Fidelity Asian Values Regulatory News (FAS)

Fidelity Asian Values PLC

Half-Yearly Results for the six months ended 31 January 2024

Financial Highlights

Contacts

For further information please contact:

George Bayer

Company Secretary

0207 961 4240

FIL Investments International

PORTFOLIO MANAGERS’ HALF-YEARLY REVIEW

PERFORMANCE REVIEWOver the six month period ended 31 January 2024, the net asset value (“NAV”) total return of Fidelity Asian Values PLC was -2.4%, underperforming the Comparative Index, the MSCI All Countries Asia ex Japan Small Cap Index (net) total return (in sterling terms), which was +3.6%. Over the same period, the Company’s share price total return was -2.5%. Whilst the Company's discount was 5.7% at the reporting period end, it widened to around 10% at the end of March, however, it was trading narrower than its peer group.

COMPANY’S NAV, SHARE PRICE AND COMPARATIVE INDEX TOTAL RETURNS (AS AT 31 JANUARY 2024)

Source: Fidelity International, 31 January 2024. Total returns include net income reinvested. Comparative Index: MSCI All countries Asia ex Japan Small Cap Index (net) total return (in sterling terms).

Our stock selection continued to contribute positively to the Company’s relative performance versus the Comparative Index. However, our market selection was a drag against a backdrop of continued divergence in country performance (see table below on country attribution). Small cap stocks in India rose by 26.7% and those in Taiwan gained by 9.6% during the six month review period. In contrast, small cap stocks in China and Hong Kong fell by 28.2% and 18.4% respectively. Since our investment process can lead us to take contrarian positions in undervalued businesses, our combined exposure to China and Hong Kong was close to its historical high (six month average of 40.6% versus the Index average weight of 13.0%). China and Hong Kong continue to underperform and have dragged down the Company’s relative returns compared to the Index in the period under review. However, stock selection has been positive, and valuations remain attractive.

COUNTRY ATTRIBUTION OVER 6 MONTHS TO 31 JANUARY 2024

Source: Fidelity International, 31 January 2024. Index: MSCI All countries Asia ex Japan Small Cap Index (net) total return (in sterling terms).

In contrast to China and Hong Kong, small cap stocks in India and Taiwan continued to perform well despite their exuberant valuations. As a result, four of our five top contributors were Indian companies and four out of five of our top detractors were from China as can be seen from the tables below.

KEY CONTRIBUTORS OVER SIX MONTHS (AS AT 31 JANUARY 2024)

Source: Fidelity International, 31 January 2024.

KEY DETRACTORS OVER SIX MONTHS (AS AT 31 JANUARY 2024)

Source: Fidelity International, 31 January 2024.

The detractors were essentially Chinese consumer-related companies (China Yongda Automobile Services, Zhongsheng Group and Focus Media Information Technology) and the real estate company China Overseas Grand Oceans Group, which fell due to weak demand and negative investor sentiment. Indonesia’s largest ceramic tiles maker Arwana Citramulia also suffered weak demand due to project delays ahead of the country’s elections. We believe these to be temporary losses and continue to own the businesses for their longer-term growth prospects and attractive valuations.

On the other hand, our holdings in India (PTC India, Granules India, LIC Housing Finance and Axis Bank) and Bank Negara Indonesia (Persero) contributed the most to the Company’s relative performance. We continue to have a positive outlook on most of these stocks as they still offer a sufficient margin of safety. We trimmed our exposure to PTC India and Granules India as a result of strong performance and a reduced margin of safety.

India’s fourth largest mortgage financier LIC Housing Finance was the second largest contributor to returns and is one of the top 10 positions in the Company. As it is promoted by Life Insurance Corporation, India’s largest and 100% government owned insurance company, it has access to low-cost funds, helping it to focus mainly on prime borrowers and maintain high returns on equity and strong asset quality. This sustainable low to mid-teen return on equity generator and book value compounder is currently trading at par with its one year forward book value and seven times its one year forward earnings.

