FIDELITY ASIAN VALUES PLC
Annual Report for the year ended 31 July
2020
CHAIRMAN’S STATEMENT
Kate
Bolsover – I have pleasure in presenting the Annual Report
of Fidelity Asian Values PLC (the “Company”) for the year ended
31 July 2020.
By any standard the year under review has been an extraordinary
one, with countries around the world experiencing unprecedented
challenges in the wake of the Coronavirus (“COVID-19”) pandemic.
Our thoughts are with all those who have been affected.
Against a challenging market backdrop, our Portfolio Manager,
Nitin Bajaj, ranks first among his
small cap peers on a five-year view, however recent performance
has, unfortunately, been weaker. From an investment perspective,
while ‘in-person’ company meetings have been paused for now, Nitin
undertakes virtual meetings with existing and potential investee
companies which are proving to be effective.
The Manager is keeping its business continuity plans and
operational resilience strategies under constant review and is
taking the necessary steps to meet its regulatory obligations and
to support its investors. The Company’s other third party service
providers have also implemented similar measures to ensure business
disruption is kept to a minimum.
In seeking to provide shareholders with a differentiated equity
exposure to Asian markets, Nitin focuses on buying businesses that
have strong management but are mispriced. This often leads him to
invest in small and medium sized companies, the ‘winners of
tomorrow’, before they become well-known. Unfortunately, this
segment of the market has been disproportionately impacted by the
prevailing environment and this has weighed on shorter-term
performance. As Nitin explains in his Portfolio Manager’s Review,
the value-investing style he deploys, and which has historically
rewarded investors, is currently out of favour, generating
excellent longer-term opportunities while demanding patience
nearer-term.
INVESTMENT AND MARKET REVIEW
In the 12 months to 31 July 2020, NAV
performance was -16.7% compared to a return of +2.7% for the
Comparative Index*. Share price performance over the same period
was a disappointing -24.8%, reflecting the fact that the Company
has moved from trading at a premium to its NAV to a discount in
more recent times. In addition to the significant impact of
COVID-19 on Asian equity markets, Nitin also faces dual headwinds
in his stylistic bias for value and also for smaller and medium
sized businesses.
Value, as an investment style, is experiencing the longest and
deepest underperformance relative to growth since the 1960s. Value
stocks considered across a range of valuation metrics, including
price-to-book and price-to-earnings multiples, have not traded so
cheaply since 1968. The stocks of smaller and medium sized
companies meanwhile have been severely punished, certainly by
historical standards, in a market environment dominated by mega-cap
names. The Board believes that value investing will return to
favour and that this is a period of unprecedented opportunity to
invest in good companies at competitive prices.
* The Company’s Comparative Index
changed from the MSCI All Countries Asia ex Japan Index (net) total
return (in Sterling terms) to the MSCI All Countries Asia ex Japan
Small Cap Index (net) total return (in Sterling terms) on
1 February 2020. Therefore, the
Comparative Index reported is a blend of the two.
RESPONSE AND OUTLOOK
In response to this difficult environment and with the Company
trading at its widest discount in over a decade, the Board
initiated a buyback programme in March of this year. The Company
has bought back 1,648,782 shares over the period under review
(further details below). At the end of the financial year, the
Company traded at a discount to NAV of 8.1%. The Board has also
carefully monitored service providers throughout the pandemic,
ensuring operational robustness.
In this year, perhaps more than most, predicting the future is
difficult. The road ahead may be strewn with challenges, but we
remain encouraged by the extreme valuation differential between
“growth” and “value” companies and the opportunities inherent in
that. As we begin the new financial year, valuations are even more
extreme in Asia than they were in
the run up to the dot com bubble, when growth stocks sold at
extraordinary multiples. While we continue to monitor performance
carefully, Nitin continues to have our full support in navigating
the months and years ahead. We are reassured by the high quality of
his portfolio and thank shareholders for their ongoing support.
OTHER MATTERS
Gearing
Increased volatility and risk aversion in the market has created
stock picking opportunities and Nitin has been able to add new
holdings and increase existing positions at more attractive
valuations. Over his tenure, Nitin has not felt the need to use
gearing extensively and has reduced gearing slightly from the level
reported last year. He continues to believe that the main driver of
the Company’s performance will be stock picking.
Management Fee
The Company has had a variable management fee structure in place
since 1 August 2018. It uses a
Comparative Index against which the variable element of the
management fee is calculated. The change to the Comparative Index
from the MSCI All Countries Asia ex Japan Index (net) total return
(in Sterling terms) to the MSCI All Countries Asia ex Japan Small
Cap Index (net) total return (in Sterling terms) from 1 February 2020 has had no impact on any fees
accrued until the date of the change. Since then, any over or under
performance has been measured against the new Comparative
Index.
The fee to 31 July 2020 was
£1,655,000 (2019: £2,262,000). Given the relative underperformance,
the variable management fee represented 0.59% of net assets
throughout the period (2019: 0.78%).
Discount/Premium and Share Repurchases/Issues
As reported in the Company’s Half-Yearly Report, up until
31 January 2020 the Company’s shares
had mostly traded at a premium and the Board authorised the issue
of 265,981 ordinary shares from the Company’s block listing
facility. Issuing shares increases the size of the Company, making
it more liquid and allowing for costs to be spread out over a
larger asset base. Since then and as at the date of this report, no
additional ordinary shares have been issued.
Repurchases of ordinary shares are made at the discretion of the
Board and within guidelines set by it and in light of prevailing
market conditions. Shares will only be repurchased when it results
in an enhancement to the NAV of the ordinary shares. In order to
assist in managing the discount, the Board has shareholder approval
to hold in Treasury any ordinary shares repurchased by the Company,
rather than cancelling them. Any shares held in Treasury would only
be re-issued at NAV per share or at a premium to NAV per share.
As I have highlighted above, we have seen an extraordinary level
of turmoil in the world’s financial markets and the Company’s
premium/discount has been commensurately volatile. The Board
initiated a buyback program in March whereby 1,648,782 ordinary
shares have been repurchased for holding in Treasury (representing
2.18% of the issued share capital). 422,255 shares have been
repurchased since the end of the reporting period and as at the
date of this report.
Dividend
Subject to shareholders’ approval at the Annual General Meeting
(“AGM”) on 8 December 2020, the
Directors recommend a dividend of 8.50
pence per ordinary share which represents a decrease of 3.4%
over the 8.80 pence paid in 2019.
This dividend will be payable on 10 December
2020 to shareholders on the register at close of business on
23 October 2020 (ex-dividend date
22 October 2020). Shareholders should
be reminded that as the Company’s objective is long-term capital
growth, the level of dividend is a function of a particular year’s
income and it should not be assumed that dividends will continue to
be paid in the future.
BOARD OF DIRECTORS
As reported in the Company’s Half-Yearly Report, Philip Smiley retired from the Board on
30 April 2020. His extensive
experience in Asia and unique
insights about the region were much appreciated by the Board and I
would like to take this opportunity to thank him for his terrific
contribution.
Timothy Scholefield succeeded
Philip as Senior Independent Director on 1
May 2020.
All Directors are subject to annual re-election at the
forthcoming AGM. The Directors’ biographies are included in the
Annual Report, and between them, they have a wide range of
appropriate skills and experience to form a balanced Board of the
Company.
BOARD SUCCESSION
The Board has spent a considerable amount of time discussing its
succession plan for the next four years and wishes to share these
with investors. Grahame Stott will
have completed his nine-year tenure in 2022 and will step down from
the Board at the AGM in 2022 and he will be replaced as Audit
Committee Chairman by Clare Brady.
By the AGM in 2023, I will have served four years as a Director and
a further nine years as Chairman and will step down from the Board
at the AGM in 2023. The Board considers that I continue to be
independent.
ANNUAL GENERAL MEETING – TUESDAY, 8
DECEMBER 2020 AT 11.00
AM
In response to the wide spread of COVID-19, the current Government
guidance stipulates that large gatherings of people are
prohibited.
With this in mind, this year’s AGM will be virtual in nature. In
accordance with the Corporate Governance and Insolvency Act 2020
and with the Company’s Articles of Association, the AGM will be
conducted in closed session via video conference. This meeting will
be restricted to the formal business of the meeting as set out in
the Annual Report and voting on the resolutions therein. An online
presentation by the Chairman and Portfolio Manager which will be
available online at www.fidelity.co.uk/asianvalues.
Copies of the Portfolio Manager’s presentation can be requested
by email at investmenttrusts@fil.com or in writing to the
Secretary at FIL Investments International, Beech Gate,
Millfield Lane, Lower Kingswood,
Tadworth, Surrey, KT20
6RP.
It is not the Board’s intention to exclude or discount the views
of the Company’s shareholders, but at the moment, the health of all
investors, workforce and officers must be paramount. We urge all
shareholders to make use of the proxy form provided. If you hold
shares through the Fidelity Platform or a nominee (and not directly
in your own name) proxy forms are not provided and you are advised
to contact the company with which you hold your shares to determine
alternative options (if available) for lodging your voting
instructions.
We encourage all investors who have any questions or comments to
contact the Secretary so that she can relay your comments to the
Board, and we will respond in due course.
We thank you for your cooperation and sincerely hope to resume
the meeting’s usual format in the future.
KATE
BOLSOVER
Chairman
13 October 2020
PORTFOLIO MANAGER’S REVIEW
Nitin
Bajaj was appointed as the Portfolio Manager of Fidelity
Asian Values PLC on 1 April 2015. He
is based in Singapore and has over
19 years’ investment experience. He is also the Portfolio Manager
for the Fidelity Asian Smaller Companies Fund. He first joined
Fidelity in 2003 as an Investment Analyst and then took over the
Fidelity India Special Situations Fund and subsequently started the
Fidelity India Value Fund. He managed these funds until
November 2012, when Fidelity decided
to sell its India business.
QUESTION
How has the Company performed in the year under review?
ANSWER
It has been a difficult year and the Company’s NAV declined 16.7%
over the period, compared to an annualised return of 14.1% up to
the prior year during my tenure as Portfolio Manager of the
Company. As always, responsibility for performance sits solely with
me in both good and bad years.
In order to get a better perspective on performance, I think
it’s also important to understand what happened over the last year
and the market environment we are operating in.
STOCK PICKING
There are two kinds of errors that an investor can make: errors of
omission and errors of commission. Errors of omission are stocks
that we don’t own that go up. Errors of commission are stocks we
own that go down.
Errors of omission are inevitable. There will always be stocks
that we do not own that go up a lot. This year these were
concentrated in technology and health care – but more generally, in
categories of stocks which can be broadly labelled as ‘momentum’.
These are stocks which we are very unlikely to own as they are
expensive, with high expectations and very little margin of error.
When they are appreciating, no one questions them.
Unfortunately, we also made a few errors of commission this year
– most notably, our investment in mortgage companies in
India. The country has been in a
housing downcycle for almost eight years resulting in significantly
improved housing affordability (house prices compared to household
income) – its best level in the last 25 years. Our analysis showed
that we should be on the cusp of a turn in the cycle for the
better. In a weak economy the recovery was delayed, and it got
worse due to COVID-19, which led to unprecedented economic hardship
and liquidity stress on households, property developers and the
financial system. I feel our analysis was sound and the risk-reward
was in our favour when we made the investment – but our bet size
was not. At 6% of the Company’s NAV, it was too big a position.
Position sizing is tricky – when you get it right, you always
feel you should have had more, and when you get it wrong, it’s the
opposite.
In addition, there have been a few other stock specific
detractors like Cebu Air. Cebu Air is a low-cost airline with 55%
market share in the Philippines.
