Fidelity China Special Situations Plc - Annual Financial Report
Annual Report for the year ended
FINANCIAL HIGHLIGHTS
-- During the year ended 31 March 2026 , the Company reported a Net Asset
Value (NAV) total return of +10.7% and share price total return of
+9.5%.
-- Over the same period, the benchmark index, the MSCI China Index,
returned +1.6%.
-- The Board of recommends a final ordinary dividend of 9.00 pence per
share, an increase of 12.5% from last year
-- Stock selection was the primary driver of performance over the year,
particularly in selected consumer discretionary, industrials and IT
sectors.
For further information, please contact:
Company Secretary
0207 961 4240
CHAIRMAN’S STATEMENT
I have pleasure in presenting the Annual Report of
While
In the reporting year to
China’s economy remains resilient
Despite the global trade headwinds, the Chinese economy performed well in 2025, meeting the government forecast of 5.0% GDP growth. Exports were particularly strong, leading to a record trade surplus of
The principal risk to the Chinese government’s GDP growth forecast of 4.5-5.0% in 2026 is the potential dampening of export demand as a result of the war in
Looking ahead, the Chinese Communist Party’s 15th Five-Year Plan, approved at the National People’s
Your portfolio in the financial year
The Q&A with Portfolio Manager
Dale continues to take advantage of the specific features of the closed-end investment company structure, including gearing the portfolio, the ability to hold short positions and to own unlisted companies without the liquidity constraints of an open-ended fund. After a busy year in the unquoted portfolio last year, just one new private investment – HashKey, a cryptocurrency exchange operator – was added during this year, although it is now part of the quoted portfolio, having debuted on the
The Board has confidence that the valuation process for our unlisted holdings is robust. They are assessed regularly by Fidelity’s dedicated Fair Value Committee (“FVC”), with advice from a third-party valuation specialist, as well as from Fidelity’s unlisted investment specialist in
Gearing
Your Board continues to believe that the judicious use of gearing 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 once again remained around 20% (net asset exposure) during the year, beginning at 20.9% and ending at 19.3%, reflecting Dale’s view that the Chinese equity market remains very attractively valued and offers many interesting investment opportunities. While historically gearing has been in a range of 10-25%, the Board views a figure of around 20% as being the upper end of the normal range. The impact of gearing using CFDs was slightly negative during the year in review, detracting 0.8% 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
The year under review has been another very strong one for the Company’s revenue return, underpinned by strong cash flows in our underlying companies and corporate governance reforms that are encouraging companies to pay more. As such, we are pleased to be able to deliver further growth in the ordinary dividend, building on last year’s 25.0% increase in the ordinary dividend by recommending a final dividend of
The dividend will be payable on
Discount management
While it is always our ambition that the share price should closely match the NAV, it is often the case that investment companies trade at a discount – indeed, at the time of writing, the average discount to NAV across the investment company sector was around 11.6%. Your Board’s policy is to aim for a discount in single figures in normal market conditions, and we pursue this actively by buying back shares in the market when supply exceeds demand. During the year, we repurchased 33,336,928 shares for cancellation (6.7% of the shares in issue (excluding treasury shares) at the start of the financial year) at a cost of just over £100 million. This was accretive to the NAV per share for continuing shareholders.
The share price began the year under review at a 7.3% discount to NAV and ended it at a discount of 8.5%. It is worth reiterating that the single-digit discount target is “in normal market conditions”, which the latter part of the review period arguably was not. Earlier I mentioned two significant external events during the year; each of these was accompanied by a widening of the discount: to just over 15% in the immediate aftermath of the Liberation Day tariff announcements, and to just over 13% in the first week of the war in
Your Board adjusts the repurchase of shares throughout the year depending on external factors and the level of the discount, and for substantial parts of the year there was very limited buyback activity. However, we have increased it during the
Ongoing Charges Ratio and Management Fee
The Ongoing Charges Ratio (the costs of running the Company) for the year was 0.92% (2025: 0.89%). The variable element of the management fee (due to outperformance of the Benchmark Index on a rolling three year basis) was a charge of 0.17% (2025: a credit of 0.15%). Therefore, the Ongoing Charges Ratio for the year, including this variable element, was 1.09% (2025: 0.74%).
Change of Auditor
In accordance with statutory requirements and FRC guidance on audit tenders, a competitive audit tender was conducted during the year as the Company’s previous auditor had been appointed for 10 years.
Following this process the Board appointed
Board of Directors
In
We are confident that your Company’s Board continues to have 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), marketing and oversight of investment companies.
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.
Articles of Association
The Board is proposing to increase the aggregate cap on Directors’ fees to provide greater flexibility for any future changes. The proposed new cap is £450,000 in aggregate per annum, which it is felt is in line with market practice, replacing the existing cap of £350,000 per annum which was put in place in 2021.
We have also taken the opportunity to make other changes of a minor, clarificatory or technical nature to the Articles, including clarifications in relation to hybrid general meetings to follow how practice has developed. However, the amendments do not provide for, and the Board has no intention to move to, fully virtual meetings. A full tracked version of all the changes proposed to the Articles is available at www.fidelity.co.uk/china . The principal changes proposed to the Articles are set out in more detail in the Directors’ Report in the Annual Report.
Annual General Meeting
The Company’s AGM will be at
Among the business of the day will be a vote on a change in the investment policy, which will give the Company the ability to hold up to 20% of the portfolio in a single stock (currently the limit is 15%). At the Company’s year end, the largest holding, Tencent, was 12.3% of net assets but 15.2% of the Benchmark; while there is no intention of materially increasing this at present, the current policy has the effect of prohibiting Dale from taking an overweight position in the stock, which would limit his ability to express a strongly positive view on Tencent or other large Chinese companies in the future. Further information on the policy change can be found in the Notice of AGM.
Outlook
In a world where global geopolitics dominates the news agenda,
The steady-as-it-goes approach by the Chinese government to its own economy and international relations are both positive factors for the outlook for investments in the world’s second largest economy. One reason exports have grown so much is the highly competitive industrial landscape – domestic competition is intense in certain sectors, which puts Chinese companies in a very strong position when they turn their ambitions to global markets. This has led to a degree of domestic deflation that the Chinese authorities are keen to reverse, by tackling over-production and irrational price wars. This should ultimately lead to better capital allocation, strengthen corporate balance sheets and drive consolidation, yet is unlikely to threaten China’s dominance in these areas of the global supply chain.
As well as a healthy industrial base, the Chinese government also wants an improving stock market, but not a return to boom and bust as seen in the past. Corporate governance reforms are encouraging companies to reward their minority shareholders through dividends and share buybacks, policies that have proved successful in other markets such as
Closer to home, your Board is proud of the Company’s record in utilising the strengths of the investment company structure to take advantage of the many opportunities in the Chinese market. The ability to boost returns through gearing, the unlisted portfolio, short positions, Dale’s long-term investment horizon, the strength of our dividend record and our undertaking of buybacks to enhance shareholder value have all added value over the medium and longer term. It has helped your Company to become one of the largest
Chairman
ANNUAL GENERAL MEETING – TUESDAY,
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 in Note 9 in the Notes to the Notice of Meeting in the Annual Report. 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/100-346-066-599 .
Please note that investors on platforms, such as Fidelity Personal Investing,
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 Company performed in the year to
ANSWER
Over the year to
The period was characterised by a tariffs shock at the beginning of 2025 and a tariffs truce in the later part of the year, a strong recovery supported by strong artificial intelligence (AI) related demand trends, followed by a more complex and volatile geopolitical environment into early 2026. Initial gains were driven by improving sentiment and renewed interest in innovation-led sectors, particularly following the launch of DeepSeek’s AI models. However, as we moved into 2026, technology-led strength gave way to a broad risk-off correction, as escalating geopolitical tensions in the
At the same time, while technological breakthroughs continued to support selected areas of the Chinese stock market and reinforced the long-term growth narrative, the near-term outlook for AI-related demand became more nuanced. Supply chain constraints, including memory shortages and energy-related disruptions, alongside margin pressure in downstream segments, have led to a more divergent performance at the sub-sector and company level. Investors became more selective, as greater scrutiny on earnings sustainability and broader macro expectations came back into focus in contrast to earlier broad-based AI-related optimism. This divergence is particularly evident in earnings expectations: while internet platforms and hyperscalers continue to invest heavily with limited near-term earnings contribution from AI, areas such as semiconductor and power-related equipment companies have been prime beneficiaries, with more meaningful upward revisions to earnings growth.
Domestically, consumer confidence remained subdued amid a gradual and uneven property market recovery. Household spending has yet to regain sustained momentum, despite elevated savings levels and some early signs of improving employment trends. Policy has remained supportive but targeted, with a clear emphasis on structural priorities such as industrial upgrading and quality growth by addressing excess competition across key sectors.
In this context stock selection remains key. The portfolio benefited from exposure to companies aligned with structural growth themes, particularly involving electrification, advanced manufacturing and selective areas of consumption. As market dispersion increased, a disciplined focus on fundamentals and competitive positioning proved increasingly important.
QUESTION
What positions were the biggest contributors and detractors this year, and what drove their performance?
ANSWER
Performance over the period was driven primarily by stock picking, with notable strength from selected consumer discretionary, industrials and information technology holdings.
