Half-year Report

Fidelity China Special Situations PLC

Half-Yearly Results for the 6 months ended 30 September 2016 (unaudited)

Financial Highlights:

• Fidelity China Special Situations PLC’s NAV returned +29.1% over the six months to 30 September 2016, outperforming its Benchmark Index by 2.9%. Performance of the Company has been driven by stock selection.

• The discount narrowed to 16.2% as a result of the share price total return of 30.8%, outperforming its Benchmark Index by 4.6%.

• Investor sentiment towards China has improved and the portfolio continues to focus on ‘New’ China and invests in areas of the market related to China’s modernisation.

• Gearing has come down to 20% (from 27% at the end of March) as valuations have increased, but the Portfolio Manager still finds significant value and opportunities to maintain a reasonable level of gearing.

  Contacts

  For further information, please contact:

  Bonita Guntrip
  Senior Company Secretary
  01737 837320

FIL Investments International

Portfolio Manager’s Half-Yearly Review

In the six months to 30 September 2016 under review, the NAV of your portfolio recorded a strong return of 29.1% and the share price rose by 30.8%. This compared to a 26.2% rise in the MSCI China Index (All figures on a total return basis).

Performance of the Company has been driven by stock selection with positions in BNN Technology (formerly DJI Holdings), NetEase, China Sanjiang Fine Chemicals, Best Pacific and Li Ning all posting over 60% returns over the reporting period. NetEase, a leading game developer and long-term high conviction holding in the portfolio, rallied following a strong increase in revenue and announcing that its revenue mix had shifted from around 20% in mobile games to over 60% in the past year. Best Pacific, a niche fabric supplier to lingerie and sportswear brands, announced a pick-up in annual sales of over 20% while profits were up nearly 40%, indicating that its innovative approach is clearly highly valued by its customers. Gearing also added value as the portfolio has been more than 20% geared during the market rally.

Conversely, returns compared to the Index have been negatively impacted by the portfolio’s holdings in China Pacific Insurance, Hutchison China MediTech and Shanghai International Airport. The insurance sector in general has lagged the market due to concerns that a fall in interest rates will have a negative impact on returns. Whilst a valid concern, it is more than reflected in valuations, especially considering the growth potential in what remains a very underpenetrated industry. Meanwhile, the holding in Shanghai International Airport underperformed the market as security breaches saw a series of sanctions from the regulator that are expected to drive one-off losses that will impact short-term earnings.

Total return performance since launch

Market View

Investor sentiment towards China has improved since the beginning of the year. At the start of 2016, investors were concerned about issues such as the lack of clarity on the change in China’s foreign exchange policy, slowing GDP growth and rising debt. The first two concerns have definitely eased, but the last still remains.

First, the change in China’s foreign exchange policy at the end of last year centred around it expanding the daily limits within which the Chinese renminbi can trade against other currencies and the fact these are now linked to a basket of its trading partner currencies, not just the US$. The confusion came from poor communication from the People’s Bank of China on what this change was and the reason for it. Over time, the market has gained comfort in this change and, as mentioned in previous reports, I believe it was a positive step towards further opening up China’s markets. The Chinese renminbi was also added as the third largest component of the IMF’s basket of Special Drawing Rights’ currencies in October 2016, confirming it as a major global currency.

Second, fears remain over slowing Chinese GDP. Again, as I have highlighted in previous reports, one would not expect an economy the size of China’s to be able to maintain the extremely high rates seen in the past and such slowing is natural as part of a rebalancing to more consumption led growth. There are, however, some signs of stabilisation in the more “old economy” sectors. An increase in infrastructure spending driven by the government has helped stabilise growth, supporting a reported increase of 6.7% in GDP for each quarter so far this year. There are some concerns that the government is reusing past intervention methods to stimulate the economy, but on the positive side, output cuts have helped support pricing in troubled sectors such as coal and steel. The government has laid out aggressive targets to reduce capacity in these areas and we need to see real progress here. China’s Producer Price Index turned positive in September for the first time in 54 months.

The rise of consumption and services is something I continue to see happening and where I focus much of the portfolio’s investments. That said, I have been finding significant value in some of the parts of ‘Old’ China that investors have been disregarding because of the complex problems at hand.