It has an almost insurmountable lead on its competition in terms of
its cost structure. The management team is best in class and it has
a well-funded balance sheet. The business has been hit hard by
COVID-19, and like most airlines, its stock price has declined. I
continue to own my position in Cebu Air as they should be able to
get through this period given the balance sheet strength and emerge
in a stronger competitive position.
In terms of positive stock contribution, our investment in
e-bike battery company Tianneng Power International performed
exceptionally well as the stock was discovered by mainstream
investors. Also, our investment in rubber glove company Riverstone
has performed well during COVID-19 due to the huge demand for
medical grade gloves. I continue to own shares in both these
businesses.
Our objective is to not lose money when we are wrong, so that
our correct decisions can add up. It did not happen this year. In
fact, this was the first year since I have managed Asian portfolios
that I have had negative contribution from stock selection. This
was partly due to: 1) stock picking; and 2) due to the number of
business we own being currently unloved in the stock market. This
meant that our bucket of positive contributors was smaller.
COUNTRY ALLOCATION
Country allocation for us is an outcome of stock selection rather
than a top down view. Going into COVID-19 we had a significant
portion of our assets invested in India, Indonesia and Philippines (38.7% at the end of February 2020; and 30% at the end of July 2020 as we adjusted some of our positions).
We have historically found exceptional businesses, with significant
growth opportunities at attractive valuations in these
countries.
However, all three are densely populated countries and have had
to impose stringent lockdowns. This was essential and does not
change the long-term dynamics of these economies. However, it has
led to a significant stock market sell off in these three countries
- more than the rest of Asia. Some
of this stock market correction is justified but I would argue that
quite a few stocks in these countries have been sold off
irrespective of fundamentals.
An example would be Power Grid Corporation of India, our 2nd largest holding. Power Grid is
a high-quality regulated monopoly for electricity transmission in
India and has an enviable track
record of growth, stability and return on equity. Irrespective of
the strong fundamentals, the stock has been sold off due to
COVID-19 and now looks very compelling from a valuation
perspective.
I have adjusted the Company’s portfolio in these countries to
concentrate our focus on businesses which can endure this economic
hardship even if it lasts another two years. COVID-19 will pass,
but these businesses will still be around, and having enhanced
their competitive position through this period, emerge
stronger.
STYLE BIAS
Value investing is what I do and investing in interesting but
unloved companies has been the key driver of returns in every
portfolio I have managed over the last decade. However, my value
bias was a significant headwind to performance last year as there
was a sentiment swing in favour of growth companies – both large
and small. On a relative basis, this hit the Company twice – as
stocks I did not own went up, while the ones I did own fell. A
number of stocks in the portfolio, despite being attractively
valued and delivering good operating performance, have not
appreciated, as a narrow group of stocks (in a few specific
sectors) have carried the stock markets in Asia.
Smaller value companies are now trading at a 55% discount to
growth companies. This compares to a 65% discount seen during the
peak of the tech bubble in 1999-2000 (peak of the previous growth
cycle). Similarly, if you compare the lowest quintile of stocks in
Asia to the most expensive
quintile of stocks, the valuation discount is even more extreme and
stands at 90%.
VALUE DISPERSION OVER THE PAST 20
YEARS
Source: Fidelity International, Bloomberg, 31 July 2020. Index: MSCI All Countries Asia ex
Japan Small Cap (net) Index.
Active weight denotes differences in fund weighting versus Index
weighting. Past performance is not an indicator of future
returns.
LOWER PRICE TO EARNINGS RATIO VERSUS
INDICES
HIGHER RETURNS ON EQUITY VERSUS
INDICES
Source: Fidelity International, FactSet, 31 July 2020. Indices: MSCI AC Asia ex Japan
Small-Cap Index and MSCI AC Asia ex Japan Small-Cap Value Index.
Price to Earnings (P/E) Ratio is a measure for valuing a company’s
share price versus its earnings. Price to Earnings based on FY1
estimates. Low P/E can indicate that a company may currently be
undervalued. Price to Book (P/B) Ratio is a measure for valuing a
company’s share price versus its book value. Low P/B can indicate
that a company may currently be undervalued.
The most interesting fact for me is that over time “value”
companies in Asia normally grow
earnings faster than “growth” companies. Not only do these stocks
provide you with a better starting margin of safety but these
businesses are also able to grow earnings faster.
Hence, it’s not surprising that over the long-term it has paid
to be invested in small cap value stocks. They have outperformed
growth companies by a significant margin over the last 20
years.
There is no doubt that currently our style is at the wrong end
of the pendulum swing. But I feel that these extreme valuations
offer a unique opportunity, not too different from 1999-2000, to
invest in these overlooked businesses.
Our investment philosophy is based on owning good businesses,
run by competent management teams and buying them at a price that
leaves a sufficient margin of safety. Unloved smaller companies
with high-quality underlying business have always been a lucrative
hunting ground for this philosophy. While the portfolio has strong
reflections of the small cap value index and is currently trading
at a 32% discount to the broader small cap index (the valuation
discount is much bigger versus large cap and growth indices), its
return on equity versus the indices is substantially higher.
To conclude, style biases are cyclical – an investment process
should not be.
QUESTION
Historically value stocks have tended to perform better than
average in market dips, but that doesn’t seem to have been the case
this time round. Why? What might trigger a reversal in fortunes for
value investors?
ANSWER
There are two reasons in my opinion.
Firstly, fundamentally ‘growth’ companies have delivered
reasonably good operating results during the economic downturn as a
lot of them are in the technology and health care sectors. These
businesses benefited during lockdown due to an accelerated shift
towards online services as well as the trend towards “working from
home”, which has led to an increase in demand for computers and
peripherals.
Secondly, the valuations of these businesses have expanded even
further. We are seeing extreme valuations which approximate to what
we witnessed during the tech bubble in 1999-2000. In my opinion,
this multiple expansion is not supported by facts, as on average,
there is a big difference in perception of growth and actual
earnings delivery.
Growth has significantly outperformed value as a style in almost
all markets. We are looking at a value drawdown which is the most
extreme in 200 years. Even though data going this far back is bound
to have some errors, it is indicative of where we stand versus
history. These cycles have always levelled out over time. It would
take a brave man to say that “this time it’s different”.
QUESTION
Small caps have lagged large caps quite markedly for some time.
What are the drivers behind that? What might be the catalyst(s) for
small cap outperformance?
ANSWER
This has been primarily driven by huge appreciation in large cap
growth stocks. If you look at the earnings of small cap value
stocks over time, they have easily outperformed large cap stocks.
Even in the last five years, the earnings of small cap value stocks
have outperformed the large growth companies despite COVID-19.
So fundamentally, I find it hard to justify, based on earnings
or cash flows, why small cap value stocks in Asia (or small caps in general) have lagged
materially in the last three years (and particularly in the last 12
months). It basically comes down to the price earnings ratio
expansion of large growth companies.
As a fundamental investor, the primary anchor for valuing any
business must be earnings and cash flows. This has always been the
case and I do not think it is different now. I have no doubt,
therefore, that this situation will reverse. The catalyst for and
timing of that change is, however, difficult to forecast.
In the meantime, current market factors are giving us an
opportunity to own high quality companies at attractive prices.
This does not happen often and hence it’s important to maintain our
discipline and take advantage.
I do understand that being patient is not easy, especially when
some of the growth stocks seem to go up every day. I empathise with
our investors (I am one of them and have a substantial personal
investment in the Company) as it has not been easy. But making
money in the markets is not easy. If it was, everyone would be
rich.
QUESTION
How has COVID-19 impacted your companies – both operationally and
from an earnings perspective?
ANSWER
None of the businesses in the Company’s portfolio have ever
experienced anything like COVID-19.
It is a shock that impacts the internal systems of businesses,
demand for their products, government policy and social structure.
I think everyone is still learning how to deal with it.
So far, most companies seemed to have managed internal
operations quite well and productive capacities are starting to
normalise, except for a few industries such as travel and
hospitality. Businesses are now trying to figure out the “new
normal” in demand, especially once the government support stops. We
will have to wait and see.
The impact of COVID-19 on earnings has been mixed. Like I said,
companies operating in technology, health care, consumer staples,
infrastructure and utilities have not really been impacted
materially, while those in discretionary consumption, travel and
hospitality have seen an adverse impact.
QUESTION
How have valuations changed in the period under review?
ANSWER
The last six months have been unprecedented. We went from a
financial crisis to euphoria in a period of three months. What I
see today is a two-speed market where we can find stocks at both
valuation extremes.
I am excited by our holdings today. We own a portfolio of
businesses which are dominant in their industries, earn good
returns on capital and are available at attractive valuations.
QUESTION
There is a greater focus than ever on ESG matters. How does
Fidelity think about ESG?
ANSWER
Fidelity believes that businesses which flout laws or do not
respect their employees, customers or communities will not be able
to sustain high returns over time. It is simply not a sustainable
way to do business. Fidelity is encouraged that the investment
community in general is paying more attention to these issues.
Adherence by corporates to the principles of sustainability will
have a growing impact on the demand for those companies’ goods and
services. Monitoring the actions of the corporates and engaging
with them to improve, is a core pillar of Fidelity’s strategy and
embedded into the research methodology which we use to assess
companies.
QUESTION
As we move through the early stage of a new decade, what should
investors be focusing on in the months and years ahead? Which
stocks look the most promising to you?
ANSWER
I think fundamental analysis and owning good businesses, run by
competent managements at attractive prices will continue to be
important. If you can combine businesses which can grow revenues
through time while earning high returns on capital with attractive
purchase prices, then it should go a long way towards helping
investors attain their financial objectives.
This is what I am focused on and I and the Fidelity analyst team
are working harder than ever to find these businesses and then test
every assumption we are making about the business fundamentals
going forward. A sound investment process, hard work, discipline
and patience have always been important for investing success. I
don’t think this will change in this decade.
NITIN
BAJAJ
Portfolio Manager
13 October 2020
STRATEGIC REPORT
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. The Board, with the assistance
of the Alternative Investment Fund Manager (FIL Investment Services
(UK) Limited/the “Manager”), has developed a risk matrix which
identifies the key risks that the Company faces and assigns a
rating to each risk. This is reviewed by the Audit Committee at
least once annually. The Board has also established associated
policies and processes designed to manage and where possible,
mitigate those risks which are monitored in the form of
comprehensive reports considered by the Audit Committee. The Board
determines the nature and extent of any risks it is willing to take
in order to achieve its strategic objectives.
EMERGING RISKS AND UNCERTAINTIES
The Board held a strategy meeting on 29
January 2020. Among wider strategic matters discussed at
this meeting, an exercise was carried out to identify any new
emerging risks and take any action necessary to mitigate their
potential impact. The Board identified the pandemic risk as having
a material effect on the Company and took the decision to include
this with its principal risks.
The Board considers the risks listed below to be the principal
risks and uncertainties faced by the Company. The wording of these
risks has been revised but they remain unchanged at a high level
from those reported in the prior year, apart from the addition of
the “Pandemic Risk”.
| Principal Risks |
Description and Risk
Mitigation |
| Market, Economic and Political
risk |
The Company’s
portfolio is made up mainly of listed securities. The principal
risks are, therefore, market related such as market downturn,
interest rate movements and exchange rate movements. Political
change or protectionism can also have an impact on the Company’s
assets, such as a US-led trade war, North Korean conflict,
political tensions in the Eurozone and Brexit risks. The Portfolio
Manager’s success or failure to protect and increase the Company’s
value against this background is core to the Company’s continued
success.