Within consumer discretionary, the electric vehicle (EV) and autonomous driving segment had a really strong year. Both Hesai Group and Pony.ai were key contributors as profits were taken during the year, benefiting from rising investor confidence in next-generation mobility technologies. Hesai’s performance reflected its leadership in LiDAR (light detection and ranging, or laser radar), supported by strong momentum in ADAS (advanced driver assistance systems) adoption, improved shipment visibility, and emerging vertical opportunities in robotics. Pony.ai, a leading autonomous driving and robotaxi platform that we have owned at both private and public stages of its development, gained on continued execution in robotaxi deployment, including new operating approvals and partnerships, alongside improving unit economics as it scales—underpinning confidence in its path toward commercialisation and sustained growth.
The industrials sector was another key contributor. Preferred holdings across solar modules, batteries, inverters, and power electronics have captured the robust demand linked to AI data centre infrastructure and benefited from market leadership within the electrification value chain.
Ningbo Deye Technology, a leading solar inverter and energy storage system (ESS) maker, advanced on a significantly improved earnings trajectory, underpinned by a strong residential energy storage upcycle. A holding in the world’s largest EV battery maker CATL, also performed well, supported by strong EV and energy storage demand, rising utilisation, and the outlook for sustainable margins through scale and pricing power. Impro Precision Industries was another key contributor. This casting and machined components manufacturer advanced on resilient demand in higher-margin segments like high horsepower engines, early signs of recovery in more cyclical markets like hydraulic & agricultural equipment, and strong operational execution. More broadly, these positions reflect the portfolio’s focus on companies with strong competitive advantages and consequent pricing power, well placed to capture structural growth across electrification, energy storage, and industrial upgrading trends.
Relative performance also benefited from limited exposure to parts of the technology and internet sectors where increasing competition, margin pressure and relatively high valuations weighed on returns. This was particularly evident in our lack of exposure to Xiaomi, where the company’s performance was further impacted by slowing growth in its core handset business, reflecting intensifying competition and rising input costs, especially for memory components. Similarly, not holding Meituan and JD.com contributed positively, as sentiment across Chinese internet platforms remained weak due to subdued consumption trends, intensifying price wars in food delivery, and stricter value-added tax (VAT) enforcement.
Elsewhere in the IT sector, Zhongji Innolight was a notable contributor. As a leading supplier of optical interconnect solutions used in data centres, the company benefited from strong demand for high-speed optical modules driven by AI-related capacity expansion. Minimax, China’s first pure LLM (large language model) play listed globally, was also among the top contributors. We took profit from this holding after a strong performance post IPO.
By contrast, an underweight position in energy and financials, mainly SOE banks, detracted from relative performance. Escalating geopolitical conflict in the
Within industrials, our high-conviction positions in
QUESTION
How is the Company currently positioned across sectors, and where are you seeing the most attractive and “special” opportunities in
ANSWER
Our sector weightings are a reflection of bottom-up stock picking, the key inputs of which include growth potential, levels of returns generated, our evaluation of management, and valuation levels. This tends to lead us to sectors where we see strong underlying growth trends and improving competitive dynamics, combined with increasing competitiveness and attractive valuations. Over the period, we reduced exposure to financials, taking profits, and increased the allocation to areas where risk-reward appears more compelling, particularly within industrials and selective consumer segments.
Cutting edge industrials continue to represent the largest area of exposure for the Company. We believe the market underappreciates the global competitiveness and innovation capabilities of many Chinese industrial companies, particularly those moving up the value chain into higher-end manufacturing, automation and AI-related infrastructure. A key focus is the power and energy ecosystem underpinning the AI buildout. While attention is often centred on semiconductors and memory chips, constraints are increasingly emerging downstream. Over the long-term, we think rising geopolitical tensions are likely to reinforce the case for renewable energy sources and the materials that underpin the energy transition. China’s scale manufacturing base and integrated supply chains position its companies well to capture this demand. In this context, we initiated a position in Wuxi Lead, a leading global supplier of lithium battery equipment and key partner to major manufacturers such as CATL. The company is well positioned to benefit from the ongoing battery capex cycle, supported by demand from energy storage and continued electrification. Emerging solid-state battery technology also offers a medium-term growth opportunity, with higher equipment intensity expected to support both cyclical recovery and structural upgrading within the battery value chain.
We have also maintained a meaningful exposure to companies exposed to global EV and automation trends, as Chinese companies have achieved scale in supplying critical components and materials in those areas. Minth Group is a good example. Its strengths in aluminium and advanced plastics automotive parts, combined with a vertically integrated manufacturing model, position the company to serve both traditional and new energy vehicles, where demand for lighter battery and chassis structures is increasing. Its new business in robotics and AI liquid cooling is also showing great potential. Meanwhile, we trimmed positions in Pony.ai and Hesai Group, selling into strength to take some profit following their strong performance over the period, though both remain key holdings in the portfolio.
Within consumer-related sectors, positioning remains selective. The challenges facing these industries are well known, which has led to a sustained period of underperformance and given rise to some attractively valued opportunities. While overall consumer sentiment remains subdued, there are pockets of recovery from cyclical troughs. In staples, we have selectively added exposure to areas such as dairy and beer, where industry conditions are beginning to bottom out and competitive landscapes are improving after smaller players have exited the markets. We also initiated a position in low-cost hog raiser Muyuan Foods, since the industry, having gone through a severe downturn marked by low hog prices and increased feed costs, is starting to see signs of supply adjustment and market consolidation.
Aside from consumer companies showing potential for cyclical recovery, we also hold some consumer discretionary names who have maintained strong brands which capture consumer trends, alongside cost efficiencies that enable them to sustain growth in a challenging environment. We particularly see this playing out in sportswear and travel-related segments. Sportswear benefits from structural tailwinds, including rising participation and health awareness, and where brand can be a key competitive advantage. Travel expenditure also continues to grow as consumer trends move more towards experience-led consumption and improving mobility. Accordingly we see high-quality hotel chains along with value for money brands being able to capture this opportunity. Both areas remain underpenetrated versus more developed markets, offering attractive long-term growth potential.
Elsewhere, within Financials we purchased HashKey, the largest regulated crypto exchange in
Beyond the large sector exposures mentioned already, we remain overweight versus the index in healthcare, real estate and communication services, broadly neutral in IT and materials, and underweight in financials, mainly through an underweight in banks, where we see few opportunities in the large state-owned enterprises.
We outline our five largest holdings in the Annual Report.
QUESTION
How have recent signals from the Chinese government, including the latest Party Plenum and longer-term economic plans, influenced where you’re finding opportunities?
ANSWER
Recent policy signals, including the latest Party Plenum and the 15th Five-Year Plan (2026–2030), reinforce a broadly stable pro-growth policy stance and continued support for structural priorities such as innovation, industrial upgrading and quality growth. While the external environment remains uncertain, particularly around geopolitics and trade, the more constructive and pro-business tone from policymakers has helped position
At the macro level, the direction of travel remains one of gradual stabilisation rather than a sharp recovery. The GDP growth target was set at c.4.5–5%, slightly lower than in recent years, reflecting a shift towards more sustainable growth and risk control, supported by targeted fiscal measures and accommodative monetary policy. While overall consumption and economic activity remain relatively soft, we are starting to see signs of stabilisation in areas such as employment, wage growth and secondary property market activity in top-tier cities.
Consumption remains central to China’s long-term growth ambitions. In the near term, household spending continues to reflect cautious behaviour following a general economic slowdown and the property downturn. However, broadly speaking the consumer balance sheet is in good shape, as weaker spending has led to elevated savings levels and less debt. Policy direction continues to be supportive — the recent relaxation of homebuying restrictions in
Importantly, the opportunity set remains highly company specific. Even in a more challenging macro environment, we are seeing a growing number of businesses adapting effectively through cost discipline, improving operational efficiency, and product innovation. In many industries, market consolidation is accelerating, creating clearer differentiation between winners and laggards.
From a portfolio perspective, this reinforces our focus on bottom-up stock selection. We continue to find opportunities in companies with strong competitive positioning, clear growth drivers and the ability to navigate a more measured recovery environment.
QUESTION
Current geopolitical tensions are high, with conflicts in
ANSWER
The more relevant channels to monitor are indirect, including global supply chain disruption, inflationary pressures, and any spillover into consumer sentiment.
Over the medium-term, sustained higher energy prices and increased concerns over energy security could accelerate the global transition to renewable energy sources and electrification. With clear global leadership across EVs, batteries, energy storage systems and renewable supply chains, many Chinese companies stand to benefit.
Whilst the Company has no direct exposure to the energy majors, it does have a significant holding in areas of structural growth and competitiveness through CATL in the battery market. We also maintain selective exposure to areas such as gold within the materials sector, which should provide some diversification in periods of heightened geopolitical uncertainty. Some near-term margin pressure may emerge in areas exposed to higher energy and transportation costs, and positioning has been adjusted accordingly.
While the portfolio typically exhibits higher volatility than the benchmark, periods of broad-based market declines amid highlighted geopolitical risk can amplify short-term price movements. Overall, while the external environment has become more uncertain, we have not made material changes to positioning. A significant portion of the portfolio remains focused on companies with drivers less impacted by short-term geopolitical developments.
