Fidelity China Special Situations Plc - Annual Financial Report
Final Results for the year ended
Financial Highlights:
-- The Board of Fidelity China Special Situations PLC (the “Company”)
recommends a final ordinary dividend of 8.00 pence per share as well as
a special dividend of 1.00 pence per share.
-- During the year ended 31 March 2025 , the Company reported a Net Asset
Value (NAV) total return of +31.5% and share price total return of
+35.8%.
-- Over the same period, the benchmark index, the MSCI China Index,
returned +37.5%.
-- Improving sentiment following stimulus packages and the emergence of
artificial intelligence provided catalysts to returns.
Contacts
For further information, please contact:
Company Secretary
0207 961 4240
CHAIRMAN’S STATEMENT
I have pleasure in presenting the Annual Report of
After three consecutive years of flat or negative returns for
This year marks the 15th anniversary of the Company’s inception on
At a macroeconomic level, we have seen the investment backdrop evolve over the year under review with a change in the attitude of the Chinese government, which is looking to stimulate the economy far more overtly following its sluggish post-Covid reopening. Measures to date have included a recapitalisation of banks to support the economy, as well as government-subsidised trade-in schemes for older discretionary items such as white goods.
There have been a number of important events in the last year, but I would like to highlight three. The first is President Xi’s meeting in February with Chinese entrepreneurs at a symposium of private enterprises. In the past, the Chinese government has been seen as sceptical of such businesses, but this gathering would seem to show a genuinely renewed commitment to embracing the role of private enterprise and entrepreneurs as part of China’s future.
The second is
The third is electric vehicle (EV) maker BYD’s revenues overtaking Tesla’s for the first time recently. These factors, and others, have helped improve sentiment, which is also reflected in the 38% rise in the stock market. This strong performance is particularly encouraging given the prevailing high levels of geopolitical uncertainty.
Dividends are also becoming more of a feature of the stock market, associated with generally more shareholder-friendly behaviour by Chinese companies. This year will be a bumper year for dividends received and paid to our shareholders (see below), making a meaningful contribution to the total return.
As I have noted before, being structured as a closed-ended investment company means that Dale does not have the liquidity constraints of an open-ended fund and can use this flexibility to invest in less liquid assets with a longer-term view of returns. Up to 15% of Net Assets plus Borrowings may be invested in unquoted companies (those not yet listed on a stock exchange), allowing Dale to take advantage of the faster growth trajectory of earlier-stage businesses before they are potentially listed on the public markets. Following on from three IPOs of private holdings in the previous financial year, the autonomous driving specialist Pony.ai floated in the US stock market in November. Dale also added a new unquoted holding to the portfolio in
The Board feels the valuation process for our unlisted holdings is robust. They are assessed regularly by Fidelity’s dedicated Fair Value Committee (“FVC”), with advice from Kroll, a third-party valuation specialist, as well as from Fidelity’s unlisted investment specialist in
DUE DILIGENCE TRIP
In November, your Board was fortunate to visit
We were most impressed by the entrepreneurialism shining through in the management teams that we met, many of whom were young, energetic, science-based and looking to build global businesses.
We were struck both by the strength of balance sheets of Chinese companies and the propensity of their major shareholders to reinvest in their businesses and not seek to extract value from them. Their drive and motivation seem to be to build something important and sustainable for the future.
GEARING
Your Board continues to believe that the judicious use of gearing (a benefit of the investment company structure) can enhance returns, although being more than 100% invested also means that the NAV and share price may be more volatile and can accentuate losses in a falling market, as well as being additive on the upside. Having repaid the Company’s
Gearing remained broadly around the 20% (net market gearing) level during the year, beginning at 20.8% and ending at 20.9%, reflecting Dale’s view that the Chinese equity market remains very attractively valued and offers many interesting investment opportunities. This level of gearing is at the upper limit that is acceptable to the Board, compared with a historical range of 10-25%. The impact of gearing was positive during the year in review, adding 6.9% to returns.
DIVIDEND
The Company’s investment objective remains focused on achieving long-term capital growth; however, it has the enviable track record of having paid an increased dividend each year since inception, growing from
As noted above, the year under review was a particularly strong one for the Company’s revenue return, reflecting the increasing focus of Chinese companies on rewarding minority shareholders through dividends. Your Board is therefore pleased to recommend an increased final ordinary dividend of
Both the ordinary and special dividends will be payable on
The revenue per share earned by the Company during the year was
DISCOUNT MANAGEMENT
Although your Company’s share price discount to NAV narrowed during the year from 10.2% to 7.3%, for much of the period it remained higher than the Board would like, and therefore we have been relatively active with share buybacks, repurchasing 30,841,184 shares (5.9% of the total at the start of the year) for cancellation. It is always our ambition that the share price should closely match the company’s NAV. We remain vigilant of changes in sentiment towards
While the primary purpose of share repurchases is to limit discount volatility, they are also of benefit to existing shareholders, as the Company’s NAV per share is increased by purchasing shares at a discount.
ONGOING CHARGES RATIO AND MANAGEMENT FEE
The Ongoing Charges Ratio (the costs of running the Company) for the year was 0.89% (2024: 0.98%). The variable element of the management fee (due to underperformance of the Benchmark Index on a rolling three year basis) was a credit of 0.15% (2024: a charge of 0.15%). Therefore, the Ongoing Charges Ratio for the year, including this variable element, was 0.74% (2024: 1.13%).
Following a reduction in the base management fee paid to the Manager in the last financial year as a result of the combination with abrdn
BOARD OF DIRECTORS
There have been no changes to your Board of Directors in either of the last two financial years, and other than me, none of the Directors have served for more than five years, meaning there are no changes expected in the shorter-term. We are pleased that your Company’s Board includes a real diversity and balance of relevant skills and experience, including consultancy covering Chinese businesses, accountancy, investment management (including private equity and private equity valuation) and marketing. In recent years, we have sought to pass on the benefit of our accumulated skills and knowledge by taking on a Board apprentice, a role put in place to help develop the next generation of individuals who may not otherwise find a route to becoming a non-executive director. Each apprentice serves a term of one year, during which time they attend all Board and Committee meetings as an observer. Further details are in the Annual Report.
In accordance with the
ANNUAL GENERAL MEETING
The Company’s AGM is at
OUTLOOK
A year ago, sentiment was undeniably poor – the Chinese economy, stock market and property market were all depressed, and the private sector was not outwardly being supported by the government. While a change in sentiment during the year under review has powered a very strong year for the Chinese stock market, we now need to see the follow-through.
While the macro picture remains uncertain with the property market still struggling and consumer sentiment fragile, the Chinese authorities could pull the lever of more monetary and fiscal stimulus, which could in turn provide a catalyst to unlock the high level of savings accumulated during the Covid lockdowns. The geopolitical backdrop, and particularly the trade issues between the US and
While the trade problems may be making headlines, I would posit that the bigger story for the long-term is the Chinese government’s willingness to engage with the private sector and acknowledge the role it has to play in the country’s future prosperity. From a bottom-up perspective, these businesses are vibrant, entrepreneurial and inventive, and the growing dominance of Chinese companies in certain global sectors is likely to be a continuing theme. For many years, people have been used to buying goods that are made in
Chairman
ANNUAL GENERAL MEETING – THURSDAY,
The AGM of the Company will be held at
For those shareholders who prefer not to attend in person, we will live-stream the formal business and presentations of the meeting online.
Properly registered shareholders joining the AGM virtually will be able to vote on the proposed resolutions. Please see Note 9 to the Notes to the Notice of Meeting in the Annual Report for details on how to vote virtually. Investors viewing the AGM online will be able to submit live written questions to the Board and the Portfolio Manager and these will be addressed at an appropriate juncture during the meeting.
Further information and links to the Lumi platform may be found on the Company’s website at www.fidelity.co.uk/china. On the day of the AGM, in order to join electronically and ask questions via the Lumi platform, shareholders will need to connect to the website https://meetings.lumiconnect.com/100-135-001-078.
Please note that investors on platforms, such as Fidelity Personal Investing, Hargreaves Lansdown,
Further information on how to vote across the most common investment platforms is available at the following link: https://www.theaic.co.uk/how-to-vote-your-shares
PORTFOLIO MANAGER’S REVIEW
QUESTION
How has the investment company performed in the year to
ANSWER
As
The Company’s share price rose by 35.8% over the year, with the discount to NAV narrowing from 10.2% at the start of the period to end at 7.3%. The Company’s NAV returned 31.5%, underperforming the MSCI China Index (the Benchmark Index), which delivered 37.5%. (All performance figures are on a total return basis).
The first five months of the reporting year proved challenging, with a combination of lacklustre economic stimulus, a weak property sector, and subdued consumption in
However, sentiment improved sharply in September following a comprehensive stimulus package from the Chinese government aimed at tackling deflation risks and reinvigorating consumption and real estate markets. I believe the size and breadth of the measures, and commitment expressed, marked a turning point in Beijing’s efforts to tackle the key economic issues most on investors’ minds. Equities rallied sharply in the month, led by real estate, consumer-related sectors, and healthcare.
While some of the momentum faded, a second major catalyst followed in January - the announcement of DeepSeek’s ground-breaking artificial intelligence (“AI”) model - reigniting enthusiasm for Chinese innovation and tech stocks. The tech sector led a broad-based rally into the end of the financial year, helping the Company to deliver a strong double-digit return.
While markets have been rocked by renewed US-China trade tensions since the financial year end, I remain confident in the resilience of the companies we own and the longer-term opportunity in Chinese equities.
QUESTION
What stocks have been the main drivers of performance during the year and why?
ANSWER
Performance during the year was driven largely by domestically focused small and mid-cap stocks, financials, and several of the most innovative companies held, particularly those linked to AI and the electric vehicle (“EV”) supply chain.
Against a backdrop of stabilising economic activity, insurers and consumer finance companies delivered strong returns.
Investor enthusiasm for AI and digital transformation supported strong returns in holdings such as
Alibaba Group Holding
, which advanced on rising expectations for cloud platform demand. However, our underweight position relative to the MSCI China Index limited the positive contribution.
Other holdings also made meaningful contributions.
Medlive
Technology
, an online professional physician platform, rallied
following the successful launch of new AI driven services and accelerating AI commercialisation efforts. Meanwhile,
Kingdee
International
One of the most innovative and strategically important areas continues to be the EV sector, where Chinese companies are increasingly establishing global leadership. While we acknowledge the significant growth potential for EV manufacturers, my preferred exposure has been through suppliers further up the value chain, where competition tends to be less intense, allowing margins to be more attractive and stable. Holdings in
On the other hand, not holding automakers BYD and Xiaomi detracted from performance compared to the MSCI China benchmark index. Xiaomi’s stock surged following the launch of its SU7 EV, which boosted sentiment across the EV space. However, I remain cautious given the competitive intensity in the auto sector along with relatively high valuations. In addition, we continue to believe a key differentiator of the Company — backed by Fidelity’s research and private-market valuation expertise — to invest in unlisted companies broadens the opportunity set and represents an additional source of potential returns for the Company.
TikTok developer ByteDance attracted attention given its role in the strategic tech sector and increasing global relevance, placing it at the intersection of innovation and geopolitical scrutiny. Encouragingly, the company emerged as a strong contributor to performance and our added stake in August last year further enhanced gains. ByteDance continued to deliver solid financial results and international expansion, despite continued uncertainty around TikTok’s US operations.
Conversely, leading autonomous driving player Pony.ai came under pressure post IPO in late 2024, following weaker-than-expected fourth-quarter results, despite this being less relevant given the early stage of this industry’s development. We remain confident in the long-term potential of its business given its strong technology platform and integrated ecosystem.
Overall, the unlisted investments delivered positive absolute returns to the portfolio during the review period, though performance was comparatively muted relative to the benchmark index, which benefited from a sentiment-driven rally fuelled by stimulus measures and AI-related catalysts.
QUESTION
How have you utilised the investment company structure this year? Has it been beneficial?
ANSWER
Net exposure to the market continues to reflect the quality and breadth of investment opportunities available, typically increasing when valuations are attractive and decreasing when opportunities become less prevalent, or valuations more stretched. I have found no shortage of attractive investment opportunities, and therefore net market exposure has fluctuated around 120% during the reporting year - at the upper end of the Company’s target range (previously around 125%). Net gearing was 20.9% at the end of the reporting year, very marginally down from 20.8% at the start.
Importantly, gearing added 6.9% to performance during the year, underlining the value that prudent gearing can bring when used appropriately.
QUESTION
Although President Trump’s “Liberation Day” announcement of higher tariffs came after the reporting year end, what impact have they had so far on the Company and on Chinese equities?
ANSWER
US-
Companies within the technology hardware and machinery sectors face the most direct pressure, with revenue impacts, given the uncertainty, and potential margin compression on lower utilisation levels as tariff costs ripple through supply chains. In our conversations with companies, few express concerns about losing market share, because these sectors are often already dominated by Chinese firms with similar supply chains. It is more a question of how demand will respond when prices rise.
