Fidelity European Trust Plc - Annual Financial Report
Final Results for the year ended
Financial Highlights:
-- The Board of Fidelity European Trust PLC (the “Company”) recommends a
final dividend of 6.00 pence which together with the interim dividend
payment of 3.90 pence per share (totalling 9.90 pence ) represents an
increase of 8.8% over the total dividend of 9.10 pence paid in the prior
year.
-- During the year ended 31 December 2025 , the Company reported a net asset
value (NAV) total return of +16.2% and a share price total return of
+21.1%.
-- The Company’s Benchmark, the FTSE World Europe ex UK Index, rose by
27.9% over the same period.
-- Positive contributors to performance included financial holdings and
gearing.
-- The Portfolio Managers believe equities remain attractively valued
relative to US peers.
Contacts
For further information, please contact:
Company Secretary
01737 836347
Chairman’s Statement
This is my first Annual Report for the Company, having joined the Board of Directors in
2025 proved to be another busy year, not just on the world political stage and in European financial markets, but also for your Company given the combination with Henderson European Trust plc (“HET”), which completed in late September. The considerable benefits of the combination are set out below, but first I would like to extend a very warm welcome to former HET shareholders, who I hope will remain happy shareholders of this Company for many years to come.
While European stock market performance in 2024 was muted as a result of geopolitical and macroeconomic concerns, 2025 saw strong returns despite some of the previous year’s fears – notably, higher US trade tariffs – becoming reality. In a more fractious global environment,
Performance
For the year ended
Sam and Marcel give a detailed picture of the contributors to and detractors from performance in their Portfolio Managers’ Review below. In brief, however, some of the factors underlying the underperformance against the Benchmark Index include holding Danish pharmaceutical firm
Over the longer-term, performance remains consistent, averaging 10-13% per annum for both the NAV and share price total return over three, five and 10 years, since Sam’s appointment in 2011 and since the Company’s launch in 1991. We have also matched or outperformed the Benchmark Index return over 10 years, as well as beating the average return of the AIC Europe peer group over three, five and 10 years (and in NAV terms over one year).
Combination with Henderson European Trust plc
Following the resignation of HET’s portfolio managers in
The proposals for the combination were covered in detail in the Half Year Report for the six months ended
•
Increased scale:
Your company now has net assets of more than £2bn, placing it in the top 10 by assets of all equity investment companies. While this may seem to have limited relevance for individual shareholders, consolidation in the wealth management market – historically a key source of demand for investment trust shares – means investment companies now need significant scale to make it on to centralised buy lists, given the large sums at work and the need to maintain liquidity, which can be challenging for investors who account for a significant proportion of a company’s share register. As one of the larger companies in the
•
Lower management fees and ongoing charges:
Fidelity agreed, with effect from completion of the HET deal, a reduction in its tiered annual management fee to: 0.70% on net assets up to £400m, 0.65% on net assets from £400m to £1.4bn and 0.55% on net assets in excess of £1.4bn. This revised fee has resulted in a blended annual management fee rate of 0.62% based on net assets as at
• Enhanced discount management policy: The Board proposed an enhancement to the Company’s discount management policy with the aim of maintaining any share price discount to NAV in mid-single digits (previously below 10%) in normal market conditions. The steps taken to manage the discount are discussed in a separate section below.
•
Governance benefits:
As part of the combination, we welcomed two new Directors to the Board:
Dividends
Sustainable and growing dividends are a key feature your Portfolio Managers seek when analysing potential holdings for your Company’s portfolio. The Board has a policy whereby it seeks to deliver a progressive dividend in normal circumstances, paid twice yearly in order to smooth dividend payments for the reporting year. We understand that dividends are also important to our shareholders, which is why your Company has increased its annual payout for the past 14 years, placing it among the AIC’s ‘next generation of dividend heroes’ (investment companies with more than 10 but fewer than 20 consecutive years of annual dividend growth).
In the year under review, the Company’s revenue return was
Subject to approval by shareholders at the Annual General Meeting (“AGM”) on
Discount Management and Treasury Shares
The success of the enhanced discount management policy (see Combination with HET above) can be seen in the narrowing of the discount to NAV during the year, from 8.0% at the beginning of the year to 4.1% as at
During the year, a total of 9,286,723 shares were repurchased into
To assist in managing the discount, the Board has shareholder approval to hold ordinary shares repurchased by the Company in
Gearing
The Company continues to gear mainly through the use of derivative instruments, primarily contracts for difference (CFDs). However, as part of the combination with HET, the Company acquired a small amount of fixed gearing €35m at par value in the form of two very long-term private loan notes at a particularly attractive blended interest rate of only 1.57%. Having this element of structural gearing provides the Company with a degree of diversification in its counterparty risk, as well as potentially allowing Sam and Marcel to take a longer-term view on some of their geared positions.
The Portfolio Managers have flexibility to gear within the parameters set by the Board, the rationale being that over the longer-term carefully monitored levels of gearing will enhance returns from a rising market. The ability to do this is a key advantage of the investment company structure. As at
The Board monitors the level of gearing and the use of derivative instruments carefully and has defined a risk control framework for this purpose which is reviewed at each Board meeting. It should be emphasised that all gearing is subject to the Portfolio Managers’ confidence in identifying attractive investment opportunities, and to their remaining attractive.
Due diligence trip to
Towards the end of the reporting year, the Board had the opportunity to visit
Board of Directors
As mentioned above, I joined the Company’s Board in
Following the AGM at which Paul retires, the Board will reduce to six Directors and then become five following the 2027 AGM when Rutger and Fleur retire.
Annual General Meeting
The Company’s AGM will be held at
The AGM provides a great opportunity for shareholders to hear first-hand from your Portfolio Managers and to meet the Company’s Directors, and of course, for us to meet you. We hope to see as many of you as possible on the day. Full details of the AGM are below.
Outlook
After a year of strong performance, with markets having risen significantly, many investors in
Chairman
ANNUAL GENERAL MEETING – TUESDAY,
The AGM of the Company will be held at
For those shareholders who are unable 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. 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 Managers and we will answer as many of these as possible at an appropriate juncture during the meeting.
Further information and links to the Lumi platform may be found in Note 9 to 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://web.lumiagm.com .
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 Managers’ Review
Question
How has the Company performed over the year to
Answer
The Company delivered a positive double-digit return in absolute terms in 2025, but underperformed its Benchmark Index, the FTSE World Europe ex
This outcome partly reflects the Company’s investment approach, which means it can lag in strong, fast-moving ‘risk-on’ markets like we saw in 2025 following Germany’s fiscal stimulus announcement. Periods characterised by sharp, momentum-led or cyclical rallies, can act as a headwind for our portfolio that prioritises sustainable cash generation and downside resilience.
Question
What were the principal drivers of performance in 2025, and to what extent was this driven by stock selection versus geographic or sector allocation?
Answer
After sustained outflows for the asset class between 2022 and 2024, European equity funds recorded renewed inflows in 2025, as investors diversified away from a US market which had become highly concentrated on a number of expensive technology stocks. A weaker US dollar further enhanced the appeal of non-US assets.
The Company’s strategy is to be ‘benchmark-aware’, with relatively tight controls around sector exposures. As a result, we usually expect performance to be predominantly driven by stock selection rather than sector or geographic allocation, with relative returns largely determined by company-specific outcomes. In 2025, however, performance was influenced to some extent by the prevailing market environment, which favoured cyclical and value-oriented stocks following the announcement of fiscal stimulus in
European equity markets were characterised by sharp, value-led and cyclical rallies, with areas such as defence, peripheral banks and German cyclicals leading the market. The Company’s emphasis on quality businesses, sustainable dividend growth and downside resilience meant that it was underweight in many of these segments, and this acted as a drag on relative performance.
Limited exposure to defence stocks such as Rheinmetall detracted following announcements of increased European defence spending. In addition, holdings including health care company
Stocks in the financials’ sector, including Bankinter, ABN AMRO Bank, KBC Group, and Intesa Sanpaolo, were the top contributors to performance as they delivered strong earnings and re-rated amid rising European bond yields and German fiscal spending plans. However, not holding peripheral banks, including UniCredit, Banco Santander and BBVA, proved costly as were our investments in private equity holdings Partners Group Holding and 3i Group.
Below are the top five stock contributors and detractors to performance in the Company’s reporting year.
Top 5 Stock Contributors (on a relative basis) %
Bankinter +1.3
ABN AMRO Bank +1.2
KBC Group +0.7
Intesa Sanpaolo +0.7
ASML +0.6
=========
Top 5 Stock Detractors (on a relative basis) %Novo Nordisk -1.7 Symrise -1.3 Partners Group Holding -1.1 SAP -1.0 Dassault Systèmes -1.0 =========
Question
How was the combination with Henderson European Trust plc? What have been the key benefits for shareholders of the enlarged Company, and how smoothly was the integration of the portfolios and investment processes executed?
Answer
The combination with Henderson European Trust plc (“HET”), which became effective on
Following the combination,
The enlarged scale of the Company delivers clear shareholder benefits. A new tiered management fee structure and improved operating leverage have resulted in a material reduction in the ongoing charges ratio. Fidelity also made a significant contribution to the costs of the transaction, equivalent to a waiver of twelve months of management fees on the assets rolling over from HET, which is expected to fully offset the Company’s direct transaction costs. The Board has also enhanced the Company’s discount management policy, with the aim of maintaining the discount in mid-single digits in normal market conditions.
