REG-Fidelity China Special Situations Plc: Annual Financial Report
10/06/2025 07:02
FIDELITY CHINA SPECIAL SITUATIONS PLC
Final Results for the year ended 31 March 2025
Financial Highlights:
* The Board of Fidelity China Special Situations PLC (the “Company”)
recommends a final ordinary dividend of 8.00 pence per share as well as a
special dividend of 1.00 pence per share.
* During the year ended 31 March 2025, the Company reported a Net Asset Value
(NAV) total return of +31.5% and share price total return of +35.8%.
* Over the same period, the benchmark index, the MSCI China Index, returned
+37.5%.
* Improving sentiment following stimulus packages and the emergence of
artificial intelligence provided catalysts to returns.
Contacts
For further information, please contact:
George Bayer
Company Secretary
0207 961 4240
FIL Investments International
CHAIRMAN’S STATEMENT
I have pleasure in presenting the Annual Report of Fidelity China Special
Situations PLC for the year ended 31 March 2025.
After three consecutive years of flat or negative returns for UK investors in
the Chinese equity market, it is pleasing to be able to look back over a more
positive period. In the reporting year to 31 March 2025, the net asset value
(“NAV”) total return of your Company was +31.5%, while the Benchmark Index
(MSCI China Index (in UK sterling terms)) returned +37.5%. The share price
total return was +35.8% boosted by the share price discount to NAV narrowing
from 10.2% at the beginning of the period to 7.3% at the year end.
This year marks the 15th anniversary of the Company’s inception on 19 April
2010, and while returns for the year under review have modestly underperformed
the Benchmark Index, in absolute terms they have been the strongest since
2021. On an annualised basis, total returns since inception have been well
ahead of the Benchmark, at +8.7% for the NAV and +8.2% for the share price,
compared with +4.5% for the Benchmark. This is a strong endorsement of the
strategy launched by Anthony Bolton and developed over the past 11 years by
your current Portfolio Manager, Dale Nicholls. To mark the occasion of the
anniversary, on 22 April I was joined by Anthony, Dale, my predecessor as
Chairman, Nicholas Bull, and the first Chairman of your Company, John Owen, to
open the day’s trading at the London Stock Exchange.
At a macroeconomic level, we have seen the investment backdrop evolve over the
year under review with a change in the attitude of the Chinese government,
which is looking to stimulate the economy far more overtly following its
sluggish post-Covid reopening. Measures to date have included a
recapitalisation of banks to support the economy, as well as
government-subsidised trade-in schemes for older discretionary items such as
white goods.
There have been a number of important events in the last year, but I would
like to highlight three. The first is President Xi’s meeting in February
with Chinese entrepreneurs at a symposium of private enterprises. In the past,
the Chinese government has been seen as sceptical of such businesses, but this
gathering would seem to show a genuinely renewed commitment to embracing the
role of private enterprise and entrepreneurs as part of China’s future.
The second is DeepSeek – the headline-grabbing generative AI app that got
the world’s attention in January, having invested less and provided arguably
a better product than US peers. Far from being an anomaly, this is a typical
example of Chinese enterprise and science-based invention.
The third is electric vehicle (EV) maker BYD’s revenues overtaking Tesla’s
for the first time recently. These factors, and others, have helped improve
sentiment, which is also reflected in the 38% rise in the stock market. This
strong performance is particularly encouraging given the prevailing high
levels of geopolitical uncertainty.
Dividends are also becoming more of a feature of the stock market, associated
with generally more shareholder-friendly behaviour by Chinese companies. This
year will be a bumper year for dividends received and paid to our shareholders
(see below), making a meaningful contribution to the total return.
As I have noted before, being structured as a closed-ended investment company
means that Dale does not have the liquidity constraints of an open-ended fund
and can use this flexibility to invest in less liquid assets with a
longer-term view of returns. Up to 15% of Net Assets plus Borrowings may be
invested in unquoted companies (those not yet listed on a stock exchange),
allowing Dale to take advantage of the faster growth trajectory of
earlier-stage businesses before they are potentially listed on the public
markets. Following on from three IPOs of private holdings in the previous
financial year, the autonomous driving specialist Pony.ai floated in the US
stock market in November. Dale also added a new unquoted holding to the
portfolio in February 2025, investing in Fujian Yangteng Innovations which
sells private-labelled aftermarket auto parts online in Europe and North
America. He also increased the position in ByteDance, the social media company
whose assets include TikTok; it is now the largest unlisted holding in the
Company’s portfolio. More details of the unlisted holdings, which make up
9.6% of the total Net Assets at the year end and have added materially to your
Company’ performance over time, are in the Annual Report.
The Board feels the valuation process for our unlisted holdings is robust.
They are assessed regularly by Fidelity’s dedicated Fair Value Committee
(“FVC”), with advice from Kroll, a third-party valuation specialist, as
well as from Fidelity’s unlisted investment specialist in Hong Kong and the
Fidelity analysts who undertake research on the companies. The valuation
process is set out in more detail in the Annual Report. The Board receives
regular updates from the FVC, with Alastair Bruce, our Audit and Risk
Committee Chairman, also providing expertise in this area, having for many
years been involved professionally in private equity investing.
DUE DILIGENCE TRIP
In November, your Board was fortunate to visit China to see Fidelity’s
investment team in action and meet with some of the portfolio companies on the
ground. One of our overriding impressions, which has gained even greater
relevance in recent weeks, was of China being potentially better prepared than
others for a more fractious global trade environment. A lot of the mitigating
actions by companies to reduce the risks from increased tariffs and to
diversify their production bases have already happened. That is not to say
that the economy will not be harmed by a slowdown in trade with the US, but
China has consciously reduced its dependence on critical US imports over the
last eight years.
We were most impressed by the entrepreneurialism shining through in the
management teams that we met, many of whom were young, energetic,
science-based and looking to build global businesses. China is emerging as a
world leader in certain sectors, such as EVs, autonomous driving and the
range-finding laser technology Lidar, which is an essential tool for
autonomous vehicles.
We were struck both by the strength of balance sheets of Chinese companies and
the propensity of their major shareholders to reinvest in their businesses and
not seek to extract value from them. Their drive and motivation seem to be to
build something important and sustainable for the future.
GEARING
Your Board continues to believe that the judicious use of gearing (a benefit
of the investment company structure) can enhance returns, although being more
than 100% invested also means that the NAV and share price may be more
volatile and can accentuate losses in a falling market, as well as being
additive on the upside. Having repaid the Company’s US$100m loan in the last
financial year, gearing this year has been solely through contracts for
difference (“CFDs”), which tend to be at lower costs than prevailing
longer-dated borrowing. However, your Board continues to review the position,
and we have not ruled out reintroducing an element of fixed rate gearing in
the future, should the terms become favourable.
Gearing remained broadly around the 20% (net market gearing) level during the
year, beginning at 20.8% and ending at 20.9%, reflecting Dale’s view that
the Chinese equity market remains very attractively valued and offers many
interesting investment opportunities. This level of gearing is at the upper
limit that is acceptable to the Board, compared with a historical range of
10-25%. The impact of gearing was positive during the year in review, adding
6.9% to returns.
DIVIDEND
The Company’s investment objective remains focused on achieving long-term
capital growth; however, it has the enviable track record of having paid an
increased dividend each year since inception, growing from 0.25 pence per
share in 2011 to 6.40 pence in 2024, which is a compound annual growth rate of
28.3%.
As noted above, the year under review was a particularly strong one for the
Company’s revenue return, reflecting the increasing focus of Chinese
companies on rewarding minority shareholders through dividends. Your Board is
therefore pleased to recommend an increased final ordinary dividend of 8.00
pence per share, a 25.0% increase on the 6.40 pence per share paid in 2024. In
addition, in light of a large exceptional dividend received from the
Company’s position in Lufax Holding, an online finance marketplace, we are
proposing an additional special dividend of 1.00 pence per share. By choosing
to pay both a final and a special dividend, your Board seeks to pass on the
benefit of large one-off receipts, while also safeguarding the Company’s
ability to continue to grow its ordinary dividend at a sustainable rate in the
future.
Both the ordinary and special dividends will be payable on 31 July 2025 to
shareholders on the register on 20 June 2025 (ex-dividend date 19 June 2025).
The revenue per share earned by the Company during the year was 10.18 pence
including the Lufax exceptional dividend, and is an increase of 76.1% compared
with the 5.78 pence earned in the prior year. This year’s dividend is fully
covered by revenue from earnings, and we have been able to add back
£7,727,000 to the revenue reserve, which now stands at 5.59 pence per share.
DISCOUNT MANAGEMENT
Although your Company’s share price discount to NAV narrowed during the year
from 10.2% to 7.3%, for much of the period it remained higher than the Board
would like, and therefore we have been relatively active with share buybacks,
repurchasing 30,841,184 shares (5.9% of the total at the start of the year)
for cancellation. It is always our ambition that the share price should
closely match the company’s NAV. We remain vigilant of changes in sentiment
towards China and the impact that has on demand for the Company’s shares
and, in turn, on the price at which they trade. In the early part of the
review period, the market at large remained wary of China given the sluggish
economy and ongoing issues in the property market. However, stimulus measures
announced by the Chinese government in the last quarter of 2024 created a
reassessment, and the discount to NAV narrowed accordingly, reaching the
mid-single digits towards the year end, despite the uncertainty surrounding
President Trump’s trade tariff plans. It is encouraging to note that it
remains in single digits at the time of writing, suggesting investors remain
relatively sanguine about the potential impacts of a trade war between China
and the US. The graph below shows the movement of the Company’s discount
during the year.
While the primary purpose of share repurchases is to limit discount
volatility, they are also of benefit to existing shareholders, as the
Company’s NAV per share is increased by purchasing shares at a discount.
ONGOING CHARGES RATIO AND MANAGEMENT FEE
The Ongoing Charges Ratio (the costs of running the Company) for the year was
0.89% (2024: 0.98%). The variable element of the management fee (due to
underperformance of the Benchmark Index on a rolling three year basis) was a
credit of 0.15% (2024: a charge of 0.15%). Therefore, the Ongoing Charges
Ratio for the year, including this variable element, was 0.74% (2024: 1.13%).
Following a reduction in the base management fee paid to the Manager in the
last financial year as a result of the combination with abrdn China Investment
Company (ACIC), there have been no further changes to the fee arrangements in
the year under review.
BOARD OF DIRECTORS
There have been no changes to your Board of Directors in either of the last
two financial years, and other than me, none of the Directors have served for
more than five years, meaning there are no changes expected in the
shorter-term. We are pleased that your Company’s Board includes a real
diversity and balance of relevant skills and experience, including consultancy
covering Chinese businesses, accountancy, investment management (including
private equity and private equity valuation) and marketing. In recent years,
we have sought to pass on the benefit of our accumulated skills and knowledge
by taking on a Board apprentice, a role put in place to help develop the next
generation of individuals who may not otherwise find a route to becoming a
non-executive director. Each apprentice serves a term of one year, during
which time they attend all Board and Committee meetings as an observer.
Further details are in the Annual Report.
In accordance with the UK Corporate Governance Code for Directors of FTSE 350
companies, all Directors are subject to annual re-election at the Annual
General Meeting (“AGM”) on 24 July 2025, in order to continue to support
and oversee the Company in the best interests of all shareholders. The
Directors’ biographies can be found in the Annual Report.
ANNUAL GENERAL MEETING
The Company’s AGM is at 11.00 am on 24 July 2025. The meeting will once
again be a hybrid format, with online attendance available; however, I hope to
see as many of you as possible in person on the day. Alongside the direct
email updates that we now provide, it is one of the few opportunities in the
year to sit down together – shareholders, the Board and the Manager – to
talk about your investment. Of course, this year has particular significance,
as we mark the Company’s 15th anniversary. Please do join us if you can.
Details of the AGM are below.
OUTLOOK
A year ago, sentiment was undeniably poor – the Chinese economy, stock
market and property market were all depressed, and the private sector was not
outwardly being supported by the government. While a change in sentiment
during the year under review has powered a very strong year for the Chinese
stock market, we now need to see the follow-through.
While the macro picture remains uncertain with the property market still
struggling and consumer sentiment fragile, the Chinese authorities could pull
the lever of more monetary and fiscal stimulus, which could in turn provide a
catalyst to unlock the high level of savings accumulated during the Covid
lockdowns. The geopolitical backdrop, and particularly the trade issues
between the US and China, should not be underestimated, but as confidence in
American exceptionalism recedes there is potential for a genuine shift in
market sentiment from the US-dominated global equity market to ‘unloved’
China. In the first quarter of 2025, the Nasdaq was down by 15% while Hong
Kong’s Hang Seng Index was up by 15%.
While the trade problems may be making headlines, I would posit that the
bigger story for the long-term is the Chinese government’s willingness to
engage with the private sector and acknowledge the role it has to play in the
country’s future prosperity. From a bottom-up perspective, these businesses
are vibrant, entrepreneurial and inventive, and the growing dominance of
Chinese companies in certain global sectors is likely to be a continuing
theme. For many years, people have been used to buying goods that are made in
China but with Western brands attached, but now Chinese brands are gaining
traction globally. It is no longer rare to see BYD cars on British driveways
or Haier and Hisense appliances in European homes. This shows both the quality
of the products and the confidence of their manufacturers, both of which are
shared by your Board and the Manager. There will be bumps in the road and the
Chinese stock market will remain volatile but at the micro economic or company
level in China there are positive longer-term trends in place, which your
Company is well placed to benefit from.
MIKE BALFOUR
Chairman
9 June 2025
ANNUAL GENERAL MEETING – THURSDAY, 24 JULY 2025 AT 11.00 AM
The AGM of the Company will be held at 11.00 am on Thursday, 24 July 2025 at 4
Cannon Street, London EC4M 5AB (nearest tube stations are St Paul’s or
Mansion House) and virtually via the online Lumi AGM meeting platform. Full
details of the meeting are given in the Notice of Meeting in the Annual
Report.
For those shareholders who prefer not to attend in person, we will live-stream
the formal business and presentations of the meeting online.
Dale Nicholls, the Portfolio Manager, will be making a presentation to
shareholders discussing the performance of the past year and the prospects for
the year to come. Dale and the Board will be very happy to answer any
questions that shareholders may have. Copies of his presentation can be
requested by email at investmenttrusts@fil.com or in writing to the Secretary
at FIL Investments International, Beech Gate, Millfield Lane, Lower Kingswood,
Tadworth, Surrey KT20 6RP.
Properly registered shareholders joining the AGM virtually will be able to
vote on the proposed resolutions. Please see Note 9 to the Notes to the Notice
of Meeting in the Annual Report for details on how to vote virtually.
Investors viewing the AGM online will be able to submit live written questions
to the Board and the Portfolio Manager and these will be addressed at an
appropriate juncture during the meeting.
Further information and links to the Lumi platform may be found on the
Company’s website at www.fidelity.co.uk/china. On the day of the AGM, in
order to join electronically and ask questions via the Lumi platform,
shareholders will need to connect to the website
https://meetings.lumiconnect.com/100-135-001-078.
Please note that investors on platforms, such as Fidelity Personal Investing,
Hargreaves Lansdown, Interactive Investor or AJ Bell Youinvest, will need to
request attendance at the AGM in accordance with the policies of your chosen
platform. They may request that you submit electronic votes in advance of the
meeting. If you are unable to obtain a unique IVC and PIN from your nominee or
platform, we will also welcome your online participation as a guest. Once you
have accessed https://meetings.lumiconnect.com/100-135-001-078 from your web
browser on a tablet, smartphone or computer, you should then select the
‘Guest Access’ option before entering your name and who you are
representing, if applicable. This will allow you to view the meeting and ask
questions, but you will not be able to vote.