So, a key part of our analysis centres around questions of price elasticity. I have reduced some exposure to the power equipment sector, where most companies share similar supply chains, with the bulk of manufacturing and sourcing based in
Overall, we expect the direct tariff impact on the Company to be insignificant. The Company remains heavily invested in domestically driven sectors such as healthcare, consumer staples, and segments of industrials, which remain broadly resilient, supported by local demand and policy tailwinds, which are likely to be more significant in response to the tariff impact drag.
Lastly, some perspective is required:
QUESTION
How effective have recent Chinese government stimulus announcements been in driving economic recovery, and do you think they will be successful?
ANSWER
Recent stimulus measures announced by the Chinese government have helped stabilise short-term economic sentiment and provided targeted support to key sectors. Notably, the recent Two Sessions - the annual meetings of the National People’s
With interest rates already at very low levels - though there remains some room for further monetary easing - expectations are rising for more fiscal action, particularly through policies aimed at boosting household incomes and supporting consumption. Consumer incentive initiatives such as the trade-in schemes, targeted property sector easing, and focused support for the services industry have positively impacted retail sales and contributed to a more stable outlook for the property market, as reflected in improving month-on-month price trends.
However, policymakers have refrained from broad-based monetary easing or large-scale stimulus programmes, opting instead for carefully targeted and flexible interventions. This cautious approach is likely designed to balance immediate economic support with long-term stability, especially given ongoing external uncertainties. Success will ultimately depend on sustaining domestic demand and consumer confidence, supported by employment growth, rising disposable incomes, and structural economic improvements. All these are well-established long-term goals of the government’s “dual circulation” strategy to create a more balanced and resilient economy. Recent policy moves have laid a strong foundation, but implementation requires ongoing monitoring.
QUESTION
How is the regulatory landscape evolving in
ANSWER
Investors may sometimes underestimate the somewhat cyclical nature of China’s regulatory environment. We are seeing a clear increase in support for private enterprise and innovation. One of the most visible signs of this was President Xi’s recent meeting with senior executives from China’s leading technology firms - a move that made headlines and reinforced the government’s more constructive tone towards the technology sector and private businesses more broadly.
As part of its long-standing “self-reliance” strategy, the government continues to prioritise key areas such as high-tech manufacturing, AI and advanced industrial automation.
Meanwhile, household balance sheets are healthy, and the vast domestic consumer market could receive further support from targeted government stimulus. We have seen exchange programmes in areas like autos and household appliances already drive increased demand. Well-positioned e-commerce platforms continue to benefit from structural growth trends, with the largest players capitalising on network effects and enhanced cost control to drive margin expansion.
Finally, government policy is also playing a constructive role in improving corporate governance. We continue to see a notable rise in shareholder-focused policies, with more companies increasing dividends and initiating buybacks. I have been spending more time engaging with companies on capital allocation, and this has already contributed to rising investment income for the Company, supporting its unbroken record of growing dividends.
QUESTION
How do you assess current valuations relative to historical averages and global markets?
ANSWER
Chinese equity valuations remain at compelling levels, both in absolute terms and relative to other global markets. On a forward price-to-earnings basis, the MSCI China Index is trading at around 10–11x, which is well below historical averages and more than a 40% discount to the S&P 500. The Company’s forward price-to-earnings ratio is slightly below that level, despite a stronger growth profile, reinforcing the value on offer.
Looking more closely, there is significant dispersion beneath the surface of the market. Many of the most exciting sectors, particularly consumer discretionary and healthcare, are still trading at multi-year lows, despite clear structural tailwinds and positive earnings momentum. Given recent global policy shifts, one wonders if we will start to see a closing of China’s implied risk premium versus other markets.
QUESTION
What are the key risks facing Chinese equities and how do you mitigate these in the portfolio?
ANSWER
Despite the recent temporary reductions, higher tariffs will still impact the outlook for GDP growth and corporate earnings, and the risk of another escalation in tensions cannot be ruled out. That said, the broader Chinese market is less reliant on US demand than it was during the previous trade war cycle. Today, exports to the US account for a much smaller share of China’s GDP, and many companies have already adapted their operations accordingly. As a result, while export-oriented sectors remain vulnerable, the overall market impact is now likely to be more muted than first feared.
Beyond geopolitics, domestic macro challenges - including continued weakness in the property sector, subdued consumer confidence, and the ongoing transition toward more consumption-driven growth - also present near-term uncertainty. However, these are widely recognised risks and, in many cases, are well reflected in current equity valuations.
We mitigate these risks in several ways. First, as mentioned, the Company’s investments are skewed toward domestically driven sectors, which are less exposed to external shocks and more aligned with China’s long-term strategic objectives. Second, we maintain a focus on companies with strong pricing power, and solid cash flows and balance sheets, which are better positioned to navigate periods of volatility. We also look to own companies that are undervalued and therefore offer a solid margin of safety.
Importantly, we also manage portfolio risk through active diversification - across sectors, market caps, and business models - and dynamically adjust net gearing and exposures depending on the opportunity set.
Finally, while macro and policy risks often dominate headlines, I believe company-specific execution and fundamentals are ultimately what drive long-term value creation. That is why our investment process remains rooted in bottom-up research, with a strong emphasis on understanding competitive positioning, management quality, and business resilience through different market environments.
QUESTION
Finally, looking forward, what are the things that excite you most and that you want to share with the Company’s shareholders?
ANSWER
What excites me most is the opportunity to invest in outstanding companies that are executing well within growing industries, have durable competitive advantages, and are still available to the Company at attractive valuations. In
The Company’s portfolio is well-positioned to benefit from this innovation-led growth across sectors. In AI and digital infrastructure, companies like Alibaba, Kingsoft, and Tencent Holdings are expanding cloud capabilities, while platforms such as Tuhu Car and ByteDance are driving monetisation through data-led service integration. In consumer sectors, companies like Xtep International and Chicmax are harnessing strong product innovation, digital marketing, and brand segmentation to drive solid market share gains. In the EV space, BYD and Hesai are advancing next-generation mobility through breakthroughs in battery systems and intelligent sensing, while Pony.ai represents a forward-looking investment in autonomous transport. In healthcare, HUTCHMED China and Innovent Biologics are good examples of China’s growing strength in biotech, combining advanced biologics manufacturing with innovative drug development to build a globally competitive healthcare ecosystem. Meanwhile, industrial holdings such as Shenzhen Inovance Technology and Weichai Power are enhancing competitiveness through automation and component innovation. Collectively, these investments reflect the Company’s focus on backing innovative leaders in areas where
While macroeconomic uncertainty and market volatility can be unsettling, they also create real opportunities for active investors, as stock prices often become disconnected from company fundamentals. Across many industries, companies are getting on with the job, executing their strategies profitably while successfully adapting to challenges. For long-term investors, such an environment presents the Company with a wealth of attractive opportunities to generate excess returns for its shareholders.
Portfolio Manager
Strategic Report
Principal Risks and Uncertainties and Risk Management
As required by provisions 28 and 29 of the 2018 UK Corporate Governance Code, the Board has a robust ongoing process for identifying, evaluating and managing the principal risks and uncertainties faced by the Company, including those that could threaten its business model, future performance, solvency or liquidity. The Board, with the assistance of the
The Manager also has responsibility for risk management for the Company. It works with the Board to identify and manage the principal and emerging risks and uncertainties and to ensure that the Board can continue to meet its
The Board considers the risks listed below as the principal risks and uncertainties faced by the Company.
Emerging Risks
Climate change, which refers to a large scale shift in the planet’s weather patterns and average temperatures, continues to be a key emerging as well as a principal risk confronting asset managers and their investors. Globally, climate change effects are already being experienced in the form of changing weather patterns. Extreme weather events can potentially impact the operations of investee companies, their supply chains and their customers. The Board notes that the Manager includes 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 to investment valuations and potentially affect shareholder returns.
The Board, together with the Manager, is also monitoring the emerging risks posed by the rapid advancement of artificial intelligence (AI) and technology and how it may threaten the Company’s activities and its potential impact on the portfolio and investee companies. AI can provide asset managers powerful tools, such as enhancing data analysis risk management, trading strategies, operational efficiency and client servicing, all of which can lead to better investment outcomes and more efficient operations. However, with these advances in computing power that will impact society, there are risks from its increasing use and manipulation with the potential to harm, including a heightened threat to cybersecurity.
Other emerging risks may continue to evolve from unforeseen geopolitical and economic events.
Principal Risks Risk Description and Risk Mitigation Trend
Impact
· Geopolitics may
impact on the value of
investments and the
Manager’s ability to
access markets freely.
· China trade tensions
with US/EU/UK and the
new US
administration’s
tariffs may impact on
a transatlantic trade
war, including the
balance between
national security and
economic interests.
· A challenging
regulatory environment
may hinder foreign
investment, including
US Executive Orders
prohibiting
transactions by US
persons in certain
publicly traded
Chinese companies. As
a result, there is an
increased risk of
sanctions that could
be imposed by western
governments on
individual Chinese · The Board receives
companies held in the insights and
portfolio, but also an information, including
increased risk of ADRs research notes, from
being delisted from the Manager and
foreign exchanges independent sources on
which would impact the a regular basis.
Company, especially in
cases where a local · The portfolio is
listing does not tilted to domestic
exist. Chinese markets.
· Uncertainty from the · Major adverse market
ongoing global events are
conflicts has stress-tested for
increased tensions operational resilience
Geopolitical Risk between the US and and financial impact. Increasing
Europe, elevating oil
supply concerns and · Regulatory and policy
driving price development is
volatility. China’s monitored by Fidelity,
exports would be including any relevant
vulnerable to any executive orders or
disruption in trade sanctions.
and the shipping
sector. · Whilst it is not
expected that China
· Regional conflict in will change the rules
the Pacific remains a affecting VIEs to the
possibility. The extent that it will ban
ramifications, foreign investment,
including potential this risk is closely
military conflict, monitored.
could have very
serious economic and
stock market
implications.
Additionally,
sanctions could lead
to the freezing of
Chinese assets,
limiting or
prohibiting the
Company’s ability to
transact in Chinese
denominated assets.
· The Company has
exposure to a number
of companies with all
or part of their
businesses in Variable
Interest Entities
(“VIEs”) and there is
a regulatory risk from
the China Security
Regulatory Commission
(“CSCR”) guidelines
around them. Although
these rules are meant
to ease the regulatory
uncertainty, they may
impact their usage
going forward as
geopolitical risks
remain increased.
· Whilst China’s
outlook for
“controlled
stabilisation” is
supported by targeted
policy measures, the
property sector,
although showing signs
of some stabilisation,
is a source of
uncertainty. Growth in
local consumption is
expected but the US · Growth is exceeding
tariffs will economic targets as the
nevertheless impact stable policy setting
economic activity is helping to restore
private sector
· China’s economy is confidence.
exposed to uncertain
world growth · The Portfolio Manager
prospects, tightening and the Manager’s
in global financial ability to understand
conditions, energy and predict events in
costs, rising food China. Independent risk
Market and Economic prices, currency management insight is
Risks (including instability and provided on a regular Increasing
Currency Risk) challenging regulatory basis.
environment.
· The Company holds a
· China faces growing diversified portfolio
economic headwinds, emphasising sectors of
including an aging strategic importance to
population, China.
environmental
pollution, isolation · The Board receives
of the financial and reviews reports
system and debt from the Portfolio
concerns in its Manager on a regular
corporate and local basis.
government sectors.
· The currency in
which the Company
reports its results is
sterling and its
ordinary shares trade
in sterling, whilst
the underlying
investments are in
different currencies.
The Company does not
hedge currencies.
· An investment
strategy overseen by
the Board to optimise
returns from investing
· The Portfolio in China, as well as
Manager may fail to oversight of gearing
outperform the and relevant limits.
Benchmark Index and
peers over the · Diversification of
longer-term. investments through
investment restrictions
Investment Performance · High gearing levels and guidelines which
Risk (including in a falling market are monitored and Stable
Gearing Risk) accentuates share reported upon by the
price weakness. NAV Investment Manager.
performance can be
affected by selling · A well-resourced team
stock in a falling of experienced analysts
market to keep the covering the market.
gearing level within
pre-agreed limits. · Board scrutiny of the
Manager and the ability
in extreme
circumstances to change
the Manager.
· There is increased
activity around
mergers and
acquisitions across · The Board, the
the investment company Company’s Broker and
marketplace and the Manager closely
alternative investment monitor industry
offerings (including activity, the peer
Marketplace, passive vehicles) group and the share
Competition and which could influence register.
Discount Management the demand for the Increasing
Risks Company’s shares. · An annual review of
strategy is undertaken
· There is a risk of by the Board to ensure
costly shareholder that the Company
activism in the continues to offer a
investment company relevant product to
sector, pursuing goals investors.
that may not be in the
interests of most
shareholders.