The integration of the portfolios and investment processes was executed smoothly and in an orderly manner, with assets aligned to the Company’s established investment framework and risk controls. The enlarged Company continues to operate with its existing capital structure, including its approach to gearing and loan notes, which remain subject to Board oversight and are described in the Financial Statements. The aggregate exposure of the Company to equities, including from borrowing and the use of derivatives, but excluding hedging, will not exceed 130% of total net assets (a gearing level of 30%). As part of the combination with HET, the Company now has unsecured borrowings of 1.53% Series A senior notes 2047 and 1.66% Series B senior notes 2052 of €25m and €10m, respectively.
Question
For new shareholders, could you outline your bottom-up stock selection approach, and how this process contributed to performance over the past year?
Answer
We employ a bottom-up, fundamentally driven investment approach. The focus is on identifying high-quality European companies with durable business models, strong balance sheets and the ability to generate sustainable, and growing, cash flows and dividends over time.
As active Portfolio Managers, we seek attractively valued companies that exhibit good long-term structural growth prospects and can grow dividends sustainably over the next three to five years. We look for four key characteristics: positive fundamentals (exemplified by structural growth prospects, a proven business model, and disciplined use of capital); the ability to generate cash; a strong balance sheet; and a compelling valuation.
We invest cautiously, looking to manage the strategy’s downside risk and build a balanced, fully invested portfolio that is benchmark aware. Turnover is low, reflecting the long-term approach. Risk is managed through diversification and disciplined position sizing.
This approach contributed to performance during the
year through bank holdings such as Bankinter, ABN AMRO
Bank, KBC Group, and Intesa Sanpaolo, which delivered strong earnings. French industrial group
Question
European equities performed strongly in 2025, despite ongoing macroeconomic and geopolitical uncertainty. How are you assessing the ability of the companies in the portfolio to deliver sustainable earnings and dividend growth into 2026 and beyond?
Answer
Although European equities delivered strong absolute and relative performance in 2025, we are conscious that this occurred alongside earnings downgrades, valuation expansion and persistent macroeconomic and geopolitical uncertainty. As we look into 2026 and beyond, our assessment of the ability of companies in the portfolio to deliver sustainable earnings and dividend growth is firmly rooted in bottom-up fundamentals rather than extrapolating recent market strength. We focus on balance sheet resilience, cash flow durability, returns on invested capital and the ability of companies to maintain or grow dividends across the cycle. Indeed, at the time of writing, the escalation in the
While not cheap in absolute terms, European equities still look attractive relative to US equities. Valuations across nearly all sectors trade at a discount to US peers, often beyond what differences in growth, margins or returns can justify. This is also the case if we compare valuations on an equal weighted basis to remove the skew to the Mag 7 (Mag 7 are the Magnificent Seven major technology companies that have driven significant stock market growth over the past decade. The seven companies are Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia and Tesla). The equal weight MSCI Europe Index forward price-earnings ratio trades at a 21.5% discount to the US, compared to a 25.7% discount on a market cap weighted basis. All European sectors, except communication services, trade at a forward price-earnings discount to their US counterparts on an equal weight basis. This creates an environment where expectations are low, and companies do not need especially bullish assumptions to deliver acceptable outcomes. In several sectors, including financials, health care, utilities and parts of industrials, European companies generate earnings and returns comparable to US peers, yet trade much cheaper, providing a meaningful margin of safety.
Within the portfolio, we continue to emphasise companies with strong free cash-flow generation and disciplined capital allocation, which supports sustainable dividends even when earnings growth is uneven. This is evident in holdings such as ASML, which can have cyclicality in its orders, but remains the world’s leading supplier of photolithography equipment used in semiconductor manufacturing. More broadly, the portfolio yield, in aggregate, is now close to the market yield, which historically has been a favourable indicator of positive long-term returns relative to the Benchmark Index, although it is no guarantee in terms of absolute returns.
Question
Looking back over the year, were there any material developments or outcomes that surprised you? If so, did these lead to changes in portfolio positioning or investment theses?
Answer
Through 2025, several developments were more surprising than initially expected. At a market level, the resilience of European equities stood out, particularly given ongoing geopolitical tensions, renewed US–EU trade frictions and political uncertainty across the region. Despite these headwinds, markets were supported by a soft economic landing, easing inflation,
At the stock level, there were some unexpected outcomes that prompted reassessment of individual investment theses. The extent of the setbacks at
Towards the end of the year, there was a brief slowdown in like-for-like sales at Action, the discount retailer owned by 3i Group, which was a surprise after a prolonged period of strong performance. However, the weakness was isolated to one geographic area over a one-month period, and other segments continued to report strong sales growth. As such, we are cautious to extrapolate this to a broader trend and remain constructive on the company.
In other areas, companies such as Symrise, Sika and Dassault Systèmes, were affected by cyclical weakness, cautious customer behaviour or softer guidance, which weighed on share prices. These developments did not result in wholesale changes to portfolio strategy, but they did lead to selective adjustments.
Where conviction in the long-term thesis weakened, positions were exited, including LVMH Moët Hennessy following a change in dividend policy and some management departures, as well as Sodexo and PUMA. Conversely, where near-term disappointment appeared to overshadow intact long-term fundamentals, we selectively added or maintained exposure, including in ASML, Dassault Systèmes and Symrise. Overall, surprises during the year reinforced the importance of disciplined stock selection and valuation awareness rather than prompting a change in investment philosophy.
Question
The dividend has increased for fourteen consecutive years, putting the Company on the AIC’s ‘next generation’ of dividend heroes. How do you look at dividends versus growth when making an investment decision?
Answer
When making investment decisions, dividends are considered within the context of a company’s overall cash-generation capability and financial strength, rather than as a standalone objective. The portfolio focuses on identifying attractively valued companies with strong long-term prospects for cash generation and dividend growth, supported by resilient business models and robust balance sheets. This reflects the belief that the ability to sustain and grow dividends over time is closely linked to the durability and quality of underlying earnings and cash flows.
The portfolio is constructed using a bottom-up approach, with investment decisions driven by company-specific fundamentals rather than short-term macroeconomic considerations. Growth opportunities are therefore assessed alongside capital discipline and balance-sheet resilience. Companies such as ASML illustrate this approach: despite having a low absolute dividend yield, the dividend has grown for many years thanks to a strong business model given a monopolistic position in Extreme Ultraviolet (EUV) lithography machines which are critical for making the most advanced semiconductors.
The Company’s record of fourteen consecutive years of dividend growth is a consequence of this disciplined focus on cash generation and financial strength, rather than pursuing high yields at the expense of long-term growth. This discipline has been a key contributor to our long-term record of income growth and total return, with the AIC also ranking the Company 13th overall, and the highest placed European strategy in its list of investment trusts that “would have made an ISA Millionaire”.
Question
How would you describe the outlook for continental
Answer
European equity markets have demonstrated resilience, supported by accommodative monetary policy, attractive relative valuations and a gradual improvement in investor sentiment. Looking ahead,
Investor expectations for earnings growth have increased, with markets anticipating an improvement driven by interest rate reductions, fiscal stimulus - particularly in
This macro view does not directly correlate with our assessment of individual companies. European companies are not simple proxies for the domestic economy, with roughly two-thirds of revenues generated outside the region. This global footprint has long been supportive, and any improvement in domestic European conditions could provide an additional source of upside. Our investment philosophy remains unchanged and is anchored in stock selection, a long-term perspective and capital preservation. The portfolio is balanced across sectors, with positioning driven by bottom-up opportunities rather than macro developments.
We continue to focus on attractively valued companies with good long-term prospects for cash generation and dividend growth. Defensive quality is not expensive on a relative basis, and the portfolio yield is close to the market yield. Higher rates and extreme factor rotations have weighed on many of the high-quality, stable-growing businesses we favour, bringing valuations closer to the market and creating opportunities. We have also made a measured increase in exposure to domestic European revenue streams, reflecting improved structural momentum around fiscal investment, integration and competitiveness reform, while remaining consistent with our bottom-up framework and valuation discipline.
Question
What is the advantage of investing in
Answer
The Company’s investment discipline provides resilience, in absolute terms, across different market environments. While this disciplined positioning, which is focused on sustainable dividend growth, can result in periods of relative underperformance when markets are more exuberant, it is designed to deliver more consistent long-term outcomes. The Company’s aim is to outperform its Benchmark Index by one to two percent per annum post fees over the long-term. This is supported by the breadth and depth of Fidelity’s research platform, which provides a consistent pipeline of high-quality investment ideas and enables the construction of a fully diversified portfolio across the market cycle. In addition, the Portfolio Managers bring deep experience, and Fidelity’s private ownership allows the firm to take a long-term view in maintaining organisational stability and supporting shareholders’ investment objectives.
Question
Looking ahead to 2026 and beyond, which sectors, themes or regions within
Answer
Looking ahead to 2026 and beyond, our optimism is selective rather than thematic or region wide. The greatest potential for long-term outperformance lies in areas where Europe’s valuation discount appears most disconnected from current fundamentals and where confidence can continue to rebuild without requiring a strong macro uplift.
Financials are a clear example. European banks are fundamentally stronger than at any point since the Global Financial Crisis, with significantly higher capital ratios, de-risked balance sheets, improved cost efficiency and structurally higher net interest income. Returns on tangible equity are now broadly in line with the wider market, and in some cases, comparable with US peers, yet valuations continue to reflect historical distrust. As confidence in the sustainability of these returns grows, financials offer meaningful upside through dividend, buybacks and potential valuation normalisation.
More broadly, we see opportunity in high-quality European companies with strong global franchises, pricing power and resilient cash flows, particularly where short-term cyclical weakness or sentiment has created attractive entry points. This includes selective industrials, software and health care names, where long-term structural drivers remain intact, but valuations have adjusted. The potential for
At the same time, we remain cautious on areas where valuations already discount optimistic assumptions around fiscal stimulus, rate cuts or easing trade tensions. Overall, we do not rely on a broad European re-rating to generate returns. Instead, we believe long-term outperformance will come from disciplined stock selection, exploiting valuation gaps created by entrenched pessimism and focusing on companies with durable business models, strong balance sheets and the ability to compound cash flows and dividends over time.
