Fidelity AsianValues: Half-year Report
19/04/2023 07:00
Fidelity Asian Values PLC
Half-Yearly Results for the six months ended 31 January 2023
Financial Highlights
* The net asset value (“NAV”) of the Company increased by +10.3% for the
six months ended 31 January 2023 outperforming the Comparative Index (MSCI All
Countries Asia ex Japan Small Cap Index) which rose by +3.6% over the same
timeframe.
* The ordinary share price return was +17.3%.
* The Company maintains net gearing of approximately 8% and reached the
highest level under the Portfolio Manager’s tenure during the reporting
period.
* The Portfolio Manager continues to find good small cap businesses at
attractive valuations.
Contacts
For further information please contact:
Smita Amin
Company Secretary
01737 836347
FIL Investments International
PORTFOLIO MANAGER’S HALF-YEARLY REVIEW
PERFORMANCE REVIEW
Over the six month period ended 31 January 2023, the net asset value
(“NAV”) total return of Fidelity Asian Values PLC was +10.3%,
outperforming the Comparative Index, the MSCI All Countries Asia ex Japan
Small Cap Index (net) total return (in Sterling terms) which rose by +3.6%.
Over the same period, the Company’s share price total return was +17.3% due
to a narrowing of the Company’s discount.
COMPANY’S NAV, SHARE PRICE AND COMPARATIVE INDEX TOTAL RETURNS (AS AT 31
JANUARY 2023)
NAV total return (%) Share Price total return (%) Comparative Index total return (%)
Tenure (since 1 April 2015) +110.6 +129.0 +130.2
5 Years +45.9 +51.3 +40.5
3 Years +53.4 +47.7 +44.9
1 Years +12.1 +14.5 -1.3
6 Months +10.3 +17.3 +3.6
3 Months +15.7 +22.9 +11.5
========= ========= =========
Source: Fidelity International, 31 January 2023. Total returns include net
income reinvested. Comparative Index: MSCI All Countries Asia ex Japan Small
Cap Index (net) total return (in Sterling terms).
The reporting period was one of two extremes; the first three months saw Asian
markets fall due to inflationary concerns and persistent interest rate hikes.
China and Taiwan underperformed the most due to geopolitical concerns, a
slowing technology cycle and as a result of COVID-related restrictions, while
the South Asian markets of India and Indonesia fared much better. However,
China rallied sharply in the last three months of the reporting period as the
government lifted COVID-related restrictions and decided to reopen its economy
which led to a strong recovery.
We are not perturbed by these short-term gyrations in the stock market, and we
continue to focus on investing in good businesses, run by good management
teams that are available at a suitable margin of safety. Over time, we have
found that our investment philosophy has led us to invest a significant amount
of our capital in small cap value stocks.
From a style perspective, the small cap value segment has had a history of
significant outperformance in Asia, as can be seen from the left-hand scale of
the chart in the Half-Yearly Report. This has been driven by the superior
earnings growth of value stocks compared to growth stocks as well as better
cash returns, in terms of dividends. Against the right-hand scale of the same
chart in the Half-Yearly Report, you can see that small cap value stocks are
currently trading at close to all-time high discounts relative to both their
large and small cap growth counterparts. We believe this should result in
outperformance of these stocks versus broad indices in the coming years.
As we look at the performance over the last six months, we do not believe that
there have been any major mistakes or errors of commission (where we lost a
lot of money in stocks that we owned). Although our holdings in Japfa Ltd, WH
Group and Shriram Finance detracted, we consider these to be temporary losses.
The fall in their share prices increased our margin of safety and we have
therefore increased our exposure to all three of these companies. Melco
Resorts and Akeso were not held in the Company’s portfolio but performed
extremely well and their absence detracted somewhat from the Company’s
performance relative to the Comparative Index.
Meanwhile, the holdings in Chow Sang Sang, Bank Mandiri, Focus Media
Information Technology, KEI Industries and Sinotrans performed well for the
Company. These businesses have been retained in the portfolio as they continue
to offer a sufficient margin of safety despite their recent gains.
For example, jewellery company Chow Sang Sang was the top contributor to
returns and is one of the largest positions in the Company. It did well in
this period as it recovered from extreme pessimism towards Chinese companies.
The business also has a good strategy for growing its market share in China
and is trading below its asset value of 14-15 HKD per share (mainly comprising
gold inventory). It also currently delivers a 6-7% dividend yield while
trading on a Price to Earnings ratio of around seven times.
Below are the Company’s top five key contributors and detractors over the
review period.
