewardship?
ANSWER
The investment process centres around good businesses managed by good people available at a good price, which implies that we actively look for a business that solves a problem for its consumers. The ‘good people’ behind a business respect law and regulation and take care of their employees, customers, the environment, and shareholders, as well as managing their businesses responsibly. We strongly believe that only an honest and competent management team will drive the business towards creating value over the long term. It is unlikely that a management team that has not focused on shareholder returns over the last 15-20 years will suddenly start putting the shareholder at the heart of what they do.
Fidelity’s stewardship activities support the responsible allocation of the Company’s assets in two main ways: by informing the investment process at the research and investment decision-making stages, and through leveraging our ownership position in companies with the aim of effecting positive corporate change.
QUESTION 8
What is your approach to gearing and short positions? And what impact have they had on returns during the year and over the longer term?
ANSWER
The level of gearing in the Company remains a function of the number of investment ideas we find. It increases when we see more ideas than money and it reduces (or we keep a higher cash balance) when we do not find as many ideas.
Gearing has recently increased as we have found investments in
QUESTION 9
What are some of the points that are important to remind the holders of the Company?
ANSWER
We own businesses that are better quality than the market and are currently priced at cheaper valuations than the market. This has been the bed rock of our investment process for over a decade. The portfolio’s Return on Equity (“ROE”) remains at a premium to the market while the Price to Earnings ratios of our holdings are at a significant discount.
The ROE metric of the portfolio is higher than that of the market implying the Company is generating superior returns for each pound of shareholder’s equity than the market. Further the blended Price to Earnings ratio of our holdings is at a significant discount which implies that we are paying a lower price for each potential pound of future earnings by our portfolio companies compared to the market as a whole.
This is driven by our historically high exposure to
We do not predict market movements and have come to understand that markets are seldom rational in their short-term responses. Thus, we consistently focus on investing in good businesses, run by good management teams that are available at a suitable margin of safety. This is the approach that has stood the test of time generating sustainable performance for the Company in the long run and should do the same in the next few years.
Portfolio Manager
Co-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 and liquidity. The Board, with the assistance of the
The Board considers the risks listed below as the principal risks and uncertainties faced by the Company.
PRINCIPAL RISKS
1. Economic, Political and Market Risks
Trend
(
from previous year
): Increased
Description and Impact Mitigation · The Company and its assets may be affected by economic and market risks. These are market downturns, interest rate movements, deflation/inflation, exchange rate movements and market shocks. Inflation and economic instability are potentially impacting investors’ risk appetite. · The Company is exposed to several geopolitical risks. The fast-changing global geopolitical landscape is largely shaped by the ongoing effects of war conflicts, deglobalisation trends and significant supply disruption. TheMiddle East andRussia are significant · The Company’s portfolio is made up net exporters of oil, natural gas and a mainly of listed securities. The variety of soft commodities and supply Portfolio Managers’ success or failure limitations have fuelled global to protect and increase the Company’s inflation and economic instability, assets against the economic, political specifically within Western nations. and market background is core to the Macro-economic uncertainty continues to Company’s continued success. Their impact Western investment appetite. investment philosophy of stock-picking Conflict in theMiddle East provides and investing in attractively valued another source of emerging geopolitical companies aims to outperform the risk and economic instability. Comparative Index over time. The Board is provided with a detailed investment · China’s outlook for ‘controlled review which covers material economic, stabilisation’ remains intact, supported political and market risks and by targeted policy measures. The legislative changes at each Board expanding strength of the global meeting. industrial cycle is benefitting China’s exports, which are once again becoming · The Board has oversight of the the main driver of growth alongside Company’s portfolio, regularly reviews capex, while growth of consumption the impact of gearing and derivatives, remains subdued. Whilst investment from and has comfort that the portfolio is mainlandChina has increased sufficiently diversified by sector and significantly, driven by favourable number of holdings. government policies and the high dividends available from someHong Kong · Risks to which the Company is exposed shares, China’s vulnerabilities remain, to in the market and currency risk with risks related to the global outlook category are included in Note 17 to the and geopolitical tensions including the Financial Statements together with possibility of global trade conflict, summaries of the policies for managing ongoing tensions betweenSouth Korea and these risks. It is the Company’s policyNorth Korea ,South China Sea dispute and not to hedge the underlying currencies implications ofChina -Taiwan relations. of the holdings in the portfolio but rather to take the currency risk into · As the year progresses, political consideration when making investment risks could increase, heading towards decisions. the US elections during late 2024, which coupled with ongoing geopolitical conflicts, could lead to higher volatility for broader markets, and oil in particular, as well as risk of changes in foreign policies across the globe. · Most of the Company’s assets and income are denominated in currencies other than sterling which is the Company’s functional and presentation currency. As a result, movements in exchange rates may affect the sterling value of its assets and income.
2. Investment Performance Risk (including the use of Derivatives and Gearing)
Trend
(
from previous year
): Unchanged
Description and Impact Mitigation
· The Investment Manager is responsible
· The achievement of the Company’s for actively monitoring the portfolio
investment performance objective selected in accordance with the asset
relative to the market requires the allocation parameters and seeks to
taking of risk, such as investment ensure that individual stocks meet an
strategy, asset allocation and stock acceptable risk/reward profile.
selection, and may lead to NAV and
share price underperformance compared · The Board reviews Fidelity’s
to the Comparative Index and/ or peer compliance with agreed investment
group companies. restrictions; investment performance and
risk; relative performance; the
· Continued underperformance could lead portfolio’s risk profile; and whether
to the Company and its objective appropriate strategies are employed to
becoming unattractive to investors. mitigate any negative impact of
substantial changes in the markets. The
· The Company gears using derivatives Board also regularly canvasses major
including long CFDs which provide shareholders for their views with
greater flexibility and are generally respect to company matters.
cheaper than bank loans. The principal
risk is that the Portfolio Managers · The Board has put in place policies
fail to use gearing effectively, and limits to control the Company’s use
resulting in a failure to outperform in of derivatives and exposures. These are
a rising market or to underperform in a monitored daily by the Manager’s
falling market. Compliance team and regular reports are
provided to the Board. Further detail on
· Derivative instruments are used to derivative instruments risk is included
enhance investment returns, as well as in Note 17 to the Financial Statements.
for hedging and efficient portfolio
management purposes. There is a risk · The Board regularly considers the
that the use of derivatives may lead to level of gearing and gearing risk. The
higher volatility in the NAV and the Investment Policy sets the gearing
share price than might otherwise be the limits within which the Manager must
case. operate and the Board regularly
considers the level of gearing and
gearing risk.
3. Changes in Legislation, Taxation or Regulation
Trend
(
from previous year
): Increased
Description and Impact Mitigation
· Changes in legislation, taxation or
regulation, or other external influence · The Board and Manager closely monitor
that require changes to the investment regulatory, taxation and legislative
trust structure of the Company are a changes, with developments impacting the
significant risk for the Company. Company summarised in the form of
regular reporting to the Board.
· A breach of Section 1158 of the
Corporation Tax Act 2010 could lead to · The Manager monitors Section 1158
a loss of investment trust status status to ensure any issues are
resulting in the Company being subject escalated to the Board and addressed
to tax on capital gains. promptly.
· There have been increased concerns · The Manager participates in industry
about investment cost disclosures and discussions regarding regulatory changes
their impact on the industry. More impacting investment companies, and
recently, however, it should be noted regulatory developments continue to be
that the government and regulator have monitored and managed by FIL through
announced a temporary exemption for active lobbying and negotiations as well
investment companies from the EU cost as a robust change management process.
disclosure requirements.
4. Cybercrime and Information Security
Trend
(
from previous year
): Increased
Description and Impact Mitigation
· The risk is monitored by the Board
with the help of the Manager’s global
cybersecurity team and their extensive
Strategic Cyber and Information Security
programme and assurances from outsourced
suppliers.
· Cybersecurity risk from cyberattacks
or threats to the functioning of global · The Manager has established a
markets and to the Manager’s own comprehensive framework of information
business model, including its and the security policies and standards which
Company’s outsourced suppliers. provide a structured approach to
identify, prevent, and respond to
· Risk of cybercrime such as phishing, information security threats. The
remote access threats, extortion, and Company’s other service providers also
denial-of-service attacks from have similar measures in place.
geopolitically motivated parties.