· The Board may fail
to implement its
discount management
policy effectively to
keep the level of the
discount in single
digits and in the face
of heavy selling
pressure, may exhaust
its authorised buyback · The Company’s
facility. discount management
policy is aimed at
· Changes in investor keeping the discount in
sentiment towards single digits during
China, market normal market
volatility and poor conditions.
performance could lead
to the Company trading · Maintaining close
at a larger discount communications with
to its underlying NAV, major shareholders
as due to the nature
of investment
companies, the price
of the Company’s
shares and its
discount to NAV are
factors which are not
totally within the
Company’s control.
· Valuations of · The Company has set a
unlisted securities limit on the level of
may be adversely investments in unlisted
affected by market companies and the
conditions, government Manager has a track
sanctions and US trade record of identifying
tariffs. profitable
opportunities.
· Initial public
Unlisted Securities offering (IPO) of the · The Board’s Audit and Stable
Risk unlisted companies may Risk Committee
face delays leading to scrutinises the
longer holding carrying value of
periods. unlisted investments
determined by the
· Potential for less Manager, Fidelity’s
stringent standards of unlisted investments
governance compared specialist and an
with those of listed external valuer and
entities. advisor.
· The Manager has
· Loss of the succession plans for
Portfolio Manager or key dependencies.
other key individuals
Key Person Risk could lead to · The depth of the team Stable
potential performance within Fidelity,
and/or operational including the
issues. experience of the
analysts covering
China.
· Cybersecurity risk
from cyberattacks or
threats to the
functioning of global
markets and to the
Manager’s own business · The Manager’s
model, including its technology risk
and the Company’s management teams have
outsourced suppliers. implemented a number of
initiatives and
· Risk of cybercrime controls to provide
such as phishing, enhanced mitigating
remote access threats, protection and also to
extortion and address the risks of
denial-of-services AI.
attacks from highly
organised criminal · Key performance
networks and indicators and metrics
sophisticated have been developed by
ransomware operators. the Manager to monitor
Additional risks from the overall efficacy of
the increased use of cybersecurity processes
artificial and controls and to
Cybercrime and intelligence (AI). further enhance the
Information Security Manager’s cybersecurity
Risks, including · Risks from the strategy and Increasing
Business Continuity increased use of operational resilience.
Risk artificial
intelligence (AI). · Fidelity has Business
Continuity and Crisis
· Business process Management Frameworks
disruption risk from in place to deal with
continued threats of business disruption and
cyberattacks, assure operational
geopolitical events, resilience.
outages, fire events
and natural disasters, · All third-party
resulting in financial service providers are
and/or reputational subject to a risk-based
impact to the Company programme of risk
affecting the oversight and internal
functioning of the audits by the Manager
business. and their own internal
controls reports are
· The Company relies received an annual
on a number of basis and any concerns
third-party service are investigated.
providers, principally
the Registrar,
Custodian and
Depositary who may be
subject to cybercrime.
· Fidelity’s
Operational Risk
Management Framework is
designed to
pro-actively prevent,
· Financial losses or identify and manage
reputational damage operational risks
from inadequate or inherent in most
failed internal activities.
Operational Risk processes, people and Decreasing
systems or from · Fidelity uses robust
external parties and systems and procedures
events. dedicated to its
operational processes.
Its risk management
structure is designed
according to the FCA’s
three lines of defence
model.
Continuation Vote
A continuation vote will take place every five years with the first such vote to be held at the AGM in 2029.
Viability Statement
In accordance with provision 31 of the 2018 UK Corporate Governance Code, the Directors have assessed the prospects of the Company over a longer period than the twelve month period required by the “Going Concern” basis. The Company is an investment trust with the objective of achieving long-term capital growth. The Board considers that five years is an appropriate investment horizon to assess the viability of the Company, although the life of the Company is not intended to be limited to this or any other period.
In making an assessment on the viability of the Company, the Board has considered the following:
· The ongoing relevance of the investment objective in prevailing market conditions;
· The Company’s level of gearing;
· The Company’s NAV and share price performance compared to its Benchmark Index;
· The principal and emerging risks and uncertainties facing the Company and their potential impact, as set out above;
· The future demand for the Company’s shares;
· The Company’s share price discount to the NAV;
· The liquidity of the Company’s portfolio;
· The level of income generated by the Company;
· Future income and expenditure forecasts; and
· Introduction of a continuation vote with effect from 2029 and every five years thereafter.
The Company’s performance for the five year reporting period to
· The Investment Manager’s compliance with the Company’s investment objective and policy, its investment strategy and asset allocation;
· The portfolio comprises sufficient readily realisable securities which can be sold to meet funding requirements if necessary; and
· The ongoing processes for monitoring operating costs and income which are considered to be reasonable in comparison to the Company’s total assets.
In preparing the Financial Statements, the Directors have considered the impact of climate change and potential emerging risks from the use of artificial intelligence as detailed above. The Board has also considered the impact of regulatory changes, global trade tariffs, continuing tensions between the US and
In addition, the Directors’ assessment of the Company’s ability to operate in the foreseeable future is included in the Going Concern Statement below.
GOING CONCERN STATEMENT
The 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 and 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), stress testing performed, 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 continue in operational existence for the foreseeable future. The Board has therefore concluded that the Company has adequate resources to continue to adopt the going concern basis for the period to
Accordingly, the Financial Statements of the Company have been prepared on a going concern basis.
The prospects of the Company over a period longer than twelve months can be found in the Viability Statement above.
PROMOTING THE SUCCESS OF THE COMPANY
Under Section 172(1) of the Companies Act 2006, the Directors of a company must act in a way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to the likely consequences of any decision in the long-term; the need to foster relationships with the Company’s suppliers, customers and others; the impact of the Company’s operations on the community and the environment; the desirability of the Company maintaining a reputation for high standards of business conduct; and the need to act fairly as between members of the Company.
As an externally managed
The Board, with the Portfolio Manager, sets the overall investment strategy and reviews this at an annual strategy day which is separate from the regular cycle of board meetings. In order to ensure good governance of the Company, the Board has set various limits on the investments in the portfolio, whether in the maximum size of individual holdings, the use of derivatives, the level of gearing and others. These limits and guidelines are regularly monitored and reviewed and are set out in the Annual Report.
The Board receives regular reports from the Company’s Broker which covers market activity, how the Company compares with its peers in the
The Board places great importance on communication with shareholders. The Annual General Meeting provides the key forum for the Board and the Portfolio Manager to present to the shareholders on the Company’s performance and future plans and the Board encourages all shareholders to attend in person or virtually and raise any questions or concerns. The Chairman and other Board members are available to meet shareholders as appropriate. Shareholders may also communicate with Board members at any time by writing to them at the Company’s registered office at
The Portfolio Manager meets with major shareholders, potential investors, stock market analysts, journalists and other commentators throughout the year. These communication opportunities help inform the Board in considering how best to promote the success of the Company over the long-term.
The Board seeks to engage with the Manager and other service providers and advisers in a constructive and collaborative way, promoting a culture of strong governance, while encouraging open and constructive debate, in order to ensure appropriate and regular challenge and evaluation. This aims to enhance service levels and strengthen relationships with service providers, with a view to ensuring shareholders’ interests are best served, by maintaining the highest standards of commercial conduct while keeping cost levels competitive.
Whilst the Company’s direct operations are limited, the Board recognises the importance of considering the impact of the Company’s investment strategy on the wider community and environment. The Board believes that a proper consideration of ESG issues aligns with the Company’s investment objective to deliver long-term capital growth, and the Board’s review of the Manager includes an assessment of their ESG approach.
In addition to ensuring that the Company’s investment objective was being pursued, key decisions and actions taken by the Directors during the reporting year, and up to the date of this report, have included:
· The decision to once again hold a hybrid AGM this year in order to make the AGM more accessible and improve the shareholder experience;
· Meeting the Company’s key shareholders during the reporting year;
·
Authorising the repurchase of 30,841,184 shares for cancellation in the reporting year when the Company’s discount widened, in line with the Board’s intention that the ordinary share price should trade at a level close to the underlying NAV. Since the year ended
·
The decision to pay a final ordinary dividend of
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each financial period. Under that law they have elected to prepare the Financial Statements in accordance with
In preparing these Financial Statements the Directors are required to:
· Select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors, and then apply them consistently;
· Make judgements and estimates that are reasonable and prudent;
· Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
· Provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Company’s financial position and financial performance;
· State whether applicable IFRS and IFRIC interpretations have been followed, subject to any material departures disclosed and explained in the Financial Statements; and
· Prepare the Financial Statements on the going concern basis unless it is inappropriate to assume that the Company will continue in business.
The Directors are responsible for ensuring that adequate accounting records are kept which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, a Directors’ Report, a Corporate Governance Statement and a Directors’ Remuneration Report that comply with that law and those regulations.
The Directors have delegated to the Manager the responsibility for the maintenance and integrity of the corporate and financial information included on the Company’s pages of the Manager’s website at
www.fidelity.co.uk/china
.
Visitors to the website need to be aware that legislation in the
The Directors confirm that to the best of their knowledge:
·
The Financial Statements, prepared in accordance with
· The Annual Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties it faces; and
· The Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company’s performance, business model and strategy.
The Statement of Directors’ Responsibilities was approved by the Board on
Chairman
FINANCIAL STATEMENTS
Income Statement for the year ended
Year ended 31 March 2025 Year ended 31 March 2024
Revenue Capital Total Revenue Capital Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
Revenue
Investment 3 46,862 – 46,862 26,123 – 26,123
income
Derivative 3 13,747 – 13,747 11,154 – 11,154
income
Other 3 2,090 – 2,090 1,659 – 1,659
income
--------------- --------------- --------------- --------------- --------------- ---------------
Total 62,699 – 62,699 38,936 – 38,936
income
========= ========= ========= ========= ========= =========
Gains/
(losses) on
investments
at fair 10 – 249,875 249,875 – (155,001) (155,001)
value
through
profit or
loss
Gains/
(losses) on 11 – 57,121 57,121 – (54,790) (54,790)
derivative
instruments
Foreign
exchange – 1,769 1,769 – (3,858) (3,858)
gains/
(losses)
Foreign
exchange – – – – 1,517 1,517
gains on
bank loans
--------------- --------------- --------------- --------------- --------------- ---------------
Total
income and 62,699 308,765 371,464 38,936 (212,132) (173,196)
gains/
(losses)
========= ========= ========= ========= ========= =========
Expenses
Investment
management 4 (2,469) (5,572) (8,041) (2,430) (8,991) (11,421)
fees
Other 5 (1,211) (32) (1,243) (1,203) (35) (1,238)
expenses
--------------- --------------- --------------- --------------- --------------- ---------------
Profit/
(loss)
before 59,019 303,161 362,180 35,303 (221,158) (185,855)
finance
costs and
taxation
Finance 6 (5,774) (17,324) (23,098) (6,699) (20,098) (26,797)
costs
--------------- --------------- --------------- --------------- --------------- ---------------
Profit/
(loss) 53,245 285,837 339,082 28,604 (241,256) (212,652)
before
taxation
Taxation 7 (1,070) – (1,070) (812) – (812)
--------------- --------------- --------------- --------------- --------------- ---------------
Profit/
(loss)
after 52,175 285,837 338,012 27,792 (241,256) (213,464)
taxation
for the
year
--------------- --------------- --------------- --------------- --------------- ---------------
Earnings/
(loss) per 8 10.18p 55.75p 65.93p 5.78p (50.18p) (44.40p)
ordinary
share
========= ========= ========= ========= ========= =========
The Company does not have any income or expenses that are not included in the profit/(loss) after taxation for the year. Accordingly, the profit/(loss) after taxation for the year is also the total comprehensive income for the year 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.
All the profit/(loss) 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 year and all items in the above statement derive from continuing operations.
The Notes below form an integral part of these Financial Statements.
Statement of Changes in Equity for the year ended
Share Capital
Share premium redemption Other Capital Revenue Total
capital account reserve reserve reserve reserve equity
Notes £’000 £’000 £’000 £’000 £’000 £’000 £’000
Total equity
at 31 March 6,113 338,167 1,104 140,861 636,526 53,243 1,176,014
2024
Contribution
in respect of
the
transaction – 100 – – – – 100
with ACIC by
the Manager
Costs
relating to
the issuance
of new shares – (160) – – – – (160)
in respect to
the ACIC
transaction
Repurchase of
ordinary 14 (308) – 308 (66,809) – – (66,809)
shares for
cancellation
Profit after
taxation for – – – – 285,837 52,175 338,012
the year
Dividend paid
to 9 – – – – – (33,355) (33,355)
shareholders
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total equity
at 31 March 5,805 338,107 1,412 74,052 922,363 72,063 1,413,802
2025
========= ========= ========= ========= ========= ========= =========
Total equity
at 31 March 5,710 211,569 917 186,794 877,782 55,649 1,338,421
2023
New ordinary
shares issued
in respect of
the 14 590 126,198 – – – – 126,788
transaction
with ACIC
Contribution
in respect of
the – 400 – – – – 400
transaction
with ACIC by
the Manager
Repurchase of
ordinary 14 – – – (6,965) – – (6,965)
shares into
Treasury
Repurchase of
ordinary 14 (187) – 187 (38,968) – – (38,968)
shares for
cancellation
(Loss)/profit
after – – – – (241,256) 27,792 (213,464)
taxation for
the year
Dividend paid
to 9 – – – – – (30,198) (30,198)
shareholders
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total equity
at 31 March 6,113 338,167 1,104 140,861 636,526 53,243 1,176,014
2024
========= ========= ========= ========= ========= ========= =========
The Notes below form an integral part of these Financial Statements.