The risk of the likely effects of COVID-19 on the markets is
discussed in the Chairman’s Statement and in the Portfolio
Manager’s Review. These risks are somewhat lessened by the
investment trust structure which means no forced sales will need to
take place to deal with any redemptions. Therefore, investments can
be held over a longer time horizon.
Risks to which the Company is exposed in the market risk category
are included in Note 17 to the Financial Statements together with
summaries of the policies for managing these risks. |
| Investment Performance
risk |
The Portfolio Manager’s investment
strategy, if inappropriate, may result in the Company
underperforming the market and/or peer group companies, leading to
the Company and its objectives becoming unattractive to investors.
In order to manage this risk, the Board reviews Fidelity’s
compliance with agreed investment restrictions; investment
performance and risk; relative performance; the portfolio’s risk
profile; and whether appropriate strategies are employed to
mitigate any negative impact of substantial changes in markets. The
Board also regularly canvasses major shareholders for their views
with respect to company matters. |
| Key Person risk |
The Portfolio Manager has a
differentiated style in relation to his peers. This style is
intrinsically linked with the Company’s investment philosophy and
strategy and, therefore, the Company has a key person dependency on
Nitin Bajaj. Fidelity has succession plans in place for its
portfolio managers which have been discussed with the Board and
provide some assurance in this regard. |
| Discount Control risk |
The price of the Company’s shares
and its premium or discount to NAV are factors which are not within
the Company’s total control. The Board has a discount management
policy in place and some short-term influence over the discount may
be exercised by the use of share repurchases at acceptable prices
within the parameters set by the Board. The Company’s share price,
NAV and discount volatility are monitored daily by the Manager and
considered by the Board on a regular basis. |
| Gearing risk |
The Company has the option to
invest up to the total of any loan facilities or to use CFDs to
invest in equities. The principal risk is that while in a rising
market the Company will benefit from gearing, in a falling market
the impact would be detrimental. Other risks are that the cost of
gearing may be high or that the term of the gearing inappropriate
in relation to market conditions. The Company currently has no bank
loans and gears through the use of long CFDs which provide greater
flexibility and are currently cheaper than bank loans. The Board
regularly considers the level of gearing and gearing risk and sets
limits within which the Manager must operate. |
| Derivatives risk |
Derivative instruments are used to
enable both the protection and enhancement of investment returns.
There is a risk that the use of derivatives may lead to higher
volatility in the NAV and the share price than might otherwise be
the case. The Board has put in place policies and limits to control
the Company’s use of derivatives and exposures. These are monitored
on a daily basis by the Manager’s Compliance team and regular
reports are provided to the Board. Further details on derivative
instruments risk is included in Note 17 to the Financial
Statements. |
| Currency risk |
The base currency of
the Company is Sterling. Most of its assets and its income are
denominated in other currencies. Consequently, it is subject to
currency risk on exchange rate movements between Sterling and these
other currencies. The Company has no formal policy for hedging
currency risk but may use foreign currency contracts to limit
exposure.
Further details can be found in Note 17 to the Financial
Statements. |
| Cybercrime risk |
Cybercrime threats
evolve rapidly and consequently the risk is regularly re-assessed
and the Board receives regular updates from the Manager in respect
of the type and possible scale of cyberattacks. The Manager’s
technology team has developed a number of initiatives and controls
in order to provide enhanced mitigating protection to this ever
increasing threat and the Board is updated on these as part of the
reporting it receives from the Manager.
Risks are increased due to the COVID-19 crisis, primarily related
to phishing, remote access threats, extortion and DDoS (Distributed
Denial of Service) attacks. The Manager has a dedicated detect and
respond resource specifically to monitor the cyber threats
associated with COVID-19. |
| Pandemic risk |
As the COVID-19
outbreak continues to spread, there has been increased focus from
financial services regulators around the world on the contingency
plans of regulated financial firms. The Manager reviews its
business continuity plans and operational resilience strategies on
an ongoing basis and will take all reasonable steps to continue
meeting its regulatory obligations and to assess operational risks,
the ability to continue operating and the steps it needs to take to
serve and support its clients, including the Board. For example, to
enhance its resilience, the Manager has mandated work from home
arrangements and implemented split team working for those whose
work is deemed necessary to be carried out in an office. The
Manager has also imposed self-isolation arrangements on staff in
line with Government recommendations and guidance.
Investment team key activities, including portfolio managers,
analysts and trading/support functions, are performing well despite
the operational challenges posed by working from home or split team
arrangements.
The Company’s other third party service providers have also
confirmed the implementation of similar measures to ensure no
business disruption. |
Other risks facing the Company include:
TAX AND REGULATORY RISKS
A breach of Section 1158 of the Corporation Tax Act 2010 could lead
to a loss of investment trust status resulting in the Company being
subject to tax on capital gains. The Board monitors tax and
regulatory changes at each Board meeting and through active
engagement with regulators and trade bodies by the Manager.
OPERATIONAL RISKS
The Company relies on a number of third party service providers,
principally the Manager, Registrar, Custodian and Depositary. It is
dependent on the effective operation of the Manager’s control
systems and those of its service providers with regard to the
security of the Company’s assets, dealing procedures, accounting
records and the maintenance of regulatory and legal requirements.
The Registrar, Custodian and Depositary are all subject to a
risk-based programme of internal audits by the Manager. In
addition, service providers’ own internal control reports are
received by the Board on an annual basis and any concerns
investigated.
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
(being mainly securities which are readily realisable) and its
expenditure and cash flow projections and have concluded that the
Company has adequate resources to continue to adopt the going
concern basis for at least twelve months from the date of this
Annual Report. This conclusion also takes into account the Board’s
assessment of the risks arising from COVID-19 as set out in the
Pandemic Risk. 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 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 NAV and share
price performance;
· The principal and emerging risks
and uncertainties facing the Company and their potential
impact;
· The future demand for the
Company’s shares;
· The Company’s share price
relative to the NAV;
· The liquidity of the Company’s
portfolio;
· The level of income generated by
the Company; and
· Future income and expenditure
forecasts.
The Company’s performance over the five year reporting period to
31 July 2020, was a NAV total return
of 47.0%, a share price total return of 51.9% and a Comparative
Index return of 67.5%. The Board regularly reviews the investment
policy and considers it to be appropriate. The Board has concluded
that there is a reasonable expectation that the Company will be
able to continue in operation and meet its liabilities as they fall
due over the next five years based on the following
considerations:
·
The Manager’s compliance with the Company’s investment objective,
its investment strategy and asset allocation;
·
The fact that the portfolio comprises sufficient 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 addition, the Company is subject to a continuation vote at
the AGM in 2021 and the Board expect that the vote, when due, will
be approved.
PROMOTING THE SUCCESS OF THE COMPANY
Under Section 172(1) of the Companies Act, the Directors have a
duty to promote the success of the Company for the benefit of its
stakeholders. This includes having regard (amongst other matters)
to fostering relationships with the Company’s stakeholders and
maintaining a reputation for high standards of business conduct.
The Company has no employees, premises, assets or operations. The
shareholders in the Company are its key stakeholders and while the
Board holds the Manager to account in managing the Company’s
assets, it recognises that this is also a key relationship. The
Directors recognise that carrying out their statutory duty is
fundamental to achieving longer-term success, and to this effect
continue to work closely with the Manager to further develop the
Company’s investment strategy and underlying policies. The
intention is not simply to achieve the Company’s investment
objective but to ensure that it is done in an effective and
responsible way in the interests of shareholders, future investors
and society at large.
It is one of the Board’s long-term intentions that the share
price should trade at a level close to the underlying net asset
value of the shares. In order to achieve this, the Board has
implemented a discount policy in order to reduce discount
volatility and will, when appropriate, execute share repurchases
(in normal market conditions).
The Board is mindful that investors expect their assets to be
managed for a competitive fee. The Board negotiated a variable
management fee with Fidelity in 2018. The Board believes that this
fee arrangement fairly rewards the Manager for any outperformance
against the Comparative Index while remaining competitive against
fees charged by the Company’s peer group. The Board, therefore,
believes that this fee also benefits shareholders. Fees for the
reporting year were £1,655,000 (2019: £2,262,000). Further
information about the variable fee arrangement can be found in the
Directors’ Report.
It is important that shareholders have access to both the
Portfolio Manager and the Board. The Portfolio Manager meets with
major shareholders, stock market analysts, journalists and other
commentators during the year. Since COVID-19, most of these
meetings have been virtual in nature. In the run-up to the final
subscription share exercise in November
2019, the Chairman, through the Broker, proactively offered
to meet with major shareholders without representatives from
Fidelity present to discuss any concerns investors may have had.
However, no concerns were raised and shareholders did not feel the
need to meet with the Chairman privately.
Long-term investors look to the future – the Portfolio Manager
in constructing the portfolio and the Board in governing the
Company. The performance of the Company and its reputation for
transparency and good governance are paramount to its long-term
success.
STATEMENT OF DIRECTORS’
RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law they have
elected to prepare the Financial Statements in accordance with UK
Generally Accepted Accounting Practice, including FRS 102: The
Financial Reporting Standard applicable in the UK and Republic of Ireland. The Financial Statements
are required by law to give a true and fair view of the state of
affairs of the Company and of the profit or loss for the
period.
In preparing these Financial Statements the Directors are
required to:
· select suitable accounting
policies and then apply them consistently;
· make judgements and estimates
that are reasonable and prudent;
· state whether applicable UK
Accounting Standards have been followed, subject to any material
departures disclosed and explained in the Financial Statements;
and
· prepare the Financial Statements
on the going concern basis unless it is inappropriate to assume
that the Company will continue in business.
The Directors are responsible for ensuring that adequate
accounting records are kept which disclose with reasonable accuracy
at any time the financial position of the Company and to enable
them to ensure that the Financial Statements comply with the
Companies Act 2006. They are also responsible for safeguarding the
assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, a Directors’ Report,
a Corporate Governance Statement and a Directors’ Remuneration
Report that comply with that law and those regulations.
The Directors have delegated the responsibility for the
maintenance and integrity of the corporate and financial
information included on the Company’s pages of the Manager’s
website at www.fidelity.co.uk/asianvalues. Visitors to the
website need to be aware that legislation in the UK governing the
preparation and dissemination of the Financial Statements may
differ from legislation in their jurisdictions.
The Directors confirm that to the best of their knowledge:
· The Financial Statements,
prepared in accordance with the applicable set of accounting
standards, give a true and fair view of the assets, liabilities,
financial position and loss of the Company; and
· The Annual Report includes a
fair review of the development and performance of the business and
the position of the Company, together with a description of the
principal risks and uncertainties it faces.
The Directors consider that the Annual Report and Financial
Statements, taken as a whole, are fair, balanced and understandable
and provide the information necessary for shareholders to assess
the Company’s performance, business model and strategy.