Further information on how to vote across the most common investment platforms
is available at the following link:
https://www.theaic.co.uk/how-to-vote-your-shares
PORTFOLIO MANAGER’S REVIEW
QUESTION
How has the investment company performed in the year to 31 March 2025?
ANSWER
As Fidelity China Special Situations PLC reaches the 15th anniversary of its
listing on the London Stock Exchange, I am pleased to report one of its
strongest annual performances since launch, albeit a volatile one.
The Company’s share price rose by 35.8% over the year, with the discount to
NAV narrowing from 10.2% at the start of the period to end at 7.3%. The
Company’s NAV returned 31.5%, underperforming the MSCI China Index (the
Benchmark Index), which delivered 37.5%. (All performance figures are on a
total return basis).
The first five months of the reporting year proved challenging, with a
combination of lacklustre economic stimulus, a weak property sector, and
subdued consumption in China weighing on investor sentiment. During this
period, the equity market eked out a marginal gain, with traditionally
defensive sectors, such as energy, utilities, telecommunications, and
state-owned banks outperforming. With its typical focus on growth-oriented
sectors, the Company delivered a small negative return.
However, sentiment improved sharply in September following a comprehensive
stimulus package from the Chinese government aimed at tackling deflation risks
and reinvigorating consumption and real estate markets. I believe the size and
breadth of the measures, and commitment expressed, marked a turning point in
Beijing’s efforts to tackle the key economic issues most on investors’
minds. Equities rallied sharply in the month, led by real estate,
consumer-related sectors, and healthcare.
While some of the momentum faded, a second major catalyst followed in January
- the announcement of DeepSeek’s ground-breaking artificial intelligence
(“AI”) model - reigniting enthusiasm for Chinese innovation and tech
stocks. The tech sector led a broad-based rally into the end of the financial
year, helping the Company to deliver a strong double-digit return.
While markets have been rocked by renewed US-China trade tensions since the
financial year end, I remain confident in the resilience of the companies we
own and the longer-term opportunity in Chinese equities.
QUESTION
What stocks have been the main drivers of performance during the year and why?
ANSWER
Performance during the year was driven largely by domestically focused small
and mid-cap stocks, financials, and several of the most innovative companies
held, particularly those linked to AI and the electric vehicle (“EV”)
supply chain.
Against a backdrop of stabilising economic activity, insurers and consumer
finance companies delivered strong returns. LexinFintech Holdings, a leading
FinTech lender, stood out with robust profit growth, improved asset quality,
and successful execution of its strategic shift toward a more optimised
product mix and stronger platform-based revenue. Similarly, Qifu Technology
benefited from solid earnings growth, an expanding user base, and a strong
ongoing programme of capital return. As an AI-enabled platform specialising in
short-term consumer credit, Qifu has built a leading market position. The
stimulus package also lifted sentiment across the broader financial sector,
supporting holdings such as Ping An Insurance Company and China Life
Insurance.
Investor enthusiasm for AI and digital transformation supported strong returns
in holdings such as Alibaba Group Holding, which advanced on rising
expectations for cloud platform demand. However, our underweight position
relative to the MSCI China Index limited the positive contribution. VNET
Group, one of China’s leading Internet Data Centre (IDC) operators,
benefited from growing AI-related infrastructure demand.
Other holdings also made meaningful contributions. Medlive Technology, an
online professional physician platform, rallied following the successful
launch of new AI driven services and accelerating AI commercialisation
efforts. Meanwhile, Kingdee International Software Group, a domestic leader in
enterprise resource planning (ERP) software, gained as it continues to benefit
from a broader industry shift toward SaaS (software-as-a-service) models and
hope that its AI-enabled features can accelerate penetration and improve
pricing.
One of the most innovative and strategically important areas continues to be
the EV sector, where Chinese companies are increasingly establishing global
leadership. While we acknowledge the significant growth potential for EV
manufacturers, my preferred exposure has been through suppliers further up the
value chain, where competition tends to be less intense, allowing margins to
be more attractive and stable. Holdings in Hesai Group, a leading automotive
LiDAR supplier, and Precision Tsugami China, a specialist in high-precision
small-size lathe machines, performed well. Precision Tsugami in particular
benefited from strong order momentum, driven by rising demand from both the
BYD supply chain and from manufacturers of AI server-related cooling systems.
On the other hand, not holding automakers BYD and Xiaomi detracted from
performance compared to the MSCI China benchmark index. Xiaomi’s stock
surged following the launch of its SU7 EV, which boosted sentiment across the
EV space. However, I remain cautious given the competitive intensity in the
auto sector along with relatively high valuations. In addition, we continue to
believe a key differentiator of the Company — backed by Fidelity’s
research and private-market valuation expertise — to invest in unlisted
companies broadens the opportunity set and represents an additional source of
potential returns for the Company.
TikTok developer ByteDance attracted attention given its role in the strategic
tech sector and increasing global relevance, placing it at the intersection of
innovation and geopolitical scrutiny. Encouragingly, the company emerged as a
strong contributor to performance and our added stake in August last year
further enhanced gains. ByteDance continued to deliver solid financial results
and international expansion, despite continued uncertainty around TikTok’s
US operations.
Conversely, leading autonomous driving player Pony.ai came under pressure post
IPO in late 2024, following weaker-than-expected fourth-quarter results,
despite this being less relevant given the early stage of this industry’s
development. We remain confident in the long-term potential of its business
given its strong technology platform and integrated ecosystem.
Overall, the unlisted investments delivered positive absolute returns to the
portfolio during the review period, though performance was comparatively muted
relative to the benchmark index, which benefited from a sentiment-driven rally
fuelled by stimulus measures and AI-related catalysts.
QUESTION
How have you utilised the investment company structure this year? Has it been
beneficial?
ANSWER
Net exposure to the market continues to reflect the quality and breadth of
investment opportunities available, typically increasing when valuations are
attractive and decreasing when opportunities become less prevalent, or
valuations more stretched. I have found no shortage of attractive investment
opportunities, and therefore net market exposure has fluctuated around 120%
during the reporting year - at the upper end of the Company’s target range
(previously around 125%). Net gearing was 20.9% at the end of the reporting
year, very marginally down from 20.8% at the start.
Importantly, gearing added 6.9% to performance during the year, underlining
the value that prudent gearing can bring when used appropriately.
QUESTION
Although President Trump’s “Liberation Day” announcement of higher
tariffs came after the reporting year end, what impact have they had so far on
the Company and on Chinese equities?
ANSWER
US-China trade tensions were widely anticipated but escalated more than most
expected. However, the recent agreement on temporary tariff reductions has
offered some relief. While the headline cuts are substantial, tariffs remain
materially higher than they were before the so-called “Liberation Day” and
have already caused significant disruption for both consumers and companies.
The base case is that tariffs will stay around these new levels after the
90-day period, but they continue to weigh on the earnings outlook,
particularly for certain export-oriented industries.
Companies within the technology hardware and machinery sectors face the most
direct pressure, with revenue impacts, given the uncertainty, and potential
margin compression on lower utilisation levels as tariff costs ripple through
supply chains. In our conversations with companies, few express concerns about
losing market share, because these sectors are often already dominated by
Chinese firms with similar supply chains. It is more a question of how demand
will respond when prices rise.
So, a key part of our analysis centres around questions of price elasticity. I
have reduced some exposure to the power equipment sector, where most companies
share similar supply chains, with the bulk of manufacturing and sourcing based
in China. But companies with diversified production footprints or strong
market positioning may weather the impact more effectively over time.
Overall, we expect the direct tariff impact on the Company to be
insignificant. The Company remains heavily invested in domestically driven
sectors such as healthcare, consumer staples, and segments of industrials,
which remain broadly resilient, supported by local demand and policy
tailwinds, which are likely to be more significant in response to the tariff
impact drag.
Lastly, some perspective is required: China is a market where sentiment can
swing significantly, but underlying fundamentals tend to evolve at a much
slower pace. Based on MSCI data, China’s revenue exposure to the US is
around 3%, so while market volatility is unsettling, the fundamental long-term
opportunity for most Chinese companies remains intact. In fact, the trade
friction itself in many ways reflects the rising competitiveness of Chinese
companies across a range of sectors.
QUESTION
How effective have recent Chinese government stimulus announcements been in
driving economic recovery, and do you think they will be successful?
ANSWER
Recent stimulus measures announced by the Chinese government have helped
stabilise short-term economic sentiment and provided targeted support to key
sectors. Notably, the recent Two Sessions - the annual meetings of the
National People’s Congress and the Chinese People’s Political Consultative
Conference (CPPCC) held in March - reinforced a clear message: policymakers
are committed to supporting growth, but through a focused and measured
approach.
With interest rates already at very low levels - though there remains some
room for further monetary easing - expectations are rising for more fiscal
action, particularly through policies aimed at boosting household incomes and
supporting consumption. Consumer incentive initiatives such as the trade-in
schemes, targeted property sector easing, and focused support for the services
industry have positively impacted retail sales and contributed to a more
stable outlook for the property market, as reflected in improving
month-on-month price trends.
However, policymakers have refrained from broad-based monetary easing or
large-scale stimulus programmes, opting instead for carefully targeted and
flexible interventions. This cautious approach is likely designed to balance
immediate economic support with long-term stability, especially given ongoing
external uncertainties. Success will ultimately depend on sustaining domestic
demand and consumer confidence, supported by employment growth, rising
disposable incomes, and structural economic improvements. All these are
well-established long-term goals of the government’s “dual circulation”
strategy to create a more balanced and resilient economy. Recent policy moves
have laid a strong foundation, but implementation requires ongoing monitoring.
QUESTION
How is the regulatory landscape evolving in China, and what implications does
this have for sectors like technology and consumer discretionary?
ANSWER
Investors may sometimes underestimate the somewhat cyclical nature of
China’s regulatory environment. We are seeing a clear increase in support
for private enterprise and innovation. One of the most visible signs of this
was President Xi’s recent meeting with senior executives from China’s
leading technology firms - a move that made headlines and reinforced the
government’s more constructive tone towards the technology sector and
private businesses more broadly.
As part of its long-standing “self-reliance” strategy, the government
continues to prioritise key areas such as high-tech manufacturing, AI and
advanced industrial automation.
Meanwhile, household balance sheets are healthy, and the vast domestic
consumer market could receive further support from targeted government
stimulus. We have seen exchange programmes in areas like autos and household
appliances already drive increased demand. Well-positioned e-commerce
platforms continue to benefit from structural growth trends, with the largest
players capitalising on network effects and enhanced cost control to drive
margin expansion.
Finally, government policy is also playing a constructive role in improving
corporate governance. We continue to see a notable rise in shareholder-focused
policies, with more companies increasing dividends and initiating buybacks. I
have been spending more time engaging with companies on capital allocation,
and this has already contributed to rising investment income for the Company,
supporting its unbroken record of growing dividends.
QUESTION
How do you assess current valuations relative to historical averages and
global markets?
ANSWER
Chinese equity valuations remain at compelling levels, both in absolute terms
and relative to other global markets. On a forward price-to-earnings basis,
the MSCI China Index is trading at around 10–11x, which is well below
historical averages and more than a 40% discount to the S&P 500. The
Company’s forward price-to-earnings ratio is slightly below that level,
despite a stronger growth profile, reinforcing the value on offer.
Looking more closely, there is significant dispersion beneath the surface of
the market. Many of the most exciting sectors, particularly consumer
discretionary and healthcare, are still trading at multi-year lows, despite
clear structural tailwinds and positive earnings momentum. Given recent global
policy shifts, one wonders if we will start to see a closing of China’s
implied risk premium versus other markets.
QUESTION
What are the key risks facing Chinese equities and how do you mitigate these
in the portfolio?
ANSWER
Despite the recent temporary reductions, higher tariffs will still impact the
outlook for GDP growth and corporate earnings, and the risk of another
escalation in tensions cannot be ruled out. That said, the broader Chinese
market is less reliant on US demand than it was during the previous trade war
cycle. Today, exports to the US account for a much smaller share of China’s
GDP, and many companies have already adapted their operations accordingly. As
a result, while export-oriented sectors remain vulnerable, the overall market
impact is now likely to be more muted than first feared.
Beyond geopolitics, domestic macro challenges - including continued weakness
in the property sector, subdued consumer confidence, and the ongoing
transition toward more consumption-driven growth - also present near-term
uncertainty. However, these are widely recognised risks and, in many cases,
are well reflected in current equity valuations.
We mitigate these risks in several ways. First, as mentioned, the Company’s
investments are skewed toward domestically driven sectors, which are less
exposed to external shocks and more aligned with China’s long-term strategic
objectives. Second, we maintain a focus on companies with strong pricing
power, and solid cash flows and balance sheets, which are better positioned to
navigate periods of volatility. We also look to own companies that are
undervalued and therefore offer a solid margin of safety.
Importantly, we also manage portfolio risk through active diversification -
across sectors, market caps, and business models - and dynamically adjust net
gearing and exposures depending on the opportunity set.
Finally, while macro and policy risks often dominate headlines, I believe
company-specific execution and fundamentals are ultimately what drive
long-term value creation. That is why our investment process remains rooted in
bottom-up research, with a strong emphasis on understanding competitive
positioning, management quality, and business resilience through different
market environments.
QUESTION
Finally, looking forward, what are the things that excite you most and that
you want to share with the Company’s shareholders?
ANSWER
What excites me most is the opportunity to invest in outstanding companies
that are executing well within growing industries, have durable competitive
advantages, and are still available to the Company at attractive valuations.
In China, innovation continues to thrive, supported by structural strengths
such as deep research and development (R&D) capabilities, a strong base of
engineering talent, and abundant data. Many companies with the right products
and services are increasing market penetration, maintaining or gaining
competitiveness and pricing power, and growing market share often both at home
and abroad.
The Company’s portfolio is well-positioned to benefit from this
innovation-led growth across sectors. In AI and digital infrastructure,
companies like Alibaba, Kingsoft, and Tencent Holdings are expanding cloud
capabilities, while platforms such as Tuhu Car and ByteDance are driving
monetisation through data-led service integration. In consumer sectors,
companies like Xtep International and Chicmax are harnessing strong product
innovation, digital marketing, and brand segmentation to drive solid market
share gains. In the EV space, BYD and Hesai are advancing next-generation
mobility through breakthroughs in battery systems and intelligent sensing,
while Pony.ai represents a forward-looking investment in autonomous transport.
In healthcare, HUTCHMED China and Innovent Biologics are good examples of
China’s growing strength in biotech, combining advanced biologics
manufacturing with innovative drug development to build a globally competitive
healthcare ecosystem. Meanwhile, industrial holdings such as Shenzhen Inovance
Technology and Weichai Power are enhancing competitiveness through automation
and component innovation. Collectively, these investments reflect the
Company’s focus on backing innovative leaders in areas where China is
steadily gaining global influence.
While macroeconomic uncertainty and market volatility can be unsettling, they
also create real opportunities for active investors, as stock prices often
become disconnected from company fundamentals. Across many industries,
companies are getting on with the job, executing their strategies profitably
while successfully adapting to challenges. For long-term investors, such an
environment presents the Company with a wealth of attractive opportunities to
generate excess returns for its shareholders.
DALE NICHOLLS
Portfolio Manager
9 June 2025
Strategic Report
Principal Risks and Uncertainties and Risk Management
As required by provisions 28 and 29 of the 2018 UK Corporate Governance Code,
the Board has a robust ongoing process for identifying, evaluating and
managing the principal risks and uncertainties faced by the Company, including
those that could threaten its business model, future performance, solvency or
liquidity. The Board, with the assistance of the Alternative Investment Fund
Manager (FIL Investment Services (UK) Limited/ the “Manager”), has
developed a risk matrix which, as part of the risk management and internal
controls process, identifies the key existing and emerging risks and
uncertainties that the Company faces.