QUESTION
The Company can borrow in order to invest; how have you used this gearing over the year? Has it been beneficial to performance?
ANSWER
Our approach to gearing remains consistent, typically increasing net market exposure when valuations are more attractive and moderating when risk-reward conditions become less compelling. Over the period, the Company’s net market exposure averaged around 120%, with net gearing declining to 19.3% at the end of the year from 20.5% at the start. Gearing continued to be implemented primarily through CFDs, providing a flexible and cost-efficient way to adjust exposure as market conditions evolved.
In terms of impact, gearing by means of CFDs slightly pared overall gains during the 12-month period, detracting 0.8% from relative returns. This largely reflects the more volatile market backdrop. Nevertheless, we continue to view gearing as an important tool for enhancing long-term performance, particularly in markets such as
QUESTION
Many shareholders may have seen
ANSWER
The TikTok situation evolved because of sustained regulatory scrutiny — beginning with US pressure under the Trump administration in 2020 and intensifying through subsequent legislation requiring divestment of its US business or a potential ban — to a structured compromise. This culminated in a spin-off of the US operations into a separately controlled entity, allowing continued operation in the US, with
Despite the external headwinds,
We first invested in
The subsequent resolution of US regulatory concerns has removed a key obstacle to progress, and we continue to view the company as well positioned for growth, supported by strong underlying profitability, ongoing international expansion and increasing application of AI across its platforms. The case of
More broadly, the Hong Kong IPO market has evolved positively in recent years, with easing regulations and a more structured framework designed to attract Chinese companies for primary listings and dual listings. It is increasingly seen as a stable and well established venue for Chinese companies to access international capital. At the same time, the quality of the IPO pipeline has improved, with a greater proportion of companies coming to market with robust business models, stronger operating track records and more transparent disclosure.
This reflects a deeper structural shift rather than a short-term trend.
From a portfolio perspective, unlisted investments remain an important part of the Company’s opportunity set, allowing us to access high-quality businesses early in their growth journey. Our approach remains selective and valuation disciplined, with a focus on companies that demonstrate scalable growth potential, clear paths to monetisation and the potential to create long-term shareholder value.
QUESTION
How do you include corporate governance in your investment process, and how do you engage with companies to protect shareholder interests?
ANSWER
Corporate governance is central to our investment process and something we assess at the outset of investing and on an ongoing basis through proactive engagement with companies.
At a high level, we have seen clear progress in China’s governance framework in recent years. Many of the core building blocks are now in place, including updates to the Corporate Governance Code, a revised Company Law that strengthens shareholder participation, and higher expectations for boards and independent directors. The direction of travel is positive, with increasing emphasis on transparency, accountability and minority shareholder protection.
More importantly, the focus is now shifting from rules to implementation. We are seeing encouraging signs in areas such as stricter oversight of controlling shareholders, greater accountability for independent directors and improved disclosure standards. There is also growing emphasis on shareholder returns, including more consistent dividend policies and increased use of buybacks.
That said, governance in
This is where our approach is important. We engage regularly with companies on areas such as board structure, capital allocation, potential dual-listing, related-party transactions and executive remuneration, with a focus on improving alignment with minority shareholders.
For example, we have actively engaged with China Mengniu Dairy to strengthen capital allocation and shareholder returns, through higher dividend payouts and share buybacks. Over time, we have witnessed a meaningful increase in its payout. A similar shift has been observed in holdings such as Tsingtao Brewery, where improving capital return policies have supported shareholder returns. More broadly, rising distributions from underlying holdings in our portfolio have contributed to the Company’s own ordinary dividend growth of around 11% per annum over the past five years, reflecting a steady improvement in total shareholder returns.
In another case, we engaged with
Overall, while the framework continues to evolve, we believe governance standards in
QUESTION
How do you assess current valuations after a strong year?
ANSWER
Following a strong period of performance, it is important to consider the evolution of market sentiment. Twelve to eighteen months ago Chinese equities were trading at deeply depressed valuations amid concerns around the market’s “investability.” The recovery through 2025 was driven in part by multiple expansion, supported by a more constructive policy backdrop and increasing recognition of Chinese companies’ competitiveness.
As we move through 2026, the dynamic is shifting. Shareholder returns are increasingly supported by earnings rather than a further re-rating. As a result, sector dispersion remains elevated, with a widening gap between companies able to deliver sustainable growth and those facing structural or cyclical pressures.
Valuations remain a supportive backdrop. Despite the rebound, Chinese equities continue to trade at a meaningful discount to global peers. The MSCI China Index is currently trading at around 11.4x forward earnings, broadly in line with its long-term average, and at an approximate 43% discount to the S&P 500 on a forward P/E basis. Further improvements in fundamentals — ultimately coming through in more conviction around the earnings outlook — could help bolster investor confidence.
In an environment where sentiment can shift quickly, this reinforces the importance of a disciplined, bottom-up approach to stock selection, with a focus on companies capable of delivering resilient earnings and long-term value creation.
QUESTION
Finally, looking forward, what excites you most about
ANSWER
Looking ahead, the most compelling opportunity remains the ability to invest in high-quality companies operating in structurally growing industries, with durable competitive advantages and offering attractive valuations. Sentiment has improved from previously depressed levels, but the broader market backdrop is likely to remain volatile, particularly amid ongoing geopolitical uncertainty. Additional areas of opportunity are where valuations and sentiment remain at depressed levels, with the potential for the outlook to stabilise and gradually improve. Such sectors would tend to include consumer, property and some financials.
China’s ability to innovate remains a key source of long-term growth.
We are also seeing China’s competitive position strengthen across industrial and technology supply chains as companies move up the value chain into higher-end manufacturing, automation, robotics and markets driven by electrification. This progress is underpinned by scale, cost advantages and increasingly integrated capabilities, positioning Chinese firms well to capture a larger share of global demand. It is particularly evident in the energy transition arena, where rising geopolitical tensions and energy security concerns are reinforcing investment in renewables, energy storage and related materials.
In automation and next generation mobility, companies such as
We are also seeing attractive opportunities in consumer facing sectors, where leading brands such as
We see selective opportunities in frontier areas. For example, our investment in HashKey reflects both a core exchange business in a growing, regulated market in digital assets and longer-term optionality as
Overall, while macro uncertainty and market volatility are likely to persist, they also create opportunities for profitable investment over the medium-term. Periods of dislocation can lead to mispricing, particularly in markets where sentiment shifts quickly. Against this backdrop, our focus remains on identifying companies that are mispriced relative to their long-term earnings’ prospects. We believe this disciplined approach positions the portfolio well to deliver attractive long-term returns for our shareholders. As a shareholder in the Company, I remain excited about the Company’s future.
Portfolio Manager
STRATEGIC REPORT
PRINCIPAL RISKS AND UNCERTAINTIES AND RISK MANAGEMENT
As required by provisions 33 and 34 of the AIC 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 will implement the new requirement, under provision 34 of the AIC Code applicable for reporting periods from
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
Globally, climate change (large scale shift in the planet’s weather patterns and average temperatures) effects are already being experienced in the form of changing weather patterns. Extreme weather events can potentially impact the operations of investee and potential investee companies, their supply chains and their customers. Climate change continues to be an emerging risk. 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 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. There are currently a number of geopolitical factors that could mean greater stock market risks and heightened macro economic changes such as inflation, interest rates, currency fluctuations, energy costs and an increased regulatory environment.
Principal Risks Risk Description and Risk Mitigation Trend
Impact
-- Political, socio
economic and
cultural events,
trends and
developments may
have an adverse
effect on the
value of the
Company’s
investments and
the Manager’s
ability to access
markets freely.
-- China’s
relationships with
the US, Japan and
Europe continue to
generate bouts of
volatility.
Fragile truce with
the US holds but
the long-term
trajectory remains
one of strategic
competition in
technology, supply
chains and
security.
-- Imposition of
tariffs may have
an adverse impact
on US/China trade.
-- US legislation
may
disproportionately
target Chinese
issuers and could,
in a material
escalation
scenario, lead to
forced delisting -- The Board
of Chinese receives
American insights and
Depositary information,
Receipts, with including
companies without research
secondary listings notes, from
being the most the Manager
vulnerable. Forced and
delisting could independent
result in the sources on a
Company holding regular basis.
unplanned unlisted -- The portfolio
investments. is tilted to
-- Uncertainty from domestic
ongoing global Chinese
conflicts, most markets.
recently the -- Major adverse
conflict in the market events
Middle East, has are
elevated oil stress-tested
1. Geopolitical supply concerns for
Risk and price operational Increased
volatility. resilience and
-- Regional conflict financial
in the Pacific impact.
region remains a -- Regulatory
possibility. The and policy
ramifications, development is
including monitored by
potential military Fidelity,
conflict, could including any
have very serious relevant
economic and stock executive
market orders or
implications. sanctions.
Additionally, -- Whilst rule
sanctions could changes
lead to the barring
freezing of investment are
Chinese assets, unlikely, this
limiting or risk is
prohibiting the closely
Company’s ability monitored.
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”),
which allow
foreign investors
to gain exposure
to industries
where direct
foreign ownership
is prohibited.
There are
regulatory risks
in respect of VIEs
arising from US
first investment
policies as well
as from the China
Security
Regulatory
Commission
(“CSCR”)
requirements.