KEY CONTRIBUTORS OVER SIX MONTHS (AS AT 31 JANUARY 2023)
Order Security Average Active Weight (%) Gain/Loss (%) Contribution to Relative Return (%)
Top 5
1 Chow Sang Sang Holdings International +2.0 +47.1 +0.8
2 Bank Mandiri (Persero) +2.5 +18.0 +0.4
3 Focus Media Information Technology +2.2 +20.2 +0.4
4 KEI Industries +1.2 +25.0 +0.3
5 Sinotrans +1.9 +18.7 +0.3
--------------- --------------- ---------------
Total +2.2
=========
* Source: Fidelity International, 31 January 2023.
KEY DETRACTORS OVER SIX MONTHS (AS AT 31 JANUARY 2023)
Order Security Average Active Weight (%) Gain/Loss (%) Contribution to Relative Return (%)
Top 5
1 Japfa Ltd +1.2 -40.7 -0.6
2 WH Group +1.4 -18.8 -0.3
3 Melco Resorts* -0.2 n/a -0.2
4 Shriram Finance +1.4 -2.1 -0.2
5 Akeso* -0.2 n/a -0.2
--------------- --------------- ---------------
Total -1.5
=========
* Not held in the Company’s portfolio
Source: Fidelity International, 31 January 2023.
INVESTMENT STRATEGY
Our strength lies in analysing businesses, finding best-in-class management
teams and mis-priced stocks. Each stock in the portfolio is analysed and
scrutinised against our investment philosophy and is owned purely for what it
can contribute to returns, rather than whether or not it forms part of an
index.
We are happy with the current shape of the Company’s portfolio, which
comprises businesses that are dominant in their industries, earn good returns
on capital and are available at attractive valuations. The following
fundamentals apply to the Company:
· Return on Equity at 16.7% versus 13.4% for the Comparative Index
(see chart in the Half-Yearly Report on the right-hand side).
· Net Debt/EBITDA* (ex-Financials) ratio for the Company’s
portfolio is 0.56x versus 1.24x for the Comparative Index.
· Price to earnings: 9.5x versus 11.9x for the Comparative Index
(see chart in the Half-Yearly Report on the left-hand side).
· Dividend yield at 4.8% versus 2.9% for the Comparative Index.
* EBITDA is net income (earnings) with interest, taxes, depreciation and
amortisation added back.
OUTLOOK
Recent activity in Asian markets has been a useful reminder of why
macroeconomic shifts are not necessarily a good guide to predicting what
direction stock markets might take. While the reopening of China and India’s
buoyant growth have undoubtedly galvanised the region’s stock markets, the
timing has been unpredictable and the beneficiaries not always clear. Having
said that, this type of environment does throw up opportunities that might be
overlooked by others and we have maintained net gearing at approximately 8% to
take advantage of this.
We believe that the companies we own are well-run businesses, where management
teams are both competent and treat us as their partners and we are buying them
at a discount to our assessment of their intrinsic value. Invariably, there
will be those companies that disappoint and others that will exceed
expectations in this new environment. We ensure that our investments are led
by the reality of a company’s standing and whether that is reflected in its
valuation. We believe that if we adhere to our process, we should be well
positioned in the medium-term, irrespective of market and style cycles in the
shorter-term.
NITIN BAJAJ
Portfolio Manager
18 April 2023
TWENTY LARGEST HOLDINGS AS AT 31 JANUARY 2023
The Asset Exposures shown below measure exposure to market price movements as
a result of owning shares, equity linked notes and derivative instruments. The
Fair Value is the actual value of the portfolio as reported on the Balance
Sheet. Where a contract for difference (“CFD”) is held, the Fair Value
reflects the profit or loss on the contract since it was opened and is based
on how much the price of the underlying share has moved.