One major overhang facing the economy is the continued strong growth in corporate debt, especially in the so-called “shadow banking” sector – occurring off the balance sheets of the banks. Banks officially reported that non-performing loans remain below 2% and, despite increased write-offs, I believe this number is heading higher. While we are hearing increasing rhetoric around the need to address this, we are yet to see this reflected in numbers and so it requires monitoring. The Company continues to have no holdings in Chinese banks.

Portfolio Positioning

The portfolio continues to focus on ‘New’ China and invests in areas of the market related to China’s modernisation. I still see huge growth potential and place a large portion of the portfolio’s investments in companies related to consumption and the changing ways of consumers. Many consumer goods in China are still underpenetrated compared to other countries. Automobile demand is a great example, as only around 1 in 10 Chinese people own a car compared to 8 in 10 in the US – yet the Chinese car market is the largest in the world with over 22.6 million new passenger vehicles being sold in the last 12 months (as at end of September). The Company is still invested in Brilliance, who owns the joint venture with BMW, and Dongfeng Motor (joint venture with Peugeot, Nissan and Honda).

These companies offer attractive rates of growth compared to global peers with similar if not lower valuation levels. However, within the consumer space, I have reduced the Company’s exposure to home appliances companies, such as Zhejiang Supor Cookware. While still good stories with good growth prospects, valuations are now less attractive.

Within consumer services I am very interested in education companies that offer test and tutoring services. Culturally, education is a primary focus for Chinese families, and companies like New Oriental Education & Technology are leading the way for tutoring and test preparation for school age children. They have invested heavily in creating an in-house curriculum system that is helping to improve pass rates and client retention. However, as well as being invested in school education, the Company is also invested in companies like Tarena which is China’s leading vocational training school. Tarena focuses on IT and internet training and I expect it to post more than 20% annual sales growth over the next couple of years.

The internet sector remains an attractive area for investment. The recent takeover by Didi Chuxing (the portfolio’s largest unlisted holding) of Uber in China highlighted the strength of Chinese internet companies. This will significantly reduce the competitive intensity in the market and shorten the path to profitability for Didi. I meet internet companies from around the world, and Chinese companies stand out as being among some of the most innovative and best managed globally with a still huge untapped market. Despite this, the portfolio’s weight in IT compared to the Index has actually fallen, but this is largely to do with the recent inclusion of US-listed Chinese companies in the MSCI China Index. Within IT, Tencent and Alibaba are the largest holdings, followed by Ctrip, China’s largest online hotel and flight booking service.

Chinese property has been a hot topic in the financial press following a surge in prices. I have been reducing the Company’s exposure as valuations looked less attractive, and with tightening regulation, I have also identified some shorting opportunities. Most investments in the portfolio are in companies started by entrepreneurs. However, throughout this year, the Company has been adding some exposure to state-owned-enterprises (“SOEs”). I like to focus on the SOEs that have attractive assets at attractive valuations with the potential to benefit from future reforms. The Company invests in Shanghai Industrial, a conglomerate with a number of regulated assets (toll roads, tobacco, water) that could see improving profitability from pricing reforms, but trades at a significant discount to its net asset value. It has also invested in Sinotrans, a logistics company that is involved in freight-forwarding with a focus on growing intra-Asia trade and also owns the Chinese joint venture with DHL. I expect to see the logistics industry grow faster than GDP yet Sinotrans trades at a valuation discount to its global peers.

Finally, as the Chinese market has rallied over the last six months, I have reduced the portfolio’s gearing. At the time of writing, it was around 20% compared to 27% at the end of March. As markets have gone up, valuations are less compelling, so I have reduced the Company’s market exposure and also selectively added to its short positions. However, I maintain a reasonable level of gearing as I still find significant value and opportunities that I believe will be recognised by the market over time.

Dale Nicholls
Portfolio Manager
21 November 2016

Interim Management Report and Responsibility Statement

Discount Management

The Company’s discount narrowed to 16.2% at the end of the reporting period from 17.2% at the start of the reporting period.