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 UK
corporate governance obligations.
The Board considers the risks listed below as the principal risks and
uncertainties faced by the Company.
Emerging Risks
The Audit and Risk Committee continues to identify any new emerging risks 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 and Risk Committee. The Board determines
the nature and extent of any risks it is willing to take in order to achieve
its strategic objectives.
Climate change, which refers to a large scale shift in the planet’s weather
patterns and average temperatures, continues to be a key emerging as well as a
principal risk confronting asset managers and their investors. Globally,
climate change effects are already being experienced in the form of changing
weather patterns. Extreme weather events can potentially impact the operations
of investee companies, their supply chains and their customers. The Board
notes that the Manager includes ESG considerations, including climate change,
into the Company’s investment process. The Board will continue to monitor
how this may impact the Company as a risk to investment valuations and
potentially affect shareholder returns.
The Board, together with the Manager, is also monitoring the emerging risks
posed by the rapid advancement of artificial intelligence (AI) and technology
and how it may threaten the Company’s activities and its potential impact on
the portfolio and investee companies. AI can provide asset managers powerful
tools, such as enhancing data analysis risk management, trading strategies,
operational efficiency and client servicing, all of which can lead to better
investment outcomes and more efficient operations. However, with these
advances in computing power that will impact society, there are risks from its
increasing use and manipulation with the potential to harm, including a
heightened threat to cybersecurity.
Other emerging risks may continue to evolve from unforeseen geopolitical and
economic events.
Principal Risks Risk Description and Impact Risk Mitigation Trend
Geopolitical Risk · Geopolitics may impact on the value of investments and the Manager’s ability to access markets freely. · China trade tensions · The Board receives insights and information, including research notes, from the Manager and independent sources on a regular basis. · The portfolio is tilted to domestic Chinese markets. · Major adverse market events are stress-tested for operational resilience and financial impact. · Regulatory and policy development is monitored by Fidelity, including any relevant executive orders or sanctions. · Whilst it is not expected that China will change the rules affecting VIEs to the extent that it will ban foreign investment, this risk is closely monitored. Increasing
with US/EU/UK and the new US administration’s tariffs may impact on a transatlantic trade war, including the balance between
national security and economic interests. · A challenging regulatory environment may hinder foreign investment, including US
Executive Orders prohibiting transactions by US persons in certain publicly traded Chinese companies. As a result, there is an
increased risk of sanctions that could be imposed by western governments on individual Chinese companies held in the portfolio,
but also an increased risk of ADRs being delisted from foreign exchanges which would impact the Company, especially in cases
where a local listing does not exist. · Uncertainty from the ongoing global conflicts has increased tensions between the US and
Europe, elevating oil supply concerns and driving price volatility. China’s exports would be vulnerable to any disruption in
trade and the shipping sector. · Regional conflict in the Pacific remains a possibility. The ramifications, including potential
military conflict, could have very serious economic and stock market implications. Additionally, sanctions could lead to the
freezing of Chinese assets, limiting or prohibiting the Company’s ability to transact in Chinese denominated assets. · The
Company has exposure to a number of companies with all or part of their businesses in Variable Interest Entities (“VIEs”) and
there is a regulatory risk from the China Security Regulatory Commission (“CSCR”) guidelines around them. Although these rules
are meant to ease the regulatory uncertainty, they may impact their usage going forward as geopolitical risks remain increased.
Market and Economic Risks (including Currency Risk) · Whilst China’s outlook for “controlled stabilisation” is supported by targeted policy measures, the property sector, although · Growth is exceeding economic targets as the stable policy setting is helping to restore private sector confidence. · The Portfolio Manager and the Manager’s ability to understand and predict events in China. Independent risk management insight is provided on a regular basis. · The Company holds a diversified portfolio emphasising sectors of strategic importance to China. · The Board receives and reviews reports from the Portfolio Manager on a regular basis. Increasing
showing signs of some stabilisation, is a source of uncertainty. Growth in local consumption is expected but the US tariffs will
nevertheless impact economic activity · China’s economy is exposed to uncertain world growth prospects, tightening in global
financial conditions, energy costs, rising food prices, currency instability and challenging regulatory environment. · China
faces growing economic headwinds, including an aging population, environmental pollution, isolation of the financial system and
debt concerns in its corporate and local government sectors. · The currency in which the Company reports its results is sterling
and its ordinary shares trade in sterling, whilst the underlying investments are in different currencies. The Company does not
hedge currencies.
Investment Performance Risk (including Gearing Risk) · The Portfolio Manager may fail to outperform the Benchmark Index and peers over the longer-term. · High gearing levels in a · An investment strategy overseen by the Board to optimise returns from investing in China, as well as oversight of gearing and relevant limits. · Diversification of investments through investment restrictions and guidelines which are monitored and reported upon by the Investment Manager. · A well-resourced team of experienced analysts covering the market. · Board scrutiny of the Manager and the ability in extreme circumstances to change the Manager. Stable
falling market accentuates share price weakness. NAV performance can be affected by selling stock in a falling market to keep
the gearing level within pre-agreed limits.
Marketplace, · There is increased activity around mergers and acquisitions across the investment company marketplace and alternative · The Board, the Company’s Broker and the Manager closely monitor industry activity, the peer group and the share register. · An annual review of strategy is undertaken by the Board to ensure that the Company continues to offer a relevant product to investors. Increasing
Competition and Discount Management Risks investment offerings (including passive vehicles) which could influence the demand for the Company’s shares. · There is a risk
of costly shareholder activism in the investment company sector, pursuing goals that may not be in the interests of most
shareholders.
· The Board may fail to implement its discount management policy effectively to keep the level of the discount in single digits · The Company’s discount management policy is aimed at keeping the discount in single digits during normal market conditions. · Maintaining close communications with major shareholders
and in the face of heavy selling pressure, may exhaust its authorised buyback facility. · Changes in investor sentiment towards
China, market volatility and poor performance could lead to the Company trading at a larger discount to its underlying NAV, as
due to the nature of investment companies, the price of the Company’s shares and its discount to NAV are factors which are not
totally within the Company’s control.
Unlisted Securities Risk · Valuations of unlisted securities may be adversely affected by market conditions, government sanctions and US trade tariffs. · · The Company has set a limit on the level of investments in unlisted companies and the Manager has a track record of identifying profitable opportunities. · The Board’s Audit and Risk Committee scrutinises the carrying value of unlisted investments determined by the Manager, Fidelity’s unlisted investments specialist and an external valuer and advisor. Stable
Initial public offering (IPO) of the unlisted companies may face delays leading to longer holding periods. · Potential for less
stringent standards of governance compared with those of listed entities.
Key Person Risk · Loss of the Portfolio Manager or other key individuals could lead to potential performance and/or operational issues. · The Manager has succession plans for key dependencies. · The depth of the team within Fidelity, including the experience of the analysts covering China. Stable
Cybercrime and Information Security Risks, including Business Continuity Risk · Cybersecurity risk from cyberattacks or threats to the functioning of global markets and to the Manager’s own business model, · The Manager’s technology risk management teams have implemented a number of initiatives and controls to provide enhanced mitigating protection and also to address the risks of AI. · Key performance indicators and metrics have been developed by the Manager to monitor the overall efficacy of cybersecurity processes and controls and to further enhance the Manager’s cybersecurity strategy and operational resilience. · Fidelity has Business Continuity and Crisis Management Frameworks in place to deal with business disruption and assure operational resilience. · All third-party service providers are subject to a risk-based programme of risk oversight and internal audits by the Manager and their own internal controls reports are received an annual basis and any concerns are investigated. Increasing
including its and the Company’s outsourced suppliers. · Risk of cybercrime such as phishing, remote access threats, extortion
and denial-of-services attacks from highly organised criminal networks and sophisticated ransomware operators. Additional risks
from the increased use of artificial intelligence (AI). · Risks from the increased use of artificial intelligence (AI). ·
Business process disruption risk from continued threats of cyberattacks, geopolitical events, outages, fire events and natural
disasters, resulting in financial and/or reputational impact to the Company affecting the functioning of the business. · The
Company relies on a number of third-party service providers, principally the Registrar, Custodian and Depositary who may be
subject to cybercrime.
Operational Risk · Financial losses or reputational damage from inadequate or failed internal processes, people and systems or from external · Fidelity’s Operational Risk Management Framework is designed to pro-actively prevent, identify and manage operational risks inherent in most activities. · Fidelity uses robust systems and procedures dedicated to its operational processes. Its risk management structure is designed according to the FCA’s three lines of defence model. Decreasing
parties and events.
Continuation Vote
A continuation vote will take place every five years with the first such vote
to be held at the AGM in 2029.
Viability Statement
In accordance with provision 31 of the 2018 UK Corporate Governance Code, the
Directors have assessed the prospects of the Company over a longer period than
the twelve month period required by the “Going Concern” basis. The Company
is an investment trust with the objective of achieving long-term capital
growth. The Board considers that five years is an appropriate investment
horizon to assess the viability of the Company, although the life of the
Company is not intended to be limited to this or any other period.
In making an assessment on the viability of the Company, the Board has
considered the following:
· The ongoing relevance of the investment objective in prevailing market
conditions;
· The Company’s level of gearing;
· The Company’s NAV and share price performance compared to its Benchmark
Index;
· The principal and emerging risks and uncertainties facing the Company and
their potential impact, as set out above;
· The future demand for the Company’s shares;
· The Company’s share price discount to the NAV;
· The liquidity of the Company’s portfolio;
· The level of income generated by the Company;
· Future income and expenditure forecasts; and
· Introduction of a continuation vote with effect from 2029 and every five
years thereafter.
The Company’s performance for the five year reporting period to 31 March
2025 was a NAV total return of +33.4% and a share price total return of
+36.6%, both significantly outperforming the Benchmark Index total return of
+3.3%. The Board regularly reviews the investment policy and considers 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 considerations:
· The Investment Manager’s compliance with the Company’s investment
objective and policy, its investment strategy and asset allocation;
· The portfolio comprises sufficient readily realisable securities which can
be sold to meet funding requirements if necessary; and
· The ongoing processes for monitoring operating costs and income which are
considered to be reasonable in comparison to the Company’s total assets.
In preparing the Financial Statements, the Directors have considered the
impact of climate change and potential emerging risks from the use of
artificial intelligence as detailed above. The Board has also considered the
impact of regulatory changes, global trade tariffs, continuing tensions
between the US and China, and China and Taiwan, unforeseen market events and
the ongoing global implications of the war in Ukraine and the conflict in the
Middle East and how this may affect the Company.
In addition, the Directors’ assessment of the Company’s ability to operate
in the foreseeable future is included in the Going Concern Statement below.
GOING CONCERN STATEMENT
The Directors have considered the Company’s investment objective, risk
management policies, liquidity risk, credit risk, capital management policies
and procedures, the nature of its portfolio and its expenditure and cash flow
projections. The Directors, having considered the liquidity of the Company’s
portfolio of investments (being mainly securities which are readily
realisable), stress testing performed, the projected income and expenditure,
are satisfied that the Company is financially sound and has adequate resources
to meet all of its liabilities and ongoing expenses and continue in
operational existence for the foreseeable future. The Board has therefore
concluded that the Company has adequate resources to continue to adopt the
going concern basis for the period to 30 June 2026 which is at least twelve
months from the date of approval of the Financial Statements. This conclusion
also takes into account the Board’s assessment of the ongoing risks from the
war in Ukraine, the conflict in the Middle East, China’s tensions with the
US and Taiwan and significant market and geopolitical events and regulatory
changes that could impact the Company’s performance, prospects and
operations.
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 Trust, 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 and audit
services. The Board considers the Company’s key stakeholders to be the
existing and potential shareholders, the externally appointed Manager (FIL
Investment Services (UK) Limited) and other third-party professional service
providers. The Board considers that the interest of these stakeholders is
aligned with the Company’s objective of delivering long-term capital growth
to investors, in line with the Company’s stated objective and strategy,
while providing the highest standards of legal, regulatory and commercial
conduct.
The Board, with the Portfolio Manager, sets the overall investment strategy
and reviews this at an annual strategy day which is separate from the regular
cycle of board meetings. In order to ensure good governance of the Company,
the Board has set various limits on the investments in the portfolio, whether
in the maximum size of individual holdings, the use of derivatives, the level
of gearing and others. These limits and guidelines are regularly monitored and
reviewed and are set out in the Annual Report.
The Board receives regular reports from the Company’s Broker which covers
market activity, how the Company compares with its peers in the China sector
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 provides the key forum for the Board and the Portfolio
Manager to present to the shareholders on the Company’s performance and
future plans and the Board encourages all shareholders to attend in person or
virtually and raise any questions or concerns. The Chairman and other Board
members are available to meet shareholders as appropriate. Shareholders may
also communicate with Board members at any time by writing to them at the
Company’s registered office at FIL Investments International, Beech Gate,
Millfield Lane, Tadworth, Surrey KT20 6RP or via the Company Secretary at the
same address or by email at investmenttrusts@fil.com.
The Portfolio Manager meets with major shareholders, potential investors,
stock market analysts, journalists and other commentators throughout the year.
These communication opportunities help inform the Board in considering how
best to promote the success of the Company over the long-term.
The Board seeks to engage with the Manager and other service providers and
advisers in a constructive and collaborative way, promoting a culture of
strong governance, while encouraging open and constructive debate, in order to
ensure appropriate and regular challenge and evaluation. This aims to enhance
service levels and strengthen relationships with service providers, with a
view to ensuring shareholders’ interests are best served, by maintaining the
highest standards of commercial conduct while keeping cost levels competitive.
Whilst the Company’s direct operations are limited, the Board recognises the
importance of considering the impact of the Company’s investment strategy on
the wider community and environment. The Board believes that a proper
consideration of ESG issues aligns with the Company’s investment objective
to deliver long-term capital growth, and the Board’s review of the Manager
includes an assessment of their ESG approach.
In addition to ensuring that the Company’s investment objective was being
pursued, key decisions and actions taken by the Directors during the reporting
year, and up to the date of this report, have included:
· The decision to once again hold a hybrid AGM this year in order to make
the AGM more accessible and improve the shareholder experience;
· Meeting the Company’s key shareholders during the reporting year;
· Authorising the repurchase of 30,841,184 shares for cancellation in the
reporting year when the Company’s discount widened, in line with the
Board’s intention that the ordinary share price should trade at a level
close to the underlying NAV. Since the year ended 31 March 2025 and up to the
latest practicable date of this report, a further 973,792 shares have been
repurchased; and
· The decision to pay a final ordinary dividend of 8.00 pence per share as
well as a special dividend of 1.00 pence per share as explained in the
Chairman’s Statement.
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and the
Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each
financial period. Under that law they have elected to prepare the Financial
Statements in accordance with UK-adopted International Accounting Standards
(“IFRS”) in conformity with the requirements of the Companies Act 2006 and
IFRIC interpretations. Under company law the Directors must not approve the
Financial Statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or loss for the
reporting period.
In preparing these Financial Statements the Directors are required to:
· Select suitable accounting policies in accordance with IAS 8: Accounting
Policies, Changes in Accounting Estimates and Errors, and then apply them
consistently;
· Make judgements and estimates that are reasonable and prudent;
· Present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
· Provide additional disclosures when compliance with the specific
requirements in IFRS is insufficient to enable users to understand the impact
of particular transactions, other events and conditions on the Company’s
financial position and financial performance;
· State whether applicable IFRS and IFRIC interpretations have been
followed, subject to any material departures disclosed and explained in the
Financial Statements; and
· Prepare the Financial Statements on the going concern basis unless it is
inappropriate to assume that the Company will continue in business.
