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Fidelity Asian Values plans bonus issue of subscription shares

Fidelity Asian Values’ NAV increased by 33.8% over the year ended 31 July 2016, outperforming its benchmark by 18%. The company delivered a return to shareholders of 33.3%. The board is recommending a dividend of 4.50 pence per ordinary share, an increase from 2.00p in 2015.

Fidelity Asian Values plans bonus issue of subscription shares

Fidelity Asian Values’ board is proposing a bonus issue of subscription shares to ordinary shareholders. shareholders will get one subscription share for every five ordinary shares that they hold. The subscription shares can be exercised on the last business day of November 2017, 2018 and 2019. The exercise price will be based on the NAV on 2 December 2016 (the reference NAV) with an adjustment depending on which year they are exercised. In 2017, the exercise price will be the reference NAV plus 1%. In 2018, plus 4% and, in 2019, plus 7%. We’ll have the new subscription share issue loaded onto our warrants and subscription shares list after they start trading.

The board thinks shareholders will benefit from:

  • increased liquidity;
  • a lower ongoing charges ratio; and
  • a broader shareholder base.

Manager’s comments

Nitin Bajaj, the manager, says that, in terms of “what went right”, about 5% of the portfolio was invested in stocks which doubled. Another 15% was invested in companies that went up by more than 50%. Most of these are not well known blue chip stocks but small niche businesses with good management teams.  He credits this success to the depth of Fidelity’s research process.

Fidelity Asian Values lost absolute money in only 12% of the portfolio. Within that it lost more than 20% in less than 4% of the portfolio.

He says the most common trait in the companies where money was lost is that these businesses carried more debt than they should have. He is generally averse to companies which need to borrow too much to operate their businesses. Nitin says that this a reminder that too much debt is an enemy to all equity holders and says he has learnt that lesson. He doesn’t expand on which stocks contributed the most to returns, both positive and negative. In fact, he says that he won’t do this now or in future.

FAS : Fidelity Asian Values plans bonus issue of subscription shares

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