The Board recognises that the Company’s share price is affected by the interaction of supply and demand in the market and investor sentiment towards China, as well as the performance of the NAV per share. Recognising these factors, the Board has conducted a detailed review of the discount policy, and it is the Board’s belief at present that the discount is best addressed by repurchasing the Company’s shares according to market conditions. During the reporting period, the Board authorised the repurchase of 1,425,000 Ordinary Shares by the Company. These shares are held in Treasury. The share repurchases will have benefited all shareholders as the NAV per share has been increased by purchasing the shares at a discount. Since the period end and as at the date of this report, the Company has not repurchased or issued any further Ordinary Shares.

Gearing

The Company has a multicurrency revolving credit facility agreement with Scotiabank Europe PLC for US$150,000,000. This facility has been fully drawn down during the period under review.

To achieve further gearing, the Company uses Contracts For Difference on a number of holdings in its portfolio.

At 30 September 2016, the Company’s gearing, defined as Gross Asset Exposure in excess of Net Assets, was 25.5% (31 March 2016: 27.2%; 30 September 2015: 28.8%).

Investment Management and Performance Fees

The Investment Managers are entitled to a management fee of 1% of the NAV per annum which is paid quarterly. For the six months ended 30 September 2016 fees were £5,364,000 (six months ended 30 September 2015: £4,510,000).

The Investment Managers are entitled to an annual performance fee of 15% of any change in NAV attributable to performance which is more than 2% above the returns on the MSCI China Index, subject to a maximum performance fee payable in any year equal to 1.0% of the arithmetic mean of the value of assets with valuations calculated at the end of each month during the year. Any out-performance above this cap cannot be carried forward. If the Company under-performs, the under-performance must be made good before any further performance fee becomes payable.

For the six months ended 30 September 2016 a provision had been made on a time apportioned basis of £671,000 (six months ended 30 September 2015: £2,738,000).

Principal Risks and Uncertainties

The Board, with the assistance of the Manager, has developed a risk matrix which, as part of the internal controls process, identifies the key risks faced by the Company. The Board believes that the principal risks and uncertainties faced by the Company continue to fall into the following categories: market, performance, discount control, gearing and currency risks. Other risks facing the Company include tax and regulatory risks and operational risks in relation to service providers. Information on each of these risks is detailed in the Strategic Report section of the Company’s Annual Report for the year ended 31 March 2016 which can be found on the Company’s pages of the Manager’s website at www.fidelityinvestmenttrusts.com. These risks and uncertainties have not materially changed during the six months to 30 September 2016 and are equally applicable to the remaining six months of the Company’s financial year.

Transactions with the Managers and Related Parties

FIL Investment Services (UK) Limited is the Company’s Alternative Investment Fund Manager and has delegated the investment management (other than in unlisted securities) to FIL Investment Management (Hong Kong) Limited. It has delegated the investment management of the unlisted securities and the company secretariat function to FIL Investments International. The transactions with the Managers and related party transactions with the Directors are disclosed in Note 14 below.

Going Concern

The Directors have considered the Company’s investment objective, policy and strategy and the Company’s projected income and expenditure. The Company’s portfolio of investments is considered to be mainly readily realisable securities. Therefore, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing these Financial Statements.

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 International Accounting Standards 34: “Interim Financial Reporting”; and

b)            the Interim Management Report, including the Portfolio Manager’s Half-Yearly Review above, includes a fair review of the information required by DTR 4.2.7R and 4.2.8R.

The Half-Yearly Report has not been audited by the Company’s Independent Auditor.

The Half-Yearly Report was approved by the Board on 21 November 2016 and the above responsibility statement was signed on its behalf by Nicholas Bull, Chairman.