Portfolio Manager Portfolio Manager
Strategic Report
RISK FRAMEWORK
Principal Risks and Uncertainties and Risk Management
As required by provisions 28 and 29 of the 2024 UK Corporate Governance Code (“UK 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 29 of the 2024 UK Code for reporting periods from
The Board, with the assistance of the
Emerging Risks
The Audit Committee continues to identify emerging risks that may arise from existing risks or new situations and take any action necessary to mitigate their potential impact. The risks identified are placed on the Company’s risk matrix and graded appropriately. This process, together with the policies and procedures for the mitigation of existing and emerging risks, is updated and reviewed regularly in the form of comprehensive reports by the Audit Committee. The Board determines the nature and extent of any risks it is willing to take in order to achieve the Company’s strategic objectives.
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 a key principal as well as 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 shareholder returns.
The Board, together with the Manager, is also monitoring the emerging risks posed by the rapid advancement of artificial intelligence (“AI”) and technology and how it may threaten the Company’s activities and its potential impact on the portfolio and investee companies. AI can provide asset managers powerful tools, such as enhancing data analysis risk management, trading strategies, operational efficiency and client servicing, all of which can lead to better investment outcomes and more efficient operations. However, with these advances in computing power, 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.
Emerging Risks – Manager’s Role
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
Annual Review of the
The Company has a full risk register which includes less material risks which the Board reviews at least annually.
The Board considers the risks listed below as the principal risks and uncertainties faced by the Company.
1. Economic, Geopolitical and Market Risks
Trend: Increased
Description and Impact Mitigation
-- The Company and its assets may
be impacted by geopolitical,
economic and market related
risks associated with pursuing
an investment policy focused on
continental Europe . In
particular, the most recent
escalation in the Middle East -- The Company’s portfolio is made
has injected fresh volatility up mainly of listed securities.
into oil markets, to which The Portfolio Managers success
Europe is exposed given its or failure to protect and
dependence on imported energy increase the Company’s value
and the inflationary against the market, economic and
implications. In addition to political background is core to
the oil prices, natural gas and the Company’s continued success.
a variety of soft commodities Their investment philosophy of
and supply limitations have stock-picking and investing in
fuelled global inflation and attractively valued companies
economic instability, should outperform the Benchmark
specifically within Western Index over time.
nations. The war in Ukraine and -- The risk from the likely effects
the potential for Russian of unforeseen economic and
aggression (hybrid and kinetic) market events is somewhat
against European NATO members mitigated by the Company’s
remains in focus. Global trade investment trust structure which
and tariff wars continue, with means no forced sales need to
ongoing tensions between the US take place to deal with any
and EU and China and the EU. redemptions. Therefore,
Finally, local European investments can be held over a
sovereigns can be subject to longer time horizon.
sudden political upheaval. The -- The Board reviews market,
geopolitical risk and economic economic and political risks and
instability, including the legislative changes at each
macroeconomic uncertainty Board meeting. The Portfolio
continues to impact Western Managers provide an investment
investment appetite. review at each meeting which
-- Heightened tensions between the includes a review of the
U.S. and global trading economic and political
partners, particularly China , environment, and any risks and
continue to impact markets. The challenges faced by the Company.
US/China relationship is also -- The Board regularly reviews the
impacted by the dynamic of the impact of gearing and
balance between national derivatives and has comfort that
security and economic interests the portfolio is sufficiently
and could lead to higher diversified by sector and number
volatility, sanctions for of holdings.
broader markets, technology and -- Risks to which the Company is
oil in particular, as well as exposed to in the market and
risk of changes in foreign currency risk category are
policies across the globe. included in Note 18 to the
-- China’s outlook for ‘controlled Financial Statements below
stabilisation’ remains intact, together with summaries of the
supported by targeted policy policies for managing these
measures. China’s growth risks. It is the Company’s
stabilisation is more credible policy not to hedge the
post-deal (i.e. the underlying currencies of the
government’s commitment to holdings in the portfolio but
implementing strategic economic rather to take the currency risk
measures to achieve steady into consideration when making
growth and economic investment decisions.
resilience), and the agreement
with the U.S. reduces pressure
on China to deliver new fiscal
easing. Exports and industrial
activities continue to
outperform despite the slower
than expected recovery in
domestic demand.
2. Investment Performance Risk (including Gearing Risk)
Trend: Increased
Description and Impact Mitigation
-- The Portfolio Managers are
-- The risk of underperformance responsible for actively
for a sustained period against monitoring the portfolio
the Benchmark Index or peer selected in accordance with the
group. The achievement of the asset allocation parameters and
Company’s investment seeks to ensure that individual
performance objective relative stocks meet an acceptable
to the market requires the risk/reward profile.
taking of risk, such as -- The Board reviews Fidelity’s
investment strategy, asset compliance with agreed
allocation and stock selection, investment restrictions;
and may lead to NAV and share investment performance and risk;
price underperformance compared relative performance; the
to the Benchmark Index and/or portfolio’s risk profile; and
peer group companies. whether appropriate strategies
-- The Board relies on the are employed to mitigate any
Portfolio Managers skills and negative impact of substantial
judgement to make investment changes in the markets. The
decisions based on research and Board also regularly canvasses
analysis of individual stocks major shareholders for their
and sectors and there is a risk views with respect to company
of volatility of performance in matters.
the short-term. Continued -- The Board has put in place
underperformance could lead to policies and limits to control
the Company and its objective the Company’s use of derivatives
becoming unattractive to and exposures. These are
investors. monitored daily by the Manager’s
-- Derivative instruments are used Compliance team and regular
to enhance investment returns. reports are provided to the
The principal risk is that the Board. Further detail on
Portfolio Managers fails to use derivative instruments risk is
gearing effectively, resulting included in Note 18 to the
in a failure to outperform in a Financial Statements below.
rising market or to -- The Board regularly considers
underperform in a falling the level of gearing and gearing
market. The Company gears using risk. The Investment Policy sets
derivatives and bank loans. the gearing limits within which
the Manager must operate.
3. Cybercrime and Information Security Risks
Trend: Increased
Description and Impact Mitigation
-- There is cybersecurity risk
from cyberattacks or threats to
the functioning of global -- The risk is monitored by the
markets and to the Manager’s Board with the help of the
own business model, including Manager’s global cybersecurity
its and the Company’s team and their extensive
outsourced suppliers. The Strategic Cyber and Information
external threat level has Security programme and
shifted with a number of UK assurances from outsourced
companies successfully targeted suppliers.
in recent months, and -- The Manager has established a
Artificial Intelligence (AI) comprehensive framework of
has also increased the attack information security policies
potential from nefarious and standards which provide a
actors. structured approach to identify,
-- There is risk of cybercrime prevent, and respond to
such as phishing, remote access information security threats.
threats, extortion, and The framework ensures
denial-of-service attacks from consistency in Fidelity’s
highly organised criminal security measures, enhances its
networks and sophisticated ability to adapt to
ransomware operators, including evolving/emerging threats, and
threats such as service compliance with changing
disruption/extortion attacks regulatory requirements. The
(DDoS, ransomware), financial Company’s other service
theft and data breaches, providers also have similar
regulatory non-compliance, measures in place.
reputational damage/loss of -- Key performance indicators and
customer trust. The threat metrics have been developed by
environment continues to evolve the Manager to monitor the
rapidly, including the overall efficacy of
heightened potential threat cybersecurity processes and
from nation state backed threat controls and to further enhance
actors due to geopolitical the Manager’s cybersecurity
tensions. Ransomware continues strategy and operational
to increase globally and is resilience.
also becoming a supply chain
risk.
4. Changes in Legislation, Taxation or Regulation
Trend: Stable
Description and Impact Mitigation
-- Changes in legislation,
taxation or regulation, or
other external influence that
require changes to the -- The Board and Manager closely
investment trust structure of monitor regulatory, taxation and
the Company are a significant legislative changes, with
risk for the Company. developments impacting the
-- A breach of Section 1158 of the Company summarised in the form
Corporation Tax Act 2010 could of regular reporting to the
lead to a loss of investment Board.
trust status resulting in the -- The Manager monitors Section
Company being subject to tax on 1158 status to ensure any issues
capital gains. are escalated to the Board and
-- There have been increased addressed promptly.
concerns about investment cost -- The Manager participates in
disclosures and their impact on industry discussions regarding
the industry. There is a risk regulatory changes impacting
that the FCA’s Consumer investment companies, and
Composite Investment (CCI) regulatory developments continue
regime may make investment to be monitored and managed by
companies more complex for Fidelity through active lobbying
consumers and other investors and negotiations as well as a
to understand and increase the robust change management
regulatory burden imposed on process.
the sector if it proceeds with
some of the proposals as
drafted.
5. Competition Risks and Marketplace Threats Impacting Business Growth
Trend: Stable
Description and Impact Mitigation
-- There is increased activity
around mergers and acquisitions
across the investment company
marketplace and alternative
investment offerings (including -- The Board, the Company’s Broker
passive vehicles) which could and the Manager closely monitor
influence the demand for the industry activity, the peer
Company’s shares. In addition, group and the share register.
cheaper capital and the search -- An annual review of strategy is
for technology scale is also undertaken by the Board to
likely to mean increased ensure that the Company
consolidation. continues to offer a relevant
-- There is a risk of costly product to investors.
shareholder activism in the
investment company sector,
pursuing goals that may not be
in the interests of most
shareholders.