· Key performance indicators and metrics
have been developed by the Manager to
monitor the overall efficacy of
cybersecurity processes and controls and
to further enhance the Manager’s
cybersecurity strategy and operational
resilience.
5. Business Continuity and Crisis Management
Trend
(
from previous year
): Increased
Description and Impact Mitigation
· The Manager has Business Continuity
and Crisis Management Frameworks in
place to deal with business disruption
and assure operational resilience. The
Board has been assured that the Manager
· There continues to be focus from has appropriate business continuity
financial services regulators around plans and the provision of services has
the world on the contingency plans of continued to be supplied without
regulated financial firms, particularly significant interruption.
given the prevalence of hybrid working
arrangements. · The Company relies on several
third-party service providers,
· Business process disruption risk from principally the Registrar, Custodian and
continued threats of cyberattacks, Depositary. They are all subject to a
geopolitical threats and natural risk-based programme of internal audits
events, such as earthquakes, resulting by the Manager and their own internal
in financial and/or reputational impact controls reports are received by the
to the Company, affecting the Manager on behalf of the Board on an
functioning of the business. annual basis. The findings are presented
to the Board and any concerns are
investigated by the Manager. The
third-party service providers have also
confirmed the implementation of
appropriate measures to ensure business
disruption is minimised.
6. Competition Risks and Marketplace Threats Impacting Business Growth
Trend
(
from previous year
): Increased
Description and Impact Mitigation · Threats facing the Company include external pressures affecting the Company’s ability to maintain and grow · The Board, the Company’s Broker and the business, and a loss of Manager closely monitor the peer group shareholders if the demand for and industry activity, and an annual investment trusts decline and the review of strategy is undertaken by the demand for passive funds and Board, to ensure that the Company holistic/digital finance offerings continues to offer a relevant product to continue to increase, particularly shareholders. within the current market environment of increased M&A activity.
7. Level of Discount to Net Asset Value
Trend
(
from previous year
): Increased
Description and Impact Mitigation
· The Board reviews the investment
strategy, investment performance and the
marketing approach, given the influence
· Due to the nature of investment of all these factors on the discount.
companies, the price of the Company’s
shares and its discount to NAV are · The Company’s share price, NAV and
factors which are not completely within discount volatility are monitored daily
the Company’s control. by the Manager and the Company’s Broker
and considered by the Board on a regular
· In considering the risk that the basis. The demand for shares can be
discount to NAV poses to shareholder influenced through good performance and
value and returns, both the absolute an active investor relations programme.
level of the discount and the amount
relative to the Company’s peer group · Repurchases of ordinary shares are
and the wider market are considered. made at the discretion of the Board,
within guidelines set by the Board, and
considering prevailing market
conditions.
8. Operational Risks
Trend
(
from previous year
): Increased
Description and Impact Mitigation
· Fidelity’s Operational Risk Management
Framework is designed to pro-actively
· Operational risks include financial prevent, identify and manage operational
losses or reputational damage from risks inherent in most activities.
inadequate internal processes, people
and systems or from external parties · Fidelity uses robust systems and
and events. procedures dedicated to its operational
processes. Its risk management structure
is designed according to the FCA’s three
lines of defence model.
9.
Trend
(
from previous year
): Decreased
Description and Impact Mitigation
· Loss of the Portfolio Manager, · The Company has a Co-Portfolio
Co-Portfolio Manager or other key Manager, Ajinkya Dhavale, who supports
individuals could lead to potential the Portfolio Manager, and has extensive
performance and/or operational issues. experience in the Asian markets and
companies and shares a common investment
· The Portfolio Manager, Nitin Bajaj , approach and complementary investment
has a differentiated style in relation experience with the Portfolio Manager.
to his peers. This style is The Portfolio Manager is also supported
intrinsically linked with the Company’s by an Investment Director, Himalee Bahl,
investment philosophy and strategy and, as a primary spokesperson for the
therefore, the Company has a key person Company. This helps strengthen the
dependency on him. investment process.
· There is also a risk that the Manager · The Manager identifies key
has inadequate succession plans for dependencies which are then addressed
other key operational individuals. through succession plans, particularly
for portfolio managers.
10. Environmental, Social and Governance (“ESG”) Risks
Trend
(
from previous year
): Decreased
Description and Impact Mitigation
· Whilst the investment portfolio does
not target or employ any set limit on
ESG investments, the Portfolio Managers
are expected to engage with companies
where sustainability issues arise.
· Investor expectations and/or
regulatory requirements related to ESG · Fidelity carries out ESG
factors of the underlying investee considerations at the fundamental
companies and the portfolio are not research level.
perceived to be met.
· The Portfolio Managers and analysts
· Whilst the Company is not labelled as carry out additional quantitative and
an ESG product, reputational damage to qualitative analysis of potential
the Company may arise from perception in investments to form a view on ESG
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.
EMERGING RISKS
The Audit Committee continues to identify any new emerging risks and take any action necessary to mitigate their potential impact. The risks identified are placed on the Company’s risk matrix and appropriately graded. This process, together with the policies and procedures for the mitigation of existing and emerging risks, is updated and reviewed regularly in the form of comprehensive reports by the Audit Committee. The Board determines the nature and extent of any risks it is willing to take to achieve its strategic objectives.
Climate change, which refers to a large scale shift in the planet’s weather patterns and average temperatures, continues to be a key emerging issue as well as a principal risk confronting asset managers and their investors. 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. The Board will continue to monitor how this may impact the Company as a risk to investment valuations and potentially to shareholder returns. The Board, together with the Manager, is also monitoring the emerging risk posted 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.
EMERGING RISKS – MANAGER’S ROLE
The Manager also has responsibility for risk management for the Company. It works with the Board to identify and manage the principal risks and emerging risks and uncertainties to ensure that the Board can continue to meet its
ANNUAL REVIEW OF FULL RISK REGISTER
The Company has a full risk register which includes less material risks which the Board reviews at least annually.
GOING CONCERN STATEMENT
The Directors have considered the Company’s investment objective, risk management policies, liquidity risk, credit risk, capital management policies and procedures, the nature of its portfolio and its expenditure and cash flow projections. The Directors, having considered the liquidity of the Company’s portfolio of investments (being mainly securities which are readily realisable) and the projected income and expenditure, are satisfied that the Company is financially sound and has adequate resources to meet all of its liabilities and ongoing expenses and continue in operational existence for the foreseeable future. The Board has, therefore, concluded that the Company has adequate resources to continue to adopt the going concern basis for the period to
Accordingly, the Financial Statements of the Company have been prepared on a going concern basis.
The prospects of the Company over a period longer than twelve months can be found in the Viability Statement below.
VIABILITY STATEMENT
In accordance with provision 31 of the 2018 UK Corporate Governance Code, the Directors have assessed the prospects of the Company over a longer period than the twelve-month period required by the “Going Concern” basis above. The Company is an investment trust with the objective of achieving long-term capital growth. The Board considers long-term to be at least five years, and accordingly, the Directors believe that five years is an appropriate investment horizon to assess the viability of the Company, although the life of the Company is not intended to be limited to this or any other period.
In making an assessment on the viability of the Company, the Board has considered the following:
· The ongoing relevance of the investment objective in prevailing market conditions;
· The Company’s level of gearing;
· The Company’s NAV and share price performance versus its Comparative Index;
· The principal and emerging risks and uncertainties facing the Company and their potential impact as set out above;
· The Company’s continuation vote;
· The future demand for the Company’s shares;
· The Company’s share price discount to the NAV;
· The liquidity of the Company’s portfolio;
· The level of income generated by the Company; and
· Future income and expenditure forecasts.
The Board regularly reviews the investment policy and considers that it remains appropriate, subject to a proposed change to the non-Asian investment limit outlined in the Notice of AGM.
The Board has concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five years based on the following considerations:
· The Investment Manager’s compliance with the Company’s investment objective and policy, its investment strategy and asset allocation;
· The Company’s portfolio mainly comprises readily realisable securities which can be sold to meet funding requirements if necessary;
· The Board’s discount management policy; and
· The ongoing processes for monitoring operating costs and income which are considered to be reasonable in comparison to the Company’s total assets.
In preparing the Financial Statements, the Directors have considered the impact of climate change, as detailed above and below. The Board has also considered the impact of regulatory changes, ongoing geopolitical tensions, and how these may affect the Company.