Asset Exposure Fair Value £’000
£’000 (%) (1)
Long Exposures – shares unless otherwise stated
Shriram Finance
Provider of hire purchase and lease finance for medium and heavy commercial vehicles 13,829 3.5 13,829
--------------- --------------- ---------------
Axis Bank
Private sector bank 11,807 3.0 11,807
--------------- --------------- ---------------
Chow Sang Sang Holdings International
(shares and long CFD)
Jewellery retailer 10,051 2.6 9,160
--------------- --------------- ---------------
Bank Mandiri (Persero)
Banking institution 9,479 2.4 9,479
--------------- --------------- ---------------
Arwana Citramulia
Ceramics manufacturer 9,464 2.4 9,464
--------------- --------------- ---------------
Focus Media Information Technology
(shares, long CFD and equity linked notes)
Advertising solution provider 9,404 2.4 9,047
--------------- --------------- ---------------
China Yongda Automobiles Services Holdings
(shares and long CFD)
Investment holding company engaged in the sale of passenger vehicles and provision of related services 8,873 2.3 7,325
--------------- --------------- ---------------
Sinotrans (shares and long CFD)
Logistics, storage and terminal services provider 8,074 2.1 6,448
--------------- --------------- ---------------
CapitaL and India Trust
(shares and long CFD)
Property trust 7,543 1.9 6,786
--------------- --------------- ---------------
BOC Aviation (long CFD)
Global aircraft operating leasing company 7,505 1.9 (110)
--------------- --------------- ---------------
Gold Road Resources
Gold production and exploration company 7,391 1.9 7,391
--------------- --------------- ---------------
Indofood CBP Sukses Makmur
Producer of packaged food products 7,378 1.9 7,378
--------------- --------------- ---------------
China Overseas Grand Oceans Group (shares and long CFD)
Real estate business 7,341 1.9 3,890
--------------- --------------- ---------------
Taiwan Union Technology (shares and long CFD)
Provider of professional support, value-added materials and advanced mass lamination service to the global electronics industry 7,046 1.8 6,925
--------------- --------------- ---------------
HDFC Bank
Private sector bank 7,003 1.8 7,003
--------------- --------------- ---------------
Granules India
Pharmaceutical manufacturing company 6,920 1.8 6,920
--------------- --------------- ---------------
WH Group
Meat and food processing company 6,477 1.7 6,477
--------------- --------------- ---------------
Texwinca Holdings
Production and sales of dyed yarns and knitted fabrics 6,350 1.6 6,350
--------------- --------------- ---------------
Qingdao Port International (shares and long CFD)
Provider of port services 5,689 1.5 5,509
--------------- --------------- ---------------
PTC India
Provider of power trading solutions in India 5,483 1.4 5,483
--------------- --------------- ---------------
Twenty largest long exposures 163,107 41.8 146,561
--------------- --------------- ---------------
Other long exposures 263,086 67.3 222,413
--------------- --------------- ---------------
Total long exposures before futures (144 holdings) 426,193 109.1 368,974
========= ========= =========
Add: long futures
--------------- --------------- ---------------
MSCI All Countries Asia ex Japan Index Future 17/03/2023 4,205 1.1 251
--------------- --------------- ---------------
Total long exposures 430,398 110.2 369,225
========= ========= =========
Add: short exposures
--------------- --------------- ---------------
Short CFDs (8 holdings) 9,568 2.4 (55)
--------------- ---------------
Gross Asset Exposure (2) 439,966 112.6
--------------- --------------- ---------------
Portfolio Fair Value (3) 369,170
---------------
Net current assets (excluding derivative assets and liabilities) 21,710
=========
Total Shareholders’ Funds/Net Assets 390,880
=========
1 Asset Exposure (as defined in the Glossary of Terms in the Half-Yearly
Report) is expressed as a percentage of Total Shareholders’ Funds.
2 Gross Asset Exposure comprises market exposure to investments of
£368,054,000 plus market exposure to derivative instruments of £71,912,000.
3 Portfolio Fair Value comprises investments of £368,054,000 plus
derivative assets of £1,988,000 less derivative liabilities of £872,000 (per
the Balance Sheet below).
INTERIM MANAGEMENT REPORT
BOARD CHANGES AND SUCCESSION
Grahame Stott stepped down from the Board at the conclusion of the Annual
General Meeting (“AGM”) on 23 November 2022 having completed nine years.
He was replaced as Chairman of the Audit Committee by Hussein Barma who joined
the Board on 24 November 2022. Mr Barma is a non-executive Director and Audit
Chairman of both Chaarat Gold Holdings Limited and Atalaya Mining plc. He is
an independent Governor of the University of the Arts London and the Chairman
and Member of the Finance Committee of the Oxford Centre for Islamic Studies.
Mr Barma is a qualified Barrister and Chartered Accountant and holds a
doctorate in corporate law.
As part of the Board’s succession plan, Kate Bolsover will step down from
the Board at the conclusion of the AGM in November 2023. She will be succeeded
as Chairman by Clare Brady who is currently the Senior Independent Director.
Michael Warren will have completed nine years on the Board by the AGM this
year. However, given the changes to the Board in the past year and the ones to
follow in November this year, he will remain on the Board for an additional
year so as to ensure that institutional and historical knowledge of the
Company is not lost. He will retire from the Board at the conclusion of the
AGM in 2024.