Approved by the Board on 13 October
2020 and signed on its behalf by:
KATE BOLSOVER
Chairman
INCOME STATEMENT FOR THE YEAR ENDED
31 JULY 2020
|
Notes |
year
ended 31 July 2020 |
year
ended 31 July 2019 |
revenue
£’000 |
capital
£’000 |
total
£’000 |
revenue
£’000 |
capital
£’000 |
total
£’000 |
| (Losses)/gains on investments |
10 |
– |
(66,743) |
(66,743) |
– |
16,606 |
16,606 |
| Gains/(losses) on derivative
instruments |
11 |
– |
6,285 |
6,285 |
– |
(573) |
(573) |
| Income |
3 |
10,602 |
– |
10,602 |
11,481 |
– |
11,481 |
| Investment management fees |
4 |
(1,967) |
312 |
(1,655) |
(2,030) |
(232) |
(2,262) |
| Other expenses |
5 |
(797) |
– |
(797) |
(772) |
(39) |
(811) |
| Foreign exchange (losses)/gains |
|
– |
(1,532) |
(1,532) |
– |
879 |
879 |
|
|
======== |
======== |
======== |
======== |
======== |
======== |
| Net return/(loss) on ordinary
activities before finance costs and taxation |
|
7,838 |
(61,678) |
(53,840) |
8,679 |
16,641 |
25,320 |
| Finance costs |
6 |
(686) |
– |
(686) |
(678) |
– |
(678) |
|
|
======== |
======== |
======== |
======== |
======== |
======== |
| Net return/(loss) on ordinary
activities before taxation |
|
7,152 |
(61,678) |
(54,526) |
8,001 |
16,641 |
24,642 |
| Taxation on return/(loss) on
ordinary activities |
7 |
(731) |
7 |
(724) |
(492) |
4 |
(488) |
|
|
======== |
======== |
======== |
======== |
======== |
======== |
| Net return/(loss) on ordinary
activities after taxation for the year |
|
6,421 |
(61,671) |
(55,250) |
7,509 |
16,645 |
24,154 |
|
|
======== |
======== |
======== |
======== |
======== |
======== |
| Basic return/(loss) per ordinary
share |
8 |
8.64p |
(82.95p) |
(74.31p) |
10.70p |
23.71p |
34.41p |
|
|
======== |
======== |
======== |
======== |
======== |
======== |
| Diluted return per ordinary
share |
8 |
n/a |
n/a |
n/a |
10.58p |
23.46p |
34.04p |
|
|
======== |
======== |
======== |
======== |
======== |
======== |
The Company does not have any other comprehensive income.
Accordingly, the net return/(loss) 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 form an integral part of these Financial
Statements.
STATEMENT OF CHANGES IN EQUITY FOR THE
YEAR ENDED 31 JULY 2020
|
Notes |
share
capital
£’000 |
share
premium
account
£’000 |
capital
redemption
reserve
£’000 |
Other
non-
distributable
reserve
£’000 |
other
reserve
£’000 |
capital
reserve
£’000 |
revenue
reserve
£’000 |
total
shareholders’
funds
£’000 |
| Total shareholders’ funds at 31
July 2019 |
|
18,058 |
38,073 |
3,197 |
7,367 |
8,613 |
237,954 |
9,737 |
322,999 |
| Net (loss)/return on ordinary
activities after taxation for the year |
|
– |
– |
– |
– |
– |
(61,671) |
6,421 |
(55,250) |
| Repurchase of ordinary shares |
14 |
– |
– |
– |
– |
(5,234) |
– |
– |
(5,234) |
| Issue of ordinary shares on the
exercise of rights attached to subscription shares |
14 |
770 |
11,332 |
– |
– |
– |
– |
– |
12,102 |
| Issue of new ordinary shares |
14 |
67 |
1,096 |
– |
– |
– |
– |
– |
1,163 |
| Dividend paid to shareholders |
9 |
– |
– |
– |
– |
– |
– |
(6,380) |
(6,380) |
|
|
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
| Total shareholders’ funds at 31
July 2020 |
|
18,895 |
50,501 |
3,197 |
7,367 |
3,379 |
176,283 |
9,778 |
269,400 |
|
|
======== |
======== |
======== |
======== |
======== |
======== |
======== |
======== |
| Total shareholders’ funds at 31
July 2018 |
|
17,167 |
24,316 |
3,197 |
7,367 |
8,613 |
221,309 |
6,005 |
287,974 |
| Net return on ordinary activities
after taxation for the year |
|
– |
– |
– |
– |
– |
16,645 |
7,509 |
24,154 |
| Issue of ordinary shares on the
exercise of rights attached to subscription shares |
14 |
303 |
4,327 |
– |
– |
– |
– |
– |
4,630 |
| Issue of new ordinary shares |
14 |
588 |
9,430 |
– |
– |
– |
– |
– |
10,018 |
| Dividend paid to shareholders |
9 |
– |
– |
– |
– |
– |
– |
(3,777) |
(3,777) |
|
|
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
| Total shareholders’ funds at 31
July 2019 |
|
18,058 |
38,073 |
3,197 |
7,367 |
8,613 |
237,954 |
9,737 |
322,999 |
|
|
======== |
======== |
======== |
======== |
======== |
======== |
======== |
======== |
The Notes form an integral part of these Financial
Statements.
BALANCE SHEET AS AT 31 JULY 2020
Company number 3183919
|
Notes |
2020
£’000 |
2019
£’000 |
| Fixed assets |
|
|
|
| Investments |
10 |
241,271 |
312,681 |
| Current assets |
|
|
|
| Derivative instruments |
11 |
7,299 |
1,537 |
| Debtors |
12 |
1,886 |
3,325 |
| Amounts held at futures clearing
houses and brokers |
|
1,115 |
2,905 |
| Cash at bank |
|
21,262 |
5,796 |
|
|
-------------- |
-------------- |
|
|
31,562 |
13,563 |
|
|
======== |
======== |
| Creditors |
|
|
|
| Derivative instruments |
11 |
(1,149) |
(2,192) |
| Other creditors |
13 |
(2,284) |
(1,053) |
|
|
-------------- |
-------------- |
|
|
(3,433) |
(3,245) |
|
|
======== |
======== |
| Net current assets |
|
28,129 |
10,318 |
|
|
======== |
======== |
| Net assets |
|
269,400 |
322,999 |
|
|
======== |
======== |
| Capital and reserves |
|
|
|
| Share capital |
14 |
18,895 |
18,058 |
| Share premium account |
15 |
50,501 |
38,073 |
| Capital redemption reserve |
15 |
3,197 |
3,197 |
| Other non-distributable reserve |
15 |
7,367 |
7,367 |
| Other reserve |
15 |
3,379 |
8,613 |
| Capital reserve |
15 |
176,283 |
237,954 |
| Revenue reserve |
15 |
9,778 |
9,737 |
|
|
-------------- |
-------------- |
| Total shareholders’
funds |
|
269,400 |
322,999 |
|
|
======== |
======== |
| Net asset value per ordinary
share |
16 |
364.39p |
447.16p |
|
|
======== |
======== |
| Diluted net asset value per
ordinary share |
16 |
n/a |
439.91p |
|
|
======== |
======== |
The Financial Statements were approved by the Board of Directors
on 13 October 2020 and were signed on
its behalf by:
KATE BOLSOVER
Chairman
The Notes on form an integral part of these Financial
Statements.
NOTES TO THE FINANCIAL STATEMENTS
1 PRINCIPAL ACTIVITY
Fidelity Asian Values PLC is an Investment Company incorporated in
England and Wales with a premium listing on the London
Stock Exchange. The Company’s registration number is 3183919, and
its registered office is Beech Gate, Millfield Lane, Lower Kingswood, Tadworth,
Surrey, KT20 6RP. The Company has been approved by HM Revenue
& Customs as an Investment Trust under Section 1158 of the
Corporation Tax Act 2010 and intends to conduct its affairs so as
to continue to be approved.
2 ACCOUNTING POLICIES
The Company has prepared its Financial Statements in accordance
with UK Generally Accepted Accounting Practice (“UK GAAP”),
including FRS 102 “The Financial Reporting Standard applicable in
the UK and Republic of Ireland”, issued by the Financial Reporting
Council (“FRC”). The Financial Statements have also been prepared
in accordance with the Statement of Recommended Practice: Financial
Statements of Investment Trust Companies and Venture Capital Trusts
(“SORP”) issued by the Association of Investment Companies (“AIC”)
in October 2019. The Company is
exempt from presenting a Cash Flow Statement as a Statement of
Changes in Equity is presented and substantially all of the
Company’s investments are highly liquid and are carried at market
value.
a) Basis of accounting – The Financial Statements have
been prepared on a going concern basis and under the historical
cost convention, except for the measurement at fair value of
investments and derivative instruments. The Company’s Going Concern
Statement in the Strategic Report takes account of all events and
conditions up to the date of approval of these Financial Statements
and includes the Company’s investment objective, risk management
policies, liquidity risk, credit risk, capital management policies
and procedures, the nature of its portfolio (being mainly
securities which are readily realisable) and its expenditure and
cash flow projections and have concluded that the Company has
adequate resources to adopt the going concern basis for at least
twelve months from the date of this Annual Report.
b) Significant accounting estimates and judgements – The
Directors make judgements and estimates concerning the future.
Estimates and judgements are continually evaluated and are based on
historical experience and other factors, such as expectations of
future events, and are believed to be reasonable under the
circumstances. Actual results may differ from these estimates. The
judgements required in order to determine the appropriate valuation
methodology of level 3 financial instruments have a risk of causing
an adjustment to the carrying amounts of assets. These judgements
include making assessments of the possible valuations in the event
of a listing or other marketability related risks.
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.
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, which took effect from 1
November 2018, is charged/credited to capital as it is based
on the performance of the net asset value per share relative to the
Comparative Index; and
· All other expenses are allocated
in full to revenue with the exception of those directly
attributable to share issues or other capital events.
g) Functional currency and foreign exchange – The
functional and reporting currency of the Company is UK Sterling,
which is the currency of the primary economic environment in which
the Company operates. Transactions denominated in foreign
currencies are reported in UK Sterling at the rate of exchange
ruling at the date of the transaction. Assets and liabilities in
foreign currencies are translated in the rates of exchange ruling
at the Balance Sheet date. Foreign exchange gains and losses
arising on the translation are recognised in the Income Statement
as a revenue or a capital item depending on the nature of the
underlying item to which they relate.
h) Finance costs – Finance costs comprise interest on
bank overdrafts and interest paid on CFDs, which are accounted for
on an accruals basis, and dividends paid on short CFDs, which are
accounted for on the date on which the obligation to incur the cost
is established, normally the ex-dividend date. Finance costs are
charged in full to the revenue column of the Income Statement.
i) Taxation – The taxation charge represents the sum of
current taxation and deferred taxation.
Current taxation is taxation suffered at source on overseas
income less amounts recoverable under taxation treaties. Taxation
is charged or credited to the revenue column of the Income
Statement, except where it relates to items of a capital nature, in
which case it is charged or credited to the capital column of the
Income Statement. Where expenses are allocated between revenue and
capital any tax relief in respect of the expenses is allocated
between revenue and capital returns on the marginal basis using the
Company’s effective rate of corporation tax for the accounting
period. The Company is an approved Investment Trust under Section
1158 of the Corporation Tax Act 2010 and is not liable for UK
taxation on capital gains.
Deferred taxation is the taxation expected to be payable or
recoverable on timing differences between the treatment of certain
items for accounting purposes and their treatment for the purposes
of computing taxable profits. Deferred taxation is based on tax
rates that have been enacted or substantively enacted when the
taxation is expected to be payable or recoverable. Deferred tax
assets are only recognised if it is considered more likely than not
that there will be sufficient future taxable profits to utilise
them.
j) Dividend paid – Dividends payable to equity
shareholders are recognised when the Company’s obligation to make
payment is established.
k) Investments – The Company’s business is investing in
financial instruments with a view to profiting from their total
return in the form of income and capital growth. This portfolio of
investments is managed and its performance evaluated on a fair
value basis, in accordance with a documented investment strategy,
and information about the portfolio is provided on that basis to
the Company’s Board of Directors. Investments are measured at fair
value with changes in fair value recognised in profit or loss, in
accordance with the provisions of both Section 11 and Section 12 of
FRS 102. The fair value of investments is initially taken to be
their cost and is subsequently measured as follows:
· Listed investments are valued at
bid prices, or last market prices, depending on the convention of
the exchange on which they are listed; and
· Unlisted investments, are
investments which are not quoted, or are not frequently traded, and
are stated at the Directors’ best estimate of fair value. The
Manager’s Fair Value Committee, which is independent of the
Portfolio Manager’s team, 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 also
given to the valuations received from an external valuer.