In addition, the Directors’ assessment of the Company’s ability to operate in the foreseeable future is included in the Going Concern Statement above.
A continuation vote takes place every five years. There is a risk that shareholders do not vote in favour of the continuation of the Company during periods when performance of the Company’s NAV and share price is poor. The last continuation vote was at the Company’s AGM held on
PROMOTING THE SUCCESS OF THE COMPANY
Under Section 172(1) of the Companies Act 2006, the Directors of a company must act in a way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to the likely consequences of any decision in the long term; the need to foster relationships with the Company’s suppliers, customers and others; the impact of the Company’s operations on the community and the environment; the desirability of the Company maintaining a reputation for high standards of business conduct; and the need to act fairly as between members of the Company.
As an externally managed investment trust, the Company has no employees or physical assets, and a number of the Company’s functions are outsourced to third parties. The key outsourced function is the provision of investment management services by the Manager, but other professional service providers support the Company by providing administration, custodial, banking and audit services. The Board considers the Company’s key stakeholders to be the existing and potential shareholders, the external appointed Manager and other third-party professional service providers. The Board considers that the interest of these stakeholders is aligned with the Company’s objective of delivering long-term capital growth to investors, in line with the Company’s stated investment objective and strategy, while providing the highest standards of legal, regulatory and commercial conduct.
The Board, with the Portfolio Managers, 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. The Board receives regular reports from the Company’s Broker which covers market activity, and how the Company compares with its peers.
The Board places great importance on communication with shareholders. The Annual General Meeting (“AGM”) provides the key forum for the Board and the Portfolio Managers to present to the shareholders on the Company’s performance and future plans and the Board encourages all shareholders to attend either in person or virtually and raise any questions or concerns. The Chairman and other Board members are available to meet shareholders as appropriate. Shareholders may also communicate with Board members at any time by writing to them at the Company’s registered office at
The Board seeks to engage with the Manager and other service providers and advisers in a constructive and collaborative way, promoting a culture of strong governance, while encouraging open and constructive debate, in order to ensure appropriate and regular challenge and evaluation. This aims to enhance service levels and strengthen relationships with service providers, with a view to ensuring shareholders’ interests are best served, by maintaining the highest standards of commercial conduct while keeping cost levels competitive.
Whilst the Company’s direct operations are limited, the Board recognises the importance of considering the impact of the Company’s investment strategy on the wider community and environment. The Board believes that a proper consideration of ESG issues aligns with the investment objective to deliver long-term capital growth, and the Board’s review of the Manager includes an assessment of their ESG approach.
In addition to ensuring that the Company’s investment objective was being pursued, key decisions and actions taken by the Directors during the reporting year, and up to the date of this report, have included:
·
As part of the Board’s succession plans, the appointment of
· Authorising the repurchase of 768,780 ordinary shares up to the date of this Annual Report in line with the Board’s discount management policy; and
·
The decision to recommend the payment of a final dividend of
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each financial period. Under that law they have elected to prepare the Financial Statements in accordance with
In preparing these Financial Statements, the Directors are required to:
· Select suitable accounting policies in accordance with Section 10 of FRS 102 and then apply them consistently;
· Make judgements and accounting estimates that are reasonable and prudent;
· Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
·
State whether applicable
· Prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time, the financial position of the Company and to enable them to ensure that the Company and the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations the Directors are also responsible for preparing a Strategic Report, a Directors’ Report, a Corporate Governance Statement and a Directors’ Remuneration Report that comply with that law and those regulations.
The Directors have delegated to the Manager the responsibility for the maintenance and integrity of the corporate and financial information included on the Company’s pages of the Manager’s website at
www.fidelity.co.uk/asianvalues
. Visitors to the website need to be aware that legislation in the
The Directors confirm that to the best of their knowledge:
·
The Financial Statements, prepared in accordance with
· The Annual Report, including the Strategic Report, includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties it faces; and
· The Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company’s performance, business model and strategy.
The Statement of Directors’ Responsibilities was approved by the Board on
Chairman
FINANCIAL STATEMENTS
Income Statement for the year ended
Year ended 31 July 2024 Year ended 31 July 2023
Revenue Capital Total Revenue Capital Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
Gains on 10 – 10,399 10,399 – 29,025 29,025
investments
(Losses)/gains
on derivative 11 – (5,073) (5,073) – 1,781 1,781
instruments
Income 3 17,605 – 17,605 17,773 – 17,773
Investment
management 4 (2,749) (744) (3,493) (2,644) (281) (2,925)
fees
Other expenses 5 (992) – (992) (988) – (988)
Foreign – 107 107 – 1,089 1,089
exchange gains
--------------- --------------- --------------- --------------- --------------- ---------------
Net return on
ordinary
activities 13,864 4,689 18,553 14,141 31,614 45,755
before finance
costs and
taxation
Finance costs 6 (2,473) – (2,473) (1,997) – (1,997)
--------------- --------------- --------------- --------------- --------------- ---------------
Net return on
ordinary
activities 11,391 4,689 16,080 12,144 31,614 43,758
before
taxation
Taxation on
return on 7 (1,203) (3,215) (4,418) (1,238) (2,882) (4,120)
ordinary
activities
--------------- --------------- --------------- --------------- --------------- ---------------
Net return on
ordinary
activities 10,188 1,474 11,662 10,906 28,732 39,638
after taxation
for the year
========= ========= ========= ========= ========= =========
Return per 8 14.24p 2.06p 16.30p 15.17p 39.95p 55.12p
ordinary share
========= ========= ========= ========= ========= =========
The Company does not have any other comprehensive income. Accordingly, the net return on ordinary activities after taxation for the year is also the total comprehensive income for the year and no separate Statement of Comprehensive Income has been presented.
The total column of this statement represents the Income Statement of the Company. The revenue and capital columns are supplementary and presented for information purposes as recommended by the Statement of Recommended Practice issued by the AIC.
No operations were acquired or discontinued in the year and all items in the above statement derive from continuing operations.
The Notes below form an integral part of these Financial Statements.
Statement of Changes in Equity for the year ended
“ Share Capital Other non- Total
Share premium redemption distributable Capital Revenue shareholders’
capital account reserve reserve reserve reserve funds
Notes £’000 £’000 £’000 £’000 £’000 £’000 £’000
Total
shareholders’ 18,895 50,501 3,197 7,367 299,562 15,055 394,577
funds at 31
July 2023
Net return on
ordinary
activities – – – – 1,474 10,188 11,662
after
taxation for
the year
Repurchase of
ordinary 14 – – – – (3,826) – (3,826)
shares
Dividend paid
to 9 – – – – – (10,399) (10,399)
shareholders
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total
shareholders’ 18,895 50,501 3,197 7,367 297,210 14,844 392,014
funds at 31
July 2024
========= ========= ========= ========= ========= ========= =========
Total
shareholders’ 18,895 50,501 3,197 7,367 273,448 14,215 367,623
funds at 31
July 2022
Net return on
ordinary
activities – – – – 28,732 10,906 39,638
after
taxation for
the year
Repurchase of
ordinary 14 – – – – (2,618) – (2,618)
shares
Dividend paid
to 9 – – – – – (10,066) (10,066)
shareholders
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total
shareholders’ 18,895 50,501 3,197 7,367 299,562 15,055 394,577
funds at 31
July 2023
========= ========= ========= ========= ========= ========= =========
The Notes below form an integral part of these Financial Statements.
Balance Sheet as at
Company number 03183919
2024 2023
Notes £’000 £’000
Fixed assets
Investments 10 378,577 377,631
Current assets
Derivative instruments 11 1,297 1,758
Debtors 12 4,379 3,556
Amounts held at futures clearing houses 4,413 3,820
and brokers
Cash at bank 9,070 13,029
--------------- ---------------
19,159 22,163
========= =========
Current liabilities
Derivative instruments 11 (2,045) (1,665)
Other creditors 13 (3,242) (3,552)
Bank overdrafts (435) –
--------------- ---------------
(5,722) (5,217)
========= =========
Net current assets 13,437 16,946
========= =========
Net assets 392,014 394,577
========= =========
Capital and reserves
Share capital 14 18,895 18,895
Share premium account 15 50,501 50,501
Capital redemption reserve 15 3,197 3,197
Other non-distributable reserve 15 7,367 7,367
Capital reserve 15 297,210 299,562
Revenue reserve 15 14,844 15,055
--------------- ---------------
Total shareholders’ funds 392,014 394,577
========= =========
Net asset value per ordinary share 16 551.66p 549.33p
========= =========
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.