By order of the Board.
FIL Investments International
21 November 2016

FINANCIAL STATEMENTS

Income Statement

		Six months ended			Year ended			Six months ended
		30 September 2016			31 March 2016			30 September 2015
		unaudited			unaudited			audited
		revenue	capital	total	revenue	capital	total	revenue	capital	total
	Notes	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Revenue
Investment income	4	17,871	–	17,871	17,571	–	17,571	15,447	–	15,447
Derivative income	4	5,644	–	5,644	2,345	–	2,345	1,715	–	1,715
Other income	4	84	–	84	118	–	118	17	–	17
		------	------	------	------	------	------	------	------	------
Total income		23,599	–	23,599	20,034	–	20,034	17,179	–	17,179
		------	------	------	------	------	------	------	------	------
Gains/(losses) on investments at fair value through profit or loss		–	232,740	232,740	–	(5,445)	(5,445)	–	(128,707)	(128,707)
Gains/(losses) on derivative instruments		–	18,114	18,114	–	6,832	6,832	–	(8,043)	(8,043)
Foreign exchange gains/(losses) on other net assets		660	6,153	6,813	(42)	3,281	3,239	(56)	(130)	(186)
Foreign exchange (losses)/gains on bank loans		–	(10,959)	(10,959)	–	(3,301)	(3,301)	–	1,777	1,777
		------	------	------	------	------	------	------	------	------
Total income and gains/(losses)		24,259	246,048	270,307	19,992	1,367	21,359	17,123	(135,103)	(117,980)
		------	------	------	------	------	------	------	------	------
Expenses
Investment management and performance fees	5	(2,682)	(3,353)	(6,035)	(4,569)	(13,707)	(18,276)	(2,255)	(4,993)	(7,248)
Other expenses		(938)	–	(938)	(1,911)	–	(1,911)	(1,068)	–	(1,068)
		------	------	------	------	------	------	------	------	------
Profit/(loss) before finance costs and taxation		20,639	242,695	263,334	13,512	(12,340)	1,172	13,800	(140,096)	(126,296)
		------	------	------	------	------	------	------	------	------
Finance costs	6	(1,143)	(1,143)	(2,286)	(1,499)	(1,499)	(2,998)	(763)	(763)	(1,526)
		------	------	------	------	------	------	------	------	------
Profit/(loss) before taxation		19,496	241,552	261,048	12,013	(13,839)	(1,826)	13,037	(140,859)	(127,822)
		------	------	------	------	------	------	------	------	------
Taxation		(615)	–	(615)	(413)	1,300	887	(470)	46	(424)
		------	------	------	------	------	------	------	------	------
Net profit/(loss) after taxation for the period		18,881	241,552	260,433	11,600	(12,539)	(939)	12,567	(140,813)	(128,246)
		------	------	------	------	------	------	------	------	------
Earnings/(loss) per Ordinary Share	7	3.42p	43.72p	47.14p	2.07p	(2.24p)	(0.17p)	2.23p	(25.03p)	(22.80p)
		------	------	------	------	------	------	------	------	------

The Company does not have any income or expenses that are not included in the net profit/(loss) for the period. Accordingly the net profit/(loss) 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 and is prepared in accordance with IFRS. The revenue and capital columns are supplementary and presented for information purposes as recommended by the Statement of Recommended Practice issued by the AIC.

All of the profit and total comprehensive income is attributable to the equity shareholders of the Company. There are no minority interests.

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

			share	capital
		share	premium	redemption	other	capital	revenue	total
		capital	account	reserve	reserve	reserve	reserve	equity
	Notes	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Six months ended 30 September 2016
Total equity at 31 March 2016		5,713	211,569	914	338,837	334,204	17,241	908,478
Repurchase of Ordinary shares	12	–	–	–	(2,064)	–	–	(2,064)
Net return on ordinary activities after taxation for the period		–	–	–	–	241,552	18,881	260,433
Dividend paid	8	–	–	–	–	–	(9,950)	(9,950)
		------	------	------	------	------	------	------
Total equity at 30 September 2016		5,713	211,569	914	336,773	575,756	26,172	1,156,897
		------	------	------	------	------	------	------
Year ended 31 March 2016
Total equity at 31 March 2015		5,713	211,569	914	366,249	346,743	12,947	944,135
Repurchase of Ordinary shares	12				(27,412)			(27,412)
Net (loss)/return on ordinary activities after taxation for the year		–	–	–	–	(12,539)	11,600	(939)
Dividend paid	8	–	–	–	–	–	(7,306)	(7,306)
		------	------	------	------	------	------	------
Total equity at 31 March 2016		5,713	211,569	914	338,837	334,204	17,241	908,478
		------	------	------	------	------	------	------
Six months ended 30 September 2015
Total equity at 31 March 2015		5,713	211,569	914	366,249	346,743	12,947	944,135
Repurchase of Ordinary shares	12				(22,566)			(22,566)
Net (loss)/return on ordinary activities after taxation for the period		–	–	–	–	(140,813)	12,567	(128,246)
Dividend paid	8	–	–	–	–	–	(7,306)	(7,306)
		------	------	------	------	------	------	------
Total equity at 30 September 2015		5,713	211,569	914	343,683	205,930	18,208	786,017
		------	------	------	------	------	------	------