In accordance with the AIC SORP, the Company includes
transaction costs, incidental to the purchase or sale of
investments, within (losses)/gains on investments in the capital
column of the Income Statement and has disclosed these costs in
Note 10 below.
l) Derivative instruments – When appropriate, permitted
transactions in derivative instruments are used. Derivative
transactions into which the Company may enter include long and
short CFDs, futures, options and forward currency contracts.
Derivatives are classified as other financial instruments and are
initially accounted and measured at fair value on the date the
derivative contract is entered into and subsequently measured at
fair value as follows:
· Long and short CFDs – the
difference between the strike price and the value of the underlying
shares in the contract;
· Futures – the difference between
the contract price and the quoted trade price;
· Options – valued based on
similar instruments or the quoted trade price for the contract;
and
· Forward currency contracts –
valued at the appropriate quoted forward foreign exchange rate
ruling at the Balance Sheet date.
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 creditors.
m) Debtors – Debtors include securities sold for future
settlement, accrued income 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, investment management fees,
secretarial and administration fees and other creditors and
expenses accrued in the ordinary course of business. If payment is
due within one year or less (or in the normal operating cycle of
the business, if longer) they are classified as current
liabilities. If not, they are presented as non-current liabilities.
They are recognised initially at fair value and, where applicable,
subsequently measured at amortised cost using the effective
interest rate method.
p) Capital reserve – The following are accounted for in
the capital reserve:
· Gains and losses on the disposal
of investments and derivative instruments;
· Changes in the fair value of
investments and derivative instruments held at the year end;
· Foreign exchange gains and
losses of a capital nature;
· Variable investment management
fees;
· Dividends receivable which are
capital in nature;
· Other expenses which are capital
in nature; and
· Taxation charged or credited
relating to items which are capital in nature.
As a result of technical guidance issued by the Institute of
Chartered Accountants in England
and Wales in TECH 02/17BL, the
determination of realised profits and losses in the context of
distributions under the Companies Act 2006, states that changes in
the fair value of investments which are readily convertible to
cash, without accepting adverse terms at the Balance Sheet date,
can be treated as realised. Capital reserves realised and
unrealised are shown in aggregate as capital reserve in the
Statement of Changes in Equity and the Balance Sheet. At the
Balance Sheet date, the portfolio of the Company consisted of
investments listed on a recognised stock exchange and derivative
instruments contracted with counterparties having an adequate
credit rating, and the portfolio was considered to be readily
convertible to cash, with the exception of the level 3 investments
which had unrealised investment holding losses of £68,000 (2019:
gains of £393,000). See Note 17 for further details on the level 3
investments.
3 INCOME
|
year ended
31.07.20
£’000 |
year ended
31.07.19
£’000 |
| Investment income |
|
|
| Overseas dividends |
9,817 |
10,694 |
| Overseas scrip dividends |
45 |
370 |
|
-------------- |
-------------- |
|
9,862 |
11,064 |
|
======== |
======== |
| Derivative income |
|
|
| Dividends received on long CFDs |
536 |
126 |
| Interest received on short CFDs |
154 |
201 |
|
-------------- |
-------------- |
|
690 |
327 |
|
======== |
======== |
| Other income |
|
|
| Interest received on collateral and
deposits |
50 |
90 |
|
-------------- |
-------------- |
| Total income |
10,602 |
11,481 |
|
======== |
======== |
No special dividends have been recognised in capital (2019:
£nil).
4 INVESTMENT MANAGEMENT FEES
|
year
ended 31 July 2020 |
year
ended 31 July 2019 |
revenue
£’000 |
capital1
£’000 |
total
£’000 |
revenue
£’000 |
capital1
£’000 |
total
£’000 |
| Investment management fees |
1,967 |
(312) |
1,655 |
2,030 |
232 |
2,262 |
|
======== |
======== |
======== |
======== |
======== |
======== |
1 For the calculation of the variable
management fee element, the Company’s NAV return was compared to
the Comparative Index return for the period from 1 August 2018 to the relevant reporting dates.
This has resulted in an underperformance of the NAV and, therefore,
a credit to the Company in the current period. Further details of
the Fee Arrangement are given in the Directors’ Report.
FIL Investment Services (UK) Limited is the Company’s
Alternative Investment Fund Manager and has delegated portfolio
management to FIL Investments International (“FII”). Both companies
are Fidelity group companies.
Since 1 August 2018, the Company
pays base investment management fees at a rate of 0.70% of net
assets per annum. In addition, with effect from 1 November 2018, there is +/- 0.20% variation fee
based on the NAV per share performance relative to the Comparative
Index. Fees are payable monthly in arrears and are calculated on a
daily basis.
5 OTHER EXPENSES
|
year
ended 31 July 2020 |
year
ended 31 July 2019 |
|
revenue
£’000 |
capital
£’000 |
revenue
£’000 |
capital
£’000 |
| AIC fees |
21 |
– |
21 |
– |
| Custody fees |
134 |
– |
133 |
– |
| Depositary fees |
26 |
– |
27 |
– |
| Directors’ expenses |
9 |
– |
26 |
– |
| Directors’ fees* |
164 |
– |
137 |
– |
| Legal and professional fees |
93 |
– |
63 |
– |
| Marketing expenses |
118 |
– |
146 |
– |
| Printing and publication
expenses |
74 |
– |
68 |
– |
| Registrars’ fees |
34 |
– |
35 |
– |
| Secretarial and administration fees
payable to the Investment Manager |
75 |
– |
75 |
– |
| Sundry other expenses |
16 |
– |
13 |
– |
| Fees payable to the Company’s
Independent Auditor for the audit of the Financial
Statements |
33 |
– |
28 |
– |
| Cost of the issue of new ordinary
shares |
– |
– |
– |
39 |
|
-------------- |
-------------- |
-------------- |
-------------- |
|
797 |
– |
772 |
39 |
|
======== |
======== |
======== |
======== |
* Details of the breakdown of Directors’
fees are disclosed in the Directors’ Remuneration Report.
6 FINANCE COSTS
|
year ended
31.07.20
£’000 |
year ended
31.07.19
£’000 |
| Interest on bank overdrafts |
2 |
4 |
| Interest paid on CFDs |
428 |
341 |
| Dividends paid on short CFDs |
256 |
333 |
|
-------------- |
-------------- |
|
686 |
678 |
|
======== |
======== |
7 TAXATION ON RETURN/(LOSS) ON
ORDINARY ACTIVITIES
|
year
ended 31 July 2020 |
year
ended 31 July 2019 |
revenue
£’000 |
capital
£’000 |
total
£’000 |
revenue
£’000 |
capital
£’000 |
total
£’000 |
| a) Analysis of the taxation
charge |
|
|
|
|
|
|
| for the year |
|
|
|
|
|
|
| Overseas taxation |
731 |
– |
731 |
492 |
– |
492 |
| Indian capital gains tax
received |
– |
(7) |
(7) |
– |
(4) |
(4) |
|
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
| Taxation charge for the year (see
Note 7b) |
731 |
(7) |
724 |
492 |
(4) |
488 |
|
======== |
======== |
======== |
======== |
======== |
======== |
b) Factors affecting the taxation charge for the year
The taxation charge for the year is lower than the standard rate of
UK corporation tax for an investment trust company of 19.00% (2019:
19.00%). A reconciliation of the standard rate of UK corporation
tax to the taxation charge for the year is shown below:
|
year
ended 31 July 2020 |
year
ended 31 July 2019 |
revenue
£’000 |
capital
£’000 |
total
£’000 |
revenue
£’000 |
capital
£’000 |
total
£’000 |
| Net return/(loss) on ordinary
activities before taxation |
7,152 |
(61,678) |
(54,526) |
8,001 |
16,641 |
24,642 |
|
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
| Net return/(loss) on ordinary
activities before taxation multiplied by the standard
rate of UK corporation tax of 19% (2019: 19%) |
1,359 |
(11,719) |
(10,360) |
1,520 |
3,162 |
4,682 |
| Effects of: |
|
|
|
|
|
|
| Capital losses/(gains) not
taxable* |
– |
11,778 |
11,778 |
– |
(3,213) |
(3,213) |
| Income not taxable |
(1,826) |
– |
(1,826) |
(2,058) |
– |
(2,058) |
| Excess management expenses |
467 |
(44) |
423 |
488 |
44 |
532 |
| Expenses not deductible |
– |
– |
– |
– |
7 |
7 |
| Excess interest paid |
– |
(15) |
(15) |
50 |
– |
50 |
| Overseas taxation |
731 |
– |
731 |
492 |
– |
492 |
| Indian capital gains tax
received |
– |
(7) |
(7) |
– |
(4) |
(4) |
| Taxation charge for the year (see
Note 7a) |
731 |
(7) |
724 |
492 |
(4) |
488 |
|
======== |
======== |
======== |
======== |
======== |
======== |
* The Company is exempt from UK
corporation tax on capital gains as it meets the HM Revenue &
Customs criteria for an investment company set out in Section 1159
of the Corporation Tax Act 2010.
c) Deferred taxation
A deferred tax asset of £5,354,000 (2019: £4,425,000), in respect
of excess management expenses of £24,531,000 (2019: £22,304,000)
and excess interest paid of £3,648,000 (2019: £3,728,000), has not
been recognised as it is unlikely that there will be sufficient
future taxable profits to utilise these expenses.
8 RETURN/(LOSS) PER ORDINARY SHARE
|
year
ended 31 July 2020 |
year
ended 31 July 2019 |
|
revenue |
capital |
total |
revenue |
capital |
total |
| Basic return/(loss) per ordinary
share |
8.64p |
(82.95p) |
(74.31p) |
10.70p |
23.71p |
34.41p |
| Diluted return per ordinary
share |
n/a |
n/a |
n/a |
10.58p |
23.46p |
34.04p |
|
======== |
======== |
======== |
======== |
======== |
======== |
The basic return/(loss) per ordinary share are based on,
respectively; the net revenue return on ordinary activities after
taxation for the year of £6,421,000 (2019: £7,509,000), the net
capital loss on ordinary activities after taxation for the year of
£61,671,000 (2019: return of £16,645,000), and the net total loss
on ordinary activities after taxation for the year of £55,250,000
(2019: return of £24,154,000), and on 74,348,836 ordinary shares
(2019: 70,193,856), being the weighted average number of ordinary
shares held outside Treasury during the year.
There is no diluted return/(loss) per ordinary share for the
current period as all the subscription shares were exercised or
cancelled (see Note 14 for further details).
In the prior year, the diluted returns per ordinary share
reflected the notional dilutive effect that would have occurred if
the rights attached to subscription shares had been exercised and
additional ordinary shares had been issued. The returns on ordinary
activities after taxation used in the prior year diluted
calculation are the same as those for the basic returns above.
These returns are divided by the notional weighted average number
of ordinary shares in issue of 70,964,574. This number of shares
reflected the additional number of ordinary shares that could have
been purchased at the average ordinary share price for the year
with the proceeds from the excess of the subscription share rights
exercise price over the average ordinary share price.