Whilst rule
changes barring
investment are
unlikely, such
rule changes could
require
significant
disinvestment by
the Company.
-- China’s GDP
growth is
moderating but -- Economic or
resilient, however market changes
it is weighed down are reviewed
by property sector at each Board
weakness and meeting.
consumer -- The
fragility. Investment
-- Whilst China’s Manager
outlook for oversees and
“controlled governs the
stabilisation” is risk profile
supported by of the
targeted policy portfolio.
measures, the -- The Board
property sector, receives and
although showing reviews
2. Market and signs of some reports from
Economic Risks stabilisation, is the Portfolio Stable
(including Currency a source of Manager on a
Risk) uncertainty. regular basis.
Growth in local -- It is not the
consumption is Company’s
expected, but US policy to
tariffs may impact hedge the
economic activity. underlying
-- The currency in currencies of
which the Company the holdings
reports its in the
results is portfolio, but
sterling and its rather the
ordinary shares Investment
trade in sterling, Manager takes
whilst the into
underlying consideration
investments are in currency risk
different when making
currencies. The investments.
Company does not
hedge currencies.
-- There is
increased activity
around mergers and
acquisitions
across the
investment company -- The Board,
marketplace and the Company’s
alternative Broker and the
investment Manager
offerings closely
(including passive monitor
vehicles) which industry
could influence activity, the
the demand for the peer group and
Company’s shares. the share
-- There is a risk register.
of costly -- An annual
shareholder review of
activism in the strategy is
investment company undertaken by
sector, pursuing the Board to
goals that may not ensure that
be in the the Company
interests of most continues to
shareholders. offer a
-- Changes in relevant
investor sentiment product to
towards China, investors.
3. Marketplace, market volatility -- The Company’s
Competition and and poor discount Stable
Discount Management performance could management
Risks lead to the policy is
Company trading at aimed at
a larger discount keeping the
to its underlying discount in
NAV, as due to the single digits
nature of during normal
investment market
companies, the conditions.
price of the -- Maintaining
Company’s shares close
and its discount communications
to NAV are factors with major
which are not shareholders.
totally within the -- If the
Company’s control. authority to
-- The Board may buy-back
fail to implement shares looked
its discount as if it could
management policy be exhausted,
effectively to shareholders
keep the level of would be asked
the discount in to approve a
single digits in renewal of the
normal conditions authority.
and in the face of
heavy selling
pressure, may
exhaust its
authorised buyback
facility.
• The Board and
Manager closely
monitor regulatory,
taxation and
legislative changes,
• Changes in with developments
legislation, taxation or impacting the Company
regulation, or other summarised in the form
external influence that of regular reporting
require changes to the to the Board.
investment trust structure
of the Company are a • The Manager
significant risk for the monitors Section 1158
Company. status to ensure any
4. Changes in issues are escalated
Legislation, • A breach of Section to the Board and
Taxation or 1158 of the Corporation addressed promptly. Stable
Regulation Tax Act 2010 could lead to
a loss of investment trust • The Manager
status resulting in the participates in
Company being subject to industry discussions
tax on capital gains. regarding regulatory
changes impacting
• There have been investment companies,
concerns about investment and regulatory
cost disclosures and their developments continue
impact on the industry. to be monitored and
managed by Fidelity
through active
lobbying and
negotiations as well
as a robust change
management process.
• Cybersecurity risk
from cyberattacks or • The Manager’s
threats to the functioning technology risk
of global markets and to management teams have
the Manager’s own business implemented a number
model, including its and of initiatives and
the Company’s outsourced controls to provide
suppliers. enhanced mitigating
protection and also to
• Risk of cybercrime address the risks of
such as phishing, remote AI.
access threats, extortion
and denial-of-services • Key performance
attacks from highly indicators and metrics
organised criminal have been developed by
networks and sophisticated the Manager to monitor
ransomware operators. the overall efficacy
of cybersecurity
• Whilst the use of processes and controls
artificial intelligence and to further enhance
(AI) presents many the Manager’s
5. Cybercrime and opportunities, it also cybersecurity strategy
Information presents risks, including and operational
Security Risks, business process resilience. Increased
including Business disruption risk as
Continuity Risk described below. • Fidelity has
Business Continuity
• Business process and Crisis Management
disruption risk from Frameworks in place to
continued threats of deal with business
cyberattacks, geopolitical disruption and assure
events, outages, fire operational
events and natural resilience.
disasters, resulting in
financial and/or • Third-party
reputational impact to the service providers are
Company affecting the subject to a
functioning of the risk-based programme
business. of risk oversight by
the Manager. Internal
• The Company relies on control reports of the
a number of third-party Registrar, Custodian
service providers, and Depositary are
principally the Registrar, received on an annual
Custodian and Depositary basis and any concerns
who may be subject to are investigated.
cybercrime.
• An investment
strategy overseen by
the Board to optimise
returns from investing
in China, as well as
oversight of gearing
and relevant limits.
• The Portfolio Manager
may fail to outperform the • Diversification of
Benchmark Index and peers investments through
over the longer-term. investment
6. Investment restrictions and
Performance Risk • High gearing levels in guidelines which are
(including Gearing a falling market monitored and reported Stable
Risk) accentuate share price upon by the Investment
weakness. NAV performance Manager.
can be affected by selling
stock in a falling market • A well-resourced
to keep the gearing level team of experienced
within pre-agreed limits. analysts covering the
market.
• Board scrutiny of
the Manager and the
ability in extreme
circumstances to
change the Manager.
• Fidelity’s
Operational Risk
Management Framework
is designed to
proactively prevent,
identify and manage
• Financial losses or operational risks
reputational damage from inherent in most
inadequate or failed activities.
7. Operational internal processes, people Stable
Risk and systems or from • Fidelity uses
external parties and robust systems and
events. procedures dedicated
to its operational
processes. Its risk
management structure
is designed according
to the FCA’s three
lines of defence
model.
• The Manager has
succession plans for
• Loss of the Portfolio key dependencies.
Manager or other key
8. Key Person Risk individuals could lead to • The depth of the Stable
potential performance team within Fidelity,
and/or operational issues. including the
experience of the
analysts covering
China.
• Valuations of unlisted
securities involve a • The Company has
higher degree of valuation set a limit on the
uncertainty and liquidity level of investments
risks than quoted in unlisted companies,
securities. and the Manager has a
track record of
• Valuations of unlisted identifying profitable
securities may be opportunities.
adversely affected by
market conditions, • The Board’s Audit
9. Unlisted government sanctions and and Risk Committee Stable
Securities Risk US trade tariffs. scrutinises the
carrying value of
• Initial public unlisted investments
offering (IPO) of the determined by the
unlisted companies may Manager, with input
face delays leading to from Fidelity’s
longer holding periods. analysts and unlisted
investments
• Potential for less specialist, and an
stringent standards of external third-party
governance compared with valuer.
those of listed entities.
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 36 of the AIC 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 which is included in the Directors’ Report in the Annual Report.
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 (“AGM”) 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, and considers the Manager’s ESG approach in this regard.
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 appointment of
• Proposing the increase of the single listed investment limit in the Investment Policy to 20% of Net Assets plus Borrowings. This amendment will be put forward for approval by shareholders at the Company’s Annual General Meeting;
•
Authorising the repurchase of 33,336,928 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 recommend the payment of a final dividend of
•
Following a competitive audit tender, and a recommendation from the
• Meeting the Company’s key shareholders during the reporting year; and
• The decision to once again hold a hybrid AGM this year in order to make the AGM more accessible and improve the shareholder experience.
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
STATEMENT OF COMPREHENSIVE INCOME
for the year ended
Year ended 31 March 2026 Year ended 31 March 2025
Revenue Capital Total Revenue Capital Total
Notes
£’000 £’000 £’000 £’000 £’000 £’000
Revenue
Investment 3 37,913 – 37,913 46,862 – 46,862
income
Derivative 3 14,509 – 14,509 13,747 – 13,747
income
Other 3 2,204 – 2,204 2,090 – 2,090
income
---------- ---------- ---------- ---------- ---------- ----------
Total 54,626 – 54,626 62,699 – 62,699
income
Gains on
investments
at fair
value 10 – 76,763 76,763 – 249,875 249,875
through
profit or
loss
Gains on
derivative 11 – 45,333 45,333 – 57,121 57,121
instruments
Foreign
exchange – 918 918 – 1,769 1,769
gains
---------- ---------- ---------- ---------- ---------- ----------
Total
income and 54,626 123,014 177,640 62,699 308,765 371,464
gains
====== ====== ====== ====== ====== ======
Expenses
Investment
management 4 (3,226) (12,308) (15,534) (2,469) (5,572) (8,041)
fees
Other 5 (1,280) (47) (1,327) (1,211) (32) (1,243)
expenses
---------- ---------- ---------- ---------- ---------- ----------
Profit
before
finance 50,120 110,659 160,779 59,019 303,161 362,180
costs and
taxation
Finance 6 (3,995) (15,980) (5,774) (17,324) (23,098)
costs (11,985)
---------- ---------- ---------- ---------- ---------- ----------
Profit
before 46,125 98,674 144,799 53,245 285,837 339,082
taxation
Taxation 7 (1,542) 610 (932) (1,070) – (1,070)
---------- ---------- ---------- ---------- ---------- ----------
Profit
after
taxation 44,583 99,284 143,867 52,175 285,837 338,012
for the
year
====== ====== ====== ====== ====== ======
Basic and
diluted
earnings 8 9.22p 20.53p 29.75p 10.18p 55.75p 65.93p
per
ordinary
share
====== ====== ====== ====== ====== ======
The Company does not have any income or expenses that are not included in the profit after taxation for the year. Accordingly, the profit 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 Statement of Comprehensive Income 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 and total comprehensive income is attributable to the equity shareholders of the Company. There are no minority interests.