6. Business Continuity and Crisis Management
Trend: Stable
Description and Impact Mitigation
-- There is business process -- Fidelity has Business Continuity
disruption risk from continued and Crisis Management Frameworks
threats of cyberattacks, in place to deal with business
geopolitical events, outages, disruption and assure
fire events and natural operational resilience.
disasters, resulting in -- All third-party service
financial and/or reputational providers are subject to a
impact to the Company affecting risk-based programme of risk
the functioning of the oversight and internal audits by
business. the Manager and their own
-- The Company relies on a number internal controls reports are
of third-party service received an annual basis and any
providers, principally the concerns are investigated.
Registrar, Custodian and -- The Board regularly reviews the
Depositary who may be subject services provided by third
to cybercrime. parties.
7. Operational Risks
Trend: Stable
Description and Impact Mitigation
-- Fidelity’s Operational Risk
Management Framework is designed
to pro-actively prevent,
-- There is risk of financial identify and manage operational
losses or reputational damage risks inherent in most
from inadequate or failed activities.
internal processes, people and -- Fidelity uses robust systems and
systems or from external procedures dedicated to its
parties and events. operational processes. Its risk
management structure is designed
according to the FCA’s three
lines of defence model.
8. Discount Control Risk
Trend: Stable
Description and Impact Mitigation
-- The price of the Company’s
shares and its discount to NAV
are factors which are not -- The Board reviews the investment
completely within the Company’s strategy, investment performance
control. and the marketing approach,
-- The Board has a discount given the influence of all these
management policy which was factors on the discount.
updated in the reporting year -- The Company’s share price, NAV
in order to maintain the and discount volatility are
discount to NAV in mid-single monitored daily by the Manager
digits in normal market and the Company’s Broker and
conditions. Some short-term considered by the Board on a
influence over the discount may regular basis. The demand for
be exercised by carrying out shares can be influenced through
share repurchases at acceptable good performance and an active
prices and within the investor relations programme.
parameters set by the Board. -- The Board regularly reviews the
-- In considering the risk that Company’s share register, and
the discount to NAV poses to the Chairman meets with large
shareholder value and returns, shareholders.
both the absolute level of the -- Discretionary repurchases of
discount and the amount ordinary shares are made within
relative to the Company’s peer guidelines set by the Board.
group and the wider market are
considered.
9. Key Person Risk and Operational Support Risks
Trend: Stable
Description and Impact Mitigation
-- The Company’s Portfolio Managers
-- The loss of the Portfolio work closely together and have
Managers or other key extensive experience in the same
individuals could lead to markets and companies and share
potential performance and/or a common investment approach and
operational issues. complementary investment
-- The Portfolio Managers have a experience and therefore if
differentiated style in there was a loss of one of them,
relation to their peers. This the remaining Portfolio Manager
style is intrinsically linked can provide continuity in
with the Company’s investment managing the portfolio. The
philosophy and strategy, and Portfolio Managers are also
therefore, the Company has a supported by an Investment
key person dependency on them. Specialist and a team of
-- There is also a risk that the Fidelity analysts.
Manager has inadequate -- The Manager identifies key
succession plans for other key dependencies which are then
operational individuals. addressed through succession
plans, particularly for
portfolio managers.
Continuation Vote
A continuation vote takes place every two years. The last continuation vote was at the AGM held on
Viability Statement
In accordance with provision 31 of the 2024 UK Corporate Governance Code, the Directors have assessed the prospects of the Company over a longer period than the twelve month period required by the “Going Concern” basis. The Company is an investment trust with the objective of achieving long-term growth in both capital and income. 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 likely future demand for the Company’s shares;
• The Company’s share price discount to the NAV and the Board’s discount management policy;
• The liquidity of the Company’s portfolio;
• The level of income generated by the Company; and
• Future income and expenditure forecasts.
The Company’s performance for the five year reporting period to
The Board regularly reviews the investment policy to consider whether it remains appropriate.
The Board has concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five years based on the following additional considerations:
• The Investment Manager’s compliance with the Company’s investment objective and policy, its investment strategy and asset allocation;
• The portfolio mainly comprises readily realisable securities which can be sold to meet funding requirements if necessary;
• The Board’s discount management policy; 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 continued 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, unforeseen market events, geopolitical concerns and the ongoing global implications of the war in
In addition, the Directors’ assessment of the Company’s ability to operate in the foreseeable future is included in the Going Concern Statement below.
Going Concern Statement
The Directors have considered the Company’s investment objective, risk management policies, liquidity risk, credit risk, capital management policies and procedures, the nature of its portfolio and its expenditure and cash flow projections. The Directors, having considered the liquidity of the Company’s portfolio of investments (being mainly securities which are readily realisable) and the projected income and expenditure, including the loan notes, 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 investment company, the Company has no employees or physical assets, and a number of the Company’s functions are outsourced to third parties. The key outsourced function is the provision of investment management services by the Manager, but other professional service providers support the Company by providing administration, custodial, banking, accounting and audit services. The Board considers the Company’s key stakeholders to be the existing and potential shareholders, the externally appointed Manager (
The Board, with the Portfolio Managers, 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 and bank loans, 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 peers in the AIC Europe and European Smaller Companies sectors on performance, discount and share repurchase activity, an analysis of the Company’s share register and market trends.
The Board places great importance on communication with shareholders. The Annual General Meeting (“AGM”) provides the key forum for the Board and the Portfolio Managers 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 Managers meet 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 Environmental, Social and Governance (ESG) approach.
In addition to ensuring that the Company’s investment objective was being pursued, key decisions and actions taken by the Board during the reporting year, and up to the date of this report, have included:
•
As part of the Board’s succession plan, appointing
•
Holding multiple ad hoc Board meetings between March and
•
The decision to combine assets with those of HET on
•
Following the combination of assets with HET, agreeing a lower management fee with the Manager with effect from
•
The decision
to pay an interim dividend of
•
Authorising the repurchase of 9,286,723 shares into
• Meetings with some of the Company’s key shareholders during the reporting year; and
• The decision once again to hold a hybrid AGM in 2026 in order to make the AGM more accessible to those shareholders who are unable to or prefer not to attend in person.
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and 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, the Directors 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 Section 10 of FRS 102 and then apply them consistently;
• Make judgements and accounting estimates that are reasonable and prudent;
• Present information, including accounting policies, in a fair and balanced manner that provides relevant, reliable, comparable and understandable information;
•
State whether applicable
• Prepare the Financial Statements on a going concern basis, unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy, at any time, the financial position of the Company and enable them to ensure that the Company and 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 which comply with that law and those regulations.
The Directors have delegated 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/europe
to the Manager. 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, including the Strategic 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
INCOME STATEMENT
for the year ended
Year ended 31 December 2025 Year ended 31 December 2024
Revenue Capital Total Revenue Capital Total
Notes
£’000 £’000 £’000 £’000 £’000 £’000
Gains/
(losses) on 10 – 207,231 207,231 – (47,301) (47,301)
investments
Gains on
derivative 11 – 27,618 27,618 – 35,423 35,423
instruments
Income 3 57,618 – 57,618 53,670 – 53,670
Investment
management 4 (2,418) (7,253) (9,671) (2,878) (8,634) (11,512)
fees
Other 5 (1,079) – (1,079) (1,063) – (1,063)
expenses
Foreign
exchange – 1,889 1,889 – (2,956) (2,956)
gains/
(losses)
--------------- --------------- --------------- --------------- --------------- ---------------
Net return/
(loss) on
ordinary
activities 54,121 229,485 283,606 49,729 (23,468) 26,261
before
finance
costs and
taxation
Finance 6 (1,771) (5,314) (7,085) (2,770) (8,309) (11,079)
costs
--------------- --------------- --------------- --------------- --------------- ---------------
Net return/
(loss) on
ordinary 52,350 224,171 276,521 46,959 (31,777) 15,182
activities
before
taxation
Taxation on
return/
(loss) on 7 (3,165) – (3,165) (4,422) – (4,422)
ordinary
activities
--------------- --------------- --------------- --------------- --------------- ---------------
Net return/
(loss) on
ordinary
activities 49,185 224,171 273,356 42,537 (31,777) 10,760
after
taxation
for the
year
========= ========= ========= ========= ========= =========
Return/
(loss) per 8 11.30p 51.50p 62.80p 10.41p (7.78p) 2.63p
ordinary
share
========= ========= ========= ========= ========= =========
The Company does not have any other comprehensive income. Accordingly, the net return/(loss) on ordinary activities after taxation for the year is also the total comprehensive income for the year and no separate Statement of Comprehensive Income has been presented.
The total column of this statement represents the Income Statement of the Company. The revenue and capital columns are supplementary and presented for information purposes as recommended by the Statement of Recommended Practice issued by the AIC.
On
The Notes below form an integral part of these Financial Statements.
STATEMENT OF CHANGES IN EQUITY
for the year ended
Share Capital Total
Share Capital Revenue
premium redemption shareholders’
Notes capital reserve reserve
account reserve funds
£’000 £’000 £’000
£’000 £’000 £’000
Total
shareholders’ 10,411 58,615 5,414 1,440,810 47,879 1,563,129
funds at 31
December 2024
Net return on
ordinary
activities – – – 224,171 49,185 273,356
after
taxation for
the year
New ordinary
shares issued
in respect of 16 2,798 458,644 – – – 461,442
the
transaction
with HET
Expenses in
respect of
the – – – (406) – (406)
transaction
with HET
Repurchase of
ordinary 15 – – – (38,097) – (38,097)
shares into
Treasury
Dividends
paid to 9 – – – – (38,194) (38,194)
shareholders
--------------- --------------- --------------- --------------- --------------- ---------------
Total
shareholders’ 13,209 517,259 5,414 1,626,478 58,870 2,221,230
funds at 31
December 2025
========= ========= ========= ========= ========= =========
Total
shareholders’ 10,411 58,615 5,414 1,472,587 40,452 1,587,479
funds at 31
December 2023
Net
(loss)/return
on ordinary
activities – – – (31,777) 42,537 10,760
after
taxation for
the year
Dividends
paid to 9 – – – – (35,110) (35,110)
shareholders
--------------- --------------- --------------- --------------- --------------- ---------------
Total
shareholders’ 10,411 58,615 5,414 1,440,810 47,879 1,563,129
funds at 31
December 2024
========= ========= ========= ========= ========= =========
The Notes below form an integral part of these Financial Statements.