Balance Sheet

Company number 7133583

		30.09.16	31.03.16	30.09.15
		unaudited	audited	unaudited
	Notes	£’000	£’000	£’000
Non current assets
Investments at fair value through profit or loss	9	1,201,252	987,878	861,989
		------	------	-------
Current assets
Derivative instruments	9	41,076	20,275	25,414
Amounts held at futures clearing houses and brokers		4,119	12,740	14,030
Other receivables	10	19,206	3,531	3,991
Cash and cash equivalents		45,211	30,266	13,312
		------	------	-------
		109,612	66,812	56,747
		------	------	-------
Creditors
Derivative instruments	9	(27,946)	(28,082)	(22,916)
Bank loans	9	(115,274)	(104,315)	(99,236)
Overseas capital gains tax payable		–	–	(1,254)
Other payables	11	(10,747)	(13,815)	(9,313)
		------	------	-------
		(153,967)	(146,212)	(132,719)
		------	------	-------
Net current liabilities		(44,355)	(79,400)	(75,972)
		------	------	-------
Net assets		1,156,897	908,478	786,017
		------	------	-------
Equity attributable to equity shareholders
Share capital	12	5,713	5,713	5,713
Share premium account		211,569	211,569	211,569
Capital redemption reserve		914	914	914
Other reserve		336,773	338,837	343,683
Capital reserve		575,756	334,204	205,930
Revenue reserve		26,172	17,241	18,208
		------	------	-------
Total equity		1,156,897	908,478	786,017
		------	------	-------
Net asset value per Ordinary share	13	209.62p	164.18p	141.07p
		------	------	-------

Cash Flow Statement

	Six months		Six months
	ended	Year ended	ended
	30 September	31 March	30 September
	2016	2016	2015
	unaudited	audited	unaudited
	£’000	£’000	£’000
Operating activities
Cash inflow from investment income	15,064	17,375	13,633
Cash inflow from derivative income	5,366	2,345	1,575
Cash inflow from other income	84	118	17
Cash outflow from Directors’ fees	(41)	(164)	(78)
Cash outflow from other payments	(14,878)	(15,757)	(10,662)
Cash outflow from the purchase of investments	(218,640)	(628,799)	(339,388)
Cash outflow from the purchase of derivatives	(1,286)	(9,340)	(9,340)
Cash inflow from the sale of investments	230,821	628,999	346,346
Cash (outflow)/inflow from the sale of derivatives	(1,537)	65,752	40,367
Cash inflow/(outflow) from amounts held at futures clearing houses and brokers	8,621	(11,357)	(12,647)
	------	------	-------
Net cash inflow from operating activities before servicing of finance	23,574	49,172	29,823
	------	------	-------
Financing activities
Cash outflow from loan interest paid	(1,005)	(1,533)	(711)
Cash outflow from CFD interest paid	(807)	(992)	(346)
Cash outflow short CFD dividends paid	(448)	(384)	(384)
Cash outflow from the repurchase of Ordinary Shares	(2,572)	(26,904)	(22,566)
Cash outflow from dividends paid to shareholders	(9,950)	(7,306)	(7,306)
	------	------	-------
Cash outflow from financing activities	(14,782)	(37,119)	(31,313)
	------	------	-------
Increase/(decrease) in cash and cash equivalents	8,792	12,053	(1,490)
Cash and cash equivalents at the start of the period	30,266	14,932	14,932
Effect of foreign exchange movements	6,153	3,281	(130)
	------	------	-------
Cash and cash equivalents at the end of the period	45,211	30,266	13,312
	------	------	-------

Notes to the Financial Statements

1 Principal Activity

Fidelity China Special Situations 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 7133583, 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 financial 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 March 2016 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 Basis of Preparation

These half-yearly financial statements have been prepared in accordance with International Accounting Standard 34: Interim Financial Reporting and use the same accounting policies as set out in the Company’s Annual Report and Financial Statements for the year ended 31 March 2016. Those Financial Statements were prepared in accordance with; International Financial Reporting Standards (“IFRS”), to the extent that they have been adopted by the European Union, the Companies Acts that apply to companies reporting under IFRS, IFRC interpretations and, as far as it is consistent with IFRS, 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 November 2014.