9 DIVIDENDS PAID TO SHAREHOLDERS
|
year ended
31.07.20
£’000 |
year ended
31.07.19
£’000 |
| Dividend paid |
|
|
| Dividend paid of 8.80 pence per
Ordinary Share paid for the year ended 31 July 2019 |
6,380 |
– |
| Dividend paid of 5.50 pence per
ordinary share for the year ended 31 July 2018 |
– |
3,777 |
|
-------------- |
-------------- |
|
6,380 |
3,777 |
|
======== |
======== |
| Dividend proposed |
|
|
| Dividend proposed of 8.50 pence per
Ordinary Share paid for the year ended 31 July 2020 |
6,250 |
– |
| Dividend proposed of 8.80 pence per
Ordinary Share paid for the year ended 31 July 2019 |
– |
6,380 |
|
-------------- |
-------------- |
|
6,250 |
6,380 |
|
======== |
======== |
The Directors have proposed the payment of a dividend for the
year ended 31 July 2020 of
8.50 pence per ordinary share which
is subject to approval by shareholders at the Annual General
Meeting on 8 December 2020 and has
not been included as a liability in these Financial Statements. The
dividend will be paid on 10 December
2020 to shareholders on the register at the close of
business on 23 October 2020
(ex-dividend date 22 October
2020).
10 INVESTMENTS AT FAIR VALUE THROUGH
PROFIT OR LOSS
|
2020
£’000 |
2019
£’000 |
| Listed investments |
240,932 |
312,139 |
| Unlisted investments |
339 |
542 |
|
-------------- |
-------------- |
| Investments at fair
value |
241,271 |
312,681 |
|
======== |
======== |
| Opening book cost |
289,167 |
260,237 |
| Opening investment holding
gains |
23,514 |
13,477 |
|
-------------- |
-------------- |
| Opening fair value |
312,681 |
273,714 |
|
======== |
======== |
| Movements in the year |
|
|
| Purchases at cost |
173,591 |
157,608 |
| Sales – proceeds |
(178,258) |
(135,247) |
| (Losses)/gains on investments |
(66,743) |
16,606 |
|
-------------- |
-------------- |
| Closing fair value |
241,271 |
312,681 |
|
======== |
======== |
| Closing book cost |
266,633 |
289,167 |
| Closing investment holding
(losses)/gains |
(25,362) |
23,514 |
|
-------------- |
-------------- |
| Closing fair value |
241,271 |
312,681 |
|
======== |
======== |
The Company received £178.3m (2019: £135.2m) from investments
sold in the year. The book cost of these investments when they were
purchased was £196.1m (2019: £128.7m). 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 (losses)/gains on the
investments above, were as follows:
|
year ended
31.07.20
£’000 |
year ended
31.07.19
£’000 |
| Purchases transaction costs |
268 |
207 |
| Sales transaction costs |
360 |
292 |
|
-------------- |
-------------- |
|
628 |
499 |
|
======== |
======== |
The portfolio turnover rate of the year was 67.0% (2019:
52.2%).
11 DERIVATIVE INSTRUMENTS
|
year ended
31.07.20
£’000 |
year ended
31.07.19
£’000 |
| Gains/(losses) on derivative
instruments |
|
|
| Realised losses on long CFD
positions closed |
(1,741) |
(36) |
| Realised gains on short CFD
positions closed |
430 |
636 |
| Realised gains on futures contracts
closed |
142 |
284 |
| Realised gains/(losses) on options
contracts closed |
1,162 |
(2,506) |
| Realised losses on forward currency
contracts |
(238) |
(431) |
| Movement in investment holding
gains/(losses) on long CFDs |
6,745 |
(903) |
| Movement in investment holding
(losses)/gains on short CFDs |
(757) |
497 |
| Movement in investment holding
gains/(losses) on futures |
732 |
(245) |
| Movement in investment holding
(losses)/gains on options |
(142) |
2,230 |
| Movement in investment holding
(losses)/gains on forward currency contracts |
(48) |
26 |
| Movement in investment holding
losses on warrants |
– |
(125) |
|
-------------- |
-------------- |
|
6,285 |
(573) |
|
======== |
======== |
|
2020
fair value
£’000 |
2019
fair value
£’000 |
| Derivative instruments recognised
on the Balance Sheet |
|
|
| Derivative instrument assets |
7,299 |
1,537 |
| Derivative instrument
liabilities |
(1,149) |
(2,192) |
|
-------------- |
-------------- |
|
6,150 |
(655) |
|
======== |
======== |
|
2020 |
2019 |
fair value
£’000 |
gross asset
exposure
£’000 |
fair value
£’000 |
gross asset
exposure
£’000 |
| At the year end the Company held
the following derivative instruments |
|
|
|
|
| Long CFDs |
5,675 |
23,230 |
(1,070) |
5,654 |
| Long future |
487 |
6,791 |
(330) |
13,532 |
| Short CFDs |
105 |
5,393 |
862 |
13,055 |
| Short futures |
– |
– |
85 |
1,401 |
| Written put option |
– |
– |
(133) |
1,101 |
| Forward currency contracts (hedging
exposure) |
(117) |
(117) |
(69) |
(69) |
|
-------------- |
-------------- |
-------------- |
-------------- |
|
6,150 |
35,297 |
(655) |
34,674 |
|
======== |
======== |
======== |
======== |
12 DEBTORS
|
2020
£’000 |
2019
£’000 |
| Securities sold for future
settlement |
619 |
1,559 |
| Accrued income |
1,183 |
1,499 |
| Other debtors and prepayments |
84 |
267 |
|
-------------- |
-------------- |
|
1,886 |
3,325 |
|
======== |
======== |
13 OTHER CREDITORS
|
2020
£’000 |
2019
£’000 |
| Securities purchased for future
settlement |
1,780 |
644 |
| Creditors and accruals |
504 |
409 |
|
-------------- |
-------------- |
|
2,284 |
1,053 |
|
======== |
======== |
14 SHARE CAPITAL
|
2020 |
2019 |
number of
shares |
£’000 |
number of
shares |
£’000 |
| Issued, allotted and fully
paid |
|
|
|
|
| Ordinary shares of 25 pence each
held outside Treasury |
|
|
|
|
| Beginning of the year |
72,233,453 |
18,058 |
68,669,402 |
17,167 |
| Ordinary shares issued on the
exercise of rights |
3,081,455 |
770 |
1,213,003 |
303 |
| New ordinary shares issued |
265,981 |
67 |
2,351,048 |
588 |
| Ordinary shares repurchased into
Treasury |
(1,648,782) |
(412) |
– |
– |
|
-------------------- |
-------------------- |
-------------------- |
-------------------- |
| End of the year |
73,932,107 |
18,483 |
72,233,453 |
18,058 |
|
=========== |
=========== |
=========== |
=========== |
| Ordinary shares of 25 pence each
held in Treasury1 |
|
|
|
|
| Beginning of the year |
– |
– |
– |
– |
| Ordinary shares repurchased into
Treasury |
1,648,782 |
412 |
– |
– |
|
-------------------- |
-------------------- |
-------------------- |
-------------------- |
| End of the year |
1,648,782 |
412 |
– |
– |
|
=========== |
=========== |
=========== |
=========== |
| Subscription shares of 0.001
pence |
|
|
|
|
| Beginning of the year |
11,103,030 |
– |
12,316,033 |
– |
| Cancellation of subscription shares
on the exercise of rights |
(3,081,455) |
– |
(1,213,003) |
– |
| Cancellation of subscription
shares |
(8,021,575) |
– |
– |
– |
|
-------------------- |
-------------------- |
-------------------- |
-------------------- |
| End of the year |
– |
– |
11,103,030 |
– |
|
=========== |
=========== |
=========== |
=========== |
| Total share capital |
|
18,895 |
|
18,058 |
|
|
=========== |
|
=========== |
1 Ordinary shares held in Treasury carry
no rights to vote, to receive a dividend or to participate in a
winding up of the Company.
The cost of ordinary shares repurchased into Treasury during the
year was £5,234,000 (2019: £nil).
A bonus issue of subscription shares to ordinary shareholders on
the basis of one subscription share for every five ordinary shares
held took place on 5 December 2016.
Each subscription share gave the holder the right, but not the
obligation, to subscribe for one ordinary share upon payment of the
subscription price. The subscription price was based on the
published unaudited NAV per ordinary share at 2 December 2016, plus a premium (rounded to the
nearest quarter penny) depending upon the year in which the right
was exercised. The subscription share rights could have been
exercised annually in the 25 business days prior to the relevant
subscription date (on which the exercise would take effect). The
subscription dates, subscription prices and premiums were as
follows:
|
Exercise date |
Exercise price |
Premium |
| First exercise date |
30 November 2017 |
370.75p |
1% |
| Second exercise date |
30 November 2018 |
381.75p |
4% |
| Final exercise date |
29 November 2019 |
392.75p |
7% |
After the final subscription date of 29
November 2019, the Company appointed a Trustee to exercise
any rights remaining that were not exercised by shareholders,
providing that by doing so a profit could be realised. To realise a
profit, the sale proceeds from selling the resulting ordinary
shares in the market would need to be in excess of the 392.75 pence per share price of exercising the
rights, plus any related expenses and fees. On 13 December 2019, the Board announced that the
Trustee had not exercised any of the unexercised subscription
rights of the 8,021,575 outstanding subscription shares. The
Trustee determined the net proceeds of sale, after deduction of all
costs and expenses, would not have exceeded the costs of exercising
the subscription share rights. Therefore, all subscription share
rights for the outstanding subscription shares lapsed with nil
value.
During the year, the Company issued 3,081,455 ordinary shares
(2019: 1,213,003 shares) on the exercise of rights attached to
subscription shares. The subscription share price of 392.75 pence per ordinary share issued
represented a premium of 367.75 pence
per share over the 25 pence nominal
value of each share. The total premium received in the year on the
issue of ordinary shares of £11,332,000 (2019: £4,327,000) was
credited to the share premium account.
The Company issued 265,981 new ordinary shares during the year
(2019: 2,351,048 shares). The total premium received in the year on
the issue of new ordinary shares of £1,096,000 (2019: £9,430,000)
was credited to the share premium account.
15 RESERVES
The “share premium account” represents the amount by which the
proceeds, from the issue of new ordinary shares or the issue of
ordinary shares on the exercise of rights attached to subscription
shares, exceeded the nominal value of those ordinary shares. It is
not distributable by way of dividend. It cannot be used to fund
share repurchases.
The “capital redemption reserve” maintains the equity share
capital of the Company and represents the nominal value of shares
repurchased and cancelled. It is not distributable by way of
dividend. It cannot be used to fund share repurchases.
The “other non-distributable reserve” represents amounts
transferred from the warrant reserve in prior years with High Court
approval. It is not distributable by way of dividend. It cannot be
used to fund share repurchases.
The “other reserve” represents amounts transferred from the
share premium account and the capital redemption reserve in prior
years with High Court approval. It is not distributable by way of
dividend. It can be used to fund share repurchases.
The “capital reserve” reflects realised gains or losses on
investments and derivative instruments sold, unrealised increases
and decreases in the fair value of investments and derivative
instruments held and other income and costs recognised in the
capital column of the Income Statement. Refer to Notes 10 and 11
for information on investment holding gains/(losses) included in
this reserve. See Note 2(p) above for further details. It can be
used to fund share repurchases and it is distributable by way of
dividend. The Board has stated that it has no current intention to
pay dividends out of capital.
The “revenue reserve” represents retained revenue surpluses
recognised through the revenue column of the Income Statement. It
is distributable by way of dividend.
16 NET ASSET VALUE PER ORDINARY SHARE
The basic net asset value per ordinary share is based on net assets
of £269,400,000 (2019: £322,999,000) and on 73,932,107 (2019:
72,233,453) ordinary shares, being the number of ordinary shares of
25 pence each held outside of
Treasury at the year end. It is the Company’s policy that shares
held in Treasury will only be reissued at net asset value per
ordinary share or at a premium to net asset value per ordinary
share and, therefore, shares held in Treasury have no dilutive
effect.