The Directors are responsible for ensuring that adequate accounting records
are kept which disclose with reasonable accuracy at any time the financial
position of the Company and to enable them to ensure that the Financial
Statements comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, a Directors’ Report, a Corporate Governance
Statement and a Directors’ Remuneration Report that comply with that law and
those regulations.
The Directors have delegated to the Manager the responsibility for the
maintenance and integrity of the corporate and financial information included
on the Company’s pages of the Manager’s website at
www.fidelity.co.uk/china. Visitors to the website need to be aware that
legislation in the UK governing the preparation and dissemination of the
Financial Statements may differ from legislation in their own jurisdictions.
The Directors confirm that to the best of their knowledge:
· The Financial Statements, prepared in accordance with UK-adopted
International Accounting Standards (“IFRS”) and IFRIC interpretations,
give a true and fair view of the assets, liabilities, financial position and
loss of the Company;
· The Annual Report includes a fair review of the development and
performance of the business and the position of the Company, together with a
description of the principal risks and uncertainties it faces; and
· The Annual Report and Financial Statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for
shareholders to assess the Company’s performance, business model and
strategy.
The Statement of Directors’ Responsibilities was approved by the Board on 9
June 2025 and signed on its behalf by:
MIKE BALFOUR
Chairman
FINANCIAL STATEMENTS
Income Statement for the year ended 31 March 2025
Year ended 31 March 2025 Year ended 31 March 2024
Notes Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Revenue
Investment income 3 46,862 – 46,862 26,123 – 26,123
Derivative income 3 13,747 – 13,747 11,154 – 11,154
Other income 3 2,090 – 2,090 1,659 – 1,659
--------------- --------------- --------------- --------------- --------------- ---------------
Total income 62,699 – 62,699 38,936 – 38,936
========= ========= ========= ========= ========= =========
Gains/(losses) on investments at fair value through profit or loss 10 – 249,875 249,875 – (155,001) (155,001)
Gains/(losses) on derivative instruments 11 – 57,121 57,121 – (54,790) (54,790)
Foreign exchange gains/(losses) – 1,769 1,769 – (3,858) (3,858)
Foreign exchange gains on bank loans – – – – 1,517 1,517
--------------- --------------- --------------- --------------- --------------- ---------------
Total income and gains/(losses) 62,699 308,765 371,464 38,936 (212,132) (173,196)
========= ========= ========= ========= ========= =========
Expenses
Investment management fees 4 (2,469) (5,572) (8,041) (2,430) (8,991) (11,421)
Other expenses 5 (1,211) (32) (1,243) (1,203) (35) (1,238)
--------------- --------------- --------------- --------------- --------------- ---------------
Profit/(loss) before finance costs and taxation 59,019 303,161 362,180 35,303 (221,158) (185,855)
Finance costs 6 (5,774) (17,324) (23,098) (6,699) (20,098) (26,797)
--------------- --------------- --------------- --------------- --------------- ---------------
Profit/(loss) before taxation 53,245 285,837 339,082 28,604 (241,256) (212,652)
Taxation 7 (1,070) – (1,070) (812) – (812)
--------------- --------------- --------------- --------------- --------------- ---------------
Profit/(loss) after taxation for the year 52,175 285,837 338,012 27,792 (241,256) (213,464)
--------------- --------------- --------------- --------------- --------------- ---------------
Earnings/(loss) per ordinary share 8 10.18p 55.75p 65.93p 5.78p (50.18p) (44.40p)
========= ========= ========= ========= ========= =========
The Company does not have any income or expenses that are not included in the
profit/(loss) after taxation for the year. Accordingly, the profit/(loss)
after taxation for the year is also the total comprehensive income for the
year and no separate Statement of Comprehensive Income has been presented.
The total column of this statement represents the Income Statement of the
Company. The revenue and capital columns are supplementary and presented for
information purposes as recommended by the Statement of Recommended Practice
issued by the AIC.
All the profit/(loss) and total comprehensive income is attributable to the
equity shareholders of the Company. There are no minority interests.
No operations were acquired or discontinued in the year and all items in the
above statement derive from continuing operations.
The Notes below form an integral part of these Financial Statements.
Statement of Changes in Equity for the year ended 31 March 2025
Notes Share Share Capital Other Capital Revenue Total
capital premium redemption reserve reserve reserve equity
£’000 account reserve £’000 £’000 £’000 £’000
£’000 £’000
Total equity at 31 March 2024 6,113 338,167 1,104 140,861 636,526 53,243 1,176,014
Contribution in respect of the transaction with ACIC by the Manager – 100 – – – – 100
Costs relating to the issuance of new shares in respect to the ACIC transaction – (160) – – – – (160)
Repurchase of ordinary shares for cancellation 14 (308) – 308 (66,809) – – (66,809)
Profit after taxation for the year – – – – 285,837 52,175 338,012
Dividend paid to shareholders 9 – – – – – (33,355) (33,355)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total equity at 31 March 2025 5,805 338,107 1,412 74,052 922,363 72,063 1,413,802
========= ========= ========= ========= ========= ========= =========
Total equity at 31 March 2023 5,710 211,569 917 186,794 877,782 55,649 1,338,421
New ordinary shares issued in respect of the transaction with ACIC 14 590 126,198 – – – – 126,788
Contribution in respect of the transaction with ACIC by the Manager – 400 – – – – 400
Repurchase of ordinary shares into Treasury 14 – – – (6,965) – – (6,965)
Repurchase of ordinary shares for cancellation 14 (187) – 187 (38,968) – – (38,968)
(Loss)/profit after taxation for the year – – – – (241,256) 27,792 (213,464)
Dividend paid to shareholders 9 – – – – – (30,198) (30,198)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total equity at 31 March 2024 6,113 338,167 1,104 140,861 636,526 53,243 1,176,014
========= ========= ========= ========= ========= ========= =========
The Notes below form an integral part of these Financial Statements.
Balance Sheet as at 31 March 2025
Company number 7133583
Notes 31 March 31 March
2025 2024
£’000 £’000
Non-current assets
Investments at fair value through profit or loss 10 1,346,238 1,162,265
--------------- ---------------
Current assets
Derivative instruments 11 9,938 7,103
Amounts held at futures clearing houses and brokers 33,760 24,589
Other receivables 12 7,295 10,066
Cash and cash equivalents 49,691 7,858
--------------- ---------------
100,684 49,616
========= =========
Current liabilities
Derivative instruments 11 (24,838) (13,307)
Other payables 13 (8,282) (9,802)
Bank overdrafts – (12,758)
--------------- ---------------
(33,120) (35,867)
========= =========
Net current assets 67,564 13,749
========= =========
Net assets 1,413,802 1,176,014
========= =========
Equity attributable to equity shareholders
Share capital 14 5,805 6,113
Share premium account 15 338,107 338,167
Capital redemption reserve 15 1,412 1,104
Other reserve 15 74,052 140,861
Capital reserve 15 922,363 636,526
Revenue reserve 15 72,063 53,243
--------------- ---------------
Total equity 1,413,802 1,176,014
========= =========
Net asset value per ordinary share 16 285.71p 223.71p
========= =========
The Financial Statements above and below were approved by the Board of
Directors on 9 June 2025 and were signed on its behalf by:
MICHAEL BALFOUR
Chairman
The Notes below form an integral part of these Financial Statements.
Cash Flow Statement for the year ended 31 March 2025
Year ended Year ended
31 March 31 March
2025 2024
£’000 £’000
Operating activities
Cash inflow from investment income 45,209 26,240
Cash inflow from derivative income 14,002 10,891
Cash inflow from other income 2,090 1,659
Cash outflow from Directors’ fees (249) (236)
Cash outflow from other payments (9,433) (13,104)
Cash outflow from the purchase of investments (651,563) (592,266)
Cash outflow from the purchase of derivatives (2,242) (1,910)
Cash outflow from the settlement of derivatives (436,471) (301,285)
Cash inflow from the sale of investments 716,551 703,150
Cash inflow from the settlement of derivatives 507,321 260,351
Cash (outflow)/inflow from amounts held at futures clearing houses and brokers (9,171) 10,224
--------------- ---------------
Net cash inflow from operating activities before servicing of finance 176,044 103,714
========= =========
Financing activities
Cash inflow from the issuance of ordinary shares in respect of the transaction with ACIC – 5,156
Cash inflow from the Fidelity contribution in respect of the transaction with ACIC – 400
Cash outflow from loan interest paid (80) (5,138)
Cash outflow from the settlement of the bank loan – (79,340)
Cash outflow from CFD interest paid (22,478) (22,695)
Cash outflow from short CFD dividends paid (321) –
Cash outflow from the repurchase of ordinary shares into Treasury – (7,095)
Cash outflow from the repurchase of ordinary shares for cancellation (66,988) (38,789)
Cash outflow from dividends paid to shareholders (33,355) (30,198)
--------------- ---------------
Cash outflow from financing activities (123,222) (177,699)
========= =========
Net increase/(decrease) in cash at bank 52,822 (73,985)
Cash at bank at the start of the year 7,858 72,943
Bank overdraft at the start of the year (12,758) –
Effect of foreign exchange movements 1,769 (3,858)
--------------- ---------------
Cash at bank at the end of the year 49,691 (4,900)
Represented by: ========= =========
Cash at bank 49,691 7,858
Bank overdrafts – (12,758)
--------------- ---------------
49,691 (4,900)
========= =========
The Notes below form an integral part of these Financial Statements.
NOTES TO THE FINANCIAL STATEMENTS
1. PRINCIPAL ACTIVITY
Fidelity China Special Situations PLC is an Investment Company incorporated in
England and Wales that is listed on the London Stock Exchange. The Company’s
registration number is 7133583, and its registered office is Beech Gate,
Millfield Lane, Lower Kingswood, Tadworth, Surrey KT20 6RP. The Company has
been approved by HM Revenue & Customs as an Investment Trust under Section
1158 of the Corporation Tax Act 2010 and intends to conduct its affairs so as
to continue to be approved.
2. ACCOUNTING POLICIES
The Company’s Financial Statements have been prepared in accordance with
UK-adopted International Accounting Standards (“IFRS”), IFRIC
interpretations and as far as it is consistent with IFRS, with the Statement
of Recommended Practice: Financial Statements of Investment Trust Companies
and Venture Capital Trusts (“SORP”) issued by the Association of
Investment Companies (“AIC”) in July 2022. The accounting policies adopted
in the preparation of these Financial Statements are summarised below.
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 30 June 2026 which is at
least twelve months from the date of approval of these Financial Statements.
In making their assessment the Directors have reviewed income and expense
projections, the
liquidity of the investment portfolio, stress testing performed and considered
the Company’s ability to meet liabilities as they fall due. This conclusion
also takes into account the Director’s assessment of the risks faced by the
Company as detailed in the Going Concern Statement above.
In preparing these Financial Statements the Directors have considered the
impact of climate change risk as an emerging and a principal risk as set out
above and have concluded that there was no further impact of climate change to
be taken into account as the investments are valued based on market pricing.
In line with IFRS 13, investments are valued at fair value, which for the
Company are quoted bid prices for investments in active markets at the balance
sheet date. Investments which are unlisted are priced using market-based
valuation approaches. All investments therefore reflect the market
participants view of climate change risk on the investments held by the
Company.
The Company’s Going Concern Statement above takes account of all events and
conditions up to 30 June 2026 which is at least twelve months from the date of
approval of these Financial Statements.
Issue of Ordinary Shares in respect of the transaction with abrdn China
Investment Company Limited (“ACIC”)
In the prior year, the Company issued new ordinary shares which were provided
to shareholders of ACIC, in connection with the combination of the assets of
the Company with the assets of ACIC.
The Manager agreed to a contribution of £715,000, representing eight months
of management fees, in respect of the assets transferred by ACIC to the
Company, that would otherwise be payable by the enlarged Company to the
Manager in the year to 31 March 2025.
Additionally, the Manager agreed to make a cash contribution to the Company
equal to £500,000. In the year to 31 March 2024, the Company had recognised
an initial contribution of £400,000, with a further £100,000 being
recognised in the year to 31 March 2025, to align with the reduction of
management fees and the recognition of expenses relating to the transaction
and issuance of shares.
Transaction costs of £543,000 in relation to the combination of ACIC have
been recognised in the Income Statement in Note 10. Costs of £160,000 in
relation to issuing new shares have been recognised in the Statement of
Changes in Equity.
The Company has recognised the additional contribution from the Manager and
the expenses relating to the issuance of shares in the Share premium account
as described in Note 15.
b) Adoption of new and revised International Accounting Standards – the
accounting policies adopted are consistent with those of the previous
financial year.
At the date of authorisation of these Financial Statements, the following
revised IAS were in issue but not yet effective:
· Amendments to IAS 1 Classification of Liabilities as Current or
Non-current;
· Amendments to IAS 7 and IFRS 7 Supplier finance arrangements;
· Amendments to IFRS 9 and IFRS 7 Classification and Measurement of
Financial Instruments; and
· IFRS 18 Presentation and Disclosure in Financial Statements.
The Directors do not expect that the adoption of the above Standards will have
a material impact on the Financial Statements of the Company in future
periods.
c) Segmental reporting – The Company is engaged in a single segment business
and, therefore, no segmental reporting is provided.
d) Presentation of the Income Statement – In order to reflect better the
activities of an investment company and in accordance with guidance issued by
the AIC, supplementary information which analyses the Income Statement between
items of a revenue and capital nature has been prepared alongside the Income
Statement. The revenue profit after taxation for the year is the measure the
Directors believe appropriate in assessing the Company’s compliance with
certain requirements set out in Section 1159 of the Corporation Tax Act 2010.
e) Significant accounting estimates, assumptions and judgements – The
preparation of the Financial Statements requires the use of estimates,
assumptions and judgements. These estimates, assumptions and judgements affect
the reported amounts of assets and liabilities at the reporting date. While
estimates are based on best judgement using information and financial data
available, the actual outcome may differ from these estimates.
The key sources of estimation and uncertainty relate to the fair value of the
unlisted investments.
Judgements
The Directors consider whether each fair value is appropriate following
detailed review and challenge of the pricing methodology. The judgement
applied in the selection of the methodology used (see Note 2 (l) below) for
determining the fair value of each unlisted investment can have a significant
impact upon the valuation.
Estimates
The key estimate in the Financial Statements is the determination of the fair
value of the unlisted investments by the Manager’s Fair Value Committee
(“FVC”), with support from an external valuer and Fidelity’s unlisted
investments specialist, for detailed review and appropriate challenge by the
Directors. This estimate is key as it significantly impacts the valuation of
the unlisted investments at the Balance Sheet date. When no recent primary or
secondary transaction in the company’s shares have taken place, the fair
valuation process involves estimation using subjective inputs that are
unobservable (for which market data is unavailable). The estimates involved in
the valuation process may include the following:
(i) The selection of appropriate comparable companies. Comparable companies
are chosen on the basis of their business characteristics and growth patterns;
(ii) The selection of a revenue metric (either historical or forecast);
(iii) The selection of an appropriate illiquidity discount factor to reflect
the reduced liquidity of unlisted companies versus their listed peers;
(iv) The estimation of the likelihood of a future exit of the position
through an initial public offering (“IPO”) or a company sale;
(v) The selection of an appropriate industry benchmark index to assist with
the valuation; and
(vi) The calculation of valuation adjustments derived from milestone analysis
and future cash flows (i.e. incorporating operational success against the
plans/forecasts of the business into the valuation).
As the valuation outcomes may differ from the fair value estimates a price
sensitivity analysis is provided in Other Price Risk Sensitivity in Note 17 to
illustrate the effect on the Financial Statements of an over or under
estimation of fair value.
The risk of an over or under estimation of fair value is greater when
methodologies are applied using more subjective inputs.