Balance Sheet as at
Company number 7133583
31 March 31 March
2025 2024
Notes £’000 £’000
Non-current assets
Investments at fair value through profit 10 1,346,238 1,162,265
or loss
--------------- ---------------
Current assets
Derivative instruments 11 9,938 7,103
Amounts held at futures clearing houses 33,760 24,589
and brokers
Other receivables 12 7,295 10,066
Cash and cash equivalents 49,691 7,858
--------------- ---------------
100,684 49,616
========= =========
Current liabilities
Derivative instruments 11 (24,838) (13,307)
Other payables 13 (8,282) (9,802)
Bank overdrafts – (12,758)
--------------- ---------------
(33,120) (35,867)
========= =========
Net current assets 67,564 13,749
========= =========
Net assets 1,413,802 1,176,014
========= =========
Equity attributable to equity shareholders
Share capital 14 5,805 6,113
Share premium account 15 338,107 338,167
Capital redemption reserve 15 1,412 1,104
Other reserve 15 74,052 140,861
Capital reserve 15 922,363 636,526
Revenue reserve 15 72,063 53,243
--------------- ---------------
Total equity 1,413,802 1,176,014
========= =========
Net asset value per ordinary share 16 285.71p 223.71p
========= =========
The Financial Statements above and below were approved by the Board of Directors on
Chairman
The Notes below form an integral part of these Financial Statements.
Cash Flow Statement for the year ended
Year ended Year ended
31 March 31 March
2025 2024
£’000 £’000
Operating activities
Cash inflow from investment income 45,209 26,240
Cash inflow from derivative income 14,002 10,891
Cash inflow from other income 2,090 1,659
Cash outflow from Directors’ fees (249) (236)
Cash outflow from other payments (9,433) (13,104)
Cash outflow from the purchase of investments (651,563) (592,266)
Cash outflow from the purchase of derivatives (2,242) (1,910)
Cash outflow from the settlement of derivatives (436,471) (301,285)
Cash inflow from the sale of investments 716,551 703,150
Cash inflow from the settlement of derivatives 507,321 260,351
Cash (outflow)/inflow from amounts held at (9,171) 10,224
futures clearing houses and brokers
--------------- ---------------
Net cash inflow from operating activities before 176,044 103,714
servicing of finance
========= =========
Financing activities
Cash inflow from the issuance of ordinary shares – 5,156
in respect of the transaction with ACIC
Cash inflow from the Fidelity contribution in – 400
respect of the transaction with ACIC
Cash outflow from loan interest paid (80) (5,138)
Cash outflow from the settlement of the bank – (79,340)
loan
Cash outflow from CFD interest paid (22,478) (22,695)
Cash outflow from short CFD dividends paid (321) –
Cash outflow from the repurchase of ordinary – (7,095)
shares into Treasury
Cash outflow from the repurchase of ordinary (66,988) (38,789)
shares for cancellation
Cash outflow from dividends paid to shareholders (33,355) (30,198)
--------------- ---------------
Cash outflow from financing activities (123,222) (177,699)
========= =========
Net increase/(decrease) in cash at bank 52,822 (73,985)
Cash at bank at the start of the year 7,858 72,943
Bank overdraft at the start of the year (12,758) –
Effect of foreign exchange movements 1,769 (3,858)
--------------- ---------------
Cash at bank at the end of the year 49,691 (4,900)
Represented by: ========= =========
Cash at bank 49,691 7,858
Bank overdrafts – (12,758)
--------------- ---------------
49,691 (4,900)
========= =========
The Notes below form an integral part of these Financial Statements.
NOTES TO THE FINANCIAL STATEMENTS
1.
PRINCIPAL ACTIVITY
2. ACCOUNTING POLICIES
The Company’s Financial Statements have been prepared in accordance with
a) Basis of accounting
– The Financial Statements have been prepared on a going concern basis and under the historical cost
convention, except for the measurement at fair value of investments and derivative instruments. The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence up to
liquidity of the investment portfolio, stress testing performed and considered the Company’s ability to meet liabilities as they fall due. This conclusion also takes into account the Director’s assessment of the risks faced by the Company as detailed in the Going Concern Statement above.
In preparing these Financial Statements the Directors have considered the impact of climate change risk as an emerging and a principal risk as set out above and have concluded that there was no further impact of climate change to be taken into account as the investments are valued based on market pricing. In line with IFRS 13, investments are valued at fair value, which for the Company are quoted bid prices for investments in active markets at the balance sheet date. Investments which are unlisted are priced using market-based valuation approaches. All investments therefore reflect the market participants view of climate change risk on the investments held by the Company.
The Company’s Going Concern Statement above takes account of all events and conditions up to
Issue of Ordinary Shares in respect of the transaction with abrdn
In the prior year, the Company issued new ordinary shares which were provided to shareholders of ACIC, in connection with the combination of the assets of the Company with the assets of ACIC.
The Manager agreed to a contribution of £715,000, representing eight months of management fees, in respect of the assets transferred by ACIC to the Company, that would otherwise be payable by the enlarged Company to the Manager in the year to
Additionally, the Manager agreed to make a cash contribution to the Company equal to £500,000. In the year to
Transaction costs of £543,000 in relation to the combination of ACIC have been recognised in the Income Statement in Note 10. Costs of £160,000 in relation to issuing new shares have been recognised in the Statement of Changes in Equity.
The Company has recognised the additional contribution from the Manager and the expenses relating to the issuance of shares in the Share premium account as described in Note 15.
b) Adoption of new and revised International Accounting Standards – the accounting policies adopted are consistent with those of the previous financial year.
At the date of authorisation of these Financial Statements, the following revised IAS were in issue but not yet effective:
· Amendments to IAS 1 Classification of Liabilities as Current or Non-current;
· Amendments to IAS 7 and IFRS 7 Supplier finance arrangements;
· Amendments to IFRS 9 and IFRS 7 Classification and Measurement of Financial Instruments; and
· IFRS 18 Presentation and Disclosure in Financial Statements.
The Directors do not expect that the adoption of the above Standards will have a material impact on the Financial Statements of the Company in future periods.
c) Segmental reporting – The Company is engaged in a single segment business and, therefore, no segmental reporting is provided.
d) Presentation of the Income Statement – In order to reflect better the activities of an investment company and in accordance with guidance issued by the AIC, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been prepared alongside the Income Statement. The revenue profit after taxation for the year is the measure the Directors believe appropriate in assessing the Company’s compliance with certain requirements set out in Section 1159 of the Corporation Tax Act 2010.
e) Significant accounting estimates, assumptions and judgements – The preparation of the Financial Statements requires the use of estimates, assumptions and judgements. These estimates, assumptions and judgements affect the reported amounts of assets and liabilities at the reporting date. While estimates are based on best judgement using information and financial data available, the actual outcome may differ from these estimates.
The key sources of estimation and uncertainty relate to the fair value of the unlisted investments.
Judgements
The Directors consider whether each fair value is appropriate following detailed review and challenge of the pricing methodology. The judgement applied in the selection of the methodology used (see Note 2 (l) below) for determining the fair value of each unlisted investment can have a significant impact upon the valuation.
Estimates
The key estimate in the Financial Statements is the determination of the fair value of the unlisted investments by the Manager’s Fair Value Committee (“FVC”), with support from an external valuer and Fidelity’s unlisted investments specialist, for detailed review and appropriate challenge by the Directors. This estimate is key as it significantly impacts the valuation of the unlisted investments at the Balance Sheet date. When no recent primary or secondary transaction in the company’s shares have taken place, the fair valuation process involves estimation using subjective inputs that are unobservable (for which market data is unavailable). The estimates involved in the valuation process may include the following:
(i) The selection of appropriate comparable companies. Comparable companies are chosen on the basis of their business characteristics and growth patterns;
(ii) The selection of a revenue metric (either historical or forecast);
(iii) The selection of an appropriate illiquidity discount factor to reflect the reduced liquidity of unlisted companies versus their listed peers;
(iv) The estimation of the likelihood of a future exit of the position through an initial public offering (“IPO”) or a company sale;
(v) The selection of an appropriate industry benchmark index to assist with the valuation; and
(vi) The calculation of valuation adjustments derived from milestone analysis and future cash flows (i.e. incorporating operational success against the plans/forecasts of the business into the valuation).
As the valuation outcomes may differ from the fair value estimates a price sensitivity analysis is provided in Other Price Risk Sensitivity in Note 17 to illustrate the effect on the Financial Statements of an over or under estimation of fair value.
The risk of an over or under estimation of fair value is greater when methodologies are applied using more subjective inputs.
Assumptions
The determination of fair value by the FVC involves key assumptions dependent upon the valuation techniques used. The valuation process recognises that the price of a recent investment may be an appropriate starting point for estimating fair value. The Multiples approach involves subjective inputs and therefore presents a greater risk of over or under estimation, particularly in the absence of a recent transaction.
f) Income – Income from equity investments and long contracts for difference (“CFDs”) is credited to the revenue column of the Income Statement on the date on which the right to receive the payment is established, normally the ex-dividend date. Overseas dividends are accounted for gross of any tax deducted at source. Where the Company has elected to receive its dividends in the form of additional shares rather than cash, the amount of the cash dividend foregone is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend foregone is recognised as a gain in the capital column of the Income Statement. Special dividends are treated as a revenue receipt or a capital receipt depending on the facts and circumstances of each particular case.
Interest on securities, interest for CFDs, collateral and bank deposits are accounted for on an accruals basis and credited to the revenue column of the Income Statement. Interest received on CFDs represent the finance costs calculated by reference to the notional value of the CFDs.
g) Functional currency and foreign exchange
– The functional and reporting currency of the Company is
h) Investment management and other expenses – These are accounted for on an accruals basis and are charged as follows:
· The base investment management fee is allocated 25% to revenue and 75% to capital;
· The variable investment management fee is charged/credited to capital as it is based on the performance of the net asset value per share relative to the Benchmark Index; and
· All other expenses are allocated in full to revenue with the exception of those directly attributable to share issues or other capital events.
i) Finance costs – Finance costs comprise interest on the bank loan and overdrafts and finance costs paid on CFDs, which are accounted for on an accruals basis, and dividends paid on short CFDs, which are accounted for on the date on which the obligation to incur the cost is established, normally the ex-dividend date. Finance costs are allocated 25% to revenue and 75% to capital.
j) Taxation – The taxation charge represents the sum of current taxation and deferred taxation.
Taxation currently payable is based on the taxable profit for the year. Taxable profit differs from profit before taxation, as reported in the Income Statement, because it excludes items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company’s liability for current taxation is calculated using taxation rates that have been enacted or substantially enacted by the Balance Sheet date.
Deferred taxation is the taxation expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the Financial Statements and the corresponding taxation bases used in the computation of taxable profit based on tax rates that have been enacted or substantively enacted when the taxation is expected to be payable or recoverable, and is accounted for using the balance sheet liability method. Deferred taxation liabilities are recognised for all taxable temporary differences and deferred taxation assets are
recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
Taxation is charged or credited to the revenue column of the Income Statement, except where it relates to items of a capital nature, in which case it is charged or credited to the capital column of the Income Statement. Where expenses are allocated between revenue and capital any tax relief in respect of the expenses is allocated between revenue and capital returns on the marginal basis using the Company’s effective rate of corporation tax for the accounting period. The Company is an approved
k) Dividend paid to shareholders – Dividends payable to equity shareholders are recognised when the Company’s obligation to make payment is established.
l) Investments – The portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment strategy, and information about the portfolio is provided on that basis to the Company’s Board of Directors. Under IFRS 9 investments are held at fair value through profit or loss, which is initially taken to be their cost, and is subsequently measured at bid or last traded prices, depending upon the convention of the exchange on which they are listed, where available, or otherwise at fair value based on published price quotations.
Investments which are not quoted, or are not frequently traded, are stated at the best estimate of fair value. The Manager’s Fair Value Committee (“FVC”), which is independent of the Portfolio Manager’s team, and with support from the external valuer and Fidelity’s unlisted investments specialist, provides recommended fair values to the Directors. These are based on the principles outlined in Note 2 (e). The unlisted investments are valued at fair value following a detailed review and appropriate challenge by the Directors of the pricing methodology
proposed by the FVC.