Notes to the Financial Statements
1
Principal Activity
2
Accounting Policies
The Company has prepared its Financial Statements 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 a principal and an emerging risk as set out above, and have concluded that there was no further impact of climate change to be taken into account as the investments are valued based on market pricing. In line with FRS 102, investments are valued at fair value, which for the Company are quoted bid prices for investments in active markets at the balance sheet date. Investments which are unlisted are priced using market-based valuation approaches. All investments therefore reflect the market participants view of climate change risk on the investments held by the Company.
The Company’s Going Concern Statement in the Strategic Report above takes account of all events and conditions up to
b) Significant accounting estimates and judgements – The preparation of the Financial Statements requires the use of estimates and judgements. These estimates and judgements affect the reported amounts of assets and liabilities at the reporting date. While estimates are based on best judgement using information and financial data available, the actual outcome may differ from these estimates.
The key sources of estimation and uncertainty relate to the fair value of the unlisted investments.
Judgements
The Directors consider whether each fair value is appropriate following detailed review and challenge of the pricing methodology. The judgement applied in the selection of the methodology used (see Note 2 (k)) 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 the external valuer and Fidelity’s unlisted investments specialists, 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 the Other Price Risk Sensitivity in Note 17, to illustrate the effect on the Financial Statements of an over or under estimation of fair value.
The risk of an over or under estimation of fair value is greater when methodologies are applied using more subjective inputs.
c) Segmental reporting – The Company is engaged in a single segment business and, therefore, no segmental reporting is provided.
d) Presentation of the Income Statement – In order to reflect better the activities of an investment company and in accordance with guidance issued by the AIC, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been prepared alongside the Income Statement. The net revenue return after taxation for the year is the measure the Directors believe appropriate in assessing the Company’s compliance with certain requirements set out in Section 1159 of the Corporation Tax Act 2010.
e) Income – Income from equity investments is accounted for on the date on which the right to receive the payment is established, normally the ex-dividend date. Overseas dividends are accounted for gross of any tax deducted at source. Amounts are credited to the revenue column of the Income Statement. Where the Company has elected to receive its dividends in the form of additional shares rather than cash, the amount of the cash dividend foregone is recognised in the revenue column of the Income Statement. Any excess in the value of the shares received over the amount of the cash dividend is recognised in the capital column of the Income Statement. Special dividends are treated as a revenue receipt or a capital receipt depending on the facts and circumstances of each particular case.
Derivative instrument income received from dividends on long contracts for difference (“CFDs”) are accounted for on the date on which the right to receive the payment is established, normally the ex-dividend date. The amount net of tax is credited to the revenue column of the Income Statement.
Interest received on CFDs, collateral and bank deposits are accounted for on an accruals basis and credited to the revenue column of the Income Statement. Interest received on CFDs represent the finance costs calculated by reference to the notional value of the CFDs.
f) Investment management fees and other expenses – Investment management fees and other expenses are accounted for on an accruals basis and are charged as follows:
· The base investment management fee is allocated in full to revenue;
· The variable investment management fee, is charged/credited to capital as it is based on the performance of the net asset value per share relative to the Benchmark Index; and
· All other expenses are allocated in full to revenue with the exception of those directly attributable to share issues or other capital events.
g) Functional currency and foreign exchange
– The functional and reporting currency of the Company is
h) Finance costs – Finance costs comprise interest on bank 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 charged in full to the revenue column of the Income Statement.
i) Taxation – The taxation charge represents the sum of current taxation and deferred taxation.
Current taxation is taxation suffered at source on overseas income less amounts recoverable under taxation treaties. Taxation is charged or credited to the revenue column of the Income Statement, except where it relates to items of a capital nature, in which case it is charged or credited to the capital column of the Income Statement. Where expenses are allocated between revenue and capital any tax relief in respect of the expenses is allocated between revenue and capital returns on the marginal basis using the Company’s effective rate of corporation tax for the accounting period. The Company is an approved
Deferred taxation is the taxation expected to be payable or recoverable on timing differences between the treatment of certain items for accounting purposes and their treatment for the purposes of computing taxable profits. Deferred taxation is based on tax rates that have been enacted or substantively enacted when the taxation is expected to be payable or recoverable. Deferred tax assets are only recognised if it is considered more likely than not that there will be sufficient future taxable profits to utilise them.
j) Dividend paid – Dividends payable to equity shareholders are recognised when the Company’s obligation to make payment is established.
k) Investments – The Company’s business is investing in financial instruments with a view to profiting from their total return in the form of income and long-term capital growth. This portfolio of investments is managed and its performance evaluated on a fair value basis, in accordance with a documented investment strategy, and information about the portfolio is provided on that basis to the Company’s Board of Directors. Investments are measured at fair value with changes in fair value recognised in profit or loss, in accordance with the provisions of both Section 11 and Section 12 of FRS 102. The fair value of investments is initially taken to be their cost and is subsequently measured as follows:
· Listed investments are valued at bid prices, or last market prices, depending on the convention of the exchange on which they are listed; and
· Unlisted investments are not quoted, or are not frequently traded, and are stated at the best estimate of fair value. The Manager’s Fair Value Committee (“FVC”), which is independent of the Portfolio Managers’ team, meets quarterly to determine the fair value of unlisted investments. These are based on the principles outlined in Note 2 (b).
The unlisted investments are valued at fair value following a detailed review and appropriate challenge by the Directors of the pricing methodology proposed by the FVC.
The FVC provide a recommendation of fair values to the Directors based on recognised valuation techniques that take account of the cost of the investment, recent arm’s length transactions in the same or similar investments and financial performance of the investment since purchase. Consideration is given to the input received from the
In accordance with the AIC SORP, the Company includes transaction costs, incidental to the purchase or sale of investments, within gains on investments in the capital column of the Income Statement and has disclosed these costs in Note 10.
l) Derivative instruments – When appropriate, permitted transactions in derivative instruments are used. Derivative transactions into which the Company may enter include long and short CFDs, futures, options and forward currency contracts. Derivatives are classified as other financial instruments and are initially accounted and measured at fair value on the date the derivative contract is entered into and subsequently measured at fair value as follows:
· Long and short CFDs – the difference between the strike price and the value of the underlying shares in the contract;
· Futures – the difference between the contract price and the quoted trade price;
· Forward currency contracts – valued at the appropriate quoted forward foreign exchange rate ruling at the Balance Sheet date; and
· Options – the quoted trade price for the contract.
Where transactions are used to protect or enhance income, if the circumstances support this, the income and expenses derived are included in net income in the revenue column of the Income Statement. Where such transactions are used to protect or enhance capital, if the circumstances support this, the income and expenses derived are included in gains on derivative instruments in the capital column of the Income Statement. Any positions on such transactions open at the year end are reflected on the Balance Sheet at their fair value within current assets or current liabilities.
m) Debtors – Debtors include securities sold for future settlement, amounts receivable on the settlement of derivatives, accrued income, taxation recoverable and other debtors and prepayments incurred in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business, if longer) they are classified as current assets. If not, they are presented as non-current assets. They are recognised initially at fair value and, where applicable, subsequently measured at amortised cost using the effective interest rate method.
n) Amounts held at futures clearing houses and brokers – These are amounts held in segregated accounts as collateral on behalf of brokers and are carried at amortised cost.
o) Other creditors – Other creditors include securities purchased for future settlement, Indian capital gains tax payable, short CFD dividends payable, investment management fees, secretarial and administration fees and other creditors and expenses accrued in the ordinary course of business. If payment is due within one year or less (or in the normal operating cycle of the business, if longer) they are classified as current liabilities. If not, they are presented as non-current liabilities. They are recognised initially at fair value and, where applicable, subsequently measured at amortised cost using the effective interest rate method.
p) Capital reserve – The following are accounted for in the capital reserve:
· Gains and losses on the disposal of investments and derivative instruments;
· Changes in the fair value of investments and derivative instruments held at the year end;
· Foreign exchange gains and losses of a capital nature;
· Variable element of management fee;
· Dividends receivable which are capital in nature;
· Other expenses which are capital in nature; and
· Taxation charged or credited relating to items which are capital in nature.