INVESTMENT STRATEGYOur investment strategy is to continue to focus on investing in good businesses, run by good management teams and available at a suitable margin of safety. Our investment process leads us to high quality undervalued businesses and a consistent value tilt.

We believe our approach to investing helps to generate sustainable performance for the Company in the long-term. Although our value style has underperformed the growth style in recent years, we believe this headwind should, at some point, become a tailwind. Small cap value stocks are currently trading at close to all-time high discounts relative to both their large cap and (as can be seen from the chart in the Half-Yearly Report) their small cap growth counterparts. Value stocks also generate superior earnings growth over time compared to growth stocks and provide better cash returns, in terms of dividends.

Macro-economic trends are difficult to forecast for anyone and building a portfolio of stocks based on such views is even more challenging. However, we do believe macro risks are more short-term in nature and owning businesses which are better quality than the market at attractive valuations has been the bedrock of our investment process for over a decade.

It has served us well in the last ten years and should continue to reward us well for the future. As can be seen from the charts in the Half-Yearly Report, the Return on Equity of our portfolio has frequently been at a premium to the market while the Price to Earnings ratio of our holdings is at a significant discount.

OUTLOOKWe are comfortable with the Company’s portfolio as it stands today. We continue to have an overweight exposure to China since we are finding a significant margin of safety in owning several well-financed and well-run businesses. As the world’s second largest economy, where consumption is expanding as a share of GDP, we believe that both earnings and multiples of our Chinese holdings will re-rate favourably from depressed levels. Conversely, our relative exposure to India is close to our historical low as the small cap index in India is now 40% more expensive than Asian small caps and 30% more expensive than Indian large caps. In India and Indonesia, we have focused on well-run financial companies which have attractive valuations. These are good long-term compounders as credit is under-penetrated and the well managed banks have significant industry tail winds. Meanwhile, we continue to avoid areas that most investors find fashionable, such as AI-driven technology hardware in Taiwan and Korea. The sector has seen a capex boom post COVID due to higher-than-average demand. We are seeing earnings downgrades as new supplies come in and demand falls back, as the AI hype subsides. This strategy has served us well in the past ten years and we believe it will continue to reward us well over the future.

NITIN BAJAJ   AJINKYA DHAVALEPortfolio Manager  Co-Portfolio Manager8 April 2024   8 April 2024

TWENTY LARGEST HOLDINGS AS AT 31 JANUARY 2024

The Asset Exposures shown below measure exposure to market price movements as a result of owning shares, corporate bonds, 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.

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 £368,002,000 plus market exposure to derivative instruments of £68,887,000.

3 Portfolio Fair Value comprises investments of £368,002,000 plus derivative assets of £1,872,000 less derivative liabilities of £1,919,000.

INTERIM MANAGEMENT REPORT AND DIRECTORS’ RESPONSIBILITY STATEMENT

BOARD CHANGES AND SUCCESSIONThe Board has a careful succession plan in place. As part of this plan, Kate Bolsover stepped down from the Board at the conclusion of the Annual General Meeting (“AGM”) on 29 November 2023. On the same date, Clare Brady succeeded her as Chairman. Matthew Sutherland succeeded Mrs Brady as the Senior Independent Director. Sally Macdonald took over from Michael Warren as the Chairman of the Management Engagement Committee from 3 April 2024.

As was reported in the Annual Report for the year ended 31 July 2023, Mr Warren agreed to stay on the Board for an additional year beyond his nine year tenure to ensure that institutional and historical knowledge of the Company, as well as his marketing expertise, was not lost. He will retire from the Board at the conclusion of the AGM in November 2024.

A recruitment process has been conducted for his replacement as a non-executive Director using the services of Cornforth Consulting, an external consultant that has no association with the Company. As a result of this process, Lucy Costa Duarte will be appointed to the Board with effect from 1 June 2024. This will ensure a smooth handover before Mr Warren steps down from the Board. Mrs Costa Duarte is a specialist in marketing strategy and investment relations in the investment trust sector. She is a Marketing Ambassador for the Association of Investment Companies, a non-executive Director of MIGO Opportunities Trust plc and a part-time Director of Investor Relations for Schroders – International Biotechnology Trust plc. She is a past director at Citigroup where she headed the emerging markets Equity Capital Markets team in London.