4 Income

	Six months	Year	Six months
	ended	ended	ended
	30.09.16	31.03.16	30.09.15
	unaudited	audited	unaudited
	£’000	£’000	£’000
Investment income
Overseas dividends	17,776	17,546	15,422
Overseas scrip dividends	95	25	25
	------	-----	-----
	17,871	17,571	15,447
	------	-----	-----
Derivative income
Dividends on long CFDs	5,637	2,340	1,715
Interest on short CFDs	7	5	–
	------	-----	-----
	5,644	2,345	1,715
	------	-----	-----
Other income
Deposit interest	84	118	17
	------	-----	-----
Total income	23,599	20,034	17,179
	------	-----	-----

5 Investment Management and Performance Fees

	revenue	capital	total
	£’000	£’000	£’000
Six months ended 30 September 2016 (unaudited)
Investment management fee	2,682	2,682	5,364
Performance fee	–	671	671
	------	-----	-----
	2,682	3,353	6,035
	------	-----	-----
Year ended 31 March 2016 (audited)
Investment management fee	4,569	4,569	9,138
Performance fee	–	9,138	9,138
	------	-----	-----
	4,569	13,707	18,276
	------	-----	-----
Six months ended 30 September 2015 (unaudited)
Investment management fee	2,255	2,255	4,510
Performance fee	–	2,738	2,738
	------	-----	-----
	2,255	4,993	7,248
	------	-----	-----

FIL Investment Services (UK) Limited (a Fidelity group company) is the Company’s Alternative Investment Fund Manager (“the Manager”) and has delegated portfolio management to FIL Investment Management (Hong Kong) Limited and FIL Investments International (“the Investment Managers”). Fee arrangements are disclosed in the Interim Management Report and Responsibility Statement above.

6 Finance Costs

	revenue	capital	total
	£’000	£’000	£’000
Six months ended 30 September 2016 (unaudited)
Interest on bank loans and overdrafts	527	527	1,054
Interest paid on CFDs	392	392	784
Dividends paid on short CFDs	224	224	448
	-------	-------	-------
	1,143	1,143	2,286
	-------	-------	-------
Year ended 31 March 2016 (audited)
Interest on bank loans and overdrafts	794	794	1,588
Interest paid on CFDs	513	513	1,026
Dividends paid on short CFDs	192	192	384
	-------	-------	-------
	1,499	1,499	2,998
	-------	-------	-------
Six months ended 30 September 2015 (unaudited)
Interest on bank loans and overdrafts	362	362	724
Interest paid on CFDs	209	209	418
Dividends paid on short CFDs	192	192	384
	-------	-------	-------
	763	763	1,526
	-------	-------	-------

7 Earnings/(loss) per Ordinary Share

	Six months	Year	Six months
	ended	ended	ended
	30.09.16	31.03.16	30.09.15
	unaudited	audited	unaudited
Revenue earnings per Ordinary Share	3.42p	2.07p	2.23p
Capital earnings/(loss) per Ordinary Share	43.72p	(2.24p)	(25.03p)
	-------	-------	-------
Total earnings/(loss) per Ordinary Share	47.14p	(0.17p)	(22.80p)
	-------	-------	-------
Net revenue profit after taxation for the period	18,881	11,600	12,567
Net capital profit/(loss) after taxation for the period	241,552	(12,539)	(140,813)
	-------	-------	-------
Net total profit/(loss) after taxation for the period	260,433	(939)	(128,246)
	-------	-------	-------
Weighted average number of Ordinary Shares held outside Treasury in issue	552,472,677	559,532,936	562,484,261
	-------	-------	-------

8 Dividend
	Six months	Year	Six months
	ended	ended	ended
	30.09.16	31.03.16	30.09.15
	unaudited	audited	unaudited
	£’000	£’000	£’000
Dividend paid
Dividend paid of 1.80 pence per Ordinary Share for the year ended 31 March 2016	9,950	–	–
Dividend paid of 1.30 pence per Ordinary Share for the year ended 31 March 2015	–	7,306	7,306
	-------	-------	-------
	9,950	7,306	7,306
	-------	-------	-------

No dividend has been declared for the six month period to 30 September 2016.