DISCOUNT MANAGEMENT AND SHARE REPURCHASES
The Board has undertaken an active discount management policy, the primary
purpose of which is to reduce discount volatility.
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 this 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 ordinary share or at a premium to NAV per
ordinary share.
There continued to be turmoil in the world’s financial markets, especially
in the first quarter of the reporting period, and at times the Company’s
discount was volatile in reaction to this. The Board, therefore approved the
repurchase of 569,000 ordinary shares into Treasury during the six month
reporting period. Since then, no ordinary shares have been repurchased into
Treasury or for cancellation.
PRINCIPAL RISKS AND UNCERTAINTIES
The Board, with the assistance of the Manager (FIL Investment Services (UK)
Limited), has developed a risk matrix which, as part of the risk management
and internal controls process, identifies the key existing and emerging risks
and uncertainties faced by the Company.
The Board considers that the principal risks and uncertainties faced by the
Company fall into the following categories: economic, political and market;
discount management; cybercrime and information security; investment
performance (including the use of derivatives and gearing); shareholder
relationship; key person; environmental, social and governance (“ESG”),
and business continuity and operational (including third-party service
providers) risks. Other risks facing the Company are tax and regulatory risks.
Information on each of these risks can be found in the Strategic Report
section of the Annual Report for the year ended 31 July 2022 which can be
found on the Company’s pages of the Manager’s website at
www.fidelity.co.uk/asianvalues.
While the principal risks and uncertainties are the same as those at the last
year end, the uncertainty continues to be heightened by the ongoing Russia and
Ukraine conflict dominating political risks and industry concerns. There is
geopolitical and economic uncertainty, in addition to events currently being
faced globally such as the energy crisis, cost of living crisis, rising
inflation, food supply crisis and the threat of cyberattacks on critical
infrastructure. There continues to be tension between China and the US and
also between Taiwan and China. More recently, the collapse of Silicon Valley
Bank and the buyout of Credit Suisse by UBS Group has caused turmoil in the
global banking sector and volatility in the markets. The quantum of risks
continues to change and the Board remains vigilant in monitoring such risks.
Climate change continues to be a key emerging issue, as well as a principal
risk, that is confronting asset managers and their investors. The Board notes
that the Manager has integrated ESG considerations, including climate change,
into the Company’s investment process. The Board will continue to monitor
how this may impact the Company as a risk, the main risk being the impact on
investment valuations and potentially shareholder returns.
Investors should be prepared for market fluctuations and remember that holding
shares in the Company should be considered to be a long-term investment. Risks
are mitigated by the investment trust structure of the Company which means
that no forced sales need to take place to deal with any redemptions.
Therefore, investments in the Company’s portfolio can be held over a longer
time horizon.
The Manager has appropriate business continuity and operational plans in place
to ensure the continued provision of services, including investment team key
activities, which also covers portfolio managers, analysts and trading/support
functions. It reviews its operational resilience strategies on an ongoing
basis and continues to take all reasonable steps in 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.
The Company’s other third party service providers also have similar measures
to ensure that business disruption is kept to a minimum.
TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES
The Manager has delegated the Company’s portfolio management and company
secretariat services to FIL Investments International. Transactions with the
Manager and related party transactions with the Directors are disclosed in
Note 13 to the Financial Statements below.
GOING CONCERN STATEMENT
The Directors have considered the Company’s investment objective, risk
management policies, liquidity risk, credit risk, capital management policies
and procedures, the nature of its portfolio, its expenditure and cash flow
projections. The Directors, having considered the liquidity of the Company’s
portfolio of investments (being mainly securities which are readily
realisable) and the projected income and expenditure, are satisfied that the
Company is financially sound and has adequate resources to meet all of its
liabilities and ongoing expenses and can continue in operational existence for
a period of at least twelve months from the date of this Half-Yearly Report.
This conclusion also takes into account the Board’s assessment of the
ongoing risks from the war in Ukraine, significant market events and
regulatory changes and continued evolving variants of COVID.
Accordingly, the Financial Statements of the Company have been prepared on a
going concern basis.
Continuation votes are held every five years and the next continuation vote
will be put to shareholders at the AGM in 2026.
BY ORDER OF THE BOARD
FIL INVESTMENTS INTERNATIONAL
18 April 2023
DIRECTORS’ RESPONSIBILITY STATEMENT
The Disclosure and Transparency Rules (“DTR”) of the UK Listing Authority
require the Directors to confirm their responsibilities in relation to the
preparation and publication of the Interim Management Report and Financial
Statements.