BALANCE SHEET
as at
Company number 2638812
31 December 2025 31 December 2024
Notes
£’000 £’000
Fixed assets
Investments 10 2,189,231 1,487,772
========= =========
Current assets
Derivative instruments 11 2,333 –
Debtors 12 11,316 9,506
Amounts held at futures clearing houses 2,814 10,078
and brokers
Cash and cash equivalents 47,710 63,042
--------------- ---------------
64,173 82,626
========= =========
Current liabilities
Derivative instruments 11 – (5,796)
Other creditors 13 (1,613) (1,473)
--------------- ---------------
(1,613) (7,269)
========= =========
Net current assets 62,560 75,357
Non current liabilities
Loan notes (unsecured) 14 (30,561) –
--------------- ---------------
(30,561) –
========= =========
Net assets 2,221,230 1,563,129
Capital and reserves
Share capital 15 13,209 10,411
Share premium account 16 517,259 58,615
Capital redemption reserve 16 5,414 5,414
Capital reserve 16 1,626,478 1,440,810
Revenue reserve 16 58,870 47,879
--------------- ---------------
Total shareholders’ funds 2,221,230 1,563,129
========= =========
Net asset value per ordinary share 17 434.39p 382.44p
========= =========
The Financial Statements above and below were approved by the Board of Directors on
Chairman
The Notes below form an integral part of these Financial Statements.
NOTES TO THE FINANCIAL STATEMENTS
1 PRINCIPAL ACTIVITY
2 ACCOUNTING POLICIES
The Company has prepared its Financial Statements 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 and a principal risk as set out above, and have concluded that there was no further impact of climate change to be taken into account as the investments are valued based on market pricing. In line with FRS 102, investments are valued at fair value, which for the Company are quoted bid prices for investments in active markets at the balance sheet date and therefore reflect the market participants view of climate change risk on the investments held by the Company.
The Company’s Going Concern Statement above takes account of all events and conditions up to
Issue of Ordinary Shares in respect of the transaction with Henderson European Trust plc (“HET”)
On
The Directors have considered the substance of the assets and activities of HET in determining whether the acquisition represents the acquisition of a business. In this case, the acquisition is not considered to be an acquisition of a business, and therefore, has not been treated as a business combination. Rather, the cost to acquire the assets and liabilities of HET has been allocated between the acquired identifiable assets and liabilities based on their relative fair values on the acquisition date without attributing any amount to goodwill or to deferred taxes. Net assets transferred comprised investments, cash, loans, payables and HET contribution to the transaction. A total of £462,717,000 of assets were acquired as a result of the transaction with HET. This comprised: investments of £478,394,000, cash of £13,631,000, loan notes of -£30,522,000, payables of -£74,000 and a HET contribution to the transaction of £1,288,000.
Transaction costs of £892,000 in relation to the combination of HET have been recognised in the Income Statement in Note 10. Costs of £406,000 in relation to issuing new shares have been recognised in the Statement of Changes in Equity.
Fidelity has agreed to make a material contribution by means of a waiver of the management fees that would otherwise be payable, under the AIFM Agreement and the Investment Management Agreement, in respect of the net assets transferred by HET to the Company following the combination of assets for the 12 month period immediately following the effective date. Fidelity’s total contribution was £2,537,000 allocated £634,000 against Revenue and £1,903,000 against Capital.
Since
b) Significant accounting estimates and judgements
The Directors make judgements and estimates concerning the future. Estimates and judgements are continually evaluated and are based on historical experience and other factors, such as expectations of future events, and are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The Company’s Financial Statements contain no key sources of estimation or uncertainty.
c) Segmental reporting
The Company is engaged in a single segment business and, therefore, no segmental reporting is provided.
d) Presentation of the Income Statement
In order to better reflect the activities of an investment company and in accordance with guidance issued by the AIC, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been prepared alongside the Income Statement. The net revenue return/(loss) 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) Income
Income from equity investments is accounted for 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. Amounts are credited to the revenue column of the Income Statement. 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 in the revenue column of the Income Statement. Any excess in the value of the shares received over the amount of the cash dividend is recognised in the capital column of the Income Statement. Special dividends are treated as a revenue receipt or a capital receipt depending on the facts and circumstances of each particular case.
Derivative instrument income received from dividends on long contracts for difference (“CFDs”) is accounted for on the date on which the right to receive the payment is established, normally the ex-dividend date. The amount net of tax is credited to the revenue column of the Income Statement.
Interest received on CFDs, bank deposits, collateral and money market funds is accounted for on an accruals basis and credited to the revenue column of the Income Statement. Interest received on CFDs represent the finance costs calculated by reference to the notional value of the CFDs.
f) Investment management fees and other expenses
Investment management fees and other expenses are accounted for on an accruals basis and are charged as follows:
• The investment management fee is allocated 25% to revenue and 75% to capital in line with the Board’s expected long-term split of revenue and capital return from the Company’s portfolio of investments; and
• All other expenses are allocated in full to revenue with the exception of those directly attributable to share issues or other capital events.
g) Functional currency and foreign exchange
The functional and reporting currency of the Company is
h) Finance costs
Finance costs comprises interest on the unsecured loans notes, overdrafts and finance costs paid on CFDs, which are accounted for on an accruals basis. Finance costs are allocated 25% to revenue and 75% to capital in line with the Board’s expected long-term split of revenue and capital from the Company’s portfolio of investments.
i) Taxation
The taxation charge represents the sum of current taxation and deferred taxation.
Current taxation is taxation suffered at source on overseas income less amounts recoverable under taxation treaties. Taxation is charged or credited to the revenue column of the Income Statement, except where it relates to items of a capital nature, in which case it is charged or credited to the capital column of the Income Statement. Where expenses are allocated between revenue and capital any tax relief in respect of the expenses is allocated between revenue and capital returns on the marginal basis using the Company’s effective rate of corporation tax for the accounting period. The Company is an approved
Deferred taxation is the taxation expected to be payable or recoverable on timing differences between the treatment of certain items for accounting purposes and their treatment for the purposes of computing taxable profits. Deferred taxation is based on tax rates that have been enacted or substantively enacted when the taxation is expected to be payable or recoverable. Deferred tax assets are only recognised if it is considered more likely than not that there will be sufficient future taxable profits to utilise them.
j) Dividend paid
Dividends payable to equity shareholders are recognised when the Company’s obligation to make payment is established.
k) Investments
The Company’s business is investing in financial instruments with a view to profiting from their total return in the form of income and capital growth. This portfolio of investments 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. Investments are measured at fair value with changes in fair value recognised in profit or loss, in accordance with the provisions of both Section 11 and Section 12 of FRS 102. The fair value of investments is initially taken to be their cost and is subsequently measured as follows:
• Listed investments are valued at bid prices, or last market prices, depending on the convention of the exchange on which they are listed.
In accordance with the AIC SORP, the Company includes transaction costs, incidental to the purchase or sale of investments, within gains/(losses) on investments in the capital column of the Income Statement and has disclosed these costs in Note 10 below.
l) Derivative instruments
When appropriate, permitted transactions in derivative instruments are used. Derivative transactions into which the Company may enter include long and short CFDs and futures. Derivatives are classified as other financial instruments 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:
• Long and short CFDs – the difference between the strike price and the value of the underlying shares in the contract; and
• Futures – the difference between the contract price and the quoted trade price.
Where transactions are used to protect or enhance income, if the circumstances support this, the income and expenses derived are included in net income in the revenue column of the Income Statement. Where such transactions are used to protect or enhance capital, if the circumstances support this, the income and expenses derived are included in gains/(losses) on derivative instruments in the capital column of the Income Statement. Any positions on such transactions open at the year end are reflected on the Balance Sheet at their fair value within current assets or current liabilities.
m) Debtors
Debtors include accrued income, taxation recoverable and other debtors and prepayments incurred in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business, if longer) they are classified as current assets. If not, they are presented as non-current assets. They are recognised initially at fair value and, where applicable, subsequently measured at amortised cost using the effective interest rate method.
n) Amounts held at futures clearing houses and brokers
These are amounts held in segregated accounts on behalf of brokers as collateral against open derivative contracts. These are carried at amortised cost.
o) Cash and cash equivalents
Cash and cash equivalents may comprise cash at bank and money market funds which are short-term, highly liquid and are readily convertible to a known amount of cash. These are subject to an insignificant risk of changes in value.
p) Loan notes (unsecured)
Loan notes are initially included in the Financial Statements at cost, being the fair value of the consideration received net of any issue costs relating to the borrowing. After initial recognition, the loans are measured at amortised cost using the effective interest rate method. The amortised cost is calculated by taking into account any issue costs and any discount or premium on settlement.
q) Other creditors
Other creditors include amounts payable on investment management fees and other creditors and expenses accrued in the ordinary course of business. If payment is due within one year or less (or in the normal operating cycle of the business, if longer), they are classified as current liabilities. If not, they are presented as non-current liabilities. They are recognised initially at fair value and, where applicable, subsequently measured at amortised cost using the effective interest rate method.
r) Capital reserve
The following are accounted for in the capital reserve:
• Gains and losses on the disposal of investments and derivative 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;
• 75% of investment management fees and finance costs;
• Dividends receivable which are capital in nature; and
• Cost of repurchasing shares.