9 Fair Value Hierarchy

Under IFRS 13: Fair Value Measurement, the International Accounting Standards Board requires investment companies to disclose the fair value hierarchy that classifies 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 valuation techniques using observable inputs other than quoted prices included within level 1
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 the Company’s Annual Report for the year ended 31 March 2016 (Accounting Policies, notes 2l and 2m). The table below sets out the Company’s fair value hierarchy:

	level 1	level 2	level 3	total
30 September 2016 (unaudited)	£’000	£’000	£’000	£’000
Financial assets at fair value through profit or loss
Investments – shares	1,173,791	–	24,287	1,198,078
Investments – equity linked notes	–	3,174	–	3,174
Derivative instruments	–	41,076	–	41,076
	------	-------	------	-------
	1,173,791	44,250	24,287	1,242,328
	------	-------	------	-------
Financial liabilities at fair value through profit or loss
	------	-------	------	-------
Derivative instruments	–	(27,946)	–	(27,946)
	------	-------	------	-------
Financial liabilities at amortised cost
	------	-------	------	-------
Bank Loan – US dollar 150,000,000	–	(115,274)	–	(115,274)
	------	-------	------	-------

	level 1	level 2	level 3	total
31 March 2016 (audited)	£’000	£’000	£’000	£’000
Financial assets at fair value through profit or loss
Investments – shares	963,712	–	20,317	984,029
Investments – equity linked notes	–	3,849	–	3,849
Derivative instruments	–	20,275	–	20,275
	------	-------	------	-------
	963,712	24,124	20,317	1,008,153
	------	-------	------	-------
Financial liabilities at fair value through profit or loss
	------	-------	------	-------
Derivative instruments	–	(28,082)	–	(28,082)
	------	-------	------	-------
Financial liabilities at amortised cost
	------	-------	------	-------
Bank Loan – US dollar 150,000,000	–	(104,315)	–	(104,315)
	------	-------	------	-------
	level 1	level 2	level 3	total
30 September 2015 (unaudited)	£’000	£’000	£’000	£’000
Financial assets at fair value through profit or loss
Investments – shares	814,648	–	28,482	843,130
Investments – equity linked notes	–	18,859	–	18,859
Derivative instruments	–	21,743	3,671	25,414
	------	-------	------	-------
	814,648	40,602	32,153	887,403
	------	-------	------	-------
Financial liabilities at fair value through profit or loss
	------	-------	------	-------
Derivative instruments	–	(22,916)	–	(22,916)
	------	-------	------	-------
Financial liabilities at amortised cost
	------	-------	------	-------
Bank Loan – US dollar 150,000,000	–	(99,236)	–	(99,236)
	------	-------	------	-------

10 Other Receivables

	30.09.16	31.03.16	30.09.15
	unaudited	audited	unaudited
	£’000	£’000	£’000
Securities sold for future settlement	15,794	3,171	1,924
Accrued income	3,348	296	1,994
Other debtors and prepayments	64	64	73
	------	-----	-----
	19,206	3,531	3,991
	------	-----	-----

11 Other Payables
	30.09.16	31.03.16	30.09.15
	unaudited	audited	unaudited
	£’000	£’000	£’000
Securities purchased for future settlement	6,377	1,035	3,715
Amount payable on share repurchases	–	508	–
Performance fee payable to the Manager	671	9,138	2,738
Other amounts payable to the Manager	3,109	2,487	2,288
Other creditors and accrued expenses	590	647	572
	------	-----	-----
	10,747	13,815	9,313
	------	-----	-----