The Directors confirm to the best of their knowledge that:
a) the condensed set of Financial Statements contained within the
Half-Yearly Report has been prepared in accordance with the Financial
Reporting Council’s Standard, FRS 104: Interim Financial Reporting; and
b) the Portfolio Manager’s Half-Yearly Review and the Interim
Management Report above include a fair review of the information required by
DTR 4.2.7R and 4.2.8R.
The Half-Yearly Report has not been audited or reviewed by the Company’s
Independent Auditor.
The Half-Yearly Report was approved by the Board on 18 April 2023 and the
above responsibility statement was signed on its behalf by Kate Bolsover,
Chairman.
FINANCIAL STATEMENTS
INCOME STATEMENT FOR THE SIX MONTHS ENDED 31 JANUARY 2023
Six months ended 31 January 2023 unaudited Six months ended 31 January 2022 unaudited Year ended 31 July 2022 audited
Notes Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000
Gains on investments – 26,445 26,445 – 5,093 5,093 – 2,708 2,708
Gains/(losses) on derivative instruments – 5,111 5,111 – (795) (795) – (1,815) (1,815)
Income 4 7,032 – 7,032 5,391 – 5,391 15,256 – 15,256
Investment management fees 5 (1,316) 77 (1,239) (1,301) 372 (929) (2,564) 732 (1,832)
Other expenses (484) – (484) (466) – (466) (905) – (905)
Foreign exchange gains – 1,386 1,386 – 807 807 – 2,609 2,609
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Net return on ordinary activities before finance costs and taxation 5,232 33,019 38,251 3,624 5,477 9,101 11,787 4,234 16,021
Finance costs 6 (829) – (829) (93) – (93) (331) – (331)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Net return on ordinary activities before taxation 4,403 33,019 37,422 3,531 5,477 9,008 11,456 4,234 15,690
Taxation on return on ordinary activities 7 (437) (1,059) (1,496) (386) (620) (1,006) (1,079) (1,085) (2,164)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Net return on ordinary activities after taxation for the period 3,966 31,960 35,926 3,145 4,857 8,002 10,377 3,149 13,526
========= ========= ========= ========= ========= ========= ========= ========= =========
Return per ordinary share 8 5.51p 44.39p 49.90p 4.30p 6.64p 10.94p 14.21p 4.31p 18.52p
========= ========= ========= ========= ========= ========= ========= ========= =========
The Company does not have any other comprehensive income. Accordingly, the net
return on ordinary activities after taxation for the period is also the total
comprehensive income for the period 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 period and all items in the
above statement derive from continuing operations.
STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 31 JANUARY 2023
Note 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
Six months ended 31 January 2023 (unaudited)
Total shareholders’ funds at 31 July 2022 18,895 50,501 3,197 7,367 – 273,448 14,215 367,623
Net return on ordinary activities after taxation for the period – – – – – 31,960 3,966 35,926
Repurchase of ordinary shares 11 – – – – – (2,603) – (2,603)
Dividend paid to shareholders 9 – – – – – – (10,066) (10,066)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total shareholders’ funds at 31 January 2023 18,895 50,501 3,197 7,367 – 302,805 8,115 390,880
========= ========= ========= ========= ========= ========= ========= =========
Six months ended 31 January 2022 (unaudited)
Total shareholders’ funds at 31 July 2021 18,895 50,501 3,197 7,367 719 273,107 10,278 364,064
========= ========= ========= ========= ========= ========= ========= =========
Net return on ordinary activities after taxation for the period – – – – – 4,857 3,145 8,002
Dividend paid to shareholders 9 – – – – – – (6,440) (6,440)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total shareholders’ funds at 31 January 2022 18,895 50,501 3,197 7,367 719 277,964 6,983 365,626
========= ========= ========= ========= ========= ========= ========= =========
Year ended 31 July 2022 (audited)
Total shareholders’ funds at 31 July 2021 18,895 50,501 3,197 7,367 719 273,107 10,278 364,064
Net return on ordinary activities after taxation for the year – – – – – 3,149 10,377 13,526
Repurchase of ordinary shares 11 – – – – (719) (2,808) – (3,527)
Dividend paid to shareholders 9 – – – – – – (6,440) (6,440)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total shareholders’ funds at 31 July 2022 18,895 50,501 3,197 7,367 – 273,448 14,215 367,623
========= ========= ========= ========= ========= ========= ========= =========
BALANCE SHEET AS AT 31 JANUARY 2023
Company number 3183919
Notes 31.01.23 unaudited £’000 31.07.22 audited £’000 31.01.22 unaudited £’000
Fixed assets
Investments 10 368,054 338,845 353,441