There is no diluted net asset value per ordinary share as all
the subscription shares were exercised or cancelled during the year
(see Note 14 for further details).
The diluted net asset value per ordinary share at 31 July 2019 reflects the potential dilution in
the net asset value per ordinary share if the rights of the
11,103,030 subscription shares in issue had been exercised on
31 July 2019 at the next exercise
date price of 392.75 pence per share.
The basis of the calculation is in accordance with the guidelines
laid down by the AIC.
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 market, economic and
political, investment performance, key person, discount control,
gearing, derivatives, currency, cybercrime and pandemic risks.
Other risks identified are tax and regulatory and operational
risks, including those relating to third party service providers
covering investment management, marketing and business development,
company secretarial, fund administration and operations and support
functions. Risks are identified and graded in this process,
together with steps taken in mitigation, and are updated and
reviewed on an ongoing basis. 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) and equity linked notes 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 instrument risk. The
Board reviews and agrees policies for managing each of these risks,
which are summarised below. These policies are consistent with
those followed last year.
Market price risk
Interest rate risk
The Company finances its operations through its share capital and
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 Manager. The Company is exposed to a
financial risk arising as a result of any increases in interest
rates associated with the funding of the derivative
instruments.
Interest rate risk exposure
The values of the Company’s financial instruments that are exposed
to movements in interest rates are shown below:
|
2020
£’000 |
2019
£’000 |
| Exposure to financial instruments
that earn interest |
|
|
| Cash at bank |
21,262 |
5,796 |
| Short CFDs – exposure plus fair
value |
5,498 |
13,917 |
| Amounts held at futures clearing
houses and brokers |
1,115 |
2,905 |
|
-------------- |
-------------- |
|
27,875 |
22,618 |
|
======== |
======== |
| Exposure to financial instruments
that bear interest |
|
|
| Long CFDs – exposure less fair
value |
17,555 |
6,724 |
|
-------------- |
-------------- |
| Net exposure to financial
instruments that earn interest |
10,320 |
15,894 |
|
======== |
======== |
Foreign currency risk
The Company’s net return/(loss) on ordinary activities after
taxation for the year and its net assets can be affected by foreign
exchange rate movements because the Company has income, assets and
liabilities which are denominated in currencies other than the
Company’s functional currency which is UK Sterling. The Portfolio
Manager may seek to manage exposure to currency movements by using
forward and spot foreign exchange contracts. The Company can also
be subject to short-term exposure to exchange rate movements, for
example, between the date when an investment is purchased or sold
and the date when settlement of the transaction occurs.
Three principal areas have been identified where foreign
currency risk could impact the Company:
· Movements in currency exchange
rates affecting the value of investments and derivative
instruments;
· Movements in currency exchange
rates affecting short-term timing differences; and
· Movements in currency exchange
rates affecting income received.
Currency exposure of financial assets
The currency exposure profile of the Company’s financial assets is
shown below:
Currency |
investments
at fair value
£’000 |
long
exposure to
derivative
instruments1
£’000 |
debtors2
£’000 |
cash at
bank
£’000 |
2020 Total
£’000 |
| Hong Kong dollar |
59,135 |
15,730 |
474 |
50 |
75,389 |
| Indian rupee |
51,163 |
– |
1,234 |
162 |
52,559 |
| South Korean won |
31,527 |
– |
106 |
150 |
31,783 |
| Taiwan dollar |
23,098 |
– |
312 |
89 |
23,499 |
| Indonesian rupiah |
21,064 |
– |
362 |
– |
21,426 |
| Australian dollar |
15,230 |
2,755 |
117 |
– |
18,102 |
| US dollar |
9,616 |
9,549 |
66 |
19,665 |
38,896 |
| Philippine peso |
6,390 |
(117) |
216 |
– |
6,489 |
| Singapore dollar |
5,672 |
1,987 |
30 |
– |
7,689 |
| Sri Lankan rupee |
4,948 |
– |
– |
– |
4,948 |
| Thai baht |
3,809 |
– |
– |
– |
3,809 |
| Other overseas currencies |
8,562 |
– |
– |
1,146 |
9,708 |
| UK Sterling |
1,057 |
– |
84 |
– |
1,141 |
|
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
|
241,271 |
29,904 |
3,001 |
21,262 |
295,438 |
|
======== |
======== |
======== |
======== |
======== |
1 The exposure to the market of long
CFDs and long futures after the netting of hedging exposures.
2 Debtors include amounts held at
futures clearing houses and brokers.
Currency |
investments
held
at fair value
£’000 |
long
exposure to
derivative
instruments1 £’000 |
debtors2
£’000 |
cash
at bank
£’000 |
2019
total
£’000 |
| Hong Kong dollar |
74,204 |
5,654 |
776 |
– |
80,634 |
| Indian rupee |
69,495 |
– |
1,016 |
446 |
70,957 |
| Indonesian rupiah |
33,872 |
– |
5 |
– |
33,877 |
| South Korean won |
29,967 |
– |
– |
7 |
29,974 |
| Taiwan dollar |
28,157 |
– |
1,475 |
282 |
29,914 |
| Philippine peso |
17,359 |
(69) |
27 |
– |
17,317 |
| Singapore dollar |
13,419 |
– |
25 |
– |
13,444 |
| Australian dollar |
11,777 |
– |
20 |
– |
11,797 |
| Thai baht |
10,562 |
– |
– |
– |
10,562 |
| Sri Lankan rupee |
6,504 |
14,633 |
2,255 |
3,035 |
26,427 |
| US dollar |
6,429 |
– |
– |
– |
6,429 |
| Other overseas currencies |
10,936 |
– |
365 |
1,867 |
13,168 |
| UK Sterling |
– |
– |
266 |
159 |
425 |
|
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
|
312,681 |
20,218 |
6,230 |
5,796 |
344,925 |
|
======== |
======== |
======== |
======== |
======== |
1 The exposure to the market of long
CFDs, long futures and options after the netting of hedging
exposures.
2 Debtors include amounts held at
futures clearing houses and brokers.
Currency exposure of financial liabilities
The Company finances its investment activities through its ordinary
share capital 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:
Currency |
short
exposure to
derivative
instruments1
£’000 |
other
creditors
£’000 |
2020
total
£’000 |
| US dollar |
1,834 |
1,440 |
3,274 |
| Hong Kong dollar |
1,756 |
188 |
1,944 |
| Australian dollar |
1,114 |
83 |
1,197 |
| Singapore dollar |
689 |
– |
689 |
| Indian rupee |
– |
69 |
69 |
| UK Sterling |
– |
504 |
504 |
|
-------------- |
-------------- |
-------------- |
|
5,393 |
2,284 |
7,677 |
|
======== |
======== |
======== |
1 The exposure to the market of short
CFDs.
| Currency |
short
exposure to
derivative
instruments1
£’000 |
other
creditors
£’000 |
2019
total
£’000 |
| US dollar |
6,680 |
90 |
6,770 |
| Australian dollar |
3,341 |
– |
3,341 |
| Hong Kong dollar |
3,034 |
54 |
3,088 |
| Indian rupee |
1,401 |
366 |
1,767 |
| Other overseas currencies |
– |
134 |
134 |
| UK Sterling |
– |
409 |
409 |
|
-------------- |
-------------- |
-------------- |
|
14,456 |
1,053 |
15,509 |
|
======== |
======== |
======== |
1 The exposure to the market of short
CFDs and short futures.
Other price risk
Other price risk arises mainly from uncertainty about future prices
of financial instruments used in the Company’s business. It
represents the potential loss the Company might suffer through
holding market positions in the face of price movements.
The Board meets quarterly to consider the asset allocation of
the portfolio and the risk associated with particular industry
sectors within the parameters of the investment objective.
The Portfolio Manager is responsible for actively monitoring the
existing portfolio selected in accordance with the overall asset
allocation parameters described above and seeks to ensure that
individual stocks also meet an acceptable risk/reward profile.
Other price risks arising from derivative positions, mainly due to
the underlying exposures, are estimated using Value at Risk and
Stress Tests as set out in the Company’s internal Derivative Risk
Measurement and Management 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 is achieved by the use of a bank overdraft, if
required.
Liquidity risk exposure
At 31 July 2020, the undiscounted
gross cash outflows of the financial liabilities were all repayable
within one year and consisted of derivative instrument liabilities
of £1,149,000 (2019: £2,192,000) and creditors of £2,284,000 (2019:
£1,053,000).
Counterparty risk
Certain derivative instruments in which the Company may invest are
not traded on an exchange but instead will be traded between
counterparties based on contractual relationships, under the terms
outlined in the International Swaps and Derivatives Association’s
(“ISDA”) market standard derivative legal documentation. 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 Over The Counter (“OTC”) derivative transactions, collateral
is used to reduce the risk of both parties to the contract.
Collateral is managed on a daily basis for all relevant
transactions. At 31 July 2020,
£5,758,000 (2019: £nil) was held by the brokers in cash in a
segregated collateral account on behalf of the Company, to reduce
the credit risk exposure of the Company. This collateral comprised:
Goldman Sachs International Ltd £350,000 in cash denominated in US
dollars, HSBC Bank plc £1,424,000 in cash denominated in US dollars
and UBS AG £3,984,000 in cash denominated in US dollars. £1,115,000
(2019: £2,905,000), 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 £1,115,000 (2019: £2,610,000) in cash and HSBC
Bank Plc £nil (2019: £295,000) in cash.
Credit risk
Financial instruments may be adversely affected if any of the
institutions with which money is deposited suffer insolvency or
other financial difficulties. All transactions are carried out with
brokers that have been approved by the Manager and are settled on a
delivery versus payment basis. Limits are set on the amount that
may be due from any one broker and are kept under review by the
Manager. Exposure to credit risk arises on unsettled security
transactions and derivative instrument contracts and cash at
bank.
Derivative instruments risk
The risks and risk management processes which result from the use
of derivative instruments, are set out in a documented Derivative
Risk Measurement and Management Document. Derivative instruments
are used by the Manager for the following purposes:
· to gain unfunded long exposure
to equity markets, sectors or single stocks. Unfunded exposure is
exposure gained without an initial flow of capital;
· to hedge equity market risk
using derivatives with the intention of at least partially
mitigating losses in the exposures of the Company’s portfolio as a
result of falls in the equity market; and
· to position short exposures in
the Company’s portfolio. These uncovered exposures benefit from
falls in the prices of shares which the Portfolio Manager believes
to be over valued. These positions, therefore, distinguish
themselves from other short exposures held for hedging purposes
since they are expected to add risk to the portfolio.
RISK SENSITIVITY ANALYSIS
Interest rate risk sensitivity analysis
Based on the financial instruments held and interest rates at
31 July 2020, an increase of 0.25% in
interest rates throughout the year, with all other variables held
constant, would have decreased the net loss on ordinary activities
after taxation for the year and increased the net assets of the
Company by £26,000 (2019: increased the net return and net assets
by £40,000). A decrease of 0.25% in interest rates throughout the
year would have had an equal but opposite effect.