No operations were acquired or discontinued during 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 Other Capital Revenue Total
premium redemption
Notes capital reserve reserve reserve equity
account reserve
£’000 £’000 £’000 £’000 £’000
£’000 £’000
Total
equity at 31 5,805 338,107 1,412 74,052 922,363 72,063 1,413,802
March 2025
Repurchase
of ordinary 14 (334) – 334 –
shares for (74,052) (26,476) (100,528)
cancellation
Profit after
taxation for – – – – 99,284 44,583 143,867
the year
Dividend
paid to 9 – – – – – (44,380) (44,380)
shareholders
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total
equity at 31 5,471 338,107 1,746 – 995,171 72,266 1,412,761
March 2026
====== ====== ====== ====== ====== ====== ======
Total
equity at 31 6,113 338,167 1,104 140,861 636,526 53,243 1,176,014
March 2024
Contribution
in respect
of the – 100 – – – – 100
transaction
with ACIC by
the Manager
Costs
relating to
the issuance
of new – (160) – – – – (160)
shares 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 5,805 338,107 1,412 74,052 922,363 72,063 1,413,802
March 2025
====== ====== ====== ====== ====== ====== ======
The Notes below form an integral part of these Financial Statements.
STATEMENT OF FINANCIAL POSITION
as at
Company number 7133583
31 March 31 March
Notes 2026 2025
£’000 £’000
Non-current assets
Investments at fair value through profit or 10 1,348,233 1,346,238
loss
Current assets
Derivative instruments 11 9,419 9,938
Amounts held at futures clearing houses and 38,879 33,760
brokers
Other receivables 12 11,160 7,295
Cash and cash equivalents 48,087 49,691
----------- -----------
107,545 100,684
Current liabilities
Derivative instruments 11 (33,754) (24,838)
Other payables 13 (9,263) (8,282)
(43,017) (33,120)
Net current assets 64,528 67,564
----------- -----------
Net assets 1,412,761 1,413,802
======= =======
Equity attributable to equity shareholders
Share capital 14 5,471 5,805
Share premium account 15 338,107 338,107
Capital redemption reserve 15 1,746 1,412
Other reserve 15 – 74,052
Capital reserve 15 995,171 922,363
Revenue reserve 15 72,266 72,063
----------- -----------
Total equity 1,412,761 1,413,802
======= =======
Net asset value per Ordinary Share 16 306.12p 285.71p
======= =======
The Financial Statements above and the notes below were approved by the Board of Directors on
Chairman
The Notes below form an integral part of these Financial Statements.
STATEMENT OF CASH FLOWS
for the year ended
Year ended Year ended
31 March 31 March
2026 2025
£’000 £’000
Operating activities
Cash inflow from investment income 36,587 45,209
Cash inflow from derivative income 14,719 14,002
Cash inflow from other income 2,204 2,090
Cash outflow from Directors’ fees (247) (249)
Cash outflow from other payments (16,033) (9,433)
Cash outflow from the purchase of investments (693,472) (651,563)
Cash outflow from the purchase of derivatives (7,371) (2,242)
Cash outflow from the settlement of derivatives (379,500) (436,471)
Cash inflow from the sale of investments 763,463 716,551
Cash inflow from the settlement of derivatives 441,299 507,321
Cash outflow from amounts held at futures clearing (5,119) (9,171)
houses and brokers
------------ ------------
Net cash inflow from operating activities before 156,530 176,044
servicing of finance
Financing activities
Cash outflow from overdraft interest paid (589) (80)
Cash outflow from CFD interest paid (15,188) (22,478)
Cash outflow from short CFD dividends paid (447) (321)
Cash outflow from the repurchase of ordinary shares (98,448) (66,988)
for cancellation
Cash outflow from dividends paid to shareholders (44,380) (33,355)
------------ ------------
Cash outflow from financing activities (159,052) (123,222)
Net (decrease)/increase in cash and cash (2,522) 52,822
equivalents
Cash and cash equivalents at the start of the year 49,691 7,858
Bank overdraft at the start of the year – (12,758)
Effect of foreign exchange movements 918 1,769
------------ ------------
Cash and cash equivalents at the end of the year 48,087 49,691
Represented by:
Cash at bank 4,648 4,432
Amount held in Fidelity Institutional Liquidity Fund 43,439 45,259
------------ ------------
48,087 49,691
====== =======
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
In preparing these Financial Statements the Directors have considered the impact of climate change risk as an emerging 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 Statement of Financial Position 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 30
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:
i) Amendments to the Classification and Measurement of Financial Instruments – Amendments to IFRS 9 and IFRS 7 (effective for annual periods beginning on or after 1 January 2026).
The
ii) IFRS 18 Presentation and Disclosure in Financial Statements (effective for annual periods beginning on or after 1 January 2027).
The IASB issued the new standard on presentation and disclosure in financial statements, which replaces IAS 1, with a focus on updates to the statement of comprehensive income.
The key new concepts introduced in IFRS 18 relate to:
• the structure of the statement of comprehensive income with defined subtotals;
• the requirement to determine the most useful structured summary for presenting expenses in the statement of comprehensive income;
• required disclosures in a single note within the financial statements for certain profit or loss performance measures that are reported outside an entity’s financial statements (that is, management-defined performance measures); and
• enhanced principles on aggregation and disaggregation which apply to the primary financial statements and notes in general.
The Company is currently still assessing the effect of the forthcoming standard and amendments.
No other new standards or amendments to standards are expected to have a material effect on the financial statements of the Company.
c) Segmental reporting – The Company is engaged in a single segment business and, therefore, no segmental reporting is provided.
d) Presentation of the Statement of Comprehensive Income – 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 Statement of Comprehensive Income between items of a revenue and capital nature has been prepared alongside the Statement of Comprehensive Income. 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)) 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 independent third-party 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 Statement of Financial Position 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 Statement of Comprehensive Income 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 Statement of Comprehensive Income. 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 Statement of Comprehensive Income. 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 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 Statement of Comprehensive Income, 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 Statement of Financial Position 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 Statement of Financial Position 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 Statement of Comprehensive Income, except where it relates to items of a capital nature, in which case it is charged or credited to the capital column of the Statement of Comprehensive Income. 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 independent third-party 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 on investments held at fair value through profit or loss in the capital column of the Statement of Comprehensive Income and has disclosed them in Note 10.
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 Statement of Comprehensive Income. Where such transactions are used to protect or enhance capital, if the circumstances support this, the gains and losses derived are included in gains on derivative instruments held at fair value through profit or loss in the capital column of the Statement of Comprehensive Income. Any positions on such transactions open at the year end are reflected on the Statement of Financial Position 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 on derivative instruments held at fair value through profit or loss in the capital column of the Statement of Comprehensive Income.
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 receivables 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;
• Costs associated with the repurchase of ordinary shares;
• 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
2026 2025
£’000 £’000
Investment income
Overseas dividends 37,425 46,590
Overseas scrip dividends 488 272
---------- ----------
37,913 46,862
Derivative income
Dividends received on long CFDs 14,154 13,152
Interest received on CFDs 355 595
---------- ----------
14,509 13,747
Other income
Interest received on collateral, bank deposits and money 2,204 2,090
market funds
---------- ----------
Total income 54,626 62,699
====== ======
No special dividends have been recognised in capital during the year (2025: £1,493,000).
4 Investment Management Fees
Year ended 31 March 2026 Year ended 31 March 2025
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Investment
management fee – 3,226 9,679 12,905 2,648 7,942 10,590
base
Investment
management fee – – 2,629 2,629 – (1,834) (1,834)
variable
Investment
management fee –
base (waived in – – – (179) (536) (715)
respect of ACIC
combination)
--------- --------- --------- --------- --------- ---------
3,226 12,308 15,534 2,469 5,572 8,041
===== ===== ===== ===== ===== =====
The base investment management fee is charged at an annual rate of 0.85% on the first £1.5 billion of Net Assets, reducing to 0.65% of Net Assets over £1.5 billion.
In the year to
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
2026 2025
£’000 £’000
Allocated to revenue:
AIC fees 29 22
Custody fees 58 45
Depositary fees 46 55
Directors’ expenses 66 89
Directors’ fees 1 287 250
Legal and professional fees 114 104
Marketing expenses 345 327
Printing and publication expenses 57 52
Registrars’ fees 76 71
Other expenses 133 133
Fees payable to the Company’s Independent Auditor for the 69 63
audit of the Financial Statements
--------- ---------
1,280 1,211
Allocated to capital:
Legal and professional fees 47 32
--------- ---------
Other expenses 1,327 1,243
===== =====
1 Details of the breakdown of Directors’ fees are provided within the Directors’ Remuneration Report in the Annual Report. Costs relating to the Directors’ national insurance and levies are included. In the prior year these costs were included in Other expenses.