Technical guidance issued by the
3 Income
Year ended Year ended
31.07.24 31.07.23
£’000 £’000
Investment income
Overseas dividends 14,009 14,847
Overseas scrip dividends 172 266
Interest on securities 584 164
--------------- ---------------
14,765 15,277
========= =========
Derivative income
Dividends received on long CFDs 1,797 1,743
Interest received on CFDs 462 258
--------------- ---------------
2,259 2,001
========= =========
Other interest
Interest received on collateral and bank 581 495
deposits
--------------- ---------------
Total income 17,605 17,773
========= =========
Special dividends of £1,827,000 have been recognised in capital during the year (2023: £420,000).
4 Investment Management Fees
Year ended 31 July 2024 Year ended 31 July 2023
Revenue Capital1 Total Revenue Capital1 Total
£’000 £’000 £’000 £’000 £’000 £’000
Investment 2,749 744 3,493 2,644 281 2,925
management fees
========= ========= ========= ========= ========= =========
1 For the calculation of the variable management fee, the Company’s NAV return was compared to the Benchmark Index return on a rolling three year basis.
The Company charges base investment management fees to revenue at an annual rate of 0.70% of net assets. In addition, there is +/-0.20% variation fee based on the Company’s NAV per ordinary share performance relative to the Company’s Benchmark Index which is charged/credited to capital. Fees are payable monthly in arrears and are calculated on a daily basis.
5 Other Expenses
Year ended Year ended
31.07.24 31.07.23
£’000 £’000
Allocated to revenue:
AIC fees 21 21
Custody fees 73 85
Depositary fees 31 30
Directors’ expenses 54 35
Directors’ fees1 189 193
Legal and professional fees 189 161
Marketing expenses 172 195
Printing and publication expenses 73 86
Registrars’ fees 44 38
Secretarial and administration fees payable to 75 75
the Investment Manager
Sundry other expenses 20 21
Fees payable to the Company's Independent
Auditor for the audit of the Financial 51 48
Statements
--------------- ---------------
992 988
========= =========
1 Details of the breakdown of Directors’ fees are disclosed in the Directors’ Remuneration Report.
6 Finance Costs
Year ended Year ended
31.07.24 31.07.23
£’000 £’000
Interest on bank overdrafts 1 2
Interest paid on CFDs 2,147 1,788
Dividends paid on short CFDs 325 207
--------------- ---------------
2,473 1,997
========= =========
7 Taxation on Return on Ordinary Activities
Year ended 31 July 2024 Year ended 31 July 2023
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
a)
Analysis
of the
taxation
charge
for the
year
Overseas 1,203 – 1,203 1,238 – 1,238
taxation
Indian
capital – 3,215 3,215 – 2,882 2,882
gains
tax
--------------- --------------- --------------- --------------- --------------- ---------------
Taxation
charge
for the 1,203 3,215 4,418 1,238 2,882 4,120
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 July 2024 Year ended 31 July 2023
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Net return
on ordinary
activities 11,391 4,689 16,080 12,144 31,614 43,758
before
taxation
Net return
on ordinary
activities
before
taxation
multiplied
by the
standard 2,848 1,172 4,020 2,551 6,642 9,193
rate of UK
corporation
tax of
25.00%
(2023:
blended
rate of
21.01%)
Effects of:
Capital
gains not – (1,358) (1,358) – (6,701) (6,701)
taxable1
Income not (3,464) – (3,464) (3,137) – (3,137)
taxable
Excess
management 620 186 806 586 59 645
expenses
Expense
relief for (4) – (4) – – –
overseas
taxation
Overseas 1,203 – 1,203 1,238 – 1,238
taxation
Indian
capital – 3,215 3,215 – 2,882 2,882
gains tax2
--------------- --------------- --------------- --------------- --------------- ---------------
Taxation
charge for
the year 1,203 3,215 4,418 1,238 2,882 4,120
(see Note
7a)
========= ========= ========= ========= ========= =========
1
The Company is exempt from
2 The Indian capital gains tax charge is composed of £1,081,000 (2023: £527,000) paid in the period and £2,134,000 (2023: £2,355,000) deferred until such time as the Indian investments are sold.
c) Deferred taxation
A deferred tax asset of £9,432,000 (2023: £8,626,000), in respect of excess management expenses of £35,457,000 (2023: £32,235,000) and excess interest paid of £2,271,000 (2023: £2,271,000), has not been recognised as it is unlikely that there will be sufficient future taxable profits to utilise these expenses.
The
8 Return per Ordinary Share
Year ended Year ended
31.07.24 31.07.23
Revenue return per ordinary share 14.24p 15.17p
Capital return per ordinary share 2.06p 39.95p
--------------- ---------------
Total return per ordinary share 16.30p 55.12p
========= =========
The return per ordinary share is based on the net return on ordinary activities after taxation for the year divided by the weighted average number of ordinary shares in issue during the year, as shown below:
£’000 £’000
Net revenue return on ordinary activities after 10,188 10,906
taxation
Net capital return on ordinary activities after 1,474 28,732
taxation
--------------- ---------------
Net total return on ordinary activities after 11,662 39,638
taxation
========= =========
Number Number
Weighted average number of ordinary shares held outside of 71,551,097 71,912,335
Treasury
========= =========
9 Dividends Paid to Shareholders
Year ended Year ended
31.07.24 31.07.23
£’000 £’000
Dividend paid
Dividend of 14.5 pence per ordinary share paid 10,399 –
for the year ended 31 July 2023
Dividend of 14.0 pence per ordinary share paid – 10,066
for the year ended 31 July 2022
--------------- ---------------
10,399 10,066
========= =========
Dividend proposed
Dividend proposed of 14.5 pence per ordinary 10,204 –
share for the year ended 31 July 2024
Dividend proposed of 14.5 pence per ordinary – 10,415
share for the year ended 31 July 2023
--------------- ---------------
10,204 10,415
========= =========
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
Listed investments 378,517 376,751
Unlisted investments 60 880
--------------- ---------------
Investments at fair value 378,577 377,631
========= =========
Opening book cost 374,514 336,727
Opening investment holding gains 3,117 2,118
--------------- ---------------
Opening fair value 377,631 338,845
========= =========
Movements in the year
Purchases at cost 217,080 209,419
Sales – proceeds (226,533) (199,658)
Gains on investments 10,399 29,025
--------------- ---------------
Closing fair value 378,577 377,631
========= =========
Closing book cost 406,135 374,514
Closing investment holding (losses)/gains (27,558) 3,117
--------------- ---------------
Closing fair value 378,577 377,631
========= =========
The Company received £226,533,000 (2023: £199,658,000) from investments sold in the year. The book cost of these investments when they were purchased was £185,459,000 (2023: £171,632,000). These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of the investments.