The techniques applied by the FVC when valuing the unlisted investments are predominantly market-based approaches. The market based approaches are set out below and are followed by an explanation of how they are applied to the Company’s unlisted portfolio:
· Multiples;
· Industry Valuation Benchmarks; and
· Available Market Prices.
The nature of the unlisted investment will influence the valuation technique applied. The valuation approach recognises that the price of a recent investment, if resulting from an orderly transaction, generally represents fair value as at the transaction date and may be an appropriate starting point for estimating fair value at subsequent measurement dates. However, consideration is given to the facts and circumstances as at the subsequent measurement date, including changes in the market or performance of the investee company. Milestone analysis and future cash flows are used where appropriate to incorporate the operational progress of the investee company into the valuation. Consideration is also given to the input received from the
The unlisted investments are valued according to a three month cycle of measurement dates. The fair value of the unlisted investments will be reviewed before the next scheduled three monthly measurement date on the following occasions:
· At the year end and half year end of the Company; and
· Where there is an indication of a change in fair value (commonly referred to as ‘trigger’ events).
In accordance with the AIC SORP, the Company includes transaction costs, incidental to the purchase or sale of investments within gains/(losses) on investments held at fair value through profit or loss in the capital column of the Income Statement and has disclosed them in Note 10 below.
m) Derivative instruments – When appropriate, permitted transactions in derivative instruments are used. Derivative transactions into which the Company may enter include CFDs, futures, options, warrants and forward currency contracts. Under IFRS 9 derivatives are classified at fair value through profit or loss – held for trading, and are initially accounted and measured at fair value on the date the derivative contract is entered into and subsequently measured at fair value as follows:
· CFDs – the difference between the strike price and the value of the underlying shares in the contract, calculated in accordance with accounting policy 2 (l);
· Futures – the difference between contract price and the quoted trade price; and
· Options – the quoted trade price for the contract.
Where such transactions are used to protect or enhance income, if the circumstances support this, the income derived is included in derivative income in the revenue column of the Income Statement. Where such transactions are used to protect or enhance capital, if the circumstances support this, the gains and losses derived are included in gains/(losses) on derivative instruments held at fair value through profit or loss in the capital column of the Income Statement. Any positions on such transactions open at the year end are reflected on the Balance Sheet at their fair value within current assets or current liabilities.
The Company obtains equivalent exposure to equities through the use of CFDs. All gains and losses in the fair value of the CFDs are included in gains/(losses) on derivative instruments held at fair value through profit or loss in the capital column of the Income Statement.
n) Amounts held at futures clearing houses and brokers – Cash deposits are held in segregated accounts on behalf of brokers as collateral against open derivative contracts. These are carried at amortised cost.
o) Other receivables – Other receivables include securities sold for future settlement, amounts receivable on settlement of derivatives, accrued income, taxation recoverable and other debtors and prepayments incurred in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business, if longer) they are classified as current assets. If not, they are presented as non-current assets. Other receivables are recognised initially at fair value and, where applicable, subsequently measured at amortised cost using the effective interest rate method and as reduced by appropriate allowance for estimated irrecoverable amounts.
p) Other payables – Other payables include securities purchased for future settlement, amounts payable on settlement of derivatives, investment management fees, amounts payable for repurchase of shares, finance costs payable and expenses accrued in the ordinary course of business. Other payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business, if longer). If not, they are presented as non-current liabilities. Other payables are recognised initially at fair value and, where applicable, subsequently measured at amortised cost using the effective interest rate method.
q) Other reserve
–The full cost of ordinary shares repurchased and held in
r) Capital reserve – The following are transferred to capital reserve:
· Gains and losses on the disposal of investments and derivatives instruments;
· Changes in the fair value of investments and derivative instruments, held at the year end;
· Foreign exchange gains and losses of a capital nature;
· Variable investment management fees;
· 75% of base investment management fees;
· 75% of finance costs;
· Dividends receivable which are capital in nature;
· Taxation charged or credited relating to items which are capital in nature; and
· Other expenses which are capital in nature.
Technical guidance issued by the
3. INCOME
Year ended Year ended
31 March 31 March
2025 2024
£’000 £’000
Investment income
Overseas dividends 46,590 26,052
Overseas scrip dividends 272 –
Interest on securities – 71
--------------- ---------------
46,862 26,123
========= =========
Derivative income
Dividends received on long CFDs 13,152 10,525
Interest received on CFDs 595 629
--------------- ---------------
13,747 11,154
========= =========
Other income
Interest received on collateral, bank deposits 2,090 1,659
and money market funds
--------------- ---------------
Total income 62,699 38,936
========= =========
Special dividends of £1,493,000 (2024: £1,458,000) have been recognised in capital.
4. INVESTMENT MANAGEMENT FEES
Year ended 31 March 2025 Year ended 31 March 2024
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Investment
management 2,648 7,942 10,590 2,430 7,289 9,719
fee – base
Investment
management – (1,834) (1,834) – 1,702 1,702
fee –
variable
Investment
management
fee – base
(waived in (179) (536) (715) – – –
respect of
ACIC
combination)
--------------- --------------- --------------- --------------- --------------- ---------------
2,469 5,572 8,041 2,430 8,991 11,421
========= ========= ========= ========= ========= =========
Since
The Manager agreed to a contribution of £715,000, representing eight months of management fees, in respect of the assets transferred by ACIC to the Company (in
In addition, there is a +/-0.20% variable fee based on the Company’s NAV per share performance relative to the Company’s Benchmark Index measured daily over a three year rolling basis.
Fees are payable monthly in arrears and are calculated on a daily basis. The base investment management fee has been allocated 75% to capital reserve in accordance with the Company’s accounting policies.
Further details of the terms of the Management Agreement are given in the Directors’ Report in the Annual Report.
5. OTHER EXPENSES
Year ended Year ended
31 March 31 March
2025 2024
£’000 £’000
Allocated to revenue:
AIC fees 22 21
Custody fees 45 101
Depositary fees 55 52
Directors’ expenses 89 79
Directors’ fees1 250 240
Legal and professional fees 104 143
Marketing expenses 327 269
Printing and publication expenses 52 39
Registrars’ fees 71 63
Other expenses 133 125
Fees payable to the Company’s Independent
Auditor for the audit of the Financial 63 71
Statements
--------------- ---------------
1,211 1,203
========= =========
Allocated to capital:
Legal and professional fees 32 35
--------------- ---------------
Other expenses 1,243 1,238
========= =========
1 Details of the breakdown of Directors’ fees are provided within the Directors’ Remuneration Report in the Annual Report.
6. Finance Costs
Year ended 31 March 2025 Year ended 31 March 2024
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Interest
paid on
bank loan 20 60 80 1,117 3,352 4,469
and
overdrafts
Interest
paid on 5,674 17,023 22,697 5,582 16,746 22,328
CFDs
Dividends
paid on 80 241 321 – – –
short CFDs
--------------- --------------- --------------- --------------- --------------- ---------------
5,774 17,324 23,098 6,699 20,098 26,797
========= ========= ========= ========= ========= =========
Finance costs have been allocated 75% to capital reserve in accordance with the Company’s accounting policies.
7. TAXATION
Year ended 31 March 2025 Year ended 31 March 2024
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
a)
Analysis
of the
taxation
charge
for the
year
Overseas 1,070 – 1,070 812 – 812
taxation
--------------- --------------- --------------- --------------- --------------- ---------------
Taxation
charge
for the 1,070 – 1,070 812 – 812
year
(see
Note 7b)
========= ========= ========= ========= ========= =========
b) Factors affecting the taxation charge for the year
The taxation charge for the year is lower than the standard rate of
Year ended 31 March 2025 Year ended 31 March 2024
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Profit/(loss)
before 53,245 285,837 339,082 28,604 (241,256) (212,652)
taxation
Profit/(loss)
before
taxation
multiplied by
the standard 13,311 71,459 84,770 7,151 (60,314) (53,163)
rate of UK
corporation
tax of 25%
(2024: 25%)
Effects of:
Capital
(gains)/losses – (77,191) (77,191) – 53,033 53,033
not taxable1
Income not (11,643) – (11,643) (6,406) – (6,406)
taxable
Expenses not – 4,316 4,316 – 4,604 4,604
deductible
Excess (1,668) 1,416 (252) (745) 2,677 1,932
expenses
Overseas 1,070 – 1,070 812 – 812
taxation
--------------- --------------- --------------- --------------- --------------- ---------------
Taxation
charge (Note 1,070 – 1,070 812 – 812
7a)
========= ========= ========= ========= ========= =========
1
The Company is exempt from
c)
Deferred taxation
A deferred tax asset of £39,263,000 (2024: £39,515,000), in respect of excess expenses of £157,052,000 (2024: £158,059,000) has not been recognised as it is unlikely that there will be sufficient future taxable profits to utilise these expenses.
8. Earnings/(Loss) per Ordinary Share
Year ended Year ended
31 March 31 March
2025 2024
Revenue earnings per ordinary share 10.18p 5.78p
Capital earnings/(loss) per ordinary share 55.75p (50.18p)
--------------- ---------------
Total earnings/(loss) per ordinary share 65.93p (44.40p)
========= =========
The earnings/(loss) per ordinary share is based on the profit/(loss) after taxation for the year divided by the weighted average number of ordinary shares held outside of
£’000 £’000
Revenue profit after taxation for the year 52,175 27,792
Capital earnings/(loss) after taxation for the 285,837 (241,256)
year
--------------- ---------------
Total profit/(loss) after taxation for the year 338,012 (213,464)
========= =========
Number Number
Weighted average number of ordinary shares held outside 512,652,970 480,806,725
of Treasury
========== ==========
9. Dividends Paid to Shareholders
Year ended Year ended
31 March 31 March
2025 2024
£’000 £’000
Dividend paid
Ordinary dividend of 6.40 pence per share paid 33,355 –
for the year ended 31 March 2024
Ordinary dividend of 6.25 pence per share paid – 30,198
for the year ended 31 March 2023
--------------- ---------------
33,355 30,198
========= =========
Dividend proposed
Special dividend proposed of 1.00 pence per 4,939 –
share for the year ended 31 March 2025
Ordinary dividend proposed of 8.00 pence per 39,509 –
share for the year ended 31 March 2025
Ordinary dividend proposed of 6.40 pence per – 33,471
share for the year ended 31 March 2024
--------------- ---------------
44,448 33,471
========= =========
The Directors have proposed the payment of a final ordinary dividend for the year ended
10. Investments at Fair Value through Profit or Loss
2025 2024
£’000 £’000
Total investments1 1,346,238 1,162,265
Opening book cost 1,398,894 1,514,572
Opening investment holding losses (236,629) (195,808)
Opening fair value of investments 1,162,265 1,318,764
--------------- ---------------
Movements in the year
Purchases at cost 648,076 586,707
Assets acquired in respect of the transaction – 120,754
with ACIC
Costs in respect to the transaction with ACIC 543 –
Sales – proceeds (714,521) (708,959)
Gains/(losses) on investments 249,875 (155,001)
--------------- ---------------
Closing fair value 1,346,238 1,162,265
--------------- ---------------
Closing book cost 1,354,515 1,398,894
Closing investment holding losses (8,277) (236,629)
--------------- ---------------
Closing fair value of investments 1,346,238 1,162,265
========= =========
1 The fair value hierarchy of the investments is shown in Note 17.
The Company received £714,521,000 (2024: £708,959,000) from investments sold in the year. The book cost of these investments when they were purchased was £692,455,000 (2024: £823,139,000). These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of the investments.