Technical guidance issued by the
3 INCOME
Year ended Year ended
31 December 2025 31 December 2024
£’000 £’000
Investment income
Overseas dividends 50,142 42,870
UK dividends 2,182 1,654
Interest on securities 230 –
--------------- ---------------
52,554 44,524
========= =========
Derivative income
Income recognised from futures contracts 1,842 2,468
Dividends received on long CFDs 2,229 3,972
Interest received on CFDs – 329
--------------- ---------------
4,071 6,769
--------------- ---------------
Investment and derivative income 56,625 51,293
========= =========
Other income
Interest received on collateral, bank deposits 993 2,323
and money market funds
Interest received on tax reclaims – 54
--------------- ---------------
993 2,377
========= =========
Total income 57,618 53,670
========= =========
No special dividends have been recognised in capital during the year (2024: £1,271,000).
4 INVESTMENT MANAGEMENT FEES
Year ended 31 December 2025 Year ended 31 December 2024
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Investment
management 3,052 9,156 12,208 2,878 8,634 11,512
fees
Fee waived
in respect
of the (634) (1,903) (2,537) – – –
transaction
with HET
--------------- --------------- --------------- --------------- --------------- ---------------
Total 2,418 7,253 9,671 2,878 8,634 11,512
========= ========= ========= ========= ========= =========
Fidelity has agreed to make a material contribution by means of a waiver of the management fees that would otherwise be payable, under the AIFM Agreement and the Investment Management Agreement, in respect of the net assets transferred by HET to the Company following the combination of assets for the 12 month period immediately following the effective date.
Since
Investment management fees have been allocated 75% to capital reserve in accordance with the Company’s accounting policies.
5 OTHER EXPENSES
Year ended Year ended
31 December 2025 31 December 2024
£’000 £’000
AIC fees 25 24
Custody fees 100 90
Depositary fees 54 63
Directors’ fees1 219 186
Legal and professional fees 79 120
Marketing expenses 214 221
Printing and publication expenses 182 191
Registrars’ fees 104 91
Fees payable to the Company’s Independent
Auditor for the audit of the Financial 72 50
Statements
Other expenses 30 27
--------------- ---------------
1,079 1,063
========= =========
1 Details of the breakdown of Directors’ fees are disclosed in the Directors’ Remuneration Report in the Annual Report .
6 FINANCE COSTS
Year ended 31 December 2025 Year ended 31 December 2024
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Interest
paid on
collateral,
unsecured 79 236 315 15 43 58
loan notes
and
overdrafts
Interest
paid on 1,318 3,956 5,274 2,122 6,367 8,489
CFDs
Costs
recognised
from 374 1,122 1,496 633 1,899 2,532
futures
contracts
--------------- --------------- --------------- --------------- --------------- ---------------
1,771 5,314 7,085 2,770 8,309 11,079
========= ========= ========= ========= ========= =========
Finance costs have been allocated 75% to capital reserve in accordance with the Company’s accounting policies. At the year end, interest payable on the unsecured loan notes amounted to £200,000 (2024: £nil).
7 TAXATION ON RETURN/(LOSS) ON ORDINARY ACTIVITIES
Year ended 31 December 2025 Year ended 31 December 2024
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
a)
Analysis
of the
taxation
charge
for the
year
Overseas 3,165 – 3,165 4,422 – 4,422
taxation
--------------- --------------- --------------- --------------- --------------- ---------------
Taxation
charge
for the 3,165 – 3,165 4,422 – 4,422
year
(see
Note 7b)
========= ========= ========= ========= ========= =========
b) Factors affecting the taxation charge for the year
The taxation charge for the year is lower than the standard rate of
Year ended 31 December 2025 Year ended 31 December 2024
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Net return/
(loss) on
ordinary 52,350 224,171 276,521 46,959 (31,777) 15,182
activities
before
taxation
--------------- --------------- --------------- --------------- --------------- ---------------
Net return/
(loss) on
ordinary
activities
before
taxation 13,088 56,043 69,131 11,740 (7,944) 3,796
multiplied by
the standard
rate of UK
corporation
tax of 25%
(2024: 25%)
Effects of:
Capital
(gains)/losses – (59,185) (59,185) – 3,709 3,709
not taxable1
Income not (13,081) – (13,081) (11,131) – (11,131)
taxable
Expenses not – 1,329 1,329 – 2,077 2,077
deductible
Excess
management (7) 1,813 1,806 (609) 2,158 1,549
expenses
Overseas 3,165 – 3,165 4,422 – 4,422
taxation
--------------- --------------- --------------- --------------- --------------- ---------------
Total taxation
charge for the 3,165 – 3,165 4,422 – 4,422
year (see Note
7a)
========= ========= ========= ========= ========= =========
1
The Company is exempt from
c) Deferred taxation
A deferred tax asset of £20,482,000 (2024: £18,676,000), in respect of excess expenses of £76,426,000 (2024: £69,202,000) and excess loan interest of £5,505,000 (2024: £5,505,000), has not been recognised as it is unlikely that there will be sufficient future taxable profits to utilise these expenses.
8 RETURN/(LOSS) PER ORDINARY SHARE
Year ended Year ended
31 December 2025 31 December 2024
Revenue return per ordinary share 11.30p 10.41p
Capital return/(loss) per ordinary share 51.50p (7.78p)
--------------- ---------------
Total return per ordinary share 62.80p 2.63p
========= =========
The return/(loss) per ordinary share is based on the net return/(loss) on ordinary activities after taxation for the year divided by the weighted average number of ordinary shares held outside of
£’000 £’000
Net revenue return on ordinary activities after 49,185 42,537
taxation
Net capital return/(loss) on ordinary 224,171 (31,777)
activities after taxation
--------------- ---------------
Total return on ordinary activities after 273,356 10,760
taxation
========= =========
Number Number
Weighted average number of ordinary shares held 435,250,229 408,730,523
outside of Treasury
========= =========
9 DIVIDENDS PAID TO SHAREHOLDERS
Year ended Year ended
31 December 2025 31 December 2024
£’000 £’000
Dividends paid
Interim dividend of 3.90 pence per ordinary 15,714 –
share paid for the year ended 31 December 2025
Final dividend of 5.50 pence per ordinary 22,480 –
share paid for the year ended 31 December 2024
Interim dividend of 3.60 pence per ordinary – 14,714
share paid for the year ended 31 December 2024
Final dividend of 4.99 pence per ordinary – 20,396
share paid for the year ended 31 December 2023
--------------- ---------------
38,194 35,110
========= =========
Dividends proposed
Final dividend of 6.00 pence per ordinary
share proposed for the year ended 31 December 30,548 –
2025
Final dividend of 5.50 pence per ordinary
share proposed for the year ended 31 December – 22,480
2024
--------------- ---------------
Total dividend proposed 30,548 22,480
========= =========
The Directors have proposed the payment of a final dividend for the year ended
10 INVESTMENTS
31 December 2025 31 December 2024
£’000 £’000
Investments held at fair value 2,189,231 1,487,772
========= =========
Opening book cost 1,005,206 943,460
Opening investment holding gains 482,566 575,415
--------------- ---------------
Opening fair value 1,487,772 1,518,875
========= =========
Movements in the year
Purchases at cost 761,976 185,382
Assets acquired in respect of the transaction 478,394 –
with HET1
Costs in respect to the transaction with HET1 892 –
Sales – proceeds (747,034) (169,184)
Gains/(losses) on investments 207,231 (47,301)
--------------- ---------------
Closing fair value 2,189,231 1,487,772
========= =========
Closing book cost 1,607,792 1,005,206
Closing investment holding gains 581,439 482,566
--------------- ---------------
Closing fair value 2,189,231 1,487,772
========= =========
1 See Accounting Policy 2 (a) above for further details.
The Company received £747,034,000 (2024: £169,184,000) from investments sold in the year. The book cost of these investments when they were purchased was £637,784,000 (2024: £123,636,000). 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
Transaction costs incurred in the acquisition and disposal of investments, which are included in the gains/(losses) on investments above, were as follows:
Year ended Year ended
31 December 2025 31 December 2024
£’000 £’000
Purchases transaction costs 1,388 488
Sales transaction costs 176 70
--------------- ---------------
1,564 558
========= =========
11 DERIVATIVE INSTRUMENTS
Year ended Year ended
31 December 31 December 2024
2025
£’000
£’000
Gains on derivative instruments
Gains on long CFD positions closed 20,597 41,187
Losses on short CFD positions closed (6,325) (8,418)
Gains on futures contracts closed 5,217 5,815
Movement in investment holding gains/(losses) 6,603 (2,246)
on long CFDs
Movement in investment holding losses on short – (142)
CFDs
Movement in investment holding gains/(losses) 1,526 (773)
on futures
--------------- ---------------
27,618 35,423
========= =========
31 December 31 December 2024
2025
Fair value
Fair value
£’000
£’000
Derivative instruments recognised on the
Balance Sheet
Derivative instrument assets 2,333 –
Derivative instrument liabilities – (5,796)
--------------- ---------------
2,333 (5,796)
========= =========
31 December 2025 31 December 2024
Asset Asset
Fair value Fair value
exposure exposure
£’000 £’000
£’000 £’000
At the year end
the Company
held the
following
derivative
instruments
Long CFDs 1,928 200,209 (4,675) 196,659
Long futures 405 47,039 (1,121) 54,743
--------------- --------------- --------------- ---------------
2,333 247,248 (5,796) 251,402
========= ========= ========= =========
12 DEBTORS
31 December 2025 31 December 2024
£’000 £’000
Accrued income 1,930 618
Taxation recoverable 9,014 8,807
Other debtors and prepayments 372 81
--------------- ---------------
11,316 9,506
========= =========
13 OTHER CREDITORS
31 December 2025
31 December 2024
£’000 £’000
Creditors and accruals 1,613 1,473
========= =========
14 LOAN NOTES (UNSECURED)
31 December 2025
31 December 2024
£’000 £’000
1.53% unsecured loan notes 2047 (Euro) 21,829 –
1.66% unsecured loan notes 2052 (Euro) 8,732 –
--------------- ---------------
30,561 –
========= =========
The
The
The issue costs for both series of loan notes are amortised over their respective terms. See Note 18 for more details on the estimate of the fair value of the unsecured loan notes.