Investment transaction costs
Transaction costs incurred in the acquisition and disposal of investments, which are included in the gains on the investments above, were as follows:
Year ended Year ended
31.07.24 31.07.23
£’000 £’000
Purchases transaction costs 249 311
Sales transaction costs 410 416
--------------- ---------------
659 727
========= =========
11 Derivative Instruments
Year ended Year ended
31.07.24 31.07.23
£’000 £’000
(Losses)/gains on derivative instruments
Realised (losses)/gains on long CFD positions (6,842) 393
closed
Realised gains/(losses) on short CFD positions 2,417 (876)
closed
Realised losses on futures contracts closed (62) (109)
Realised gains on options contracts closed 1,136 951
Realised gains on forward currency contracts – 118
Movement in investment holding (losses)/gains on (2,113) 1,016
long CFDs
Movement in investment holding gains/(losses) on 909 (261)
short CFDs
Movement in investment holding (losses)/gains on (162) 270
futures
Movement in investment holding (losses)/gains on (356) 233
options
Movement in investment holding gains on forward – 46
currency contracts
--------------- ---------------
(5,073) 1,781
========= =========
2024 2023
Fair value Fair value
£’000 £’000
Derivative instruments recognised on the Balance
Sheet
Derivative instrument assets 1,297 1,758
Derivative instrument liabilities (2,045) (1,665)
--------------- ---------------
(748) 93
========= =========
2024 2023
Asset Asset
Fair value exposure Fair value exposure
£’000 £’000 £’000 £’000
At the year end
the Company held
the following
derivative
instruments:
Long CFDs (1,315) 48,144 798 44,089
Long future – – 172 4,061
Call options 208 2,805 – –
(long exposure)
Put options – – (156) 1,466
Short CFDs 373 12,995 (536) 10,586
Short future – – (10) 1,292
Call options (14) 374 (175) 1,705
(short exposure)
--------------- --------------- --------------- ---------------
(748) 64,318 93 63,199
========= ========= ========= =========
12 Debtors
2024 2023
£’000 £’000
Securities sold for future settlement 2,733 1,366
Amounts receivable on settlement of derivatives 66 162
Accrued income 1,162 1,572
Taxation recoverable 302 315
Other debtors and prepayments 116 141
--------------- ---------------
4,379 3,556
========= =========
13 Other Creditors
2024 2023
£’000 £’000
Securities purchased for future settlement 201 598
Indian capital gains tax payable 2,134 2,355
Amounts payable on short CFD dividends 214 –
Creditors and accruals 693 599
--------------- ---------------
3,242 3,552
========= =========
14 Share Capital
2024 2023
Nominal Nominal
Number of value Number of value
shares £’000 shares £’000
Issued, allotted
and fully paid
Ordinary shares
of 25 pence each
held outside of
Treasury
Beginning of the 71,829,336 17,958 72,398,336 18,100
year
Ordinary shares
repurchased into (768,780) (192) (569,000) (142)
Treasury
--------------- --------------- --------------- ---------------
End of the year 71,060,556 17,766 71,829,336 17,958
========= ========= ========= =========
Ordinary shares
of 25 pence each
held in
Treasury1
Beginning of the 3,751,553 937 3,182,553 795
year
Ordinary shares
repurchased into 768,780 192 569,000 142
Treasury
--------------- --------------- --------------- ---------------
End of the year 4,520,333 1,129 3,751,553 937
========= ========= ========= =========
Total share 18,895 18,895
capital
========= =========
1
Ordinary shares held in
The cost of ordinary shares repurchased into
15 Capital and Reserves
Share Capital Other non- Total
Share premium redemption distributable Capital Revenue shareholders’
capital account reserve reserve reserve reserve funds
£’000 £’000 £’000 £’000 £’000 £’000 £’000
At 1 August 18,895 50,501 3,197 7,367 299,562 15,055 394,577
2023
Gains on
investments – – – – 10,399 – 10,399
(see Note
10)
Losses on
derivative
instruments – – – – (5,073) – (5,073)
(see Note
11)
Foreign
exchange – – – – 107 – 107
gains
Investment
management – – – – (744) – (744)
fees (see
Note 4)
Indian
capital – – – – (3,215) – (3,215)
gains tax
(see Note 7)
Revenue
return on
ordinary
activities – – – – – 10,188 10,188
after
taxation for
the year
Dividend
paid to – – – – – (10,399) (10,399)
shareholders
(see Note 9)
Repurchase
of ordinary – – – – (3,826) – (3,826)
shares (see
Note 14)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 July 18,895 50,501 3,197 7,367 297,210 14,844 392,014
2024
========= ========= ========= ========= ========= ========= =========
At 1 August 18,895 50,501 3,197 7,367 273,448 14,215 367,623
2022
Gains on
investments – – – – 29,025 – 29,025
(see Note
10)
Gains on
derivative
instruments – – – – 1,781 – 1,781
(see Note
11)
Foreign
exchange – – – – 1,089 – 1,089
gains
Investment
management – – – – (281) – (281)
fees (see
Note 4)
Indian
capital – – – – (2,882) – (2,882)
gains tax
(see Note 7)
Revenue
return on
ordinary
activities – – – – – 10,906 10,906
after
taxation for
the year
Dividend
paid to – – – – – (10,066) (10,066)
shareholders
(see Note 9)
Repurchase
of ordinary – – – – (2,618) – (2,618)
shares (see
Note 14)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 July 18,895 50,501 3,197 7,367 299,562 15,055 394,577
2023
========= ========= ========= ========= ========= ========= =========
The capital reserve balance at
16 Net Asset Value per Ordinary Share
The calculation of the net asset per ordinary share is based on the total shareholders’ funds divided by the number of ordinary shares held outside of
2024 2023
Total shareholders’ funds £392,014,000 £394,577,000
Ordinary shares held outside of Treasury at year end 71,060,556 71,829,336
Net asset value per ordinary share 551.66p 549.33p
=========== ===========
It is the Company’s policy that shares held in
17 Financial Instruments
Management of risk
The Company’s investing activities in pursuit of its investment objective involve certain inherent risks. The Board confirms that there is an ongoing process for identifying, evaluating and managing the risks faced by the Company. The Board with the assistance of the Manager, has developed a risk matrix which, as part of the internal control process, identifies the risks that the Company faces. Principal risks identified are economic, political and market, investment performance (including the use of derivatives and gearing), changes in legislation, taxation or regulation, cybercrime and information security, business continuity and crisis management, competition and marketplace threats impacting business growth, level of discount to NAV, operational, key person and environmental, social and governance (“ESG”). Risks are identified and graded in this process, together with steps taken in mitigation, and are updated and reviewed on an ongoing basis. These risks and how they are identified, evaluated and managed are shown in the Strategic Report.
This Note 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 and corporate bonds held in accordance with the Company’s investment objective and policies;
· Derivative instruments which comprise CFDs, forward currency contracts, futures and options on listed stocks and equity indices; and
· Cash, liquid resources and short-term debtors and creditors that arise from its operations.
The risks identified arising from the Company’s financial instruments are market price risk (which comprises interest rate risk, foreign currency risk and other price risk), liquidity risk, counterparty risk, credit risk and derivative instruments risk. The Board reviews and agrees policies for managing each of these risks, which are summarised below. These policies are consistent with those followed last year.
Market price risk
Interest rate risk
The Company principally finances its operations through its share capital and reserves. In addition, the Company has gearing through the use of derivative instruments. The level of gearing is reviewed by the Board and the Portfolio Managers. The Company is exposed to a financial risk arising as a result of any increases in interest rates associated with the funding of the derivative instruments.
Interest rate risk exposure
The values of the Company’s financial instruments that are exposed to movements in interest rates are shown below:
2024 2023
£’000 £’000
Exposure to financial instruments that bear
interest
Long CFDs – exposure less fair value 49,459 43,291
Bank overdrafts 435 –
--------------- ---------------
49,894 43,291
========= =========
Exposure to financial instruments that earn
interest
Short CFDs – exposure plus fair value 13,368 10,050
Cash at bank 9,070 13,029
Amounts held at futures clearing houses and 4,413 3,820
brokers
--------------- ---------------
26,851 26,899
========= =========
Net exposure to financial instruments that bear (23,043) (16,392)
interest
========= =========
Foreign currency risk
The Company’s net return on ordinary activities after taxation for the year and its net assets can be affected by foreign exchange rate movements because the Company has income, assets and liabilities which are denominated in currencies other than the Company’s functional currency which is
Three principal areas have been identified where foreign currency risk could impact the Company:
· Movements in currency exchange rates affecting the value of investments and derivative instruments;
· Movements in currency exchange rates affecting short-term timing differences; and
· Movements in currency exchange rates affecting income received.
Currency exposure of financial assets
The currency exposure profile of the Company’s financial assets is shown below:
2024
Long
exposure to
Investments derivative Cash at
at fair value instruments1 Debtors2 bank Total
Currency £’000 £’000 £’000 £’000 £’000
Hong Kong 85,219 42,392 648 – 128,259
dollar
Indian 67,191 – 4,493 19 71,703
rupee
Indonesian 62,226 – – – 62,226
rupiah US dollar 41,115 3,358 2,307 8,851 55,631
South 51,091 – 14 89 51,194
Korean won
Australian 18,557 3,223 926 – 22,706
dollar
Singapore 10,789 1,976 – – 12,765
dollar
Taiwan 11,113 – 301 86 11,500
dollar
Chinese 9,900 – – – 9,900
renminbi
Philippine 6,928 – 3 – 6,931
peso Thai baht 4,109 – – – 4,109
Sri Lankan 3,959 – – – 3,959
rupee
Other
overseas 6,380 – – – 6,380
currencies
UK – – 100 25 125
sterling
--------------- --------------- --------------- --------------- ---------------
378,577 50,949 8,792 9,070 447,388
========= ========= ========= ========= =========
1 The exposure to the market of long CFDs and call options.
2 Debtors include amounts held at futures clearing houses and brokers.
2023
Long
exposure to
Investments derivative Cash at
at fair value instruments1 Debtors2 bank Total
Currency £’000 £’000 £’000 £’000 £’000
Hong Kong 105,426 28,575 1,517 89 135,607
dollar
Indian 82,090 – 3,260 1,351 86,701
rupee US dollar 27,358 14,980 2,077 11,289 55,704
Indonesian 51,868 – – – 51,868
rupiah
South 33,540 12 7 – 33,559
Korean won
Australian 19,017 3,303 – 213 22,533
dollar
Singapore 12,934 2,746 – – 15,680
dollar
Taiwan 14,861 – 377 – 15,238
dollar
Chinese 14,109 – – 87 14,196
renminbi
Philippine 4,361 – – – 4,361
peso
Malaysian 3,832 – – – 3,832
ringgit
Sri Lankan 3,423 – – – 3,423
rupee
Other
overseas 4,812 – 11 – 4,823
currencies
UK – – 127 – 127
sterling
--------------- --------------- --------------- --------------- ---------------
377,631 49,616 7,376 13,029 447,652
========= ========= ========= ========= =========
1 The exposure to the market of long CFDs long futures and put options.
2 Debtors include amounts held at futures clearing houses and brokers.
Currency exposure of financial liabilities
The Company principally finances its investment activities through its ordinary share capital and reserves. The Company’s financial liabilities comprise short positions on derivative instruments and other payables. The currency profile of these financial liabilities is shown below:
2024
Short
exposure to
derivative Other Bank
instruments1 creditors overdrafts Total
Currency £’000 £’000 £’000 £’000
US dollar 9,665 230 – 9,895
Hong Kong dollar 3,704 216 435 4,355
Indian rupee – 2,134 – 2,134
UK sterling – 630 – 630
Korean won – 31 – 31
Singapore dollar – 1 – 1
--------------- --------------- --------------- ---------------
13,369 3,242 435 17,046
========= ========= ========= =========
1 The exposure to the market of short CFDs and call options.
2023
Short
exposure to
derivative Other Bank
instruments1 creditors overdrafts Total
Currency £’000 £’000 £’000 £’000
US dollar 12,957 233 – 13,190
Indian rupee – 2,355 – 2,355
Hong Kong dollar 626 41 – 667
Korean won – 326 – 326
Indonesian – 64 – 64
rupiah
Singapore dollar – 1 – 1
UK sterling – 532 – 532
--------------- --------------- --------------- ---------------
13,583 3,552 – 17,135
========= ========= ========= =========
1 The exposure to the market of short CFDs, short futures and call options.
Other price risk
Other price risk arises mainly from uncertainty about future prices of financial instruments used in the Company’s business. It represents the potential loss the Company might suffer through holding market positions in the face of price movements.
The Board meets quarterly to consider the asset allocation of the portfolio and the risk associated with particular industry sectors within the parameters of the investment objective.
The Portfolio Managers are responsible for actively monitoring the existing portfolio selected in accordance with the overall asset allocation parameters described above and seeks to ensure that individual stocks also meet an acceptable risk/reward profile. Other price risks arising from derivative positions, mainly due to the underlying exposures, are estimated using Value at Risk and Stress Tests as set out in the Company’s internal Risk Management Process Document.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulties in meeting obligations associated with financial liabilities. The Company’s assets mainly comprise readily realisable securities and derivative instruments which can be sold easily to meet funding commitments if necessary. Short-term flexibility, if required, is achieved by the use of a bank overdraft.
Liquidity risk exposure
At
Counterparty risk
Certain derivative instruments in which the Company may invest are not traded on an exchange but instead will be traded between counterparties based on contractual relationships, under the terms outlined in the International Swaps and Derivatives Association’s (“ISDA”) market standard derivative legal documentation. These are known as Over the Counter (“OTC”) trades. As a result, the Company is subject to the risk that a counterparty may not perform its obligations under the related contract. In accordance with the risk management process which the Manager employs, the Manager will seek to minimise such risk by only entering into transactions with counterparties which are believed to have an adequate credit rating at the time the transaction is entered into, by ensuring that formal legal agreements covering the terms of the contract are entered into in advance, and through adopting a counterparty risk framework which measures, monitors and manages counterparty risk by the use of internal and external credit agency ratings and by evaluating derivative instrument credit risk exposure.
For OTC and exchange traded derivative transactions, collateral is used to reduce the risk of both parties to the contract. Collateral is managed on a daily basis for all relevant transactions.
At
£4,413,000 (2023: £3,820,000), shown as amounts held at futures clearing houses and brokers on the Balance Sheet, was held by the Company in a segregated collateral account, on behalf of the brokers, to reduce the credit risk exposure of the brokers. This collateral is comprised of: UBS AG £3,019,000 (2023: £3,346,000) in cash,
Credit risk
Financial instruments may be adversely affected if any of the institutions with which money is deposited suffer insolvency or other financial difficulties. All transactions are carried out with brokers that have been approved by the Manager and are settled on a delivery versus payment basis. Limits are set on the amount that may be due from any one broker and are kept under review by the Manager. Exposure to credit risk arises on unsettled security transactions and derivative instrument contracts and cash at bank.
Derivative instruments risk
The risks and risk management processes which result from the use of derivative instruments, are set out in a Risk Management Process Document. Derivative instruments are used by the Manager for the following purposes:
· To gain unfunded long exposure to equity markets, sectors or single stocks. Unfunded exposure is exposure gained without an initial flow of capital;
· To hedge equity market risk using derivatives with the intention of at least partially mitigating losses in the exposures of the Company’s portfolio as a result of falls in the equity market; and
· To position short exposures in the Company’s portfolio. These uncovered exposures benefit from falls in the prices of shares which the Portfolio Managers believes to be over valued. These positions, therefore, distinguish themselves from other short exposures held for hedging purposes since they are expected to add risk to the portfolio.
RISK SENSITIVITY ANALYSIS
Interest rate risk sensitivity analysis
Based on the financial instruments held and interest rates at
Foreign currency risk sensitivity analysis
Based on the financial instruments held and currency exchange rates as at the Balance Sheet date, with all other variables held constant, a 10% strengthening of the
2024 2023
Currency £’000 £’000
Hong Kong dollar 11,264 12,267
Indian rupee 6,324 7,668
Indonesian rupiah 5,657 4,709
South Korean won 4,651 3,021
US dollar 4,158 3,865
Australian dollar 2,064 2,048
Singapore dollar 1,160 1,425
Taiwan dollar 1,045 1,385
Chinese renminbi 900 1,291
Philippine peso 630 396
Thai baht 374 277
Sri Lankan rupee 360 311
Other overseas currencies 580 509
--------------- ---------------
39,167 39,172
=========== ===========
Based on the financial instruments held and currency exchange rates as at the Balance Sheet date, with all other variables held constant, a 10% weakening of the
2024 2023
Currency £’000 £’000
Hong Kong dollar 13,767 14,993
Indian rupee 7,730 9,372
Indonesian rupiah 6,914 5,756
South Korean won 5,685 3,693
US dollar 5,082 4,724
Australian dollar 2,523 2,504
Singapore dollar 1,418 1,742
Taiwan dollar 1,278 1,693
Chinese renminbi 1,100 1,577
Philippine peso 770 485
Thai baht 457 338
Sri Lankan rupee 440 380
Other overseas currencies 709 623
--------------- ---------------
47,873 47,880
=========== ===========
Other price risk – exposure to investments sensitivity analysis
Based on the listed investments held and share prices at
An increase of 10% in the valuation of unlisted investments held at
Other price risk – net exposure to derivative instruments sensitivity analysis
Based on the derivative instruments held and share prices at
Fair Value of Financial Assets and Liabilities
Financial assets and liabilities are stated in the Balance Sheet at values which are not materially different to their fair values. As explained in Notes 2 (k) and (l), investments and derivative instruments are shown at fair value. In the case of cash at bank, book value approximates to fair value due to the short maturity of the instruments.
Fair Value Hierarchy
The Company is required to disclose the fair value hierarchy that classifies its financial instruments measured at fair value at one of three levels, according to the relative reliability of the inputs used to estimate the fair values.