--------------- --------------- ---------------
Current assets
Derivative instruments 10 1,988 972 779
Debtors 2,638 4,568 2,144
Amounts held at futures clearing houses and brokers 2,220 2,997 1,609
Cash at bank 21,799 25,368 13,368
--------------- --------------- ---------------
28,645 33,905 17,900
========= ========= =========
Current liabilities
Derivative instruments 10 (872) (1,302) (513)
Other creditors (4,947) (3,825) (5,202)
--------------- --------------- ---------------
(5,819) (5,127) (5,715)
========= ========= =========
Net current assets 22,826 28,778 12,185
========= ========= =========
Net assets 390,880 367,623 365,626
========= ========= =========
Capital and reserves
Share capital 11 18,895 18,895 18,895
Share premium account 50,501 50,501 50,501
Capital redemption reserve 3,197 3,197 3,197
Other non-distributable reserve 7,367 7,367 7,367
Other reserve – – 719
Capital reserve 302,805 273,448 277,964
Revenue reserve 8,115 14,215 6,983
--------------- --------------- ---------------
Total shareholders’ funds 390,880 367,623 365,626
========= ========= =========
Net asset value per ordinary share 12 544.18p 507.78p 499.63p
========= ========= =========
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 PUBLICATION OF NON-STATUTORY ACCOUNTS
The Financial Statements in this Half-Yearly Report have not been audited by
the Company’s Independent Auditor and do not constitute statutory accounts
as defined in section 434 of the Companies Act 2006 (the “Act”). The
financial information for the year ended 31 July 2022 is extracted from the
latest published Financial Statements of the Company. Those Financial
Statements were delivered to the Registrar of Companies and included the
Independent Auditor’s Report which was unqualified and did not contain a
statement under either section 498(2) or 498(3) of the Act.
3 ACCOUNTING POLICIES
(i) Basis of Preparation
The Company prepares its Financial Statements on a going concern basis and in
accordance with UK Generally Accepted Accounting Practice (“UK GAAP”) and
FRS 102: The Financial Reporting Standard applicable in the UK and Republic of
Ireland, issued by the Financial Reporting Council. The Financial Statements
are also prepared in accordance with the Statement of Recommended Practice:
Financial Statements of Investment Trust Companies and Venture Capital Trusts
(“SORP”) issued by the Association of Investment Companies (“AIC”) in
July 2022. FRS 104: Interim Financial Reporting has also been applied in
preparing this condensed set of Financial Statements. The accounting policies
followed are consistent with those disclosed in the Company’s Annual Report
and Financial Statements for the year ended 31 July 2022.
(ii) Going Concern
The Directors have a reasonable expectation that the Company has adequate
resources to continue in operational existence for a period of at least twelve
months from the date of approval of these Financial Statements. Accordingly,
the Directors consider it appropriate to adopt the going concern basis of
accounting in preparing these Financial Statements. This conclusion also takes
into account the Directors’ assessment of the risks faced by the Company as
detailed in the Interim Management Report above.
4 INCOME
Six months ended 31.01.23 unaudited £’000 Six months ended 31.01.22 unaudited £’000 Year ended 31.07.22 audited £’000
Investment income
Overseas dividends 5,953 5,074 13,905
Overseas scrip dividends 244 111 114
Interest on securities 35 – –
--------------- --------------- ---------------
6,232 5,185 14,019
========= ========= =========
Derivative income
Dividends received on long CFDs 487 203 1,200
Interest received on CFDs 106 2 20
--------------- --------------- ---------------
593 205 1,220
========= ========= =========
Other interest
Interest received on collateral and deposits 207 1 17
--------------- --------------- ---------------
Total income 7,032 5,391 15,256
========= ========= =========
No special dividends have been recognised in capital during the period (six
months ended 31 January 2022: £nil and year ended 31 July 2022: £97,000).
5 INVESTMENT MANAGEMENT FEES
Six months ended 31.01.23 unaudited £’000 Six months ended 31.01.22 unaudited £’000 Year ended 31.07.22 audited £’000
Investment management fees – base (charged to revenue) 1,316 1,301 2,564
Investment management fees – variable (credited to capital) (77) (372) (732)
--------------- --------------- ---------------
1,239 929 1,832
========= ========= =========
FIL Investment Services (UK) Limited is the Company’s Alternative Investment
Fund Manager and has delegated portfolio management to FIL Investments
International (“FII”). Both companies are Fidelity group companies.