15 SHARE CAPITAL
31 December 2025 31 December 2024
Nominal Nominal
Number of Number of
value value
shares shares
£’000 £’000
Issued, allotted
and fully paid
Ordinary shares
of 2.5 pence
each held
outside of
Treasury
Beginning of the 408,730,523 10,218 408,730,523 10,218
year
Ordinary shares
repurchased into (9,286,723) (232) – –
Treasury
New ordinary
shares issued in
respect of the 111,902,155 2,798 – –
transaction with
HET
--------------- --------------- --------------- ---------------
End of the year 511,345,955 12,784 408,730,523 10,218
========= ========= ========= =========
Ordinary shares
of 2.5 pence
each held in
Treasury1
Beginning of the 7,717,387 193 7,717,387 193
year
Ordinary shares
repurchased into 9,286,723 232 – –
Treasury
End of the year 17,004,110 425 7,717,387 193
--------------- --------------- --------------- ---------------
Total share 13,209 10,411
capital
========= =========
1
Ordinary shares held in
On
During the year, the Company repurchased 9,286,723 (2024: nil) ordinary shares and held them in
16 CAPITAL AND RESERVES
Share Capital Total
Share Capital Revenue
premium redemption shareholders’
capital reserve reserve
account reserve funds
£’000 £’000 £’000
£’000 £’000 £’000
At 1 January 10,411 58,615 5,414 1,440,810 47,879 1,563,129
2025
Gains on
investments – – – 207,231 – 207,231
(see Note
10)
Gains on
derivative
instruments – – – 27,618 – 27,618
(see Note
11)
Foreign
exchange – – – 1,889 – 1,889
gains
Investment
management – – – (7,253) – (7,253)
fees (see
Note 4)
Finance
costs (see – – – (5,314) – (5,314)
Note 6)
New ordinary
shares
issued in
respect of 2,798 458,644 – – – 461,442
the
transaction
with HET
Expenses in
respect of
the – – – (406) – (406)
transaction
with HET1
Repurchase
of ordinary – – – (38,097) – (38,097)
shares (see
Note 15)
Revenue
returns
after – – – – 49,185 49,185
taxation for
the year
Dividends
paid to – – – – (38,194) (38,194)
shareholders
(see Note 9)
--------------- --------------- --------------- --------------- --------------- ---------------
At 31
December 13,209 517,259 5,414 1,626,478 58,870 2,221,230
2025
========= ========= ========= ========= ========= =========
1 See Accounting Policy 2 (a) above for further details.
Share Capital Total
Share Capital Revenue
premium redemption shareholders’
capital reserve reserve
account reserve funds
£’000 £’000 £’000
£’000 £’000 £’000
At 1 January 10,411 58,615 5,414 1,472,587 40,452 1,587,479
2024
Losses on
investments – – – (47,301) – (47,301)
(see Note
10)
Gains on
derivative
instruments – – – 35,423 – 35,423
(see Note
11)
Foreign
exchange – – – (2,956) – (2,956)
losses
Investment
management – – – (8,634) – (8,634)
fees (see
Note 4)
Finance
costs (see – – – (8,309) – (8,309)
Note 6)
Revenue
return on
ordinary
activities – – – – 42,537 42,537
after
taxation for
the year
Dividends
paid to – – – – (35,110) (35,110)
shareholders
(see Note 9)
--------------- --------------- --------------- --------------- --------------- ---------------
At 31
December 10,411 58,615 5,414 1,440,810 47,879 1,563,129
2024
========= ========= ========= ========= ========= =========
The capital reserve balance at
17 NET ASSET VALUE PER ORDINARY SHARE
The calculation of the net asset value per ordinary share is based on the total shareholders’ funds divided by the number of ordinary shares held outside of
31 December 2025 31 December 2024
Total shareholders’ funds £2,221,230,000 £1,563,129,000
Ordinary shares held outside of Treasury at 511,345,955 408,730,523
year end
--------------- ---------------
Net asset value per ordinary share 434.39p 382.44p
========= =========
It is the Company’s policy that shares held in
18 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 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. These risks and how they are identified, evaluated and managed are shown in the Strategic Report above.
This note 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 held in accordance with the Company’s investment objective and policies;
• Derivative instruments which comprise CFDs and futures on equity indices;
• Cash, liquid resources and short-term debtors and creditors that arise from its operations; and
• Bank borrowings
The risks identified 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 and on unsecured fixed rate loan facilities of
Interest rate risk exposure
The values of the Company’s financial instruments that are exposed to movements in interest rates are shown below:
31 December 2025 31 December 2024
£’000 £’000
Exposure to financial instruments that bear
interest
Long CFDs – exposure less fair value 198,281 201,334
Unsecured loan notes 30,561 –
--------------- ---------------
228,842 201,334
========= =========
Exposure to financial instruments that earn
interest
Amounts held at futures clearing houses and 2,814 10,078
brokers
Cash and cash equivalents 47,710 63,042
--------------- ---------------
50,524 73,120
========= =========
Net exposure to financial instruments that 178,318 128,214
bear interest
========= =========
Foreign currency risk
The Company’s net return/(loss) on ordinary activities after taxation for the year and its net assets can be affected by foreign exchange rate 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 exchange rates affecting the value of investments and derivative instruments;
• Movements in exchange rates affecting short-term timing differences; and
• Movements in exchange rates affecting income received.
Currency exposure of financial assets
The currency profile of the Company’s financial assets is shown below:
31 December 2025
Long
Investments Cash and
exposure
held at Debtors1 cash Total
Currency to derivative
fair value £’000 equivalents2 £’000
instruments
£’000 £’000
£’000
Euro 1,392,580 196,947 5,975 47,067 1,642,569
Swiss 483,482 – 4,103 – 487,585
franc
Danish 66,619 – 316 60 66,995
krone
Swedish 117,415 – – – 117,415
krona
US dollar – 50,301 – – 50,301
Norwegian 37,683 – – – 37,683
krone
UK 91,452 – 3,736 583 95,771
sterling
--------------- --------------- --------------- --------------- ---------------
2,189,231 247,248 14,130 47,710 2,498,319
========= ========= ========= ========= =========
1 Debtors include amounts held at futures clearing houses and brokers.
2 Cash and cash equivalent are made up of £4,660,000 cash at bank and £43,050,000 held in
31 December 2024
Long
Investments Cash and
exposure
held at Debtors1 cash Total
Currency to derivative
fair value £’000 equivalents2 £’000
instruments
£’000 £’000
£’000
Euro 917,732 213,759 4,309 63,042 1,198,842
Swiss 295,505 – 3,752 – 299,257
franc
Danish 85,263 – 341 – 85,604
krone
Swedish 92,286 – – – 92,286
krona
US dollar – 37,643 – – 37,643
Norwegian 25,629 – – – 25,629
krone
UK 71,357 – 11,182 – 82,539
sterling
--------------- --------------- --------------- --------------- ---------------
1,487,772 251,402 19,584 63,042 1,821,800
========= ========= ========= ========= =========
1 Debtors include amounts held at futures clearing houses and brokers.
2 Cash and cash equivalent are made up of £3,460,000 cash at bank and £59,582,000 held in
Currency exposure of financial liabilities
The currency profile of the Company’s financial liabilities is shown below:
31 December 2025
Unsecured Other
Total
Currency loan notes creditors
£’000
£’000 £’000
Euro 30,561 107 30,668
US dollar – 87 87
UK sterling – 1,419 1,419
--------------- --------------- ---------------
30,561 1,613 32,174
========= ========= =========
31 December 2024
Unsecured Other
Total
Currency loan notes creditors
£’000
£’000 £’000
Euro – 200 200
US dollar – 78 78
UK sterling – 1,195 1,195
--------------- --------------- ---------------
– 1,473 1,473
========= ========= =========
Other price risk
Other price risk arises mainly from uncertainty about future prices of financial instruments used in the Company’s business. It represents the potential loss the Company might suffer through holding market positions in the face of price movements. 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 Portfolio Managers are responsible for actively monitoring the existing portfolio selected in accordance with the overall asset allocation parameters described above and seek to ensure that individual stocks also meet an acceptable risk/reward profile.
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. The Company has the current borrowing of
Liquidity risk exposure
At
31 December 2025
Within More than
Total
one year one year
£’000
£’000 £’000
Creditors and accruals 1,613 – 1,613
1.53% unsecured loan notes 2047 334 21,829 22,163
(Euro)1
1.66% unsecured loan notes 2052 145 8,732 8,877
(Euro)1
--------------- --------------- ---------------
2,092 30,561 32,653
========= ========= =========
1
Acquired by the Company, as part of the combination with HET on
31 December 2024
Within More than
Total
one year one year
£’000
£’000 £’000
Derivative instruments 5,796 – 5,796
Creditors and accruals 1,473 – 1,473
--------------- --------------- ---------------
7,269 – 7,269
========= ========= =========
Counterparty risk
Certain derivative instruments in which the Company invests 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 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 by evaluating derivative instrument credit risk exposure
31 December 2025 31 December 2024
Collateral Collateral Collateral Collateral
received pledged received pledged
£’000 £’000 £’000 £’000
J.P. Morgan 1,600 – – 5,025
Securities plc
UBS AG – 2,814 50 5,053
--------------- --------------- --------------- ---------------
1,600 2,814 50 10,078
========= ========= ========= =========
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 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 Manager. Exposure to credit risk arises on unsettled 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, are set out in a documented Risk Management Process Document. Derivative instruments are used by the Manager for the following purposes:
• to gain unfunded long exposure to equity markets, sectors or single stocks. Unfunded exposure is exposure gained without an initial flow of capital; and
• to position short exposures in the Company’s portfolio. These uncovered exposures benefit from falls in the prices of shares which the Portfolio Managers believe to be overvalued. These positions, therefore, distinguish themselves from other short exposures held for hedging purposes since they are expected to add risk to the portfolio.