Classification Input
Level 1 Valued using quoted prices in active markets for identical assets
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 (k) and (l). The table below sets out the Company’s fair value hierarchy:
2024
Financial
assets at Level 1 Level 2 Level 3 Total
fair value £’000 £’000 £’000 £’000
through
profit or
loss
Investments 358,503 19,028 1,046 378,577
Derivative
instrument 131 1,166 – 1,297
assets
------------------ ------------------ ------------------ ------------------
358,634 20,194 1,046 379,874
=========== =========== =========== ===========
Financial
liabilities
at fair
value
through
profit or
loss
Derivative
instrument (14) (2,031) – (2,045)
liabilities
=========== =========== =========== ===========
2023
Financial
assets at Level 1 Level 2 Level 3 Total
fair value £’000 £’000 £’000 £’000
through
profit or
loss
Investments 367,312 9,439 880 377,631
Derivative
instrument 172 1,586 – 1,758
assets
------------------ ------------------ ------------------ ------------------
367,484 11,025 880 379,389
=========== =========== =========== ===========
Financial
liabilities
at fair
value
through
profit or
loss
Derivative
instrument (341) (1,324) – (1,665)
liabilities
=========== =========== =========== ===========
The table below sets out the movements in level 3 financial instruments during the year:
Year ended Year ended
31.07.24 31.07.23
£’000 £’000
Beginning of the year 880 1,591
Transfers into level 3 at cost – Interojo1 1,404 –
Transfers out of level 3 at cost – Tuhu (1,049) –
Car2
Movement in investment holding losses (189) (711)
------------------ ------------------
End of the year 1,046 880
=========== ===========
1 Financial instruments are transferred into level 3 on the date they are suspended or when they have not traded for thirty days.
2 Financial instruments are transferred out of level 3 when they become listed.
Below are details of the four investments which fall into level 3 of which the first two investments are unlisted and the latter two are suspended from trading.
Chime Biologics
Chime Biologics is a
Eden Biologics
Eden Biologics develops biosimilars and is also engaged in providing process development and contract manufacturing solutions to the biopharmaceutical industry and is an unlisted company. On
Interojo
Interojo is a Korean-based company that manufactures and markets contact lenses. The company was suspended from trading on the
18 Capital Resources and Gearing
The Company does not have any externally imposed capital requirements. The financial resources of the Company comprise its share capital and reserves, as disclosed in the Balance Sheet above and any gearing, which is managed by the use of derivative instruments. Financial resources are managed in accordance with the Company’s investment policy and in pursuit of its investment objective, both of which are detailed in the Strategic Report. The principal risks and their management are disclosed in the Strategic Report and in Note 17.
The Company’s gross and net gearing at the year end is set out above:
2024
Gross gearing Net gearing
Asset Asset
exposure exposure
£’000 %1 £’000 %1
Investments 378,577 96.6 378,577 96.6
Long CFDs 48,144 12.3 48,144 12.3
Call options
(long 2,805 0.7 2,805 0.7
exposure)
------------------ ------------------ ------------------ ------------------
Total long 429,526 109.6 429,526 109.6
exposures
=========== =========== =========== ===========
Short CFDs 12,995 3.3 (12,995) (3.3)
Call options
(short 374 0.1 (374) (0.1)
exposure)
------------------ ------------------ ------------------ ------------------
Gross asset
exposure/net 442,895 113.0 416,157 106.2
market
exposure
=========== =========== =========== ===========
Shareholders’ 392,014 392,014
funds
=========== ===========
Gearing2 13.0% 6.2%
=========== ===========
1 Asset exposure to the market expressed as a percentage of shareholders’ funds.
2 Gearing is the amount by which gross asset exposure/net market exposure exceeds shareholders’ funds expressed as a percentage of shareholders’ funds.
2023
Gross gearing Net gearing
Asset Asset
exposure exposure
£’000 %1 £’000 %1
Investments 377,631 95.7 377,631 95.7
Long CFDs 44,089 11.2 44,089 11.2
Long future 4,061 1.0 4,061 1.0
Put options 1,466 0.4 1,466 0.4
------------------ ------------------ ------------------ ------------------
Total long 427,247 108.3 427,247 108.3
exposures
=========== =========== =========== ===========
Short CFDs 10,586 2.7 (10,586) (2.7)
Call options 1,705 0.4 (1,705) (0.4)
Short future 1,292 0.3 (1,292) (0.3)
------------------ ------------------ ------------------ ------------------
Gross asset
exposure/net 440,830 111.7 413,664 104.9
market
exposure
=========== =========== =========== ===========
Shareholders’ 394,577 394,577
funds
=========== ===========
Gearing2 11.7% 4.9%
=========== ===========
1 Asset exposure to the market expressed as a percentage of shareholders’ funds.
2 Gearing is the amount by which gross asset exposure/net market exposure exceeds shareholders’ funds expressed as a percentage of shareholders’ funds.
19 Transactions with the Manager and Related Parties
Details of the current fee arrangements are given in the Directors’ Report. During the year, management fees of £3,493,000 (2023: £2,925,000), and secretarial and administration fees of £75,000 (2023: £75,000) were payable to FII. At the Balance Sheet date, management fees of £277,000 (2023: £292,000), and secretarial and administration fees of £6,200 (2023: £25,000) were accrued and included in other creditors. FII also provides the Company with marketing services. The total amount payable for these services during the year was £172,000 (2023: £195,000). At the Balance Sheet date, marketing services of £77,000 (2023: £nil) were accrued and included in other creditors.
Disclosures of the Directors’ interests in the ordinary shares of the Company and Director’s fees and taxable expenses relating to reasonable travel expenses payable to the Directors are given in the Directors’ Remuneration Report. In addition to the fees and taxable expenses disclosed in the Directors’ Remuneration Report, £19,000 (2023: £20,000) of employers’
Alternative Performance Measures
Discount/Premium
The discount/premium is considered to be an Alternative Performance Measure. It is the difference between the NAV per ordinary share of the Company and the ordinary share price and is expressed as a percentage of the NAV per ordinary share. Details of the Company’s discount/premium are on the Financial Highlights above.
Gearing
Gearing (both Gross and Net) is considered to be an Alternative Performance Measure. See Note 18 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 above and Note 16 for further details.
Ongoing charges
Th ongoing charges ratio is considered to be an Alternative Performance Measure. The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC as the total of investment management fees and other expenses expressed as a percentage of the average net asset values throughout the year.
2024 2023
£’000 £’000
Investment management fees (£’000) 2,749 2,644
Other expenses (£’000) 992 988
------------------ ------------------
Ongoing charges (£’000) 3,741 3,632
=========== ===========
Variable element of management fee (£’000) 744 281
Average net assets (£’000) 392,271 377,729
------------------ ------------------
Ongoing charges ratio 0.95% 0.96%
=========== ===========
Ongoing charges ratio including variable 1.14% 1.03%
element of management fee
=========== ===========
Revenue, Capital and Total Returns per Share
Revenue, capital and total returns per share are considered to be Alternative Performance Measures. See the Income Statement above and Note 8 for further details.
Total Return Performance
Total return performance is considered to be an Alternative Performance Measure. NAV per ordinary share total return includes reinvestment of the dividend in the NAV of the Company on the ex-dividend date. The ordinary share price total return includes the reinvestment of the net dividend in the month that the share price goes ex-dividend.
The tables below provide information relating to the NAV per ordinary share and ordinary share price of the Company and the impact of the dividend reinvestments and the total returns for the years ended
Net asset
value per Ordinary
ordinary share
2024 share price
31 July 2023 549.33p 520.00p
31 July 2024 551.66p 496.00p
Change in year +0.4% -4.6%
Impact of dividend reinvestment +2.8% +2.9%
------------------ ------------------
Total return for the year +3.2% -1.7%
=========== ===========
Net asset
value per Ordinary
ordinary share
2023 share price
31 July 2022 507.78p 458.00p
31 July 2023 549.33p 520.00p
Change in year +8.2% +13.5%
Impact of dividend reinvestment +3.2% +3.8%
------------------ ------------------
Total return for the year +11.4% +17.3%
=========== ===========
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/asianvalues within two working days.
A copy of the Annual Report will shortly be submitted to the National Storage Mechanism and will be available for inspection at: www.morningstar.co.uk/uk/NSM
The Annual Report will be posted to shareholders later this month and additional copies will be available from the registered office of the Company and on the Company's website: www.fidelity.co.uk/asianvalues where up to date information on the Company, including daily NAV and share prices, factsheets and other information can also be found.
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.
ENDS