6 Finance Costs
Year ended 31 March 2026 Year ended 31 March 2025
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Interest paid on
collateral and 147 442 589 20 60 80
overdrafts
Interest paid on 3,744 11,232 14,976 5,674 17,023 22,697
CFDs
Dividends paid on 104 311 415 80 241 321
short CFDs
-------- -------- -------- -------- -------- --------
3,995 11,985 15,980 5,774 17,324 23,098
===== ===== ===== ===== ===== =====
Finance costs have been allocated 75% to capital reserve in accordance with the Company’s accounting policies.
7 Taxation
Year ended 31 March 2026 Year ended 31 March 2025
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
a) Analysis of the
taxation charge for
the year
Prior year 209 (209) – – – –
adjustment
Notional tax charge 401 (401) – – – –
Overseas taxation 932 – 932 1,070 – 1,070
-------- -------- -------- -------- -------- --------
Taxation charge for
the year (see Note 1,542 (610) 932 1,070 – 1,070
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 2026 Year ended 31 March 2025
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Profit
before 46,125 98,674 144,799 53,245 285,837 339,082
taxation
Profit
before
taxation
multiplied
by the 11,531 24,669 36,200 13,311 71,459 84,770
standard
rate of UK
corporation
tax of 25%
(2025: 25%)
Effects of:
Capital
gains not – (30,754) (30,754) – (77,191) (77,191)
taxable 1
Income not (9,478) – (9,478) (11,643) – (11,643)
taxable
Expenses
not – 2,886 2,886 – 4,316 4,316
deductible
Prior year 209 (209) – – – –
adjustment
Notional 401 (401) – – – –
tax charge
Excess (2,053) 3,199 1,146 (1,668) 1,416 (252)
expenses
Overseas 932 – 932 1,070 – 1,070
taxation
---------- ---------- ---------- ---------- ---------- ----------
Taxation
charge 1,542 (610) 932 1,070 – 1,070
(Note 7a)
====== ====== ====== ====== ====== ======
1
The Company is exempt from
c) Deferred taxation
A deferred tax asset of £40,409,000 (2025: £39,263,000), in respect of excess expenses of £161,636,000 (2025: £157,052,000) has not been recognised as it is unlikely that there will be sufficient future taxable profits to utilise these expenses.
8 Basic and diluted earnings per ordinary share
Year ended Year ended
31 March 31 March
2026 2025
Revenue earnings per ordinary share 9.22p 10.18p
Capital earnings per ordinary share 20.53p 55.75p
---------- ----------
Total earnings per ordinary share 29.75p 65.93p
====== ======
The earnings per ordinary share is based on the profit 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 44,583 52,175
Capital profit after taxation for the year 99,284 285,837
---------- ----------
Total profit after taxation for the year 143,867 338,012
====== ======
Number Number
Weighted average number of ordinary shares held 483,522,161 512,652,970
outside of Treasury
====== ======
9 Dividends Paid to Shareholders
Year ended Year ended
31 March 31 March
2026 2025
£’000 £’000
Dividend paid
Ordinary dividend of 8.00 pence per share paid for the 39,449 –
year ended 31 March 2025
Special dividend of 1.00 pence per share paid for the 4,931 –
year ended 31 March 2025
Ordinary dividend of 6.40 pence per share paid for the – 33,355
year ended 31 March 2024
----------- -----------
44,380 33,355
====== ======
Dividend proposed
Ordinary dividend proposed of 9.00 pence per share for 41,254 –
the year ended 31 March 2026
Ordinary dividend proposed of 8.00 pence per share for – 39,509
the year ended 31 March 2025
Special dividend proposed of 1.00 pence per share for – 4,939
the year ended 31 March 2025
----------- -----------
41,254 44,448
====== ======
The Directors have proposed the payment of a final ordinary dividend for the year ended
10 Investments at Fair Value through Profit or Loss
2026 2025
£’000 £’000
Total investments 1 1,348,233 1,346,238
Opening book cost 1,354,515 1,398,894
Opening investment holding losses (8,277) (236,629)
-------------- --------------
Opening fair value of investments 1,346,238 1,162,265
Movements in the year
Purchases at cost 694,168 648,076
Costs in respect of the transaction with ACIC – 543
Sales – proceeds (768,936) (714,521)
Gains on investments 76,763 249,875
-------------- --------------
Closing fair value 1,348,233 1,346,238
-------------- --------------
Closing book cost 1,441,125 1,354,515
Closing investment holding losses (92,892) (8,277)
-------------- --------------
Closing fair value of investments 1,348,233 1,346,238
======== ========
1 The fair value hierarchy of the investments is shown in Note 17.
The Company received £768,936,000 (2025: £714,521,000) from investments sold in the year. The book cost of these investments when they were purchased was £607,558,000 (2025: £692,455,000). 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 on investments were as follows:
Year ended Year ended
31 March 31 March
2026 2025
£’000 £’000
Purchases transaction costs 1,527 773
Sales transaction costs 1,102 812
-------------- --------------
2,629 1,585
======== ========
11 Derivative Instruments
Year ended Year ended
31 March 31 March
2026 2025
£’000 £’000
Net changes to gains on derivative instruments
Realised gains on CFDs 60,529 130,822
Realised losses on futures (6,691) (65,414)
Realised gains on options 452 1,765
Movement in investment holding losses on CFDs (8,121) (13,424)
Movement in investment holding (losses)/gains on (626) 3,366
futures
Movement in investment holding (losses)/gains on (210) 6
options
-------------- --------------
45,333 57,121
======== ========
2026 2025
Fair value Fair value
£’000 £’000
Fair value of derivative instruments recognised
on the Statement of Financial Position 1
Derivative instrument assets 9,419 9,938
Derivative instrument liabilities (33,754) (24,838)
-------------- --------------
(24,335) (14,900)
======== ========
1 The fair value hierarchy of the derivative instruments is shown in Note 17.
2026 2025
Fair value Asset Fair value Asset
£’000 exposure £’000 exposure
£’000 £’000
At the year end the
Company held the
following derivative
instruments
Long CFDs (30,489) 560,076 (19,358) 583,496
Short CFDs 3,215 44,684 205 18,813
Futures (hedging 2,265 (189,185) 2,891 (203,084)
exposure)
Call options 944 12,066 1,761 9,442
Call options (hedging (132) (1,962) (399) (8,967)
exposure)
Put options (138) 1,937 – –
------------ ------------ ------------ ------------
(24,335) 427,616 (14,900) 399,700
======= ======= ======= =======
12 Other Receivables
2026 2025
£’000 £’000
Securities sold for future settlement 9,398 3,926
Amounts receivable on settlement of derivatives – 1,280
Accrued income 1,479 1,783
Taxation recoverable 11 11
Other receivables 272 295
------------ ------------
11,160 7,295
======= =======
13 Other Payables
2026 2025
£’000 £’000
Securities purchased for future settlement 3,293 3,084
Amounts payable on settlement of derivatives 1,367 2,986
Investment management fees 1,401 1,023
Finance costs payable 584 830
Accrued expenses 538 359
Amounts payable for repurchase of shares for 2,080 –
cancellation
------------ ------------
9,263 8,282
======= =======
14 Share Capital
2026 2025
Number of Nominal Number of Nominal
shares value shares value
£’000 £’000
Issued, allotted
and fully paid
Ordinary shares of
1 pence each held
outside of Treasury
Beginning of the 494,840,250 4,950 525,681,434 5,258
year
Ordinary shares
repurchased for (33,336,928) (334) (30,841,184) (308)
cancellation
------------------ ---------- ----------------- ----------
End of the year 461,503,322 4,616 494,840,250 4,950
Ordinary shares of
1 pence each held 85,629,548 855 85,629,548 855
in Treasury 1
---------- ----------
Total share 5,471 5,805
capital
====== =====
1 The ordinary shares held in treasury carry no rights to vote, to receive a dividend or to participate in a winding up of the Company.
During the year, the Company repurchased 33,336,928 (2025: 30,841,184) ordinary shares for cancellation. The cost of repurchasing these shares of £100,528,000 (2025: £66,809,000) was charged to the Other reserve and the Capital reserve.