Assumptions
The determination of fair value by the FVC involves key assumptions dependent
upon the valuation techniques used. The valuation process recognises that the
price of a recent investment may be an appropriate starting point for
estimating fair value. The Multiples approach involves subjective inputs and
therefore presents a greater risk of over or under estimation, particularly in
the absence of a recent transaction.
f) Income – Income from equity investments and long contracts for difference
(“CFDs”) is credited to the revenue column of the Income Statement on the
date on which the right to receive the payment is established, normally the
ex-dividend date. Overseas dividends are accounted for gross of any tax
deducted at source. Where the Company has elected to receive its dividends in
the form of additional shares rather than cash, the amount of the cash
dividend foregone is recognised as income. Any excess in the value of the
shares received over the amount of the cash dividend foregone is recognised as
a gain in the capital column of the Income Statement. Special dividends are
treated as a revenue receipt or a capital receipt depending on the facts and
circumstances of each particular case.
Interest on securities, interest for CFDs, collateral and bank deposits are
accounted for on an accruals basis and credited to the revenue column of the
Income Statement. Interest received on CFDs represent the finance costs
calculated by reference to the notional value of the CFDs.
g) Functional currency and foreign exchange – The functional and reporting
currency of the Company is UK sterling, which is the currency of the primary
economic environment in which the Company operates. Transactions denominated
in foreign currencies are reported in UK sterling at the rate of exchange
ruling at the date of the transaction. Assets and liabilities in foreign
currencies are translated at the rates of exchange ruling at the Balance Sheet
date. Foreign exchange gains and losses arising on translation are recognised
in the Income Statement as a revenue or a capital item depending on the nature
of the underlying item to which they relate.
h) Investment management and other expenses – These are accounted for on an
accruals basis and are charged as follows:
· The base investment management fee is allocated 25% to revenue and 75% to
capital;
· The variable investment management fee is charged/credited to capital as
it is based on the performance of the net asset value per share relative to
the Benchmark Index; and
· All other expenses are allocated in full to revenue with the exception of
those directly attributable to share issues or other capital events.
i) Finance costs – Finance costs comprise interest on the bank loan and
overdrafts and finance costs paid on CFDs, which are accounted for on an
accruals basis, and dividends paid on short CFDs, which are accounted for on
the date on which the obligation to incur the cost is established, normally
the ex-dividend date. Finance costs are allocated 25% to revenue and 75% to
capital.
j) Taxation – The taxation charge represents the sum of current taxation and
deferred taxation.
Taxation currently payable is based on the taxable profit for the year.
Taxable profit differs from profit before taxation, as reported in the Income
Statement, because it excludes items of income or expense that are taxable or
deductible in other years and items that are never taxable or deductible. The
Company’s liability for current taxation is calculated using taxation rates
that have been enacted or substantially enacted by the Balance Sheet date.
Deferred taxation is the taxation expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities in the
Financial Statements and the corresponding taxation bases used in the
computation of taxable profit based on tax rates that have been enacted or
substantively enacted when the taxation is expected to be payable or
recoverable, and is accounted for using the balance sheet liability method.
Deferred taxation liabilities are recognised for all taxable temporary
differences and deferred taxation assets are
recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised.
Taxation is charged or credited to the revenue column of the Income Statement,
except where it relates to items of a capital nature, in which case it is
charged or credited to the capital column of the Income Statement. Where
expenses are allocated between revenue and capital any tax relief in respect
of the expenses is allocated between revenue and capital returns on the
marginal basis using the Company’s effective rate of corporation tax for the
accounting period. The Company is an approved Investment Trust under Section
1158 of the Corporation Tax Act 2010 and is not liable for UK taxation on
capital gains.
k) Dividend paid to shareholders – Dividends payable to equity shareholders
are recognised when the Company’s obligation to make payment is established.
l) Investments – The portfolio of financial assets is managed and its
performance evaluated on a fair value basis, in accordance with a documented
investment strategy, and information about the portfolio is provided on that
basis to the Company’s Board of Directors. Under IFRS 9 investments are held
at fair value through profit or loss, which is initially taken to be their
cost, and is subsequently measured at bid or last traded prices, depending
upon the convention of the exchange on which they are listed, where available,
or otherwise at fair value based on published price quotations.
Investments which are not quoted, or are not frequently traded, are stated at
the best estimate of fair value. The Manager’s Fair Value Committee
(“FVC”), which is independent of the Portfolio Manager’s team, and with
support from the external valuer and Fidelity’s unlisted investments
specialist, provides recommended fair values to the Directors. These are based
on the principles outlined in Note 2 (e). The unlisted investments are valued
at fair value following a detailed review and appropriate challenge by the
Directors of the pricing methodology
proposed by the FVC.
The techniques applied by the FVC when valuing the unlisted investments are
predominantly market-based approaches. The market based approaches are set out
below and are followed by an explanation of how they are applied to the
Company’s unlisted portfolio:
· Multiples;
· Industry Valuation Benchmarks; and
· Available Market Prices.
The nature of the unlisted investment will influence the valuation technique
applied. The valuation approach recognises that the price of a recent
investment, if resulting from an orderly transaction, generally represents
fair value as at the transaction date and may be an appropriate starting point
for estimating fair value at subsequent measurement dates. However,
consideration is given to the facts and circumstances as at the subsequent
measurement date, including changes in the market or performance of the
investee company. Milestone analysis and future cash flows are used where
appropriate to incorporate the operational progress of the investee company
into the valuation. Consideration is also given to the input received from the
Fidelity International analyst that covers the company, Fidelity’s unlisted
investments specialist and from an external valuer. Additionally, the
background to the transaction must be considered. As a result, various
multiples-based techniques are employed to assess the valuations particularly
in those companies with established revenues. An absence of relevant industry
peers may preclude the application of the Industry Valuation Benchmarks
technique and an absence of observable prices may preclude the Available
Market Prices approach.
The unlisted investments are valued according to a three month cycle of
measurement dates. The fair value of the unlisted investments will be reviewed
before the next scheduled three monthly measurement date on the following
occasions:
· At the year end and half year end of the Company; and
· Where there is an indication of a change in fair value (commonly referred
to as ‘trigger’ events).
In accordance with the AIC SORP, the Company includes transaction costs,
incidental to the purchase or sale of investments within gains/(losses) on
investments held at fair value through profit or loss in the capital column of
the Income Statement and has disclosed them in Note 10 below.
m) Derivative instruments – When appropriate, permitted transactions in
derivative instruments are used. Derivative transactions into which the
Company may enter include CFDs, futures, options, warrants and forward
currency contracts. Under IFRS 9 derivatives are classified at fair value
through profit or loss – held for trading, and are initially accounted and
measured at fair value on the date the derivative contract is entered into and
subsequently measured at fair value as follows:
· CFDs – the difference between the strike price and the value of the
underlying shares in the contract, calculated in accordance with accounting
policy 2 (l);
· Futures – the difference between contract price and the quoted trade
price; and
· Options – the quoted trade price for the contract.
Where such transactions are used to protect or enhance income, if the
circumstances support this, the income derived is included in derivative
income in the revenue column of the Income Statement. Where such transactions
are used to protect or enhance capital, if the circumstances support this, the
gains and losses derived are included in gains/(losses) on derivative
instruments held at fair value through profit or loss in the capital column of
the Income Statement. Any positions on such transactions open at the year end
are reflected on the Balance Sheet at their fair value within current assets
or current liabilities.
The Company obtains equivalent exposure to equities through the use of CFDs.
All gains and losses in the fair value of the CFDs are included in
gains/(losses) on derivative instruments held at fair value through profit or
loss in the capital column of the Income Statement.
n) Amounts held at futures clearing houses and brokers – Cash deposits are
held in segregated accounts on behalf of brokers as collateral against open
derivative contracts. These are carried at amortised cost.
o) Other receivables – Other receivables include securities sold for future
settlement, amounts receivable on settlement of derivatives, accrued income,
taxation recoverable and other debtors and prepayments incurred in the
ordinary course of business. If collection is expected in one year or less (or
in the normal operating cycle of the business, if longer) they are classified
as current assets. If not, they are presented as non-current assets. Other
receivables are recognised initially at fair value and, where applicable,
subsequently measured at amortised cost using the effective interest rate
method and as reduced by appropriate allowance for estimated irrecoverable
amounts.
p) Other payables – Other payables include securities purchased for future
settlement, amounts payable on settlement of derivatives, investment
management fees, amounts payable for repurchase of shares, finance costs
payable and expenses accrued in the ordinary course of business. Other
payables are classified as current liabilities if payment is due within one
year or less (or in the normal operating cycle of the business, if longer). If
not, they are presented as non-current liabilities. Other payables are
recognised initially at fair value and, where applicable, subsequently
measured at amortised cost using the effective interest rate method.
q) Other reserve –The full cost of ordinary shares repurchased and held in
Treasury and ordinary shares repurchased for cancellation is charged to the
Other reserve.
r) Capital reserve – The following are transferred to capital reserve:
· Gains and losses on the disposal of investments and derivatives
instruments;
· Changes in the fair value of investments and derivative instruments, held
at the year end;
· Foreign exchange gains and losses of a capital nature;
· Variable investment management fees;
· 75% of base investment management fees;
· 75% of finance costs;
· Dividends receivable which are capital in nature;
· Taxation charged or credited relating to items which are capital in
nature; and
· Other expenses which are capital in nature.
Technical guidance issued by the Institute of Chartered Accountants in England
and Wales in TECH 02/17BL, guidance on the determination of realised profits
and losses in the context of distributions under the Companies Act 2006,
states that changes in the fair value of investments which are readily
convertible to cash, without accepting adverse terms at the Balance Sheet
date, can be treated as realised. Capital reserves realised and unrealised are
shown in aggregate as capital reserve in the Statement of Changes in Equity
and the Balance Sheet. At the Balance Sheet date, the portfolio of the Company
consisted of investments listed on a recognised stock exchange and derivative
instruments contracted with counterparties having adequate credit rating, and
the portfolio was considered to be readily convertible to cash, with the
exception of the level 3 investments which had unrealised investment holding
gains of £24,731,000 (2024: unrealised investment holding gains of
£10,288,000). See Note 17 below for further details on the level 3
investments.
3. INCOME
Year ended Year ended
31 March 31 March
2025 2024
£’000 £’000
Investment income
Overseas dividends 46,590 26,052
Overseas scrip dividends 272 –
Interest on securities – 71
--------------- ---------------
46,862 26,123
========= =========
Derivative income
Dividends received on long CFDs 13,152 10,525
Interest received on CFDs 595 629
--------------- ---------------
13,747 11,154
========= =========
Other income
Interest received on collateral, bank deposits and money market funds 2,090 1,659
--------------- ---------------
Total income 62,699 38,936
========= =========
Special dividends of £1,493,000 (2024: £1,458,000) have been recognised in
capital.
4. INVESTMENT MANAGEMENT FEES
Year ended 31 March 2025 Year ended 31 March 2024
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Investment management fee – base 2,648 7,942 10,590 2,430 7,289 9,719
Investment management fee – variable – (1,834) (1,834) – 1,702 1,702
Investment management fee – base (waived in respect of ACIC combination) (179) (536) (715) – – –
--------------- --------------- --------------- --------------- --------------- ---------------
2,469 5,572 8,041 2,430 8,991 11,421
========= ========= ========= ========= ========= =========
FIL Investment Services (UK) Limited is the Company’s Alternative Investment
Fund Manager (“the Manager”) and has delegated portfolio management to FIL
Investment Management (Hong Kong) Limited (“the Investment Manager”). Both
companies are Fidelity group companies.
Since 14 March 2024, the base investment management fee has been charged at an
annual rate of 0.85% (previously 0.90%) on the first £1.5 billion of Net
Assets, reducing to 0.65% (previously 0.70%) of Net Assets over £1.5 billion.
The Manager agreed to a contribution of £715,000, representing eight months
of management fees, in respect of the assets transferred by ACIC to the
Company (in March 2024), that would otherwise be payable by the enlarged
Company to the Manager being recognised in the year to 31 March 2025.
In addition, there is a +/-0.20% variable fee based on the Company’s NAV per
share performance relative to the Company’s Benchmark Index measured daily
over a three year rolling basis.
Fees are payable monthly in arrears and are calculated on a daily basis. The
base investment management fee has been allocated 75% to capital reserve in
accordance with the Company’s accounting policies.
Further details of the terms of the Management Agreement are given in the
Directors’ Report in the Annual Report.
5. OTHER EXPENSES
Year ended Year ended
31 March 31 March
2025 2024
£’000 £’000
Allocated to revenue:
AIC fees 22 21
Custody fees 45 101
Depositary fees 55 52
Directors’ expenses 89 79
Directors’ fees 1 250 240
Legal and professional fees 104 143
Marketing expenses 327 269
Printing and publication expenses 52 39
Registrars’ fees 71 63
Other expenses 133 125
Fees payable to the Company’s Independent Auditor for the audit of the Financial Statements 63 71
--------------- ---------------
1,211 1,203
========= =========
Allocated to capital:
Legal and professional fees 32 35
--------------- ---------------
Other expenses 1,243 1,238
========= =========
1 Details of the breakdown of Directors’ fees are provided within the
Directors’ Remuneration Report in the Annual Report.
6. Finance Costs
Year ended 31 March 2025 Year ended 31 March 2024
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Interest paid on bank loan and overdrafts 20 60 80 1,117 3,352 4,469
Interest paid on CFDs 5,674 17,023 22,697 5,582 16,746 22,328
Dividends paid on short CFDs 80 241 321 – – –
--------------- --------------- --------------- --------------- --------------- ---------------
5,774 17,324 23,098 6,699 20,098 26,797
========= ========= ========= ========= ========= =========
Finance costs have been allocated 75% to capital reserve in accordance with
the Company’s accounting policies.
7. TAXATION
Year ended 31 March 2025 Year ended 31 March 2024
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
a) Analysis of the taxation charge for the year
Overseas taxation 1,070 – 1,070 812 – 812
--------------- --------------- --------------- --------------- --------------- ---------------
Taxation charge for the year (see Note 7b) 1,070 – 1,070 812 – 812
========= ========= ========= ========= ========= =========
b) Factors affecting the taxation charge for the year
The taxation charge for the year is lower than the standard rate of UK
corporation tax for an investment trust company of 25% (2024: 25%). A
reconciliation of the standard rate of UK corporation tax to the taxation
charge for the year is shown below:
Year ended 31 March 2025 Year ended 31 March 2024
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Profit/(loss) before taxation 53,245 285,837 339,082 28,604 (241,256) (212,652)
Profit/(loss) before taxation multiplied by the standard rate of UK corporation tax of 25% (2024: 25%) 13,311 71,459 84,770 7,151 (60,314) (53,163)
Effects of:
Capital (gains)/losses not taxable 1 – (77,191) (77,191) – 53,033 53,033
Income not taxable (11,643) – (11,643) (6,406) – (6,406)
Expenses not deductible – 4,316 4,316 – 4,604 4,604
Excess expenses (1,668) 1,416 (252) (745) 2,677 1,932
Overseas taxation 1,070 – 1,070 812 – 812
--------------- --------------- --------------- --------------- --------------- ---------------
Taxation charge (Note 7a) 1,070 – 1,070 812 – 812
========= ========= ========= ========= ========= =========
1 The Company is exempt from UK corporation tax on capital gains as it meets
the HM Revenue & Customs criteria for an investment company set out in Section
1159 of the Corporation Tax Act 2010.
c) Deferred taxation
A deferred tax asset of £39,263,000 (2024: £39,515,000), in respect of
excess expenses of £157,052,000 (2024: £158,059,000) has not been recognised
as it is unlikely that there will be sufficient future taxable profits to
utilise these expenses.