RISK SENSITIVITY ANALYSIS
Interest rate risk sensitivity analysis
Based on the financial instruments held and interest rates at
Foreign currency risk sensitivity analysis
Based on the financial instruments held and currency exchange rates at the Balance Sheet date, a 10% strengthening of the
31 December 2025 31 December 2024
Currency
£’000 £’000
Euro 146,536 108,967
Swiss franc 44,326 27,205
Swedish krona 10,674 8,390
Danish krone 6,090 7,782
US dollar 4,565 3,415
Norwegian krone 3,426 2,330
--------------- ---------------
215,617 158,089
========= =========
Based on the financial instruments held and currency exchange rates at the Balance Sheet date, a 10% weakening of the
31 December 2025 31 December 2024
Currency
£’000 £’000
Euro 179,100 133,182
Swiss franc 54,176 33,251
Swedish krona 13,046 10,254
Danish krone 7,444 9,512
US dollar 5,579 4,174
Norwegian krone 4,187 2,848
--------------- ---------------
263,532 193,221
========= =========
Other price risk – exposure to investments sensitivity analysis
Based on the investments held and share prices at
Other price risk – net exposure to derivative instruments sensitivity analysis
Based on the derivative instruments held and share prices at
Fair Value of Financial Assets and Liabilities
Financial assets and liabilities are stated in the Balance Sheet at values which are not materially different to their fair values. As explained in Notes 2 (k) and (l), investments and derivative instruments are shown at fair value. In the case of cash and cash equivalents, book value approximates to fair value due to the short maturity of the instruments. The exception are the Euro unsecured bank loans, their fair value having been calculated by discounting future cash flows at current Euro interest rates.
31 December 2025
At fair value At amortised cost
£’000 £’000
1.53% unsecured loan notes 2047 (Euro) 21,433 21,829
1.66% unsecured loan notes 2052 (Euro) 8,481 8,732
--------------- ---------------
Total 29,914 30,561
========= =========
The unsecured loan notes were acquired as a result of the transaction with HET.
In order to comply with fair value accounting disclosures only, the fair value of the unsecured loan notes has been estimated to be £29,914,000 (2024: £nil) and is categorised as Level 3 in the fair value hierarchy as described below. However, for the purpose of the daily NAV announcements, the unsecured loan notes are valued at par in the NAV because they are not traded and the Directors expect them to be held to maturity and, accordingly, the directors have assessed that this is the most appropriate value to be applied for this purpose.
The estimate of the fair value of each unsecured loan note is calculated by aggregating the discounted value of future cash flows, being the contractual interest payments and the repayment of capital at maturity as each note falls due. The discount rate used for each note is based on the yield of the reference instrument that was used in the pricing of each loan note plus the same credit spread applied at the issue. The net assets including the unsecured loan notes at fair value would have been £2,221,877,000 at
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 (k) and (l). The table below sets out the Company’s fair value hierarchy.
31 December 2025
Financial assets Level 1 Level 2 Level 3 Total
at fair value
through profit £’000 £’000 £’000 £’000
or loss
Investments 2,189,231 – – 2,189,231
Derivative
instrument 405 1,928 – 2,333
assets
--------------- --------------- --------------- ---------------
2,189,636 1,928 – 2,191,564
========= ========= ========= =========
Financial
liabilities at
fair value
through profit
or loss
Derivative
instrument – – – –
liabilities
========= ========= ========= =========
31 December 2024
Financial assets Level 1 Level 2 Level 3 Total
at fair value
through profit £’000 £’000 £’000 £’000
or loss
Investments 1,487,772 – – 1,487,772
Derivative
instrument – – – –
assets
--------------- --------------- --------------- ---------------
1,487,772 – – 1,487,772
========= ========= ========= =========
Financial
liabilities at
fair value
through profit
or loss
Derivative
instrument (1,121) (4,675) – (5,796)
liabilities
========= ========= ========= =========
In the event that the Company decided to pay back the loan notes earlier than the maturity date, the loan note agreements include certain clauses that may require additional payments to be made. These clauses are primarily to protect the lender from any losses suffered from early repayment. Such ‘make-whole amounts’ are based on any excess of the discounted value of the remaining scheduled payments over the life of the unsecured loan notes above the value of the principal. The make-whole amount cannot be less than zero. The directors have assessed that the likelihood of early repayment is considered to be highly unlikely to occur.
19 CAPITAL RESOURCES AND GEARING
The Company does not have any externally imposed capital requirements. The financial resources of the Company comprise its share capital and reserves, as disclosed in the Balance Sheet above, and any gearing, which is managed by the use of derivative instruments. Financial resources are managed in accordance with the Company’s 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 18.
The Company’s gross gearing and net gearing at the year end is set out below:
31 December 2025
Gross gearing Net gearing
Asset Asset
exposure %1 exposure %1
£’000 £’000
Investments 2,189,231 98.6 2,189,231 98.6
Long CFDs 200,209 9.0 200,209 9.0
Long futures 47,039 2.1 47,039 2.1
Total long exposures 2,436,479 109.7 2,436,479 109.7
Gross asset exposure/net market exposure 2,436,479 109.7 2,436,479 109.7
========= ========= ========= =========
Shareholders’ funds 2,221,230 2,221,230
========= =========
Gearing2 9.7 9.7
========= =========
1
Asset exposure to the market expressed as a percentage of shareholders’ funds.
2
Gearing is the amount by which gross asset exposure/net market exposure exceeds shareholders’ funds expressed as a percentage of shareholders’ funds.
31 December 2024
Gross gearing Net gearing
Asset Asset
exposure %1 exposure %1
£’000 £’000
Investments 1,487,772 95.2 1,487,772 95.2
Long CFDs 196,659 12.6 196,659 12.6
Long futures 54,743 3.5 54,743 3.5
Total long exposures 1,739,174 111.3 1,739,174 111.3
Gross asset exposure/net market exposure 1,739,174 111.3 1,739,174 111.3
========= ========= ========= =========
Shareholders’ funds 1,563,129 1,563,129
========= =========
Gearing2 11.3 11.3
========= =========
1 Asset exposure to the market expressed as a percentage of shareholders’ funds.
2 Gearing is the amount by which gross asset exposure/net market exposure exceeds shareholders’ funds expressed as a percentage of shareholders’ funds.
20 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 FII:
31 December 2025 31 December 2024
£’000 £’000
Management fees 12,208 11,512
Marketing services 214 221
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At the Balance Sheet date, the following balances payable to FII were accrued and included in other creditors:
31 December 2025 31 December 2024
£’000 £’000
Management fees 1,237 972
Marketing services – 53
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As at
Disclosures of the Directors’ interests in the ordinary shares of the Company and Directors’ fees and taxable expenses relating to reasonable travel expenses paid 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, £21,000 (2024: £20,000) of Employers’ National Insurance Contributions was also paid by the Company. As at
ALTERNATIVE PERFORMANCE MEASURES
The Company uses the following as Alternative Performance Measures and these are all defined in the Glossary of Terms in the Annual Report.
Discount/Premium
Details of the Company’s discount are on the Financial Highlights page in the Annual Report.
Gearing
See Note 19 above for details of the Company’s gearing (both gross and net).
Net Asset Value (“NAV”) per Ordinary Share
See the Balance Sheet and Note 17 above for further details.
Ongoing Charges Ratio
The ongoing charges ratio 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.
31 December 2025 31 December 2024
Investment management fees (£’000) 12,208 11,512
Other expenses (£’000) 1,079 1,063
Ongoing charges (£’000) 13,287 12,575
Fee waivers in respect of the transaction with (2,537) –
HET (£’000)
Ongoing charges ratio 0.73% 0.76%
Ongoing charges ratio including fee waivers 0.59% 0.76%
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Revenue, Capital and Total Returns per Share
See the Income Statement and Note 8 above for further details.
Total Return Performance
The NAV per ordinary share total return performance includes reinvestment of the dividend in the NAV of the Company on the ex-dividend date. The ordinary share price total return performance 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 ordinary share and the ordinary share price of the Company, the impact of the dividend reinvestments and the total returns for the years ended
Net asset
Ordinary
value per
2025 share
ordinary
price
share
31 December 2024 382.44p 352.00p
31 December 2025 434.39p 416.50p
Change in year +13.6% +18.3%
Impact of dividend reinvestments +2.6% +2.8%
Total return for the year +16.2% +21.1%
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Net asset
Ordinary
value per
2024 share
ordinary
price
share
31 December 2023 383.39p 360.00p
31 December 2024 382.44p 352.00p
Change in year -1.5% -2.2%
Impact of dividend reinvestments +2.0% +2.1%
Total return for the year +0.5% -0.1%
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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: www.morningstar.co.uk/uk/NSM
The Annual Report will be posted to shareholders later this month and additional copies will be available from the registered office of the Company and on the Company's website: www.fidelity.co.uk/europe where up to date information on the Company, including daily NAV and share prices, factsheets and other information can also be found.
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.
ENDS
