Warrants that give the right to buy a company's ordinary shares at a fixed price between two specific dates tend to exaggerate the performance of the ordinary shares. David Paterson, Fleming investment director, said: "Both the share price and the net asset value of the China fund fell during the year The fund is exposed to both China and Hong Kong.
"The warrants mean that the investment trust will fall further than the market. It will remain a difficult and volatile market, although some companies' p/e ratios look quite good. Hong Kong will remain especially sensitive to changes in US interest rates."
Also among the poor performers was Fleming's high-income warrants fund. This fund is invested in the warrants of UK companies that pay a higher-than-normal dividend. Mr Paterson said that the performance of the fund had been hit because for a period high-yielding shares had underperformed the market.
Mr Paterson said: "The FT-SE is now yielding about 4 per cent, compared with the fund, which is aimed at yielding 4. 5 per cent." But he added: "At the beginning of the year the high-income trust was standing at a 5.5 per cent premium. It is now standingat a 3 per cent discount."
Nick Hodgson, Thornton's director, said: "Nearly all the Far East markets did badly. The only markets that went up were Korea, Taiwan and Sri Lanka."
Fleming also runs one of the top perfoming funds over one year. The Japanese Warrants fund benefited from being invested in one of the few markets that rose over the year. Again the warrants meant that any market movement was exaggerated.
One of the best-performing markets over the year was Brazil. Juliet Bullick, Foreign & Colonial emerging markets adviser, said: "The emphasis on the fund was on the mid-cap stocks, which have done extremely well. Over the year, real inflation has fallen from about 50 per cent a month to about 3 per cent a month, and the mid-caps have been extremely well placed to take advantage of that recovery."
Sumit, a venture capital investment trust, has also performed very well. Lindsay Bury, its chief executive, said that the fund had benefited from a number of successful flotations over the year.
"One company we had a stake in was Partco; another was the Nottingham Group.'' He added that the investment trust had significant stakes in others yet to come to market.
INVESTMENT TRUSTS The best £ 1 Edinburgh Japan Warrants 157.65
2 Sumit 156.62
3 Brazilian Investment 140.10
4 Manakin Holdings 127.78
5 Fleming Japanese Warrants 125.99
6 Kleinwort Development Fund 125.09
7 Mezzanine Capital & Income (2001) 122.81
8 Dunedin Enterprise 120.36
9 HTR Japanese Smaller Companies 120.28
10 JF Fledgling Japan 119.25
The worst 429 River & Mercantile Extra Warrants 51.72
430 Scottish Investment Warrants 50. 53
431 Edinburgh Java Warrants 48.39
432 Wigmore Property Warrants 46.66
433 TR Far East Income Warrants 45.60
434 Fleming High Income Warrants 42.31
435 Fleming Chinese Warrants 41.66
436 Northern American Gas Warrants 28.57
437 Pacific Horizon Warrants 28.00
438 Thornton Asian Emerging Mkts Warrants 26.44
Table shows the value on 2 January 1995 of £100 invested a year earlier. Figures are on a mid-market to mid-market basis, with net income reinvested. Source: MicropalReuse content