APPOINTMENT OF CO-PORTFOLIO MANAGERAjinkya Dhavale has been appointed as the Company’s Co-Portfolio Manager to support and closely work alongside the Portfolio Manager, Nitin Bajaj. He has extensive experience in Asian markets and companies and shares a common investment approach and complementary investment experience with the Portfolio Manager. Mr Dhavale’s appointment helps to strengthen the investment process and manage key person risk.

DISCOUNT MANAGEMENT AND SHARE REPURCHASESThe Board closely monitors the Company’s share price discount to its NAV and will undertake active discount management where necessary, the primary purpose of which is to limit discount volatility. Repurchases of ordinary shares are made at the discretion of the Board, within guidelines set by it and considering prevailing market conditions. Shares will only be repurchased in the market at prices below the prevailing NAV per ordinary share, thereby resulting in an enhancement to the NAV per ordinary share. In order to assist in managing the discount, the Board has shareholder approval to hold in Treasury any ordinary shares repurchased by the Company, rather than cancelling them. Any shares held in Treasury would only be reissued at NAV per ordinary share or at a premium to NAV per ordinary share.

There has been market volatility in the reporting period, and at times the Company’s discount has widened in reaction to this. The Board, therefore, approved the repurchase of 137,825 ordinary shares into Treasury during the six month reporting period. Since then and up to the latest practicable date of this report, a further 337,980 ordinary shares have been repurchased into Treasury.

PRINCIPAL RISKS AND UNCERTAINTIESThe 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 continue to fall into the following categories: economic, political and market; investment performance (including the use of derivatives and gearing); cybercrime and information security; level of discount to net asset value; key person; environmental, social and governance (ESG); business continuity and operational (including third-party service providers); and shareholder relationship risks. Other risks facing the Company are tax and regulatory risks. Information on each of these risks is given on pages 28 to 32 in the Strategic Report section of the Annual Report for the year ended 31 July 2023 which can be found on the Company’s pages of the Manager’s website at www.fidelity.co.uk/asianvalues.

Whilst the principal risks and uncertainties remain the same as at the last year end, the magnitude of their uncertainty continues to grow with the ongoing conflicts in Ukraine and the Middle East. Geopolitical tensions, such as those between the US and China, and China and Taiwan, are exacerbating economic headwinds, such as the cost of living crisis; inflation; high interest rates; food supply crisis; and the threat of cyberattacks on critical infrastructure. The Board remains vigilant about the changing scale of such risks.

Climate change continues to be a key principal risk confronting asset managers and their investors. Globally, climate change effects are already being experienced in the form of changing weather patterns. Climate change can potentially impact the operations of investee companies, their supply chains and their customers. Additional risks may also arise from increased regulations, costs and net-zero programmes which can all impact investment returns. 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. The Investment Company structure means that the Portfolio Managers are not required to trade to meet investor redemptions and so they are able to hold investments for a longer period.

The Manager has appropriate business continuity and operational resilience plans in place to ensure the continued provision of services. This includes investment team key activities, which also covers portfolio managers, analysts and trading/support functions. The Manager reviews its operational resilience strategies on an ongoing basis and continues to take all reasonable steps in meeting its regulatory obligations, assess its ability to continue operating and the steps it needs to take to serve and support its clients, including the Board. It has an appropriate control environment in place.

The Company’s other third-party service providers also have similar measures in place to ensure that business disruption is kept to a minimum.

TRANSACTIONS WITH THE MANAGER AND RELATED PARTIESThe Manager has delegated the Company’s portfolio management of assets 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 STATEMENTThe 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 as outlined above.

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.

DIRECTORS’ RESPONSIBILITY STATEMENTThe 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 Managers’ 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 8 April 2024 and the above responsibility statement was signed on its behalf by Clare Brady, Chairman.