12 Share Capital

		Six months ended		Year ended		Six months ended
		30.09.16		31.03.16		30.09.15
		unaudited		audited		unaudited
	number of		number of		number of
	shares	£’000	shares	£’000	shares	£’000
Issued, allotted and fully paid
Ordinary Shares of 1 penny held outside Treasury
Beginning of the period	553,339,480	5,533	571,254,480	5,712	571,254,480	5,712
Ordinary Shares repurchased into Treasury	(1,425,000)	(14)	(17,915,000)	(179)	(14,075,000)	(141)
	-----	------	-------	-------	-------	------
End of the period	551,914,480	5,519	553,339,480	5,533	557,179,480	5,571
	-----	------	-------	-------	-------	------
Ordinary Shares of 1 penny held in Treasury1
Beginning of the period	18,015,000	180	100,000	1	100,000	1
Ordinary Shares repurchased into Treasury	1,425,000	14	17,915,000	179	14,075,000	141
	-----	------	-------	-------	-------	------
End of the period	19,440,000	194	18,015,000	180	14,175,000	142
	-----	------	-------	-------	-------	------
Total share capital		5,713		5,713		5,713
		-------		------		---------

¹  Ordinary Shares held in Treasury represent 3.4% (31 March 2016: 3.2% and 30 September 2015: 2.5%) of the Company’s total share capital. Ordinary Shares held in Treasury carry no rights to vote, to receive a dividend or to participate in a winding up of the Company.

During the period the Company repurchased 1,425,000 Ordinary Shares (year ended 31 March 2016: 17,915,000 and six months ended 30 September 2015 14,075,000) and placed them in Treasury. The cost of repurchasing these shares of £2,064,000 (year ended 31 March 2016: £27,412,000 and six months ended 30 September 2015 £22,566,000) was charged to the Other Reserve.

13 Net Asset Value Per Ordinary Share

The net asset value per Ordinary Share is based on net assets of £1,156,897,000 (31 March 2016: £908,478,000 and 30 September 2015: £786,017,000) and on 551,914,480 (31 March 2016: 553,339,480 and 30 September 2015: 557,179,480) Ordinary Shares, being the number of Ordinary Shares held outside Treasury in issue at the period end. It is the Company’s policy that Ordinary Shares held in Treasury will only be issued at a premium to net asset value per share and, therefore, the shares held in Treasury have no dilutive effect.

14 Transactions with the Managers and Related Parties

FIL Investment Services (UK) Limited is the Company’s Alternative Investment Fund Manager and has delegated portfolio management to FIL Investment Management (Hong Kong) Limited and FIL Investments International. They are all Fidelity group companies. Investment management and performance fees charged and details of fee arrangements are disclosed in the Interim Management Report and Responsibility Statement and in Note 5 above. The Company also paid accounting, administration and secretarial fees of £300,000 (year ended 31 March 2016: £600,000 and six months ended 30 September 2015 £300,000). The Manager also provides the Company with marketing services. The amount payable for these services was £163,000 (year ended 31 March 2016: £230,000 and six months ended 30 September 2015 £203,000). Amounts payable to the Manager at the Balance Sheet date are included in “Other Payables” and are disclosed in Note 11 above.

As at 30 September 2016, the Board consisted of six non-executive Directors, all of whom are considered to be independent by the Board, apart from John Ford, who joined the Board on 22 July 2016 and is employed by Fidelity. John Owen and Andrew Wells retired from the Board on 22 July 2016. None of the Directors have a service contract with the Company.

The Chairman receives an annual fee of £42,000, the Audit Committee Chairman receives an annual fee of £32,000, the Chairman of the Investment Committee receives an annual fee of £31,500, the Senior Independent Director receives an annual fee of £31,500 and each other Director receives an annual fee of £26,500, apart from John Ford who waives his Directors’ fees. The following members of the Board hold Ordinary Shares in the Company: Nicholas Bull 65,804 shares, David Causer 65,804 shares, Peter Pleydell-Bouverie 78,683 shares and Elisabeth Scott 19,819 shares.

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

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.fidelityinvestmenttrusts.com where up to date information on the Company, including daily NAV and share prices, factsheets and other information can also be found.