Fidelity Special Values has announced interim figures covering the six months ended 28 February 2015. Over the period the company’s net asset value total return was 5% – ahead of the 4.1% breturn generated by the FTSE All-Share Index. unfortunately the company’s discount widened from 4.7% to 9.6% and this left the return to shareholders as 1.2%. In response the Board has decided to adopt a formal discount control policy whereby it will buy in shares with the am of keeping the discount in single figures in normal market conditions.
Other changes proposed by the Board include a share split and amendments to the investment objective and policy.
With respect to the subdivision, the proposal is that the company splits its shares on a five for one basis to make it easier for people reinvesting income or with regular savings accounts to purchase shares.
The Company wants to clarify and make changes to its investment objective and policy by:
- broadening the wording of the investment objective to make it clear that investments into companies can be made directly through stocks as well as via derivatives;
- clarifying the use of derivatives within the Company’s investment policy. Derivatives are used principally in the following ways:
- as an alternative form of gearing to bank loans or bonds. The Company will purchase long CFDs that achieve an equivalent effect to bank gearing but currently at lower financing costs;
- to hedge equity market risks where the Portfolio Manager considers that suitable protection can be positioned to limit the downside of a falling market at a reasonable cost; and
- to enhance the investment returns by taking short exposures on stocks that the Portfolio Manager considers to be over-valued; and
- changing the gross gearing limit from 130% to 140%, thereby allowing the Portfolio Manager the flexibility to manage the net gearing of the portfolio within a typical range of 100% to 120%.
Looking at what drove Fidelity Special Value’s performance over the period, the manager says several key holdings across a variety of sectors made noteworthy contributions to returns, driven by their positive growth outlook. At a stock level, the holding in the video-game publisher Electronic Arts was the biggest contributor as the company raised its annual guidance for both revenue and earnings. A positive earnings outlook also lifted the positions in global workplace provider Regus and interdeal broker ICAP. UDG Healthcare, which provides outsourced services to healthcare companies, was another notable contributor helped by its positive business momentum and a favourable currency environment.
On the downside, several of their holdings in the oil & gas sector suffered in the sell-off amid the sharp decline in oil prices. Notable among them was Premier Oil, whose shares were further affected by news that its partner Noreco decided to write-off its discoveries in the Huntington field in the UK Central North Sea. The holding in business process outsourcer Xchanging also fell due to a lower
growth outlook for 2015 as a result of delays around acquisition integration.
FSV : Fidelity Special Values adopts discount control policy