Foreign currency risk sensitivity analysis
Based on the financial instruments held and currency exchange rates
at the Balance Sheet date, a 10% strengthening of the UK Sterling
exchange rate against other currencies would have increased the
Company’s net loss on ordinary activities after taxation for the
year and decreased the net assets (2019: decreased the net return
and net assets) by the following amounts:
Currency |
2020
£’000 |
2019
£’000 |
| Hong Kong dollar |
6,677 |
7,611 |
| Indian rupee |
4,772 |
6,611 |
| US dollar |
3,238 |
3,018 |
| South Korean won |
2,889 |
2,729 |
| Taiwan dollar |
2,136 |
2,721 |
| Indonesian rupiah |
1,948 |
3,080 |
| Australian dollar |
1,537 |
1,376 |
| Singapore dollar |
636 |
1,222 |
| Philippine peso |
590 |
1,574 |
| Sri Lankan rupee |
450 |
584 |
| Thai baht |
346 |
960 |
| Other overseas currencies |
883 |
1,204 |
|
-------------- |
-------------- |
|
26,102 |
32,690 |
|
======== |
======== |
Based on the financial instruments held and currency exchange
rates at the Balance Sheet date, a 10% weakening of the UK Sterling
exchange rate against other currencies would have decreased the
Company’s net loss on ordinary activities after taxation for the
year and increased the net assets (2019: increased the net return
and net assets) by the following amounts:
Currency |
2020
£’000 |
2019
£’000 |
| Hong Kong dollar |
8,161 |
9,302 |
| Indian rupee |
5,832 |
8,080 |
| US dollar |
3,958 |
3,689 |
| South Korean won |
3,531 |
3,335 |
| Taiwan dollar |
2,611 |
3,325 |
| Indonesian rupiah |
2,381 |
3,764 |
| Australian dollar |
1,878 |
1,682 |
| Singapore dollar |
778 |
1,494 |
| Philippine peso |
721 |
1,924 |
| Sri Lankan rupee |
550 |
714 |
| Thai baht |
423 |
1,174 |
| Other overseas currencies |
1,079 |
1,471 |
|
-------------- |
-------------- |
|
31,903 |
39,954 |
|
======== |
======== |
Other price risk – exposure to investments sensitivity
analysis
Based on the investments held and share prices at 31 July 2020, an increase of 10% in share prices,
with all other variables held constant, would have decreased the
Company’s net loss on ordinary activities after taxation for the
year and increased the net assets of the Company by £24,127,000
(2019: increased the net return and net assets by £31,268,000). A
decrease of 10% in share prices would have had an equal and
opposite effect.
Other price risk – net exposure to derivative instruments
sensitivity analysis
Based on the derivative instruments held and share prices at
31 July 2020, an increase of 10% in
the share prices underlying the derivative instruments, with all
other variables held constant, would have decreased the Company’s
net loss on ordinary activities after taxation for the year and
increased the net assets of the Company by £2,463,000 (2019:
increased the net return and net assets by £583,000). A decrease of
10% in share prices would have had an equal and opposite
effect.
Fair Value of Financial Assets and Liabilities
Financial assets and liabilities are stated in the Balance Sheet at
values which are not materially different to their fair values. As
explained in Notes 2 (k) and (l) above, investments and derivative
instruments are shown at fair value. In the case of cash at bank,
book value approximates to fair value due to the short maturity of
the instruments.
Fair Value Hierarchy
The Company is required to disclose the fair value hierarchy that
classifies its financial instruments measured at fair value at one
of three levels, according to the relative reliability of the
inputs used to estimate the fair values.
| Classification |
Input |
| Level 1 |
Valued using quoted prices in active
markets for identical assets |
| Level 2 |
Valued by reference to inputs other
than quoted prices included within level 1 that are observable
(i.e. developed using market data) for the asset or liability,
either directly or indirectly. |
| Level 3 |
Valued by reference to valuation
techniques using inputs that are not based on observable market
data |
Categorisation within the hierarchy has been determined on the
basis of the lowest level input that is significant to the fair
value measurement of the relevant asset. The valuation techniques
used by the Company are explained in Notes 2 (k) and (l) above. The
table below sets out the Company’s fair value hierarchy:
Financial assets at fair value through profit or loss |
level 1
£’000 |
level 2
£’000 |
level 3
£’000 |
2020
total
£’000 |
| Investments |
238,836 |
2,096 |
339 |
241,271 |
| Derivative instrument assets |
487 |
6,812 |
– |
7,299 |
|
-------------- |
-------------- |
-------------- |
-------------- |
|
239,323 |
8,908 |
339 |
248,570 |
|
======== |
======== |
======== |
======== |
| Financial liabilities at fair value
through profit or loss |
|
|
|
|
| Derivative instrument
liabilities |
– |
(1,149) |
– |
(1,149) |
|
======== |
======== |
======== |
======== |
Financial assets at fair value through profit or loss |
level 1
£’000 |
level 2
£’000 |
level 3
£’000 |
2019
total
£’000 |
| Investments |
311,753 |
386 |
542 |
312,681 |
| Derivative instrument assets |
85 |
1,194 |
258 |
1,537 |
|
-------------- |
-------------- |
-------------- |
-------------- |
|
311,838 |
1,580 |
800 |
314,218 |
|
======== |
======== |
======== |
======== |
| Financial liabilities at fair
value through profit or loss |
|
|
|
|
| Derivative instrument
liabilities |
(463) |
(1,729) |
– |
(2,192) |
|
======== |
======== |
======== |
======== |
The table below sets out the movements in level 3 financial
instruments during the year:
|
year
ended
31.07.20
£’000 |
year
ended
31.07.19
£’000 |
| Beginning of the year |
800 |
407 |
| Transfer into level 3 - China Ding
Yi Feng Holdings (Short CFD)* |
– |
258 |
| Proceeds from closing of the China
Ding Yi Feng Holdings (Short CFD) position |
(208) |
– |
| (Losses)/gains on investments |
(253) |
135 |
|
-------------- |
-------------- |
| End of the year |
339 |
800 |
|
======== |
======== |
* Financial instruments are transferred
into level 3 on the date they are suspended, delisted or when they
have not traded for thirty days.
JHL Biotech Inc
JHL Biotech Inc develops biosimilars and is also engaged in
providing process development and contract manufacturing solutions
to the biopharmaceutical industry. On 26
February 2018, JHL Biotech voluntarily delisted from the
Taipei Exchange. The valuation at 31 July
2020 is based on the company’s financial information and
benchmarking the position to a range of comparable companies.
Chime Biologics
Chime Biologics is a China-based
Contract Development and Manufacturing Organization (CDMO) that
provides a solution supporting customers from early-stage
biopharmaceutical development through to late-stage clinical and
commercial manufacturing. The valuation at 31 July 2020 is based on the price of the shares
when US$277 million of funding was
raised in February 2020.
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, 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 above.
The Company’s gearing at the year end is set out below:
|
2020
gross asset
exposure
£’000 |
2019
gross asset
exposure
£’000 |
| Long exposure to shares and equity
linked notes |
241,271 |
312,681 |
| Long CFDs |
23,230 |
5,654 |
| Long future |
6,791 |
13,532 |
| Written put option |
– |
1,101 |
|
-------------- |
-------------- |
| Total long exposures |
271,292 |
332,968 |
| Less: hedging exposure to forward
currency contracts |
(117) |
(69) |
|
-------------- |
-------------- |
| Total long exposures after the
netting of hedges |
271,175 |
332,899 |
| Short CFDs |
5,393 |
13,055 |
| Short futures |
– |
1,401 |
|
-------------- |
-------------- |
| Gross Asset Exposure |
276,568 |
347,355 |
|
======== |
======== |
| Total Shareholders’
Funds |
269,400 |
322,999 |
|
======== |
======== |
| Gearing* |
2.7% |
7.5% |
|
======== |
======== |
* Gross Asset Exposure less Total
Shareholders’ Funds expressed as a percentage of Total
Shareholders’ Funds.
19 TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES
FIL Investment Services (UK) Limited is the Company’s Alternative
Investment Fund Manager and has delegated portfolio management and
the role of company secretary to FIL Investments International
(“FII”). Both companies are Fidelity group companies.
Details of the current fee arrangements are given in the
Directors’ Report. During the year, management fees of £1,655,000
(2019: £2,262,000), and secretarial and administration fees of
£75,000 (2019: £75,000) were payable to FII. At the Balance Sheet
date, management fees of £117,000 (2019: £217,000), and secretarial
and administration fees of £6,000 (2019: £6,000) were accrued and
included in other creditors. FII also provides the Company with
marketing services. The total amount payable for these services was
£118,000 (2019: £146,000). At the Balance Sheet date, £25,000
(2019: £20,000) for marketing services was 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,
£16,000 (2019: £13,000) of employers’ National Insurance
contributions were paid by the Company. At the Balance Sheet date,
Directors’ fees of £12,000 (2019: £11,000) were accrued and
payable.
ALTERNATIVE PERFORMANCE MEASURES
TOTAL RETURN
Total return is considered to be an Alternative Performance
Measure. NAV and diluted NAV total return includes reinvestment of
the dividend in the NAV/diluted NAV of the Company on the
ex-dividend date. Share price total return includes the
reinvestment of the net dividend in the month that the share price
goes ex-dividend.
The tables below provide information relating to the NAVs and
share prices of the Company, the impact of the dividend
reinvestments and the total returns for the years ended
31 July 2020 and 31 July 2019.
2020 |
Net asset
value per
ordinary
share –
undiluted |
Net asset
value per
ordinary
share –
diluted |
Share
price |
| 31 July 2019 |
447.16p |
439.91p |
455.50p |
| 31 July 2020 |
364.39p |
n/a |
335.00p |
| Change in year |
-18.5% |
n/a |
-26.5% |
| Impact of dividend reinvestment |
+1.8% |
n/a |
+1.7% |
|
-------------- |
-------------- |
-------------- |
| Total return for the
year |
-16.7% |
n/a |
-24.8% |
|
======== |
======== |
======== |
2019 |
Net asset
value per
ordinary
share –
undiluted |
Net asset
value per
ordinary
share –
diluted |
Share
price |
| 31 July 2018 |
419.36p |
413.64p |
412.00p |
| 31 July 2019 |
447.16p |
439.91p |
455.50p |
| Change in year |
+6.6% |
+6.4% |
+10.6% |
| Impact of dividend reinvestment |
+1.6% |
+1.5% |
+1.7% |
|
-------------- |
-------------- |
-------------- |
| Total return for the year |
+8.2% |
+7.9% |
+12.3% |
|
======== |
======== |
======== |
ONGOING CHARGES
Ongoing charges are 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.
|
2020 |
2019 |
| Investment management fees
(£’000) |
1,967 |
2,030 |
| Other expenses (£’000) |
797 |
811 |
| Ongoing charges (£’000) |
2,764 |
2,841 |
| Variable element of management fees
(£’000) |
(312) |
232 |
| Average net assets (£’000) |
280,521 |
289,809 |
| Ongoing charges ratio |
0.98% |
0.98% |
| Ongoing charges ratio including
variable element of management fee |
0.87% |
1.06% |
|
======== |
======== |
GEARING
Gearing is considered to be an Alternative Performance Measure. See
Note 18 for details of the Company’s gearing.
The Annual Financial Report Announcement is not the Company's
statutory accounts. The above results for the year ended
31 July 2020 are an abridged version
of the Company's full Annual Report and Financial Statements, which
have been approved and audited with an unqualified report. The 2019
and 2020 statutory accounts received unqualified reports from the
Company's Auditor and did not include any reference to matters to
which the Auditor drew attention by way of emphasis without
qualifying the reports, and did not contain a statement under s.498
of the Companies Act 2006. The financial information for 2019 is
derived from the statutory accounts for 2018 which have been
delivered to the Registrar of Companies. The 2020 Financial
Statements will be filed with the Registrar of Companies in due
course.
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 in due course
and additional copies will be available from the registered office
of the Company and on the Company's website:
www.fidelityinvestmenttrusts.com where up to date information on
the Company, including daily NAV and share prices, factsheets and
other information can also be found.
The Annual General Meeting will be
held at 11.00 on 8 December 2020
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