The Company charges base investment management fees at an annual rate of 0.70%
of net assets. In addition, there is +/- 0.20% variation fee based on the
Company’s NAV per ordinary share performance relative to the Company’s
Benchmark Index which is charged/credited to capital. Fees are payable monthly
in arrears and are calculated on a daily basis.
6 FINANCE COSTS
Six months ended 31.01.23 unaudited £’000 Six months ended 31.01.22 unaudited £’000 Year ended 31.07.22 audited £’000
Interest on bank overdrafts and collateral 1 1 5
Interest paid on CFDs* 703 67 255
Dividends paid on short CFDs 125 25 71
--------------- --------------- ---------------
829 93 331
========= ========= =========
* Increased compared to prior periods due to an increase in both
exposure to CFDs and interest rates.
7 TAXATION ON RETURN ON ORDINARY ACTIVITIES
Six months ended 31.01.23 unaudited £’000 Six months ended 31.01.22 unaudited £’000 Year ended 31.07.22 audited £’000
Revenue – taxation on overseas dividends 437 386 1,079
Capital – Indian capital gains tax 1,059 620 1,085
--------------- --------------- ---------------
Total taxation charge for the period 1,496 1,006 2,164
========= ========= =========
8 RETURN PER ORDINARY SHARE
Six months ended 31.01.23 unaudited £’000 Six months ended 31.01.22 unaudited £’000 Year ended 31.07.22 audited £’000
Revenue return per ordinary share 5.51p 4.30p 14.21p
Capital return per ordinary share 44.39p 6.64p 4.31p
--------------- --------------- ---------------
Total return per ordinary share 49.90p 10.94p 18.52p
========= ========= =========
The return per ordinary share is based on the net return on ordinary
activities after taxation for the period divided by the weighted average
number of ordinary shares held outside of Treasury during the period, as shown
below:
£’000 £’000 £’000
Net revenue return on ordinary activities after taxation 3,966 3,145 10,377
Net capital return on ordinary activities after taxation 31,960 4,857 3,149
--------------- --------------- ---------------
Net total return on ordinary activities after taxation 35,926 8,002 13,526
========= ========= =========
Number Number Number
Weighted average number of ordinary shares held outside of Treasury during the period 71,993,981 73,178,879 73,039,011
========= ========= =========
9 DIVIDENDS PAID TO SHAREHOLDERS
Six months ended 31.01.23 unaudited £’000 Six months ended 31.01.22 unaudited £’000 Year ended 31.07.22 audited £’000
Dividend of 14.00 pence per ordinary share paid for the year ended 31 July 2022 10,066 – –
Dividend of 8.80 pence per ordinary share paid for the year ended 31 July 2021 – 6,440 6,440
--------------- --------------- ---------------
10,066 6,440 6,440
========= ========= =========
No dividend has been declared in respect of the six months ended 31 January
2023 (six months ended 31 January 2022: £nil).
10 FAIR VALUE HIERARCHY
The Company is required to disclose the fair value hierarchy that classifies
its financial instruments measured at fair value at one of three levels,
according to the relative reliability of the inputs used to estimate the fair
values.
Classification Input
Level 1 Valued using quoted prices in active markets for identical assets
Level 2 Valued by reference to inputs other than quoted prices included in level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly
Level 3 Valued by reference to valuation techniques using inputs that are not based on observable market data
Categorisation within the hierarchy has been determined on the basis of the
lowest level input that is significant to the fair value measurement of the
relevant asset. The valuation techniques used by the Company are as disclosed
in the Company’s Annual Report for the year ended 31 July 2022 (Accounting
Policies Notes 2 (k) and 2 (l) on pages 56 and 57). The table below sets out
the Company’s fair value hierarchy:
31 January 2023 (unaudited) Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000
Financial assets at fair value through profit or loss
Investments 360,555 6,135 1,364 368,054
Derivative instrument assets 729 1,259 – 1,988
-------------- -------------- -------------- --------------
361,284 7,394 1,364 370,042
========= ========= ========= =========
Financial liabilities at fair value through profit or loss
Derivative instrument liabilities – (872) – (872)
========= ========= ========= =========
31 July 2022 (unaudited) Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000
Financial assets at fair value through profit or loss
Investments 330,119 7,135 1,591 338,845
Derivative instrument assets 317 655 – 972
-------------- -------------- -------------- --------------
330,436 7,790 1,591 339,817
========= ========= ========= =========
Financial liabilities at fair value through profit or loss
Derivative instrument liabilities (108) (1,194) – (1,302)
========= ========= ========= =========
31 January 2022 (unaudited) Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000
Financial assets at fair value through profit or loss