8. Earnings/(Loss) per Ordinary Share
Year ended Year ended
31 March 31 March
2025 2024
Revenue earnings per ordinary share 10.18p 5.78p
Capital earnings/(loss) per ordinary share 55.75p (50.18p)
--------------- ---------------
Total earnings/(loss) per ordinary share 65.93p (44.40p)
========= =========
The earnings/(loss) per ordinary share is based on the profit/(loss) after
taxation for the year divided by the weighted average number of ordinary
shares held outside of Treasury during the year, as shown below:
£’000 £’000
Revenue profit after taxation for the year 52,175 27,792
Capital earnings/(loss) after taxation for the year 285,837 (241,256)
--------------- ---------------
Total profit/(loss) after taxation for the year 338,012 (213,464)
========= =========
Number Number
Weighted average number of ordinary shares held outside of Treasury 512,652,970 480,806,725
========== ==========
9. Dividends Paid to Shareholders
Year ended Year ended
31 March 31 March
2025 2024
£’000 £’000
Dividend paid
Ordinary dividend of 6.40 pence per share paid for the year ended 31 March 2024 33,355 –
Ordinary dividend of 6.25 pence per share paid for the year ended 31 March 2023 – 30,198
--------------- ---------------
33,355 30,198
========= =========
Dividend proposed
Special dividend proposed of 1.00 pence per share for the year ended 31 March 2025 4,939 –
Ordinary dividend proposed of 8.00 pence per share for the year ended 31 March 2025 39,509 –
Ordinary dividend proposed of 6.40 pence per share for the year ended 31 March 2024 – 33,471
--------------- ---------------
44,448 33,471
========= =========
The Directors have proposed the payment of a final ordinary dividend for the
year ended 31 March 2025 of 8.00 pence per share and also a special dividend
of 1.00 pence per share which is subject to approval by shareholders at the
Annual General Meeting on 24 July 2025 and has not been included as a
liability in these Financial Statements. The dividends will be paid on 31 July
2025 to shareholders on the register at the close of business on 20 June 2025
(ex-dividend date 19 June 2025).
10. Investments at Fair Value through Profit or Loss
2025 2024
£’000 £’000
Total investments 1 1,346,238 1,162,265
Opening book cost 1,398,894 1,514,572
Opening investment holding losses (236,629) (195,808)
Opening fair value of investments 1,162,265 1,318,764
--------------- ---------------
Movements in the year
Purchases at cost 648,076 586,707
Assets acquired in respect of the transaction with ACIC – 120,754
Costs in respect to the transaction with ACIC 543 –
Sales – proceeds (714,521) (708,959)
Gains/(losses) on investments 249,875 (155,001)
--------------- ---------------
Closing fair value 1,346,238 1,162,265
--------------- ---------------
Closing book cost 1,354,515 1,398,894
Closing investment holding losses (8,277) (236,629)
--------------- ---------------
Closing fair value of investments 1,346,238 1,162,265
========= =========
1 The fair value hierarchy of the investments is shown in Note 17.
The Company received £714,521,000 (2024: £708,959,000) from investments sold
in the year. The book cost of these investments when they were purchased was
£692,455,000 (2024: £823,139,000). These investments have been revalued over
time and until they were sold any unrealised gains/losses were included in the
fair value of the investments.
Investment transaction costs incurred in the acquisition and disposal of
investments, which are included in the gains/(losses) on investments were as
follows:
Year ended Year ended
31 March 31 March
2025 2024
£’000 £’000
Purchases transaction costs 773 720
Sales transaction costs 812 740
--------------- ---------------
1,585 1,460
========= =========
11. DERIVATIVE INSTRUMENTS
Year ended Year ended
31 March 31 March
2025 2024
£’000 £’000
Net change to gains/(losses) on derivative instruments
Realised gains/(losses) on CFDs 130,822 (74,311)
Realised (losses)/gains on futures (65,414) 27,951
Realised gains/(losses) on options 1,765 (4,632)
Movement in investment holding losses on CFDs (13,424) (11,900)
Movement in investment holding gains on futures 3,366 6,382
Movement in investment holding gains on options 6 1,720
--------------- ---------------
57,121 (54,790)
========= =========
2025 2024
Fair value Fair value
£’000 £’000
Fair value of derivative instruments recognised on the Balance Sheet 1
Derivative instrument assets 9,938 7,103
Derivative instrument liabilities (24,838) (13,307)
--------------- ---------------
(14,900) (6,204)
========= =========
1 The fair value hierarchy of the derivative instruments is shown in Note 17.
Fair value 2025 Fair value 2024
£’000 Asset £’000 Asset
exposure exposure
£’000 £’000
At the year end the Company held the following derivative instruments
Long CFDs (19,358) 583,496 (4,483) 412,237
Short CFDs 205 18,813 (1,246) 14,766
Futures (hedging exposure) 2,891 (203,084) (475) (138,402)
Call options 1,761 9,442 – –
Call options (hedging exposure) (399) (8,967) – –
--------------- --------------- --------------- ---------------
(14,900) 399,700 (6,204) 288,601
========= ========= ========= =========
12. OTHER RECEIVABLES
2025 2024
£’000 £’000
Securities sold for future settlement 3,926 5,957
Amounts receivable on settlement of derivatives 1,280 2,161
Accrued income 1,783 1,726
Taxation recoverable 11 12
Other receivables 295 210
--------------- ---------------
7,295 10,066
========= =========
13. OTHER PAYABLES
2025 2024
£’000 £’000
Securities purchased for future settlement 3,084 6,843
Amounts payable on settlement of derivatives 2,986 1,078
Investment management fees 1,023 678
Finance costs payable 830 610
Accrued expenses 359 414
Amounts payable for repurchase of shares for cancellation – 179
--------------- ---------------
8,282 9,802
========= =========
14. SHARE CAPITAL
2025 2024
Number of Nominal Number of Nominal
shares value shares value
£’000 £’000
Issued, allotted and fully paid
Ordinary shares of 1 pence each held outside of Treasury
Beginning of the year 525,681,434 5,258 488,325,628 4,884
New ordinary shares issued in respect of the transaction with ACIC – – 59,005,997 590
Ordinary shares repurchased into Treasury – – (2,900,696) (29)
Ordinary shares repurchased for cancellation (30,841,184) (308) (18,749,495) (187)
----------------- ----------------- ----------------- -----------------
End of the year 494,840,250 4,950 525,681,434 5,258
========== ========== ========== ==========
Ordinary shares of 1 pence each held in Treasury 1
Beginning of the year 85,629,548 855 82,728,852 826
Ordinary shares repurchased into Treasury – – 2,900,696 29
----------------- ----------------- ----------------- -----------------
End of the year 85,629,548 855 85,629,548 855
========== ========== ========== ==========
Total share capital 5,805 6,113
========== ==========
1 The ordinary shares held in Treasury carry no rights to vote, to receive a
dividend or to participate in a winding up of the Company.
During the year, the Company repurchased nil (2024: 2,900,696) ordinary shares
and held them in Treasury. The cost of repurchasing these shares of £nil
(2024: £6,965,000) was charged to the Other reserve.
The Company also repurchased 30,841,184 (2024: 18,749,495) ordinary shares for
cancellation. The cost of repurchasing these shares of £66,809,000 (2024:
£38,968,000) was charged to the Other reserve.
15. CAPITAL AND RESERVES
Share Share Capital Other Capital Revenue Total
capital premium redemption reserve reserve reserve equity
£’000 account reserve £’000 £’000 £’000 £’000
£’000 £’000
At 1 April 2024 6,113 338,167 1,104 140,861 636,526 53,243 1,176,014
Gains on investments (see Note 10) – – – – 249,875 – 249,875
Gains on derivative instruments (see Note 11) – – – – 57,121 – 57,121
Foreign exchange gains – – – – 1,769 – 1,769
Investment management fees (see Note 4) – – – – (5,572) – (5,572)
Other expenses (see Note 5) – – – – (32) – (32)
Finance costs (see Note 6) – – – – (17,324) – (17,324)
Revenue profit after taxation for the year – – – – – 52,175 52,175
Dividend paid to shareholders (see Note 9) – – – – – (33,355) (33,355)
Contribution in respect of the transaction with ACIC by the Manager (see Note 2 (a)) – 100 – – – – 100
Costs relating to the ACIC transaction (inclusive of VAT recovered) (see Note 2 (a)) – (160) – – – – (160)
Repurchase of ordinary shares for cancellation (see Note 14) (308) – 308 (66,809) – – (66,809)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 March 2025 5,805 338,107 1,412 74,052 922,363 72,063 1,413,802
========= ========= ========= ========= ========= ========= =========
At 1 April 2023 5,710 211,569 917 186,794 877,782 55,649 1,338,421
Losses on investments (see Note 10) – – – – (155,001) – (155,001)
Losses on derivative instruments (see Note 11) – – – – (54,790) – (54,790)
Foreign exchange losses – – – – (3,858) – (3,858)
Foreign exchange gains on bank loan – – – – 1,517 – 1,517
Investment management fees (see Note 4) – – – – (8,991) – (8,991)
Other expenses (see Note 5) – – – – (35) – (35)
Finance costs (see Note 6) – – – – (20,098) – (20,098)
Revenue profit after taxation for the year – – – – – 27,792 27,792
Dividend paid to shareholders (see Note 9) – – – – – (30,198) (30,198)
New ordinary shares issued in respect of the transaction with ACIC (see Note 14) 590 126,198 – – – – 126,788
Contribution in respect of the transaction with ACIC by the Manager (see Note 2 (a)) – 400 – – – – 400
Repurchase of ordinary shares into Treasury (see Note 14) – – – (6,965) – – (6,965)
Repurchase of ordinary shares for cancellation (see Note 14) (187) – 187 (38,968) – – (38,968)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 March 2024 6,113 338,167 1,104 140,861 636,526 53,243 1,176,014
========= ========= ========= ========= ========= ========= =========
The capital reserve balance at 31 March 2025 includes investment holding
losses on investments of £8,277,000 (2024: losses of £236,629,000) as
detailed in Note 10 above. See Note 2 (r) for further details. The revenue,
capital and other reserves are distributable by way of dividend.
16. Net Asset Value per Ordinary Share
The calculation of the net asset value per ordinary share is based on the net
assets divided by the number of ordinary shares held outside of Treasury.
2025 2024
Net assets £1,413,802,000 £1,176,014,000
Ordinary shares held outside of Treasury at year end 494,840,250 525,681,434
Net asset value per ordinary share 285.71p 223.71p
========= =========
It is the Company’s policy that shares held in Treasury will only be
reissued at net asset value per share or at a premium to net asset value per
share so that shares held in Treasury have no dilutive effect.
17 Financial Instruments
Management of risk
The Company’s investing activities in pursuit of its investment objective
involve certain inherent risks. The Board confirms that there is an ongoing
process for identifying, evaluating and managing the risks faced by the
Company. The Board with the assistance of the Investment Manager, has
developed a risk matrix which, as part of the internal control process,
identifies the risks that the Company faces. Risks are identified and graded
in this process, together with steps taken in mitigation, and are updated and
reviewed on an ongoing basis. Risks identified are shown in the Strategic
Report above.
This Note is incorporated in accordance with IFRS 7: Financial Instruments:
Disclosures and refers to the identification, measurement and management of
risks potentially affecting the value of financial instruments.
The Company’s financial instruments may comprise:
· Equity shares (listed and unlisted), equity linked notes, convertible
bonds and rights issues;
· Derivative instruments including CFDs, warrants, futures and options
written or purchased on stocks and equity indices and forward currency
contracts;
· Cash, liquid resources and short-term receivables and payables that arise
from its operations; and
· Bank borrowings.
The risks identified by IFRS 7 arising from the Company’s financial
instruments are market price risk (which comprises interest rate risk, foreign
currency risk and other price risk), liquidity risk, counterparty risk, credit
risk and derivative instrument risk. The Board reviews and agrees policies for
managing each of these risks, which are summarised below. These policies are
consistent with those followed last year.
Market price risk
Interest rate risk
The Company principally finances its operations through its share capital and
reserves. In addition, the Company has gearing through the use of derivative
instruments. The level of gearing is reviewed by the Board and the Portfolio
Managers. The Company is exposed to a financial risk arising as a result of
any increases in interest rates associated with the funding of the derivative
instruments.
Interest rate risk exposure
The values of the Company’s financial instruments that are exposed to
movements in interest rates are shown below:
2025 2024
£’000 £’000
Exposure to financial instruments that bear interest
Long CFDs – exposure less fair value 602,854 416,720
Bank overdrafts – 12,758
---------------- ----------------
602,854 429,478
---------------- ----------------
Exposure to financial instruments that earn interest
Short CFDs – exposure plus fair value 19,018 13,520
Amounts held at futures clearing houses and brokers 33,760 24,589
Cash at bank 49,691 7,858
--------------- ----------------
102,469 45,967
========== ==========
Net exposure to financial instruments that bear interest 500,385 383,511
========== ==========
Foreign currency risk
The Company’s profit/(loss) after taxation and its net assets can be
affected by foreign exchange movements because the Company has income, assets
and liabilities which are denominated in currencies other than the Company’s
functional currency which is UK sterling.
Three principal areas have been identified where foreign currency risk could
impact the Company:
· Movements in currency exchange rates affecting the value of investments;
· Movements in currency exchange rates affecting short-term timing
differences, for example, between the date when an investment is bought or
sold and the date when settlement of the transaction occurs; and
· Movements in currency exchange rates affecting income received.
Currency exposure of financial assets
The Company’s financial assets comprise of investments, long positions on
derivative instruments, short-term debtors and cash at bank. The currency
exposure profile of these financial assets is shown below:
Currency Investments Asset Other Cash 2025
held at exposure of receivables 2 at bank Total
fair value long £’000 £’000 £’000
through derivative
profit or loss instruments 1
£’000 £’000
Chinese renminbi 29,850 – – – 29,850
Euro 15,468 – – – 15,468
Hong Kong dollar 873,075 127,296 5,850 2,731 1,008,952
Japanese yen – 13,585 1,084 – 14,669
Taiwan dollar 5,006 – – – 5,006
UK sterling 12,725 – 295 – 13,020
US dollar 410,114 240,006 33,826 46,960 730,906
--------------- --------------- --------------- --------------- ---------------
1,346,238 380,887 41,055 49,691 1,817,871
========= ========= ========= ========= =========
1 The asset exposure of long CFDs after the netting of hedging exposures.
2 Other receivables include amounts held at futures clearing houses and
brokers.
Currency Investments Asset Other Cash 2024
held at exposure of receivables 2 at bank Total
fair value long £’000 £’000 £’000
through derivative
profit or loss instruments 1
£’000 £’000
Chinese renminbi 92,336 – – 1,372 93,708
Euro 10,903 – – – 10,903
Hong Kong dollar 704,175 148,557 18,153 – 870,885
Japanese yen 5,787 22,134 125 341 28,387
Taiwan dollar 7,603 – 12 – 7,615
Thai baht 439 – – – 439
UK sterling 17,752 – 209 – 17,961
US dollar 323,270 103,144 16,156 6,145 448,715
--------------- --------------- --------------- --------------- ---------------
1,162,265 273,835 34,655 7,858 1,478,613
========= ========= ========= ========= =========
1 The asset exposure of long CFDs after the netting of hedging exposures.
2 Other receivables include amounts held at futures clearing houses and
brokers.