Given the number of shares held in
15 Capital and Reserves
Share Capital
Share Other Revenue Total
premium redemption Capital
capital reserve reserve equity
account reserve reserve
£’000 £’000 £’000 £’000
£’000 £’000 £’000
At 1 April 5,805 338,107 1,412 74,052 922,363 72,063 1,413,802
2025
Gains on
investments – – – – 76,763 – 76,763
(see Note
10)
Gains on
derivative
instruments – – – – 45,333 – 45,333
(see Note
11)
Foreign
exchange – – – – 918 – 918
gains
Investment
management – – – – (12,308) – (12,308)
fees (see
Note 4)
Other
expenses – – – – (47) – (47)
(see Note 5)
Finance
costs (see – – – – (11,985) – (11,985)
Note 6)
Notional
taxation – – – – 610 – 610
transfer
Revenue
profit after – – – – – 44,583 44,583
taxation for
the year
Dividend
paid to – – – – – (44,380) (44,380)
shareholders
(see Note 9)
Repurchase
of ordinary
shares for (334) – 334 (74,052) (26,476) – (100,528)
cancellation
(see Note
14)
------------ ------------ ------------ ------------ ------------ ------------ ------------
At 31 March 5,471 338,107 1,746 – 995,171 72,266 1,412,761
2026
======= ======= ======= ======= ======= ======= =======
Share Capital
Share Other Revenue Total
premium redemption Capital
capital reserve reserve equity
account reserve reserve
£’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 – 100 – – – – 100
transaction
with ACIC by
the Manager
Costs
relating to
the ACIC
transaction – (160) – – – – (160)
(inclusive
of VAT
recovered)
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
======= ======= ======= ======= ======= ======= =======
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
2026 2025
Net assets £1,412,761,000 £1,413,802,000
Ordinary shares held outside of Treasury at year 461,503,322 494,840,250
end
Net asset value per ordinary share 306.12p 285.71p
========== ==========
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 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 Manager. The Company is exposed to a financial risk arising as a result of any increase in interest rates associated with the funding of 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:
2026 2025
£’000 £’000
Exposure to financial instruments that bear
interest
Long CFDs – exposure less fair value 590,565 602,854
------------ ------------
590,565 602,854
Exposure to financial instruments that earn
interest
Short CFDs – exposure plus fair value 47,899 19,018
Amounts held at futures clearing houses and brokers 38,879 33,760
Cash and cash equivalents 48,087 49,691
------------ ------------
134,865 102,469
Net exposure to financial instruments that bear 455,700 500,385
interest
======= =======
Foreign currency risk
The Company’s profit 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 and derivative instruments;
•
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 and cash equivalents. The currency exposure profile of these financial assets is shown below:
Investments Asset
Cash
held at exposure of 2026
Other and cash
fair value long
Currency receivables
through derivative 2 equivalents
3 Total
profit or instruments £’000
loss 1 £’000 £’000
£’000 £’000
Chinese 24,564 – – – 24,564
renminbi
Euro 13,294 – – – 13,294
Hong Kong 948,405 175,223 13,715 997 1,138,340
dollar
Japanese – 7,085 – 135 7,220
yen
Taiwan – – 11 – 11
dollar
UK 11,847 – 272 22 12,141
sterling
US dollar 350,123 200,624 36,041 46,933 633,721
------------- ------------- ------------- ------------- -------------
1,348,233 382,932 50,039 48,087 1,829,291
======= ======= ======= ======= =======
1 The asset exposure of long CFDs and options after the netting of hedging exposures.
2 Other receivables include amounts held at futures clearing houses and brokers.
3
Cash and cash equivalents are made up of £4,648,000 cash at bank and £43,439,000 is held in
Investments Asset
Cash 2025
held at exposure of
Other and cash
fair value long
Currency receivables 2 equivalents
through derivative 3 Total
£’000
profit or loss instruments 1 £’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 and options after the netting of hedging exposures.
2 Other receivables include amounts held at futures clearing houses and brokers.
3
Cash and cash equivalents are made up of £4,432,000 cash at bank and £45,259,000 is held in
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 and other payables. The currency profile of these financial liabilities is shown below:
Asset
2026
exposure of
Other
short
Currency payables
derivative Total
£’000
instruments 1 £’000
£’000
Hong Kong dollar 34,818 3,791 38,609
Japanese yen – 135 135
UK sterling – 4,020 4,020
US dollar 9,866 1,317 11,183
----------- ----------- -----------
44,684 9,263 53,947
====== ====== ======
Asset
2025
exposure of
Other
short
Currency payables
derivative Total
£’000
instruments 1 £’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
====== ====== ======
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
For OTC and exchange traded derivative transactions, collateral is used to reduce the risk of both parties to the contract. Collateral is managed on a daily basis for all relevant transactions and held in segregated collateral accounts. Collateral can be held by brokers on behalf of the Company to reduce the credit risk exposure of the Company or held by the Company on behalf of brokers to reduce the credit risk exposure of the brokers. All collateral received or pledged at reporting date is in cash. The value of collateral received from brokers and pledged to brokers is shown below:
2026 2025
Collateral Collateral Collateral Collateral
received pledged received pledged
£’000 £’000 £’000 £’000
Goldman Sachs International – 3,791 – –
Ltd
HSBC Bank plc – 6,139 – 3,037
UBS AG – 17,385 – 23,770
J.P. Morgan Securities plc – 6,688 – 6,953
Morgan Stanley & Co. – 4,876 1,109 –
International Ltd
----------- ----------- ----------- -----------
Total – 38,879 1,109 33,760
====== ====== ====== ======
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 Statement of Financial Position.
The Company’s derivative instrument financial assets and liabilities recognised in the Statement of Financial Position and amounts that could be subject to netting in the event of a default or termination are shown below:
Gross Net amount 2026
amount Related amounts not set
of off on the SoFP 1
of financial
recognised
Gross assets
financial Margin
Financial amount
assets liabilities presented Financial account Net
£’000 on
set off on instruments received amount
the SoFP as
the SoFP 1 £’000 collateral £’000
1
£’000 £’000
£’000
CFDs 6,210 – 6,210 (6,210) – –
Options 944 – 944 – – 944
Futures
(exchange 2,265 – 2,265 – – 2,265
traded)
---------- ---------- ---------- ---------- ---------- ----------
9,419 – 9,419 (6,210) – 3,209
======= ======= ======= ======= ======= =======
Gross
amount Net amount
of of
recognised financial
Gross
financial liabilities Related amounts not set 2026
Financial amount off on the SoFP 1
liabilities assets presented
£’000 on
set off on
the
the SoFP SoFP 1
1
£’000
£’000
Margin
Financial account Net
instruments pledged as amount
£’000 collateral £’000
£’000
CFDs – (33,484) 6,210 22,715 (4,559)
(33,484)
Options (270) – (270) – – (270)
---------- ---------- ---------- ---------- ---------- ----------
– (33,754) 6,210 22,715 (4,829)
(33,754)
======= ======= ======= ======= ======= =======
Gross 2025
amount Net amount Related amounts not set
off on the SoFP 1
of of
recognised financial
Gross
Financial financial assets Margin
assets amount Financial Net
liabilities presented account
£’000 on instruments amount
set off on received as
the SoFP 1 £’000 collateral £’000
the SoFP 1
£’000 £’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
======= ======= ======= ======= ======= =======
Gross Net amount 2025
amount Related amounts not set
of off on the SoFP 1
of financial
recognised
Gross liabilities Margin
Financial financial
liabilities amount presented Financial account Net
assets on
£’000 instruments pledged as amount
set off on the SoFP
1 £’000 collateral £’000
the SoFP 1
£’000 £’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)
======= ======= ======= ======= ======= =======
1 Statement of Financial Position.
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
The risks and risk management processes which result from the use of derivative instruments by the Investment Manager, are set out in a documented Risk Management Process Document. Derivative instruments are used by the Investment Manager 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 Statement of Financial Position 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 £4,557,000 (2025: decreased the net profit after taxation and decreased the net assets by £5,004,000). 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 Statement of Financial Position date, a strengthening of the
2026 2025
Currency
£’000 £’000
Chinese renminbi 2,233 2,714
Euro 1,209 1,406
Hong Kong dollar 99,976 91,125
Japanese yen 644 1,333
Taiwan dollar 1 455
US dollar 56,594 64,707
---------- ----------
160,657 161,740
====== ======
Based on the financial assets and liabilities held and the exchange rates ruling at the Statement of Financial Position date, a weakening of the
2026 2025
Currency
£’000 £’000
Chinese renminbi 2,729 3,317
Euro 1,477 1,719
Hong Kong dollar 122,192 111,376
Japanese yen 787 1,629
Taiwan dollar 1 556
US dollar 69,171 79,085
---------- ----------
196,357 197,682
====== ======
Other price risk sensitivity analysis
Changes in market prices affect the net profit 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 in the Annual Report.
An increase of 10% in the share prices of the listed investments held at the Statement of Financial Position date would have increased the net profit after taxation for the year and increased the net assets of the Company by £119,253,000 (2025: increased the net profit after taxation and increased the net assets by £121,019,000). 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 Statement of Financial Position date would have increased the net profit after taxation for the year and increased the net assets of the Company by £15,570,000 (2025: increased the net profit after taxation and increased the net assets by £13,604,000). 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
Sensitivity
to changes in
Fair Key Other
Valuation value unobservable unobservable Range significant
approach unobservable
£’000* inputs inputs inputs
If TEV/LTM
revenue
multiple moved
TEV/LTM by +/- 10%,
revenue a, b, c, d 1.95x - 3.5x the fair value
multiple 1 would change
by £1,688,000
and
-£1,668,000
If TEV/LTM
EBITDA
multiple moved
TEV/LTM EBITDA by +/- 10%,
multiple 2 a, b, c, d 7.25x - 8.25x the fair value
would change
by £1,478,000
and
-£1,513,000
Market If TEV/FY+1
approach revenue
using multiple moved
comparable 101,672 TEV/FY+1 by +/- 10%,
traded revenue a, b, c, d 1.55x - 3.25x the fair value
multiples or multiple 3 would change
calibration by £1,016,000
factors and
-£1,036,000
If TEV/FY+1
EBITDA
multiple moved
TEV/FY+1 by +/- 10%,
EBITDA a, b, c, d 5.0x - 6.0x the fair value
multiple 4 would change
by £1,570,000
and
-£1,605,000
If P/E LTM
multiple moved
by +/- 10%,
P/E LTM a, b, c, d 14.0x - 17.0x the fair value
multiple 5 would change
by £1,104,000
and
-£1,059,000
If the market
factor of the
Selection of comparable
comparable companies
Sum of the 26,636 companies and c (10.0%) - moved by +/-
parts e relevant 10.0% 5% the fair
indices value would
change by
£575,000 and
-£575,000
If the
Scenario discount rate
analysis moved by +/-
considering a 25,102 Discount rate c, d 16.5% - 17.5% 10% the fair
range of value would
exit change by
scenarios f £717,000 and
-£690,000
* An asset may be valued using multiple approaches therefore this column is not expected to represent the total of level 3 investments
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 Price to earnings (P/E) divided by the last twelve months (LTM) revenue.