Investments 347,827 4,161 1,453 353,441
Derivative instrument assets 365 414 – 779
-------------- -------------- -------------- --------------
348,192 4,575 1,453 354,220
========= ========= ========= =========
Financial liabilities at fair value through profit or loss
Derivative instrument liabilities (213) (300) – (513)
========= ========= ========= =========
11 SHARE CAPITAL
31 January 2023 unaudited 31 July 2022 audited 31 January 2022 unaudited
Number of shares £’000 Number of shares £’000 Number of shares £’000
Issued, allotted and fully paid
Ordinary shares of 25 pence each held outside of Treasury
Beginning of the period 72,398,336 18,100 73,178,879 18,295 73,178,879 18,295
Ordinary shares repurchased into Treasury (569,000) (142) (780,543) (195) – –
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
End of the period 71,829,336 17,958 72,398,336 18,100 73,178,879 18,295
========= ========= ========= ========= ========= =========
Ordinary shares of 25 pence each held in Treasury (1)
Beginning of the period 3,182,553 795 2,402,010 600 2,402,010 600
Ordinary shares repurchased into Treasury 569,000 142 780,543 195 – –
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
End of the period 3,751,553 937 3,182,553 795 2,402,010 600
========= ========= ========= ========= ========= =========
Total share capital 18,895 18,895 18,895
========= ========= =========
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 period was
£2,603,000 (year ended 31 July 2022: £3,527,000 and six months ended 31
January 2022: £nil).
12 NET ASSET VALUE PER ORDINARY SHARE
The calculation of the net asset value per ordinary share is based on the
following:
31.01.23 unaudited 31.07.22 audited 31.01.22 unaudited
Total shareholders’ funds £390,880,000 £367,623,000 £365,626,000
Ordinary shares held outside of Treasury at period end 71,829,336 72,398,336 73,178,879
------------------ ------------------ ------------------
Net asset value per ordinary share 544.18p 507.78p 499.63p
========== ========== ==========
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.
13 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 fee arrangements are given in Note 5 above. During the period,
management fees of £1,239,000 (six months ended 31 January 2022: £929,000
and year ended 31 July 2022: £1,832,000) and secretarial and administration
fees of £38,000 (six months ended 31 January 2022: £38,000 and year ended
31 July 2022: £75,000) were payable to FII. At the Balance Sheet date, net
management fees of £296,000 (31 January 2022: £157,000 and 31 July 2022:
£156,000) and secretarial and administration fees of £25,000 (31 January
2022: £25,000 and 31 July 2022: £25,000) were accrued and included in other
creditors. FII also provides the Company with marketing services. The total
amount payable for these services during the period was £86,000 (six months
ended 31 January 2022: £104,000 and year ended 31 July 2022: £157,000). At
the Balance Sheet date, marketing services of £nil (31 January 2022: £13,000
and 31 July 2022: £20,000) were accrued and included in other creditors.
As at 31 January 2023, the Board consisted of six non-executive Directors (as
shown in the Directory in the Half-Yearly Report), all of whom are considered
to be independent by the Board. None of the Directors have a service contract
with the Company. The Chairman receives an annual fee of £42,000, the
Chairman of the Audit Committee an annual fee of £35,000 and each other
Director an annual fee of £29,000. The following members of the Board held
shares in the Company: Hussein Barma 2,500 ordinary shares, Kate Bolsover
15,452 ordinary shares, Clare Brady 2,500 ordinary shares, Sally Macdonald
2,734 ordinary shares, Matthew Sutherland 27,859 ordinary shares and Michael
Warren 10,000 ordinary shares.
The financial information contained in this Half-Yearly Results Announcement
does not constitute statutory accounts as defined in section 435 of the
Companies Act 2006. The financial information for the six months ended 31
January 2023 and 31 January 2022 has not been audited or reviewed by the
Company’s Independent Auditor.
The information for the year ended 31 July 2022 has been extracted from the
latest published audited financial statements, which have been filed with the
Registrar of Companies, unless otherwise stated. The report of the Auditor on
those financial statements contained no qualification or statement under
sections 498(2) or (3) of the Companies Act 2006.
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.
A copy of the Half-Yearly Report will shortly be submitted to the National
Storage Mechanism and will be available for inspection at
www.morningstar.co.uk/uk/NSM
The Half-Yearly Report will also be available on the Company's website at
www.fidelity.co.uk/asianvalues where up to date information on the Company,
including daily NAV and share prices, factsheets and other information can
also be found.
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