Currency exposure of financial liabilities
The Company finances its investment activities through its ordinary share
capital and reserves. The Company’s financial liabilities comprise short
positions on derivative instruments, other payables and bank overdrafts. The
currency profile of these financial liabilities is shown below:
Currency Asset Other Bank 2025
exposure of payables overdrafts Total
short £’000 £’000 £’000
derivative
instruments 1
£’000
Hong Kong dollar – 6,570 – 6,570
Japanese yen – 7 – 7
UK sterling – 1,382 – 1,382
US dollar 18,813 323 – 19,136
--------------- --------------- --------------- ---------------
18,813 8,282 – 27,095
========== ========== ========== ==========
Currency Asset Other Bank 2025
exposure of payables overdrafts Total
short £’000 £’000 £’000
derivative
instruments 1
£’000
Hong Kong dollar – 5,994 12,744 18,738
UK sterling – 1,271 14 1,285
US dollar 14,766 2,537 – 17,303
--------------- --------------- --------------- ---------------
14,766 9,802 12,758 37,326
========== ========== ========== ==========
1 The asset exposure of short derivative instruments excluding hedging
exposures.
Other price risk
Other price risk arises mainly from uncertainty about future prices of
financial instruments. It represents the potential loss the Company might
suffer through price movements in its investment positions. The Board meets
quarterly to consider the asset allocation of the portfolio and the risk
associated with particular industry sectors within the parameters of the
investment objective.
The Investment Manager is responsible for actively monitoring the portfolio
selected in accordance with the overall asset allocation parameters and seeks
to ensure that individual stocks also meet an acceptable risk/reward profile.
Other price risks arising from derivative positions, mainly due to the
underlying exposures, are assessed by the Investment Manager’s specialist
derivative instruments team.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulties in
meeting obligations associated with financial liabilities. The Company’s
assets mainly comprise readily realisable securities and derivative
instruments which can be sold easily to meet funding commitments if necessary.
Short-term flexibility is achieved by the use of a bank overdraft, if
required.
Counterparty risk
Certain derivative instruments in which the Company may invest are not traded
on an exchange but instead will be traded between counterparties based on
contractual relationships, under the terms outlined in the International Swaps
and Derivatives Association’s (“ISDA”) market standard derivative legal
documentation. These are known as Over The Counter (“OTC”) trades. As a
result, the Company is subject to the risk that a counterparty may not perform
its obligations under the related contract. In accordance with the risk
management process which the Investment Manager employs, this risk is
minimised by only entering into transactions with counterparties which are
believed to have an adequate credit rating at the time the transaction is
entered into, by ensuring that formal legal agreements covering the terms of
the contract are entered into in advance, and through adopting a counterparty
risk framework which measures, monitors and manages counterparty risk by the
use of internal and external credit agency ratings and evaluates derivative
instrument credit risk exposure.
Collateral
2025 2024
collateral collateral collateral collateral
received pledged received pledged
£’000 £’000 £’000 £’000
Goldman Sachs International Ltd – – 2,613 –
HSBC Bank plc – 3,037 198 –
UBS AG – 23,770 – 15,689
J.P. Morgan Securities plc – 6,953 – 5,186
Morgan Stanley & Co. International Ltd 1,109 – – 3,714
----------------- ----------------- ----------------- -----------------
1,109 33,760 2,811 24,589
========= ========= ========= =========
Offsetting
To mitigate counterparty risk for OTC derivative transactions, the ISDA legal
documentation is in the form of a master agreement between the Company and the
broker. This allows enforceable netting arrangements in the event of a default
or termination event. Derivative instrument assets and liabilities that are
subject to netting arrangements have not been offset in preparing the Balance
Sheet.
The Company’s derivative instrument financial assets and liabilities
recognised in the Balance Sheet and amounts that could be subject to netting
in the event of a default or termination are shown below:
Financial assets Gross Gross amount Net amount Related amounts not set off 2025
amount of recognised of financial on balance sheet
£’000 financial assets
liabilities presented on
set off on the balance
the balance sheet Net
sheet £’000 amount
£’000 £’000
Financial Margin
instruments account
£’000 received as
collateral
£’000
CFDs 5,286 – 5,286 (4,087) (1,109) 90
Options 1,761 – 1,761 – – 1,761
Futures (exchange traded) 2,891 – 2,891 – – 2,891
-------------- -------------- -------------- -------------- -------------- --------------
9,938 – 9,938 (4,087) (1,109) 4,742
========= ========= ========= ========= ========= =========
Financial liabilities Gross Gross amount Net amount Related amounts not set off 2025
amount of recognised of financial on balance sheet
£’000 financial liabilities
assets presented on
set off on the balance
the balance sheet Net
sheet £’000 amount
£’000 £’000
Financial Margin
instruments account
£’000 pledged as
collateral
£’000
CFDs (24,439) – (24,439) 4,087 12,870 (7,482)
Options (399) – (399) – – (399)
-------------- -------------- -------------- -------------- -------------- --------------
(24,838) – (24,838) 4,087 12,870 (7,881)
========= ========= ========= ========= ========= =========
Financial assets Gross Gross amount Net amount Related amounts not set off 2024
amount of recognised of financial on balance sheet
£’000 financial assets
liabilities presented on
set off on the balance
the balance sheet Net
sheet £’000 amount
£’000 £’000
Financial Margin
instruments account
£’000 received as
collateral
£’000
-------------- -------------- -------------- -------------- -------------- --------------
CFDs 7,103 – 7,103 (3,844) (2,389) 870
========= ========= ========= ========= ========= =========
Financial liabilities Gross Gross amount Net amount Related amounts not set off 2024
amount of recognised of financial on balance sheet
£’000 financial liabilities
assets presented on
set off on the balance
the balance sheet Net
sheet £’000 amount
£’000 £’000
Financial Margin
instruments account
£’000 pledged as
collateral
£’000
CFDs (12,832) – (12,832) 3,844 8,900 (88)
Futures (exchange traded) (475) – (475) – 475 –
-------------- -------------- -------------- -------------- -------------- --------------
(13,307) – (13,307) 3,844 9,375 (88)
========= ========= ========= ========= ========= =========
Credit risk
Financial instruments may be adversely affected if any of the institutions
with which money is deposited suffer insolvency or other financial
difficulties. All transactions are carried out with brokers that have been
approved by the Investment Manager and are settled on a delivery versus
payment basis. Limits are set on the amount that may be due from any one
broker and are kept under review by the Investment Manager. Exposure to credit
risk arises on outstanding security transactions and derivative instrument
contracts and cash at bank.
Derivative instrument risk
A Derivative Instrument Charter, including an appendix entitled Derivative
Risk Measurement and Management, details the risks and risk management
processes used by the Investment Manager. This Charter was approved by the
Board and allows the use of derivative instruments for the following purposes:
· To gain exposure to equity markets, sectors or individual investments;
· To hedge equity market risk in the Company’s investments with the
intention of mitigating losses in the events market falls;
· To enhance portfolio returns by writing call and put options; and
· To take short positions in equity markets, which would benefit from a fall
in the relevant market price, where the Investment Manager believes the
investment is overvalued. These positions distinguish themselves from other
short exposures held for hedging purposes since they are expected to add risk
to the portfolio.
The risk and investment performance of these instruments are managed by an
experienced, specialist derivative team of the Investment Manager using
portfolio risk assessment tools for portfolio construction.
RISK SENSITIVITY ANALYSIS
Interest rate risk sensitivity analysis
Based on the financial instruments held and interest rates at the Balance
Sheet date, an increase of 1.00% in interest rates throughout the year, with
all other variables held constant, would have decreased the net profit after
taxation for the year and decreased the net assets of the Company by
£5,004,000 (2024: increased the net loss after taxation and decreased the net
assets by £3,835,000). A decrease of 1.00% in interest rates throughout the
year would have had an equal but opposite effect.
Foreign currency risk sensitivity analysis
Based on the financial assets and liabilities held and currency exchange rates
ruling at the Balance Sheet date, a strengthening of the UK sterling exchange
rate by 10% against other currencies, with all other variables held constant,
would have decreased the net profit after taxation for the year and decreased
the net assets of the Company (2024: increased the net loss after taxation and
decreased the net assets) by the following amounts:
Currency 2025 2024
£’000 £’000
Chinese renminbi 2,714 8,519
Euro 1,406 991
Hong Kong dollar 91,125 77,468
Japanese yen 1,333 2,581
Taiwan dollar 455 692
Thai baht – 40
US dollar 64,707 39,219
--------------- ---------------
161,740 129,510
========= =========
Based on the financial assets and liabilities held and the exchange rates
ruling at the Balance Sheet date, a weakening of the UK sterling exchange rate
by 10% against other currencies would have increased the net profit after
taxation for the year and increased the net assets of the Company (2024:
decreased the net loss after taxation and increased the net assets) by the
following amounts:
Currency 2025 2024
£’000 £’000
Chinese renminbi 3,317 10,412
Euro 1,719 1,211
Hong Kong dollar 111,376 94,683
Japanese yen 1,629 3,154
Taiwan dollar 556 846
Thai baht – 49
US dollar 79,085 47,935
--------------- ---------------
197,682 158,290
========= =========
Other price risk sensitivity analysis
Changes in market prices affect the profit/(loss) after taxation for the year
and the net assets of the Company. Details of how the Board sets risk
parameters and performance objectives are disclosed in the Strategic Report
above.
An increase of 10% in the share prices of the listed investments held at the
Balance Sheet date would have increased the net profit after taxation for the
year and increased the net assets of the Company by £121,019,000 (2024:
decreased the net loss after taxation and increased the net assets by
£100,526,000). A decrease of 10% in share prices of the investments
designated at fair value through profit or loss would have had an equal but
opposite effect.
An increase of 10% in the valuation of unlisted investments held at the
Balance Sheet date would have increased the net profit after taxation for the
year and increased the net assets of the Company by £13,604,000 (2024:
decreased the net loss after taxation and increased the net assets by
£15,701,000). A decrease of 10% in the valuation would have had an equal but
opposite effect.
The sensitivity analysis below illustrates how the unobservable inputs used in
the valuation methodologies of the unlisted assets impact the fair value as at
31 March 2025
Valuation approach Significant unobservable inputs
Fair Key Other Range Sensitivity to changes in
value unobservable unobservable significant unobservable inputs
£’000 inputs inputs
Market approach using comparable traded multiples or calibration factors 72,128 TEV/LTM a,b,c,d 1.95x – 3.5x If TEV/LTM revenue multiple moved by +/-10%, the fair value would change by £1,535,000 and -£1,534,000
revenue multiple 1
TEV/LTM a,b,c,d 7.25x – 8.25x If TEV/LTM EBITDA multiple moved by +/-10%, the fair value would change by £931,000 and -£954,000
EBITDA multiple 2
TEV/FY+1 a,b,c,d 1.55x – 3.25x If TEV/FY+1 revenue multiple moved by +/-10%, the fair value would change by £1,354,000 and -£1,377,000
revenue multiple 3
TEV/FY+1 a,b,c,d 5.0x – 6.0x If TEV/FY+1 EBITDA multiple moved by +/-10%, the fair value would change by £978,000 and -£1,001,000
EBITDA multiple 4
P/E LTM multiple 5 a,b,c,d 14.0x – 17.0x If P/E LTM multiple moved by +/-10%, the fair value would change by £435,000 and -£435,000
P/E FY+1 multiple 6 a,b,c,d 12.0x – 15.0x If P/E FY+1 multiple moved by +/-10%, the fair value would change by £185,000 and -£185,000
Sum of the parts e 30,258 Selection of c (10.0%) – 10.0% If the market factor of the comparable companies moved by +/-5% the fair value would change by £557,000 and -£557,000
comparable
companies and
relevant indices
Scenario analysis considering a range of exit scenarios f 26,194 Discount rate c,d 16.5% – 17.5% If the discount rate moved by +/- 10% the fair value would change by £353,000 and -£353,000
Recent transaction prices g 62,469 n/a c n/a n/a
1 Total enterprise value (TEV) divided by the last twelve months (LTM)
revenue.
2 Total enterprise value (TEV) divided by the last twelve months (LTM)
earnings before interest, taxes, depreciation and amortisation (EBITDA).
3 Total enterprise value (TEV) divided by the next twelve months forecasted
revenue (FY+1).
4 Total enterprise value (TEV) divided by the next twelve months (FY+1)
forecasted earnings before interest, taxes, depreciation and amortisation
(EBITDA).
5 Share Price divided by the last twelve months (LTM) earnings per share.
6 Share Price divided by the next twelve months (FY+1) forecasted earnings
per share.
The sensitivity analysis below illustrates how the unobservable inputs used in
the valuation methodologies of the unlisted assets impact the fair value as at
31 March 2024
Valuation approach Significant unobservable inputs
Fair Key Other Range Sensitivity to changes in
value unobservable unobservable significant unobservable inputs
£’000 inputs inputs
Market approach using comparable traded multiples or calibration factors 98,298 TEV/LTM a,b,c,d 2.30x – 4.0x If TEV/LTM revenue multiple moved by +/-10%, the fair value would change by £1,021,000 and -£1,021,000
revenue multiple 1
TEV/FY+1 a,b,c,d 1.55x – 3.50x If TEV/FY+1 revenue multiple moved by +/-10%, the fair value would change by £963,000 and -£963,000
EBITDA multiple 2
P/E LTM multiple 3 a,b,c,d 19.0x – 21.0x If P/E LTM multiple moved by +/-10%, the fair value would change by £229,000 and -£229,000
P/E LTM+1 multiple 4 a,b,c,d 17.0x – 19.0x If P/E FY+1 multiple moved by +/-10%, the fair value would change by £236,000 and -£236,000
Selection of c (22.5%) – (12.5%) If market factor of the comparable companies moved by +/-5%, the fair value would change by £2,671,000 and -£2,598,000
comparable
companies and
relevant indices
Sum of the parts e 25,602 Selection of c n/a If the market factor of the comparable companies moved by +/-5% the fair value would change by £512,000 and -£512,000
comparable
companies and
relevant indices
Scenario analysis considering a range of exit scenarios f 58,081 Multiple at exit c,d 15.0x – 22.0x If the exit multiples moved by +/-10% the fair value would change by £789,000 and -£789,000
Discount rate c,d 14.5% – 15.5% If the discount rate moved by +/-10% the fair value would change by £668,000 and -£701,000
Recent transaction prices g 67,529 n/a c n/a n/a
1 Total enterprise value (TEV) divided by the last twelve months (LTM)
revenue.
2 Total enterprise value (TEV) divided by the next twelve months forecasted
revenue (FY+1).
3 Share Price divided by the last twelve months (LTM) earnings per share.
4 Share Price divided by the next twelve months (FY+1) forecasted earnings
per share.
a. Selection of comparable companies
The fair value is determined by examining the market valuations of similar
publicly traded firms. This approach involves identifying peer companies with
similar industry characteristics, size, growth prospects, and financial
metrics. Key valuation multiples such as Price-to-Earnings (P/E), Enterprise
Value-to-EBITDA (TEV/EBITDA), and Enterprise Value-to-Sales (TEV/revenue) are
calculated for each comparable company. These multiples are then applied to
the target company’s corresponding financial figures to derive an estimated
value range. The selection of comparable companies is evaluated at each
valuation.
b. Selection of appropriate benchmarks
The fair value is influenced by the valuation of corresponding benchmarks.