BY ORDER OF THE BOARDFIL INVESTMENTS INTERNATIONAL8 April 2024

FINANCIAL STATEMENTS

INCOME STATEMENT FOR THE SIX MONTHS ENDED 31 JANUARY 2024

The Company does not have any other comprehensive income. Accordingly, the net return/(loss) 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 2024

BALANCE SHEET AS AT 31 JANUARY 2024 Company number 3183919

NOTES TO THE FINANCIAL STATEMENTS

1 PRINCIPAL ACTIVITYFidelity 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 ACCOUNTSThe 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 2023 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 PreparationThe 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 2023.

(ii) Going ConcernThe 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

No special dividends have been recognised in capital during the period (six months ended 31 January 2023: £nil and year ended 31 July 2023: £420,000).

5 INVESTMENT MANAGEMENT FEES

1 For the calculation of the variable management fee, the Company’s NAV return was compared to the Benchmark Index return on a rolling three year basis.

FIL Investment Services (UK) Limited is the Company’s Alternative Investment Fund Manager and has delegated portfolio management to FIL Investments International. Both companies are Fidelity group companies.

The Company charges base investment management fees to revenue at an annual rate of 0.70% of net assets. In addition, there is +/- 0.20% variation fee based on the Company’s NAV per ordinary share performance relative to the Company’s Benchmark Index which is charged/ credited to capital. Fees are payable monthly in arrears and are calculated on a daily basis.

6 FINANCE COSTS

1 Increased compared to the prior six months due to an increase in both exposure to CFDs and interest rates.

7 TAXATION ON RETURN/(LOSS) ON ORDINARY ACTIVITIES

8 RETURN/(LOSS) PER ORDINARY SHARE

The return/(loss) per ordinary share is based on the net return/(loss) on ordinary activities after taxation for the period divided by the weighted average number of ordinary shares in issue during the period, as shown below:

9 DIVIDENDS PAID TO SHAREHOLDERS

No dividend has been declared in respect of the six months ended 31 January 2024 (six months ended 31 January 2023: £nil).

10 FAIR VALUE HIERARCHYThe 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.

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 2023 (Accounting Policies Notes 2 (k) and 2 (l) on pages 59 and 60). The table below sets out the Company’s fair value hierarchy:

11 SHARE CAPITAL

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 £677,000 (year ended 31 July 2023: £2,618,000 and six months ended 31 January 2023: £2,603,000).

12 NET ASSET VALUE PER ORDINARY SHAREThe calculation of the net asset value per ordinary share is based on the total shareholders’ funds divided by the number of ordinary shares held outside of Treasury.

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 PARTIESFIL 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. During the period, management fees of £1,751,000 (six months ended 31 January 2023: £1,239,000 and year ended 31 July 2023: £2,925,000) and secretarial and administration fees of £38,000 (six months ended 31 January 2023: £38,000 and year ended 31 July 2023: £75,000) were payable to FII. At the Balance Sheet date, net management fees of £291,000 (31 January 2023: £296,000 and 31 July 2023: £292,000) and secretarial and administration fees of £25,000 (31 January 2023: £25,000 and 31 July 2023: £25,000) were accrued and included in other creditors. FII also provides the Company with marketing services. The total amount payable for these services during the period was £94,000 (six months ended 31 January 2023: £86,000 and year ended 31 July 2023: £195,000). At the Balance Sheet date, marketing services of £58,000 (31 January 2023: £nil and 31 July 2023: £nil) were accrued and included in other creditors.

As at 31 January 2024, the Board consisted of five 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 £44,100, the Audit Committee Chairman an annual fee of £36,750, the Senior Independent Director an annual fee of £32,500 and each other Director an annual fee of £30,500. The following members of the Board held shares in the Company: Hussein Barma 2,500 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. Since the end of the reporting period, Clare Brady has purchased 8,089 shares in the Company.

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 2024 and 31 January 2023 has not been audited or reviewed by the Company’s Independent Auditor.

The information for the year ended 31 July 2023 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.