Investment transaction costs incurred in the acquisition and disposal of investments, which are included in the gains/(losses) on investments were as follows:
Year ended Year ended
31 March 31 March
2025 2024
£’000 £’000
Purchases transaction costs 773 720
Sales transaction costs 812 740
--------------- ---------------
1,585 1,460
========= =========
11. DERIVATIVE INSTRUMENTS
Year ended Year ended
31 March 31 March
2025 2024
£’000 £’000
Net change to gains/(losses) on derivative
instruments
Realised gains/(losses) on CFDs 130,822 (74,311)
Realised (losses)/gains on futures (65,414) 27,951
Realised gains/(losses) on options 1,765 (4,632)
Movement in investment holding losses on CFDs (13,424) (11,900)
Movement in investment holding gains on futures 3,366 6,382
Movement in investment holding gains on options 6 1,720
--------------- ---------------
57,121 (54,790)
========= =========
2025 2024
Fair value Fair value
£’000 £’000
Fair value of derivative instruments recognised
on the Balance Sheet1
Derivative instrument assets 9,938 7,103
Derivative instrument liabilities (24,838) (13,307)
--------------- ---------------
(14,900) (6,204)
========= =========
1 The fair value hierarchy of the derivative instruments is shown in Note 17.
2025 2024
Asset Asset
Fair value exposure Fair value exposure
£’000 £’000 £’000 £’000
At the year end
the Company held
the following
derivative
instruments
Long CFDs (19,358) 583,496 (4,483) 412,237
Short CFDs 205 18,813 (1,246) 14,766
Futures (hedging 2,891 (203,084) (475) (138,402)
exposure)
Call options 1,761 9,442 – –
Call options
(hedging (399) (8,967) – –
exposure)
--------------- --------------- --------------- ---------------
(14,900) 399,700 (6,204) 288,601
========= ========= ========= =========
12. OTHER RECEIVABLES
2025 2024
£’000 £’000
Securities sold for future settlement 3,926 5,957
Amounts receivable on settlement of derivatives 1,280 2,161
Accrued income 1,783 1,726
Taxation recoverable 11 12
Other receivables 295 210
--------------- ---------------
7,295 10,066
========= =========
13. OTHER PAYABLES
2025 2024
£’000 £’000
Securities purchased for future settlement 3,084 6,843
Amounts payable on settlement of derivatives 2,986 1,078
Investment management fees 1,023 678
Finance costs payable 830 610
Accrued expenses 359 414
Amounts payable for repurchase of shares for – 179
cancellation
--------------- ---------------
8,282 9,802
========= =========
14. SHARE CAPITAL
2025 2024
Nominal Nominal
Number of value Number of value
shares £’000 shares £’000
Issued,
allotted and
fully paid
Ordinary
shares of 1
pence each
held outside
of Treasury
Beginning of 525,681,434 5,258 488,325,628 4,884
the year
New ordinary
shares
issued in
respect of – – 59,005,997 590
the
transaction
with ACIC
Ordinary
shares
repurchased – – (2,900,696) (29)
into
Treasury
Ordinary
shares
repurchased (30,841,184) (308) (18,749,495) (187)
for
cancellation
----------------- ----------------- ----------------- -----------------
End of the 494,840,250 4,950 525,681,434 5,258
year
========== ========== ========== ==========
Ordinary
shares of 1
pence each
held in
Treasury1
Beginning of 85,629,548 855 82,728,852 826
the year
Ordinary
shares
repurchased – – 2,900,696 29
into
Treasury
----------------- ----------------- ----------------- -----------------
End of the 85,629,548 855 85,629,548 855
year
========== ========== ========== ==========
Total share 5,805 6,113
capital
========== ==========
1
The ordinary shares held in
During the year, the Company repurchased nil (2024: 2,900,696) ordinary shares and held them in
The Company also repurchased 30,841,184 (2024: 18,749,495) ordinary shares for cancellation. The cost of repurchasing these shares of £66,809,000 (2024: £38,968,000) was charged to the Other reserve.
15. CAPITAL AND RESERVES
Share Capital
Share premium redemption Other Capital Revenue Total
capital account reserve reserve reserve reserve equity
£’000 £’000 £’000 £’000 £’000 £’000 £’000
At 1 April 6,113 338,167 1,104 140,861 636,526 53,243 1,176,014
2024
Gains on
investments – – – – 249,875 – 249,875
(see Note
10)
Gains on
derivative
instruments – – – – 57,121 – 57,121
(see Note
11)
Foreign
exchange – – – – 1,769 – 1,769
gains
Investment
management – – – – (5,572) – (5,572)
fees (see
Note 4)
Other
expenses – – – – (32) – (32)
(see Note 5)
Finance
costs (see – – – – (17,324) – (17,324)
Note 6)
Revenue
profit after – – – – – 52,175 52,175
taxation for
the year
Dividend
paid to – – – – – (33,355) (33,355)
shareholders
(see Note 9)
Contribution
in respect
of the
transaction – 100 – – – – 100
with ACIC by
the Manager
(see Note 2
(a))
Costs
relating to
the ACIC
transaction
(inclusive – (160) – – – – (160)
of VAT
recovered)
(see Note 2
(a))
Repurchase
of ordinary
shares for (308) – 308 (66,809) – – (66,809)
cancellation
(see Note
14)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 March 5,805 338,107 1,412 74,052 922,363 72,063 1,413,802
2025
========= ========= ========= ========= ========= ========= =========
At 1 April 5,710 211,569 917 186,794 877,782 55,649 1,338,421
2023
Losses on
investments – – – – (155,001) – (155,001)
(see Note
10)
Losses on
derivative
instruments – – – – (54,790) – (54,790)
(see Note
11)
Foreign
exchange – – – – (3,858) – (3,858)
losses
Foreign
exchange – – – – 1,517 – 1,517
gains on
bank loan
Investment
management – – – – (8,991) – (8,991)
fees (see
Note 4)
Other
expenses – – – – (35) – (35)
(see Note 5)
Finance
costs (see – – – – (20,098) – (20,098)
Note 6)
Revenue
profit after – – – – – 27,792 27,792
taxation for
the year
Dividend
paid to – – – – – (30,198) (30,198)
shareholders
(see Note 9)
New ordinary
shares
issued in
respect of
the 590 126,198 – – – – 126,788
transaction
with ACIC
(see Note
14)
Contribution
in respect
of the
transaction – 400 – – – – 400
with ACIC by
the Manager
(see Note 2
(a))
Repurchase
of ordinary
shares into – – – (6,965) – – (6,965)
Treasury
(see Note
14)
Repurchase
of ordinary
shares for (187) – 187 (38,968) – – (38,968)
cancellation
(see Note
14)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 March 6,113 338,167 1,104 140,861 636,526 53,243 1,176,014
2024
========= ========= ========= ========= ========= ========= =========
The capital reserve balance at
16. Net Asset Value per Ordinary Share
The calculation of the net asset value per ordinary share is based on the net assets divided by the number of ordinary shares held outside of
2025 2024
Net assets £1,413,802,000 £1,176,014,000
Ordinary shares held outside of Treasury at year 494,840,250 525,681,434
end
Net asset value per ordinary share 285.71p 223.71p
========= =========
It is the Company’s policy that shares held in
17 Financial Instruments
Management of risk
The Company’s investing activities in pursuit of its investment objective involve certain inherent risks. The Board confirms that there is an ongoing process for identifying, evaluating and managing the risks faced by the Company. The Board with the assistance of the Investment Manager, has developed a risk matrix which, as part of the internal control process, identifies the risks that the Company faces. Risks are identified and graded in this process, together with steps taken in mitigation, and are updated and reviewed on an ongoing basis. Risks identified are shown in the Strategic Report above.
This Note is incorporated in accordance with IFRS 7: Financial Instruments: Disclosures and refers to the identification, measurement and management of risks potentially affecting the value of financial instruments.
The Company’s financial instruments may comprise:
· Equity shares (listed and unlisted), equity linked notes, convertible bonds and rights issues;
· Derivative instruments including CFDs, warrants, futures and options written or purchased on stocks and equity indices and forward currency contracts;
· Cash, liquid resources and short-term receivables and payables that arise from its operations; and
· Bank borrowings.
The risks identified by IFRS 7 arising from the Company’s financial instruments are market price risk (which comprises interest rate risk, foreign currency risk and other price risk), liquidity risk, counterparty risk, credit risk and derivative instrument risk. The Board reviews and agrees policies for managing each of these risks, which are summarised below. These policies are consistent with those followed last year.
Market price risk
Interest rate risk
The Company principally finances its operations through its share capital and reserves. In addition, the Company has gearing through the use of derivative instruments. The level of gearing is reviewed by the Board and the Portfolio Managers. The Company is exposed to a financial risk arising as a result of any increases in interest rates associated with the funding of the derivative instruments.
Interest rate risk exposure
The values of the Company’s financial instruments that are exposed to movements in interest rates are shown below:
2025 2024
£’000 £’000
Exposure to financial instruments that bear
interest
Long CFDs – exposure less fair value 602,854 416,720
Bank overdrafts – 12,758
---------------- ----------------
602,854 429,478
---------------- ----------------
Exposure to financial instruments that earn
interest
Short CFDs – exposure plus fair value 19,018 13,520
Amounts held at futures clearing houses and 33,760 24,589
brokers
Cash at bank 49,691 7,858
--------------- ----------------
102,469 45,967
========== ==========
Net exposure to financial instruments that 500,385 383,511
bear interest
========== ==========
Foreign currency risk
The Company’s profit/(loss) after taxation and its net assets can be affected by foreign exchange movements because the Company has income, assets and liabilities which are denominated in currencies other than the Company’s functional currency which is
Three principal areas have been identified where foreign currency risk could impact the Company:
· Movements in currency exchange rates affecting the value of investments;
· Movements in currency exchange rates affecting short-term timing differences, for example, between the date when an investment is bought or sold and the date when settlement of the transaction occurs; and
· Movements in currency exchange rates affecting income received.
Currency exposure of financial assets
The Company’s financial assets comprise of investments, long positions on derivative instruments, short-term debtors and cash at bank. The currency exposure profile of these financial assets is shown below:
Investments Asset
held at exposure of
fair value long
through derivative Other Cash 2025
profit or loss instruments1 receivables2 at bank Total
Currency £’000 £’000 £’000 £’000 £’000
Chinese 29,850 – – – 29,850
renminbi
Euro 15,468 – – – 15,468
Hong
Kong 873,075 127,296 5,850 2,731 1,008,952
dollar
Japanese – 13,585 1,084 – 14,669
yen
Taiwan 5,006 – – – 5,006
dollar
UK 12,725 – 295 – 13,020
sterling
US 410,114 240,006 33,826 46,960 730,906
dollar
--------------- --------------- --------------- --------------- ---------------
1,346,238 380,887 41,055 49,691 1,817,871
========= ========= ========= ========= =========
1 The asset exposure of long CFDs after the netting of hedging exposures.
2 Other receivables include amounts held at futures clearing houses and brokers.
Investments Asset
held at exposure of
fair value long
through derivative Other Cash 2024
profit or loss instruments1 receivables2 at bank Total
Currency £’000 £’000 £’000 £’000 £’000
Chinese 92,336 – – 1,372 93,708
renminbi
Euro 10,903 – – – 10,903
Hong
Kong 704,175 148,557 18,153 – 870,885
dollar
Japanese 5,787 22,134 125 341 28,387
yen
Taiwan 7,603 – 12 – 7,615
dollar
Thai 439 – – – 439
baht
UK 17,752 – 209 – 17,961
sterling
US 323,270 103,144 16,156 6,145 448,715
dollar
--------------- --------------- --------------- --------------- ---------------
1,162,265 273,835 34,655 7,858 1,478,613
========= ========= ========= ========= =========
1 The asset exposure of long CFDs after the netting of hedging exposures.
2 Other receivables include amounts held at futures clearing houses and brokers.
Currency exposure of financial liabilities
The Company finances its investment activities through its ordinary share capital and reserves. The Company’s financial liabilities comprise short positions on derivative instruments, other payables and bank overdrafts. The currency profile of these financial liabilities is shown below:
Asset
exposure of
short
derivative Other Bank 2025
instruments1 payables overdrafts Total
Currency £’000 £’000 £’000 £’000
Hong Kong dollar – 6,570 – 6,570
Japanese yen – 7 – 7
UK sterling – 1,382 – 1,382
US dollar 18,813 323 – 19,136
--------------- --------------- --------------- ---------------
18,813 8,282 – 27,095
========== ========== ========== ==========
Asset
exposure of
short
derivative Other Bank 2025
instruments1 payables overdrafts Total
Currency £’000 £’000 £’000 £’000
Hong Kong dollar – 5,994 12,744 18,738
UK sterling – 1,271 14 1,285
US dollar 14,766 2,537 – 17,303
--------------- --------------- --------------- ---------------
14,766 9,802 12,758 37,326
========== ========== ========== ==========
1 The asset exposure of short derivative instruments excluding hedging exposures.
Other price risk
Other price risk arises mainly from uncertainty about future prices of financial instruments. It represents the potential loss the Company might suffer through price movements in its investment positions. The Board meets quarterly to consider the asset allocation of the portfolio and the risk associated with particular industry sectors within the parameters of the investment objective.
The Investment Manager is responsible for actively monitoring the portfolio selected in accordance with the overall asset allocation parameters and seeks to ensure that individual stocks also meet an acceptable risk/reward profile. Other price risks arising from derivative positions, mainly due to the underlying exposures, are assessed by the Investment Manager’s specialist derivative instruments team.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulties in meeting obligations associated with financial liabilities. The Company’s assets mainly comprise readily realisable securities and derivative instruments which can be sold easily to meet funding commitments if necessary. Short-term flexibility is achieved by the use of a bank overdraft, if required.