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
Fair Key Other Sensitivity to
Valuation value unobservable unobservable changes in
approach significant
£’000* inputs inputs Range unobservable
inputs
If TEV/LTM
revenue
TEV/LTM multiple moved
revenue a, b, c, d 1.95x - 3.5x by +/- 10%, the
multiple 1 fair value
would change by
£1,535,000 and
-£1,534,000
If TEV/LTM
EBITDA multiple
moved by +/-
TEV/LTM EBITDA a, b, c, d 7.25x - 8.25x 10%, the fair
multiple 2 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 multiple 3 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 fair
multiple 4 value would
change by
£978,000 and
-£1,001,000
If P/E LTM
multiple moved
P/E LTM by +/- 10%,
multiple 5 a, b, c, d 14.0x - 17.0x the fair value
would change by
£435,000 and
-£435,000
If P/E FY+1
multiple moved
P/E FY+1 by +/- 10%,
multiple 6 a, b, c, d 12.0x - 15.0x the fair value
would change by
£185,000 and
-£185,000
If the market
factor of the
Selection of comparable
Sum of the comparable (10.0%) - companies moved
parts e 30,258 companies and c 10.0% by +/- 5% the
relevant fair value
indices would change by
£557,000 and
-£557,000
Scenario If the discount
analysis rate moved by
considering a +/- 10% the
range of 26,194 Discount rate c, d 16.5% - 17.5% fair value
exit scenarios would change by
f £353,000 and
-£353,000
Recent
transaction 62,469 n/a c n/a n/a
prices g
* An asset may be valued using multiple approaches therefore this column is not expected to represent the total of level 3 investments held at the end of the period.
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 Price to earnings (P/E) divided by the last twelve months (LTM) revenue.
6 Price to earnings (P/E) divided by the next twelve months forecasted revenue (FY+1).
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 (EV/EBITDA), and Price-to-Sales (P/S) 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
A benchmark-based valuation methodology estimates the fair value of a company by comparing its financial and operational metrics to a set of relevant industry or market benchmarks. These benchmarks may include sector averages, historical performance standards, or key financial ratios such as return on equity (ROE), profit margins, or revenue growth rates. 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 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 Statement of Financial Position date would have increased the profits after taxation for the year and increased the net assets of the Company by £33,825,000 (2025: increased the profit after taxation and increased the net assets by £36,207,000). 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 Statement of Financial Position 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:
2026
Financial assets at Level 1 Level 2 Level 3
fair value through Total
profit or loss £’000 £’000 £’000
£’000
Investments 1,192,531 – 155,702 1,348,233
Derivative 2,336 7,083 – 9,419
instrument assets
------------- ------------- ------------- -------------
1,194,867 7,083 155,702 1,357,652
------------- ------------- ------------- -------------
Financial
liabilities at fair
value through profit
or loss
Derivative
instrument – (33,754) – (33,754)
liabilities
======== ======== ======== ========
2025
Financial assets at Level 1 Level 2 Level 3
fair value through Total
profit or loss £’000 £’000 £’000
£’000
Investments 1,210,194 – 136,044 1,346,238
Derivative 2,891 7,047 – 9,938
instrument 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
======== ======== ======== ========
Level 3 investments (unlisted and delisted investments)
2026 2025
£’000 £’000
ByteDance 73,733 55,005
Venturous Holdings 27,036 30,258
Chime Biologics 25,480 26,194
DJI International 21,381 17,123
Fujian Yangteng Innovation 8,072 7,464
Shanghai Yiguo – –
3 listed investments whose listings are currently – –
suspended
------------- -------------
155,702 136,044
======== ========
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 Statement of Financial Position 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.
Income 2026
Turnover Pre-tax
recognised for the profits/losses Net assets/
Fair from the latest for the latest (liabilities)
Cost audited audited at the latest
Holdings value holding in financial financial
£’000 year audited
£’000 the year year balance
£’000 sheet date
£’000 £’000
£’000
ByteDance 19,775 73,732 Nil Information not publicly available
Venturous 23,701 27,036 Nil Information not publicly available
Holdings
Chime 25,227 25,479 Nil Information not publicly available
Biologics
====== ====== ======
Income 2025
Turnover Pre-tax
recognised for the Net assets/
from the latest profits/losses (liabilities)
Cost Fair value audited for the latest at the latest
Holdings holding in financial audited
£’000 £’000 financial audited
the year year year balance
sheet date
£’000 £’000 £’000
£’000
ByteDance 19,775 55,005 Nil Information not publicly available
Venturous 23,701 30,258 Nil Information not publicly available
Holdings
====== ====== ======
2026 2025
Movements in level 3 investments during the year Level 3 Level 3
£’000 £’000
Level 3 investments at the beginning of the year 136,044 157,008
Purchases at cost 25,686 20,251
Sales proceeds – (14,410)
Sales gain – 960
Transfers out of level 3 at cost 1 (25,686) (42,208)
Unrealised gain recognised in the Statement of 19,658 14,443
Comprehensive Income
------------ ------------
Level 3 investments at the end of the year 155,702 136,044
======= =======
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 Statement of Financial Position. The Company is managed in accordance with its investment policy and in pursuit of its investment objective, both of which are detailed in the Strategic Report in the Annual Report. The principal risks and their management are disclosed in the Strategic Report above and in Note 17.
The Company’s gearing at the year end is set out below:
2026
Gross gearing Net gearing
Exposure Exposure
% 1 % 1
£’000 £'000
Investments 1,348,233 95.4 1,348,233 95.4
Long CFDs 560,076 39.6 560,076 39.6
Long options 14,003 1.0 14,003 1.0
-------------- -------------- -------------- --------------
Total long
exposures before 1,922,312 136.0 1,922,312 136.0
hedges
Less: Hedged Future (189,185) (13.4) (189,185) (13.4)
Exposures
Less: Hedged Option (1,962) (0.1) (1,962) (0.1)
Exposures
-------------- -------------- -------------- --------------
Total long
exposures after the 1,731,165 122.5 1,731,165 122.5
netting of hedges
Short CFDs 44,684 3.2 (44,684) (3.2)
-------------- -------------- -------------- --------------
Gross Asset
Exposure/Net Market 1,775,849 125.7 1,686,481 119.3
Exposure*
-------------- -------------- -------------- --------------
Net Assets 1,412,761 1,412,761
======= ======
Gearing 2 25.7% 19.3%
======= =======
2025
Gross gearing Net gearing
Exposure Exposure
% 1 % 1
£’000 £'000
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 Future (203,084) (14.4) (203,084) (14.4)
Exposures
Less: Hedged Option (8,967) (0.6) (8,967) (0.6)
Exposures
-------------- -------------- -------------- --------------
Total long
exposures after the 1,727,125 122.2 1,727,125 122.2
netting of hedges
Short CFDs 18,813 1.3 (18,813) (1.3)
-------------- -------------- -------------- --------------
Gross Asset
Exposure/Net Market 1,745,938 123.5 1,708,312 120.9
Exposure*
-------------- -------------- -------------- --------------
Net Assets 1,413,802 1,413,802
======= ======
Gearing 2 23.5% 20.9%
======= =======
* 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, the following expenses were payable to Fidelity:
2026 2025
£’000 £’000
Management fees 15,534 8,041
Marketing services 345 327
====== ======
At the Statement of Financial Position date, the following balances payable to FII were accrued and included in other creditors:
2026 2025
£’000 £’000
Management fees 1,401 1,023
Marketing services 72 47
====== ======
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, 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 Statement of Financial Position 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.
2026 2025
Investment management fees (£’000) 12,905 9,875
Other expenses (£’000) 1,327 1,243
Ongoing charges (£’000) 14,232 11,118
Variable management fees (£’000) 2,629 (1,834)
Average net assets (£’000) 1,539,184 1,249,044
Ongoing charges ratio 0.92% 0.89%
Ongoing charges ratio including variable management fees 1.09% 0.74%
======= ========
Revenue, Capital and Total Earnings per Share
See the Statement of Financial Position 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
Share
2026 value per
price
share
31 March 2025 285.71p 265.00p
31 March 2026 306.12p 280.00p
Change in the year +7.1% +5.7%
Impact of dividend reinvestment +3.6% +3.8%
Total return for the year +10.7% +9.5%
======= =======
Net asset
Share
2025 value per
price
share
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%
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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: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
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/china 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.
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