These benchmarks may include company indices or sector indices. The selection
of appropriate benchmarks is assessed individually for each investment and
updated regularly.
c. Selection of alternative valuation methodologies
Fair value is be determined using a variety of valuation methodologies, each
suited to different types of investments and contexts. Common alternative
approaches include the market approach, which estimates fair value based on
market valuations of similar publicly traded companies, and the income
approach, which estimates fair value based on the present value of expected
future cash flows, utilizing discounted cash flow (DCF) models and estimated
weighted average cost of capital (WACC) discount rates.
d. Estimate of sustainable earnings
The approach focuses on normalized earnings, either forecasted over the next
12 months or adjusted to reflect a sustainable, long-term level that smooths
out cyclical fluctuations and one-time events. Analysts typically use
forward-looking metrics such as projected net income or EBITDA, derived from
management guidance, analyst forecasts, or historical trends. These earnings
are then multiplied by a valuation multiple (e.g., P/E or EV/EBITDA) that
reflects market expectations and industry norms. The chosen multiple may be
based on comparable companies or historical averages. By focusing on earnings
that are expected to persist over time, the approach aims to provide a more
accurate and stable estimate of intrinsic value, especially in dynamic or
transitional market environments.
e. Sum of the parts valuation
Sum of parts valuation (SOTP) determines the overall value of a company by
assessing the individual worth of its various divisions or segments,
particularly effective where a company is a conglomerate and has business
units across multiple industries. The fair value of each business unit or
segment is derived separately in accordance with the International Private
Equity and Venture Capital 2022 (“IPEV”) Valuation Guidelines determined
by any number of analysis methods including discounted cash flow (DCF)
valuations, asset-based valuations and multiples valuations using revenue,
operating profit or profit margins.
f. Range of exit scenarios
Fair value is determined by modelling potential scenarios about how a company
might be sold, or value might be realised. Analysts typically develop several
plausible exit scenarios such as a strategic acquisition, initial public
offering (IPO), management buyout, or liquidation each with its own
assumptions about timing, valuation multiples, and transaction terms. For each
scenario, the expected proceeds are estimated, often using projected financial
metrics and applying relevant market-based multiples. These proceeds are then
discounted back to present value using an appropriate discount rate to reflect
the time value of money and risk. The final fair value is calculated as a
probability-weighted average of the present values across all scenarios,
incorporating both the likelihood and financial impact of each outcome.
g. Recent transaction price
A recent transaction price itself is observable and whilst it may be the most
appropriate basis for a valuation, it often only represents one input and will
be used alongside other unobservable inputs to determine the fair value of an
asset.
Derivative instruments exposure sensitivity analysis
The Company invests in derivative instruments to gain or reduce exposure to
the equity market. An increase of 10% in the share prices of the investments
underlying the derivative instruments at the Balance Sheet date would have
increased the net profit after taxation for the year and increased the net
assets of the Company by £36,207,000 (2024: decreased the net loss after
taxation and increased the net assets by £25,907,000). A decrease of 10% in
share prices of the investments underlying the derivative instruments would
have had an equal but
opposite effect.
Fair value of financial assets and liabilities
Financial assets and liabilities are stated in the Balance Sheet at values
which are not materially different to their fair values. As explained in Notes
2 (l) and (m), investments and derivative instruments are shown at fair value.
In the case of cash at bank, book value approximates to fair value due to the
short maturity of the instruments.
Fair value hierarchy
The Company is required to disclose the fair value hierarchy that classifies
its financial instruments measured at fair value at one of three levels,
according to the relative reliability of the inputs used to estimate the fair
values.
Classification Input
Level 1 Valued using quoted prices in active markets for identical assets
Level 2 Valued by reference to inputs other than quoted prices included in level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly
Level 3 Valued by reference to valuation techniques using inputs that are not based on observable market data
Categorisation within the hierarchy has been determined on the basis of the
lowest level input that is significant to the fair value measurement of the
relevant asset. The valuation techniques used by the Company are explained in
Notes 2 (e), (l) and (m). The table below sets out the Company’s fair value
hierarchy:
Financial assets at fair value through profit or loss Level 1 Level 2 Level 3 2025
£’000 £’000 £’000 Total
£’000
Investments 1,210,194 – 136,044 1,346,238
Derivative instrument assets 2,891 7,047 – 9,938
--------------- --------------- --------------- ---------------
1,213,085 7,047 136,044 1,356,176
========= ========= ========= =========
Financial liabilities at fair value through profit or loss
Derivative instrument liabilities – (24,838) – (24,838)
========= ========= ========= =========
Financial assets at fair value through profit or loss Level 1 Level 2 Level 3 2024
£’000 £’000 £’000 Total
£’000
Investments 980,975 24,282 157,008 1,162,265
Derivative instrument assets – 7,103 – 7,103
--------------- --------------- --------------- ---------------
980,975 31,385 157,008 1,169,368
========= ========= ========= =========
Financial liabilities at fair value through profit or loss
Derivative instrument liabilities (475) (12,832) – (13,307)
========= ========= ========= =========
Level 3 investments (unlisted and delisted investments)
2025 2024
£’000 £’000
ByteDance 55,005 24,724
Venturous Holdings 30,258 25,602
Chime Biologics 26,194 27,312
DJI International 17,123 30,769
Fujian Yangteng Innovations 7,464 –
Pony.ai (moved to Level 1) – 42,805
Shanghai Yiguo – –
3 listed investments whose listings are currently suspended (2024: 4 listed investments suspended) – 5,796
--------------- ---------------
136,044 192,878
========= =========
ByteDance
ByteDance is a technology company that develops applications for smart phones
and is an unlisted company. The valuation is based on the company’s
financial performance, the macro-environment and benchmarking the position to
a range of comparable market data. As of 31 March 2025, its fair value was
£55,005,000 (book cost: £19,775,000).
Venturous Holdings
Venturous Holdings is an investment company with a focus in building and
creating smart city technology companies and is an unlisted company. The
valuation is based on a review of the company’s portfolio including
performance, the wider macro-environment and benchmarking the position to a
range of comparable market data. As of 31 March 2025, its fair value was
£30,258,000 (book cost: £23,701,000).
Chime Biologics
Chime Biologics is a leading biologics China-based Contract Development and
Manufacturing Organization (CDMO) company that provides support to its clients
from early-stage biopharmaceutical development through to late-stage clinical
and commercial manufacturing and is an unlisted company. The valuation is
based on analysis of the company performance, the terms of the convertible
note and benchmarking the position to a range of comparable market data. As of
31 March 2025, its fair value was £26,194,000 (book cost: £25,227,000).
DJI International
DJI International is a manufacturer of drones and is an unlisted company. The
valuation for the B shares is based on the company’s performance, the
macro-environment, product development and benchmarking the position to a
range of comparable market data. As of 31 March 2025, its fair value was
£17,123,000 (book cost: £8,967,000).
Fujian Yangteng Innovations
Fujian Yangteng Innovations is an online retailer for aftermarket auto parts
and is an unlisted company. Given that this is a recent acquisition, the
current valuation is based on cost and a full independent valuation will be
completed in the next quarter. As of 31 March 2025, its fair value was
£7,464,000 (book cost: £7,837,000).
Shanghai Yiguo
Shanghai Yiguo operates an e-commerce platform, selling fruit and vegetables
online to customers in China and is an unlisted company. The company has
commenced liquidation proceedings and following internal review, the valuation
at £nil remained appropriate as of 31 March 2025 (book cost: £11,806,000).
Companies whose listings are suspended
Three listed companies in the portfolio have had their listing suspended: DBA
Telecommunication (Asia) Limited (suspended July 2014), China Animal
Healthcare Limited (suspended March 2015), BNN Technology Limited (suspended
September 2017).
Significant holdings
Details of significant holdings are noted below in accordance with the
disclosure requirements of paragraph 82 of the AIC SORP. The Company is
required to provide a list of all investments at the balance sheet date with a
value greater than 5% of its portfolio and at least the ten largest
investments, including the value of each investment and for unlisted
investments included in the list, additional detail is required as shown
below. This disclosure includes turnover, pre-tax profits and net assets
attributable to investors, as reported within the most recently audited
financial statements of the investee companies.
As at 31 March 2025, there are no unlisted investments greater than 5% of the
portfolio.
Movements in level 3 investments during the year 2025 2024
Level 3 Level 3
£’000 £’000
Level 3 investments at the beginning of the year 157,008 192,878
Purchases at cost – ByteDance and Fujian Yangteng Innovations 20,251 –
Sales proceeds – DJI International D shares (14,410) (2,943)
Sales gain – DJI International D shares 960 615
Transfers into level 3 at cost – China Renaissance Holdings – 17,316
Transfers out of level 3 at cost 1 – China Renaissance Holdings and Pony.ai (42,208) (35,153)
Unrealised profit/(loss) recognised in the Income Statement 14,443 (15,705)
--------------- ---------------
Level 3 investments at the end of the year 136,044 157,008
========= =========
1 Financial instruments are transferred out of level 3 when they become
listed. See above for more information.
18 Capital Resources and Gearing
The Company does not have any externally imposed capital requirements. The
financial resources of the Company comprise its share capital, reserves and
gearing, which are disclosed on the Balance Sheet. The Company is managed in
accordance with its investment policy and in pursuit of its investment
objective, both of which are detailed in the Annual Report. The principal
risks and their management are disclosed in the Strategic Report above and in
Note 17 above.
The Company’s gearing at the year end is set out below:
2025
Gross gearing Net gearing
Exposure % 1 Exposure % 1
£’000 £'000
Investments 1,346,238 95.2 1,346,238 95.2
Long CFDs 583,496 41.3 583,496 41.3
Long options 9,442 0.7 9,442 0.7
--------------- --------------- --------------- ---------------
Total long exposures before hedges 1,939,176 137.2 1,939,176 137.2
========= ========= ========= =========
less: Hedged Future Exposures (203,084) (14.4) (203,084) (14.4)
less: Hedged Option Exposures (8,967) (0.6) (8,967) (0.6)
--------------- --------------- --------------- ---------------
Total long exposures after the netting of hedges 1,727,125 122.2 1,727,125 122.2
========= ========= ========= =========
Short CFDs 18,813 1.3 (18,813) (1.3)
Gross Asset Exposure/Net Market Exposure* 1,745,938 123.5 1,708,312 120.9
--------------- --------------- --------------- ---------------
Net Assets 1,413,802 1,413,802
========= =========
Gearing 2 23.5% 20.9%
========= =========
2024
Gross gearing Net gearing
Exposure % 1 Exposure % 1
£’000 P£'000
Investments 1,162,265 98.8 1,162,265 98.8
Long CFDs 412,237 35.1 412,237 35.1
--------------- --------------- --------------- ---------------
Total long exposures before hedges 1,574,502 133.9 1,574,502 133.9
========= ========= ========= =========
less: short derivative instruments hedging the above (138,402) (11.8) (138,402) (11.8)
--------------- --------------- --------------- ---------------
Total long exposures after the netting of hedges 1,436,100 122.1 1,436,100 122.1
========= ========= ========= =========
Short CFDs 14,766 1.3 (14,766) (1.3)
Gross Asset Exposure/Net Market Exposure* 1,450,866 123.4 1,421,334 120.8
--------------- --------------- --------------- ---------------
Net Assets 1,176,014 1,176,014
========= =========
Gearing 2 23.4% 20.8%
========= =========
* Defined in the Glossary of Terms in the Annual Report.
1 Exposure to the market expressed as a percentage of Net Assets.
2 Gearing is the amount by which Gross Asset Exposure/net market exposure
exceeds Net Assets expressed as a percentage of Net Assets.
19 Transactions with the Managers and Related Parties
FIL Investment Services (UK) Limited is the Company’s Alternative Investment
Fund Manager and has delegated portfolio management to FIL Investment
Management (Hong Kong) Limited. Both companies are Fidelity group companies.
Details of the current fee arrangements are given in the Directors’ Report
in the Annual Report. During the year, management fees of £8,041,000 (2024:
£11,421,000) were payable to Fidelity. At the Balance Sheet date, management
fees of £1,023,000 (2024: £678,000) were accrued and included in other
payables. Fidelity also provides the Company with marketing services. The
total amount payable for these services was £327,000 (2024: £269,000). At
the Balance Sheet date, marketing services of £47,000 (2024: £91,000) were
accrued and included in other payables.
FIL Investment Services (UK) Limited agreed to contribute towards the costs of
the transaction with ACIC and an amount equal to eight months of management
fees, £715,000 in the year to 31 March 2025.
The Company has recognised an additional contribution from the Manager of
£100,000 in respect of the transaction with ACIC.
Disclosures of the Directors’ interests in the shares of the Company and
fees and taxable expenses, relating to reasonable travel expenses, payable to
the Directors are given in the Directors’ Remuneration Report in the Annual
Report. In addition to the fees and taxable expenses disclosed in the
Directors’ Remuneration Report, £25,000 (2024: £23,000) of employers’
National Insurance contributions were paid by the Company. At the Balance
Sheet date, Directors’ fees of £29,000 (2024: £26,000) were accrued and
payable.
Alternative Performance Measures
The Company uses the following as Alternative Performance Measures which are
all defined in the Glossary to the Annual Report which can be found in the
Annual Report.
Discount/Premium
The discount/premium is the difference between the net asset value (“NAV”)
per ordinary share of the Company and the ordinary share price and is
expressed as a percentage of the NAV per ordinary share. Details of the
Company’s discount are on the Financial Highlights page in the Annual
Report.
Gearing
See Note 18 above for details of the Company’s gearing (both gross and net).
Net Asset Value (“NAV”) per Ordinary Share
See the Balance Sheet on and Note 16 above for further details.
Ongoing Charges Ratio
The ongoing charges ratio is considered to be an Alternative Performance
Measure. It has been calculated in accordance with guidance issued by the AIC
as the total of management fees and other expenses expressed as a percentage
of the average net assets throughout the year.
2025 2024
Investment management fees (£’000) 9,875 9,719
Other expenses (£’000) 1,243 1,238
--------------- ---------------
Ongoing charges (£’000) 11,118 10,957
--------------- ---------------
Variable management fees (£’000) (1,834) 1,702
--------------- ---------------
Ongoing charges ratio 0.89% 0.98%
--------------- ---------------
Ongoing charges ratio including variable management fees 0.74% 1.13%
========= =========
Revenue, Capital and Total Earnings per Share
See the Income Statement and Note 8 above for further details.
Total Return Performance
The NAV per share total return includes reinvestment of the dividend in the
NAV of the Company on the ex-dividend date. Share price total return includes
the reinvestment of the net dividend in the month that the share price goes
ex-dividend.
The tables below provide information relating to the NAV per share and share
prices of the Company, the impact of the dividend reinvestments and the total
returns for the years ended 31 March 2025 and 31 March 2024.
2025 Net asset Share
value per price
share
31 March 2024 223.71p 201.00p
31 March 2025 285.71p 265.00p
Change in the year +27.7% +31.8%
Impact of dividend reinvestment +3.8% +4.0%
--------------- ---------------
Total return for the year +31.5% +35.8%
========= =========
2024 Net asset Share
value per price
share
31 March 2023 274.08p 247.50p
31 March 2024 223.71p 201.00p
Change in the year -18.4% -18.8%
Impact of dividend reinvestment +2.1% +2.4%
--------------- ---------------
Total return for the year -16.3% -16.4%
========= =========
The Annual Financial Report Announcement is not the Company's statutory
accounts. The above results for the year ended 31 March 2025 are an abridged
version of the Company's full Annual Report and Financial Statements, which
have been approved and audited with an unqualified report. The 2024 and 2025
statutory accounts received unqualified reports from the Company's Auditor and
did not include any reference to matters to which the Auditor drew attention
by way of emphasis without qualifying the reports and did not contain a
statement under s.498 of the Companies Act 2006. The financial information for
2024 is derived from the statutory accounts for 2024 which have been delivered
to the Registrar of Companies. The 2025 Financial Statements will be filed
with the Registrar of Companies in due course.
A copy of the Annual Report will shortly be submitted to the National Storage
Mechanism and will be available for inspection at:
www.morningstar.co.uk/uk/NSM
The Annual Report will be posted to shareholders later this month and
additional copies will be available from the registered office of the Company
and on the Company's website: www.fidelity.co.uk/japan where up to date
information on the Company, including daily NAV and share prices, factsheets
and other information can also be found.
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of, this announcement.
ENDS
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