Counterparty risk
Certain derivative instruments in which the Company may invest are not traded on an exchange but instead will be traded between counterparties based on contractual relationships, under the terms outlined in the International Swaps and Derivatives Association’s (“ISDA”) market standard derivative legal documentation. These are known as Over The Counter (“OTC”) trades. As a result, the Company is subject to the risk that a counterparty may not perform its obligations under the related contract. In accordance with the risk management process which the Investment Manager employs, this risk is minimised by only entering into transactions with counterparties which are believed to have an adequate credit rating at the time the transaction is entered into, by ensuring that formal legal agreements covering the terms of the contract are entered into in advance, and through adopting a counterparty risk framework which measures, monitors and manages counterparty risk by the use of internal and external credit agency ratings and evaluates derivative instrument credit risk exposure.
Collateral
2025 2024
collateral collateral collateral collateral
received pledged received pledged
£’000 £’000 £’000 £’000
Goldman Sachs
International – – 2,613 –
Ltd
HSBC Bank plc – 3,037 198 –
UBS AG – 23,770 – 15,689
J.P. Morgan
Securities – 6,953 – 5,186
plc
Morgan
Stanley & Co. 1,109 – – 3,714
International
Ltd
----------------- ----------------- ----------------- -----------------
1,109 33,760 2,811 24,589
========= ========= ========= =========
Offsetting
To mitigate counterparty risk for OTC derivative transactions, the ISDA legal documentation is in the form of a master agreement between the Company and the broker. This allows enforceable netting arrangements in the event of a default or termination event. Derivative instrument assets and liabilities that are subject to netting arrangements have not been offset in preparing the Balance Sheet.
The Company’s derivative instrument financial assets and liabilities recognised in the Balance Sheet and amounts that could be subject to netting in the event of a default or termination are shown below:
Related amounts not set off
Gross amount on balance sheet 2025
of recognised Net amount
financial of financial
liabilities assets
set off on presented on Margin
Gross the balance the balance account Net
amount sheet sheet Financial received as amount
Financial £’000 £’000 £’000 instruments collateral £’000
assets £’000 £’000
CFDs 5,286 – 5,286 (4,087) (1,109) 90
Options 1,761 – 1,761 – – 1,761
Futures
(exchange 2,891 – 2,891 – – 2,891
traded)
-------------- -------------- -------------- -------------- -------------- --------------
9,938 – 9,938 (4,087) (1,109) 4,742
========= ========= ========= ========= ========= =========
Related amounts not set off
Gross amount on balance sheet 2025
of recognised Net amount
financial of financial
assets liabilities
set off on presented on Margin
Gross the balance the balance account Net
amount sheet sheet Financial pledged as amount
Financial £’000 £’000 £’000 instruments collateral £’000
liabilities £’000 £’000
CFDs (24,439) – (24,439) 4,087 12,870 (7,482)
Options (399) – (399) – – (399)
-------------- -------------- -------------- -------------- -------------- --------------
(24,838) – (24,838) 4,087 12,870 (7,881)
========= ========= ========= ========= ========= =========
Related amounts not set off
Gross amount on balance sheet 2024
of recognised Net amount
financial of financial
liabilities assets
set off on presented on Margin
Gross the balance the balance account Net
amount sheet sheet Financial received as amount
Financial £’000 £’000 £’000 instruments collateral £’000
assets £’000 £’000
-------------- -------------- -------------- -------------- -------------- --------------
CFDs 7,103 – 7,103 (3,844) (2,389) 870
========= ========= ========= ========= ========= =========
Related amounts not set off
Gross amount on balance sheet 2024
of recognised Net amount
financial of financial
assets liabilities
set off on presented on Margin
Gross the balance the balance account Net
amount sheet sheet Financial pledged as amount
Financial £’000 £’000 £’000 instruments collateral £’000
liabilities £’000 £’000
CFDs (12,832) – (12,832) 3,844 8,900 (88)
Futures
(exchange (475) – (475) – 475 –
traded)
-------------- -------------- -------------- -------------- -------------- --------------
(13,307) – (13,307) 3,844 9,375 (88)
========= ========= ========= ========= ========= =========
Credit risk
Financial instruments may be adversely affected if any of the institutions with which money is deposited suffer insolvency or other financial difficulties. All transactions are carried out with brokers that have been approved by the Investment Manager and are settled on a delivery versus payment basis. Limits are set on the amount that may be due from any one broker and are kept under review by the Investment Manager. Exposure to credit risk arises on outstanding security transactions and derivative instrument contracts and cash at bank.
Derivative instrument risk
A Derivative Instrument Charter, including an appendix entitled Derivative Risk Measurement and Management, details the risks and risk management processes used by the Investment Manager. This Charter was approved by the Board and allows the use of derivative instruments for the following purposes:
· To gain exposure to equity markets, sectors or individual investments;
· To hedge equity market risk in the Company’s investments with the intention of mitigating losses in the events market falls;
· To enhance portfolio returns by writing call and put options; and
· To take short positions in equity markets, which would benefit from a fall in the relevant market price, where the Investment Manager believes the investment is overvalued. These positions distinguish themselves from other short exposures held for hedging purposes since they are expected to add risk to the portfolio.
The risk and investment performance of these instruments are managed by an experienced, specialist derivative team of the Investment Manager using portfolio risk assessment tools for portfolio construction.
RISK SENSITIVITY ANALYSIS
Interest rate risk sensitivity analysis
Based on the financial instruments held and interest rates at the Balance Sheet date, an increase of 1.00% in interest rates throughout the year, with all other variables held constant, would have decreased the net profit after taxation for the year and decreased the net assets of the Company by £5,004,000 (2024: increased the net loss after taxation and decreased the net assets by £3,835,000). A decrease of 1.00% in interest rates throughout the year would have had an equal but opposite effect.
Foreign currency risk sensitivity analysis
Based on the financial assets and liabilities held and currency exchange rates ruling at the Balance Sheet date, a strengthening of the
2025 2024
Currency £’000 £’000
Chinese renminbi 2,714 8,519
Euro 1,406 991
Hong Kong dollar 91,125 77,468
Japanese yen 1,333 2,581
Taiwan dollar 455 692
Thai baht – 40
US dollar 64,707 39,219
--------------- ---------------
161,740 129,510
========= =========
Based on the financial assets and liabilities held and the exchange rates ruling at the Balance Sheet date, a weakening of the
2025 2024
Currency £’000 £’000
Chinese renminbi 3,317 10,412
Euro 1,719 1,211
Hong Kong dollar 111,376 94,683
Japanese yen 1,629 3,154
Taiwan dollar 556 846
Thai baht – 49
US dollar 79,085 47,935
--------------- ---------------
197,682 158,290
========= =========
Other price risk sensitivity analysis
Changes in market prices affect the profit/(loss) after taxation for the year and the net assets of the Company. Details of how the Board sets risk parameters and performance objectives are disclosed in the Strategic Report above.
An increase of 10% in the share prices of the listed investments held at the Balance Sheet date would have increased the net profit after taxation for the year and increased the net assets of the Company by £121,019,000 (2024: decreased the net loss after taxation and increased the net assets by £100,526,000). A decrease of 10% in share prices of the investments designated at fair value through profit or loss would have had an equal but opposite effect.
An increase of 10% in the valuation of unlisted investments held at the Balance Sheet date would have increased the net profit after taxation for the year and increased the net assets of the Company by £13,604,000 (2024: decreased the net loss after taxation and increased the net assets by £15,701,000). A decrease of 10% in the valuation would have had an equal but opposite effect.
The sensitivity analysis below illustrates how the unobservable inputs used in the valuation methodologies of the unlisted assets impact the fair value as at
Significant unobservable inputs
Valuation Fair Key Other Sensitivity to
approach value unobservable unobservable changes in
£’000 inputs inputs Range significant
unobservable
inputs
If TEV/LTM
revenue
TEV/LTM multiple moved
revenue a,b,c,d 1.95x – 3.5x by +/-10%, the
multiple1 fair value
would change by
£1,535,000 and
-£1,534,000
If TEV/LTM
EBITDA multiple
TEV/LTM moved by
EBITDA a,b,c,d 7.25x – 8.25x +/-10%, the
multiple2 fair value
would change by
£931,000 and
-£954,000
If TEV/FY+1
revenue
TEV/FY+1 multiple moved
revenue a,b,c,d 1.55x – 3.25x by +/-10%, the
Market multiple3 fair value
approach using would change by
comparable £1,354,000 and
traded 72,128 -£1,377,000
multiples or
calibration If TEV/FY+1
factors EBITDA multiple
TEV/FY+1 moved by
EBITDA a,b,c,d 5.0x – 6.0x +/-10%, the
multiple4 fair value
would change by
£978,000 and
-£1,001,000
If P/E LTM
multiple moved
P/E LTM by +/-10%, the
multiple5 a,b,c,d 14.0x – 17.0x fair value
would change by
£435,000 and
-£435,000
If P/E FY+1
multiple moved
P/E FY+1 by +/-10%, the
multiple6 a,b,c,d 12.0x – 15.0x fair value
would change by
£185,000 and
-£185,000
If the market
factor of the
Selection of comparable
Sum of the comparable companies moved
partse 30,258 companies and c (10.0%) – 10.0% by +/-5% the
relevant fair value
indices would change by
£557,000 and
-£557,000
If the discount
Scenario rate moved by
analysis +/- 10% the
considering a 26,194 Discount rate c,d 16.5% – 17.5% fair value
range of exit would change by
scenariosf £353,000 and
-£353,000
Recent
transaction 62,469 n/a c n/a n/a
pricesg
1 Total enterprise value (TEV) divided by the last twelve months (LTM) revenue.
2 Total enterprise value (TEV) divided by the last twelve months (LTM) earnings before interest, taxes, depreciation and amortisation (EBITDA).
3 Total enterprise value (TEV) divided by the next twelve months forecasted revenue (FY+1).
4 Total enterprise value (TEV) divided by the next twelve months (FY+1) forecasted earnings before interest, taxes, depreciation and amortisation (EBITDA).
5 Share Price divided by the last twelve months (LTM) earnings per share.
6 Share Price divided by the next twelve months (FY+1) forecasted earnings per share.
The sensitivity analysis below illustrates how the unobservable inputs used in the valuation methodologies of the unlisted assets impact the fair value as at
Significant unobservable inputs
Valuation Fair Key Other Sensitivity to
approach value unobservable unobservable changes in
£’000 inputs inputs Range significant
unobservable
inputs
If TEV/LTM
revenue multiple
TEV/LTM moved by +/-10%,
revenue a,b,c,d 2.30x – 4.0x the fair value
multiple1 would change by
£1,021,000 and
-£1,021,000
If TEV/FY+1
revenue multiple
TEV/FY+1 moved by +/-10%,
EBITDA a,b,c,d 1.55x – 3.50x the fair value
multiple2 would change by
£963,000 and
-£963,000
If P/E LTM
Market approach multiple moved
using P/E LTM by +/-10%, the
comparable multiple3 a,b,c,d 19.0x – 21.0x fair value would
traded 98,298 change by
multiples or £229,000 and
calibration -£229,000
factors
If P/E FY+1
multiple moved
P/E LTM+1 by +/-10%, the
multiple4 a,b,c,d 17.0x – 19.0x fair value would
change by
£236,000 and
-£236,000
If market factor
of the
Selection of comparable
comparable (22.5%) – companies moved
companies and c (12.5%) by +/-5%, the
relevant fair value would
indices change by
£2,671,000 and
-£2,598,000
If the market
factor of the
Selection of comparable
Sum of the comparable companies moved
partse 25,602 companies and c n/a by +/-5% the
relevant fair value would
indices change by
£512,000 and
-£512,000
If the exit
multiples moved
Multiple at by +/-10% the
exit c,d 15.0x – 22.0x fair value would
change by
Scenario £789,000 and
analysis -£789,000
considering a 58,081
range of exit If the discount
scenariosf rate moved by
+/-10% the fair
Discount rate c,d 14.5% – 15.5% value would
change by
£668,000 and
-£701,000
Recent
transaction 67,529 n/a c n/a n/a
pricesg
1 Total enterprise value (TEV) divided by the last twelve months (LTM) revenue.
2 Total enterprise value (TEV) divided by the next twelve months forecasted revenue (FY+1).
3 Share Price divided by the last twelve months (LTM) earnings per share.
4 Share Price divided by the next twelve months (FY+1) forecasted earnings per share.
a. Selection of comparable companies
The fair value is determined by examining the market valuations of similar publicly traded firms. This approach involves identifying peer companies with similar industry characteristics, size, growth prospects, and financial metrics. Key valuation multiples such as Price-to-Earnings (P/E), Enterprise Value-to-EBITDA (TEV/EBITDA), and Enterprise Value-to-Sales (TEV/revenue) are calculated for each comparable company. These multiples are then applied to the target company’s corresponding financial figures to derive an estimated value range. The selection of comparable companies is evaluated at each valuation.
b. Selection of appropriate benchmarks
The fair value is influenced by the valuation of corresponding benchmarks. These benchmarks may include company indices or sector indices. The selection of appropriate benchmarks is assessed individually for each investment and updated regularly.
c. Selection of alternative valuation methodologies
Fair value is be determined using a variety of valuation methodologies, each suited to different types of investments and contexts. Common alternative approaches include the market approach, which estimates fair value based on market valuations of similar publicly traded companies, and the income approach, which estimates fair value based on the present value of expected future cash flows, utilizing discounted cash flow (DCF) models and estimated weighted average cost of capital (WACC) discount rates.
d. Estimate of sustainable earnings
The approach focuses on normalized earnings, either forecasted over the next 12 months or adjusted to reflect a sustainable, long-term level that smooths out cyclical fluctuations and one-time events. Analysts typically use forward-looking metrics such as projected net income or EBITDA, derived from management guidance, analyst forecasts, or historical trends. These earnings are then multiplied by a valuation multiple (e.g., P/E or EV/EBITDA) that reflects market expectations and industry norms. The chosen multiple may be based on comparable companies or historical averages. By focusing on earnings that are expected to persist over time, the approach aims to provide a more accurate and stable estimate of intrinsic value, especially in dynamic or transitional market environments.
e. Sum of the parts valuation
Sum of parts valuation (SOTP) determines the overall value of a company by assessing the individual worth of its various divisions or segments, particularly effective where a company is a conglomerate and has business units across multiple industries. The fair value of each business unit or segment is derived separately in accordance with the
f. Range of exit scenarios
Fair value is determined by modelling potential scenarios about how a company might be sold, or value might be realised. Analysts typically develop several plausible exit scenarios such as a strategic acquisition, initial public offering (IPO), management buyout, or liquidation each with its own assumptions about timing, valuation multiples, and transaction terms. For each scenario, the expected proceeds are estimated, often using projected financial metrics and applying relevant market-based multiples. These proceeds are then discounted back to present value using an appropriate discount rate to reflect the time value of money and risk. The final fair value is calculated as a probability-weighted average of the present values across all scenarios, incorporating both the likelihood and financial impact of each outcome.
g. Recent transaction price
A recent transaction price itself is observable and whilst it may be the most appropriate basis for a valuation, it often only represents one input and will be used alongside other unobservable inputs to determine the fair value of an asset.
Derivative instruments exposure sensitivity analysis
The Company invests in derivative instruments to gain or reduce exposure to the equity market. An increase of 10% in the share prices of the investments underlying the derivative instruments at the Balance Sheet date would have increased the net profit after taxation for the year and increased the net assets of the Company by £36,207,000 (2024: decreased the net loss after taxation and increased the net assets by £25,907,000). A decrease of 10% in share prices of the investments underlying the derivative instruments would have had an equal but
opposite effect.
Fair value of financial assets and liabilities
Financial assets and liabilities are stated in the Balance Sheet at values which are not materially different to their fair values. As explained in Notes 2 (l) and (m), investments and derivative instruments are shown at fair value. In the case of cash at bank, book value approximates to fair value due to the short maturity of the instruments.
Fair value hierarchy
The 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.
Classification Input
Level 1 Valued using quoted prices in active markets for identical assets
Valued by reference to inputs other than quoted prices included
Level 2 in level 1 that are observable (i.e. developed using market data)
for the asset or liability, either directly or indirectly
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 Notes 2 (e), (l) and (m). The table below sets out the Company’s fair value hierarchy:
2025
Financial assets Level 1 Level 2 Level 3 Total
at fair value £’000 £’000 £’000 £’000
through profit
or loss
Investments 1,210,194 – 136,044 1,346,238
Derivative
instrument 2,891 7,047 – 9,938
assets
--------------- --------------- --------------- ---------------
1,213,085 7,047 136,044 1,356,176
========= ========= ========= =========
Financial
liabilities at
fair value
through profit
or loss
Derivative
instrument – (24,838) – (24,838)
liabilities
========= ========= ========= =========
2024
Financial assets Level 1 Level 2 Level 3 Total
at fair value £’000 £’000 £’000 £’000
through profit
or loss
Investments 980,975 24,282 157,008 1,162,265
Derivative
instrument – 7,103 – 7,103
assets
--------------- --------------- --------------- ---------------
980,975 31,385 157,008 1,169,368
========= ========= ========= =========
Financial
liabilities at
fair value
through profit
or loss
Derivative
instrument (475) (12,832) – (13,307)
liabilities
========= ========= ========= =========
Level 3 investments (unlisted and delisted investments)
2025 2024
£’000 £’000
ByteDance 55,005 24,724
Venturous Holdings 30,258 25,602
Chime Biologics 26,194 27,312
DJI International 17,123 30,769
Fujian Yangteng Innovations 7,464 –
Pony.ai (moved to Level 1) – 42,805
Shanghai Yiguo – –
3 listed investments whose listings are
currently suspended (2024: 4 listed investments – 5,796
suspended)
--------------- ---------------
136,044 192,878
========= =========
ByteDance
ByteDance is a technology company that develops applications for smart phones and is an unlisted company. The valuation is based on the company’s financial performance, the macro-environment and benchmarking the position to a range of comparable market data. As of 31
Chime Biologics
Chime Biologics is a leading biologics
Fujian Yangteng Innovations
Fujian Yangteng Innovations is an online retailer for aftermarket auto parts and is an unlisted company. Given that this is a recent acquisition, the current valuation is based on cost and a full independent valuation will be completed in the next quarter. As of
Shanghai Yiguo
Shanghai Yiguo operates an e-commerce platform, selling fruit and vegetables online to customers in
Companies whose listings are suspended
Three listed companies in the portfolio have had their listing suspended:
Significant holdings
Details of significant holdings are noted below in accordance with the disclosure requirements of paragraph 82 of the AIC SORP. The Company is required to provide a list of all investments at the balance sheet date with a value greater than 5% of its portfolio and at least the ten largest investments, including the value of each investment and for unlisted investments included in the list, additional detail is required as shown below. This disclosure includes turnover, pre-tax profits and net assets attributable to investors, as reported within the most recently audited financial statements of the investee companies.
As at
2025 2024
Level 3 Level 3
Movements in level 3 investments during the year £’000 £’000
Level 3 investments at the beginning of the year 157,008 192,878
Purchases at cost – ByteDance and Fujian 20,251 –
Yangteng Innovations
Sales proceeds – DJI International D shares (14,410) (2,943)
Sales gain – DJI International D shares 960 615
Transfers into level 3 at cost – China – 17,316
Renaissance Holdings
Transfers out of level 3 at cost1 – China (42,208) (35,153)
Renaissance Holdings and Pony.ai
Unrealised profit/(loss) recognised in the 14,443 (15,705)
Income Statement
--------------- ---------------
Level 3 investments at the end of the year 136,044 157,008
========= =========
1 Financial instruments are transferred out of level 3 when they become listed. See above for more information.
18 Capital Resources and Gearing
The Company does not have any externally imposed capital requirements. The financial resources of the Company comprise its share capital, reserves and gearing, which are disclosed on the Balance Sheet. The Company is managed in accordance with its investment policy and in pursuit of its investment objective, both of which are detailed in the Annual Report. The principal risks and their management are disclosed in the Strategic Report above and in Note 17 above.
The Company’s gearing at the year end is set out below:
2025
Gross gearing Net gearing
Exposure Exposure
£’000 %1 £'000 %1
Investments 1,346,238 95.2 1,346,238 95.2
Long CFDs 583,496 41.3 583,496 41.3
Long options 9,442 0.7 9,442 0.7
--------------- --------------- --------------- ---------------
Total long
exposures before 1,939,176 137.2 1,939,176 137.2
hedges
========= ========= ========= =========
less: Hedged (203,084) (14.4) (203,084) (14.4)
Future Exposures
less: Hedged (8,967) (0.6) (8,967) (0.6)
Option Exposures
--------------- --------------- --------------- ---------------
Total long
exposures after 1,727,125 122.2 1,727,125 122.2
the netting of
hedges
========= ========= ========= =========
Short CFDs 18,813 1.3 (18,813) (1.3)
Gross Asset
Exposure/Net 1,745,938 123.5 1,708,312 120.9
Market Exposure*
--------------- --------------- --------------- ---------------
Net Assets 1,413,802 1,413,802
========= =========
Gearing2 23.5% 20.9%
========= =========
2024
Gross gearing Net gearing
Exposure Exposure
£’000 %1 P£'000 %1
Investments 1,162,265 98.8 1,162,265 98.8
Long CFDs 412,237 35.1 412,237 35.1
--------------- --------------- --------------- ---------------
Total long
exposures before 1,574,502 133.9 1,574,502 133.9
hedges
========= ========= ========= =========
less: short
derivative
instruments (138,402) (11.8) (138,402) (11.8)
hedging the
above
--------------- --------------- --------------- ---------------
Total long
exposures after 1,436,100 122.1 1,436,100 122.1
the netting of
hedges
========= ========= ========= =========
Short CFDs 14,766 1.3 (14,766) (1.3)
Gross Asset
Exposure/Net 1,450,866 123.4 1,421,334 120.8
Market Exposure*
--------------- --------------- --------------- ---------------
Net Assets 1,176,014 1,176,014
========= =========
Gearing2 23.4% 20.8%
========= =========
* Defined in the Glossary of Terms in the Annual Report.
1 Exposure to the market expressed as a percentage of Net Assets.
2 Gearing is the amount by which Gross Asset Exposure/net market exposure exceeds Net Assets expressed as a percentage of Net Assets.
19 Transactions with the Managers and Related Parties
Details of the current fee arrangements are given in the Directors’ Report in the Annual Report. During the year, management fees of £8,041,000 (2024: £11,421,000) were payable to Fidelity. At the Balance Sheet date, management fees of £1,023,000 (2024: £678,000) were accrued and included in other payables. Fidelity also provides the Company with marketing services. The total amount payable for these services was £327,000 (2024: £269,000). At the Balance Sheet date, marketing services of £47,000 (2024: £91,000) were accrued and included in other payables.
The Company has recognised an additional contribution from the Manager of £100,000 in respect of the transaction with ACIC.
Disclosures of the Directors’ interests in the shares of the Company and fees and taxable expenses, relating to reasonable travel expenses, payable to the Directors are given in the Directors’ Remuneration Report in the Annual Report. In addition to the fees and taxable expenses disclosed in the Directors’ Remuneration Report, £25,000 (2024: £23,000) of employers’
Alternative Performance Measures
The Company uses the following as Alternative Performance Measures which are all defined in the Glossary to the Annual Report which can be found in the Annual Report.
Discount/Premium
The discount/premium is the difference between the net asset value (“NAV”) per ordinary share of the Company and the ordinary share price and is expressed as a percentage of the NAV per ordinary share. Details of the Company’s discount are on the Financial Highlights page in the Annual Report.
Gearing
See Note 18 above for details of the Company’s gearing (both gross and net).
Net Asset Value (“NAV”) per Ordinary Share
See the Balance Sheet on and Note 16 above for further details.
Ongoing Charges Ratio
The ongoing charges ratio is considered to be an Alternative Performance Measure. It has been calculated in accordance with guidance issued by the AIC as the total of management fees and other expenses expressed as a percentage of the average net assets throughout the
year.
2025 2024
Investment management fees (£’000) 9,875 9,719
Other expenses (£’000) 1,243 1,238
--------------- ---------------
Ongoing charges (£’000) 11,118 10,957
--------------- ---------------
Variable management fees (£’000) (1,834) 1,702
--------------- ---------------
Ongoing charges ratio 0.89% 0.98%
--------------- ---------------
Ongoing charges ratio including variable 0.74% 1.13%
management fees
========= =========
Revenue, Capital and Total Earnings per Share
See the Income Statement and Note 8 above for further details.
Total Return Performance
The NAV per share total return includes reinvestment of the dividend in the NAV of the Company on the ex-dividend date. Share price total return includes the reinvestment of the net dividend in the month that the share price goes ex-dividend.
The tables below provide information relating to the NAV per share and share prices of the Company, the impact of the dividend reinvestments and the total returns for the years ended
Net asset
value per Share
2025 share price
31 March 2024 223.71p 201.00p
31 March 2025 285.71p 265.00p
Change in the year +27.7% +31.8%
Impact of dividend reinvestment +3.8% +4.0%
--------------- ---------------
Total return for the year +31.5% +35.8%
========= =========
Net asset
value per Share
2024 share price
31 March 2023 274.08p 247.50p
31 March 2024 223.71p 201.00p
Change in the year -18.4% -18.8%
Impact of dividend reinvestment +2.1% +2.4%
--------------- ---------------
Total return for the year -16.3% -16.4%
========= =========
The Annual Financial Report Announcement is not the Company's statutory accounts. The above results for the year ended
A copy of the Annual Report will shortly be submitted to the National Storage Mechanism and will be available for inspection at: www.morningstar.co.uk/uk/NSM
The Annual Report will be posted to shareholders later this month and additional copies will be available from the registered office of the Company and on the Company's website: www.fidelity.co.uk/japan where up to date information on the Company, including daily NAV and share prices, factsheets and other information can also be found.
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
