REG-Fidelity China Special Situations Plc: Half-year Financial Report
Tue 07:02
FIDELITY CHINA SPECIAL SITUATIONS PLC
Half-Yearly results for the six months ended 30 September 2025 (unaudited)
Financial Highlights:
* During the six months ended 30 September 2025, Fidelity China
Special Situations PLC reported an ordinary share price total return of +28.7%
and Net Asset Value (NAV) return of +29.7%.
* The Benchmark Index, the MSCI China Index, produced a total
return of +18.0% over the same timeframe.
* Core holdings in the consumer and industrials sectors, many
aligning with advanced manufacturing and innovation themes, were the main
contributors to performance.
* China remains a fertile ground for structural growth
opportunities, particularly in sectors benefiting from rapid technological
innovation, such as automation, electric vehicles, AI and advanced
manufacturing.
Contacts
For further information, please contact:
George Bayer
Company Secretary
FIL Investments International
0207 961 4240
PORTFOLIO MANAGER’S HALF-YEARLY REVIEW
MACRO AND MARKET BACKDROP
Chinese equities staged a strong rally over the six months to 30
September 2025. After a volatile start amid renewed US–China trade tensions,
markets recovered as a temporary truce eased geopolitical concerns. Renewed
interest in innovation-led sectors, supported by DeepSeek’s breakthrough
artificial intelligence (AI) model earlier in the year and a rise in global
biotech licensing deals from Chinese companies, reinforced optimism around the
country’s technological capability and industrial competitiveness. Improved
investor sentiment and increased retail participation supported record trading
volumes, alongside strong southbound inflows led by domestic institutional
investors seeking opportunities in Hong Kong listed financial and
high-dividend stocks. Together, these dynamics supported a broad valuation
re-rating ahead of the underlying earnings recovery.
External demand has remained firm, reflecting the strength in China’s global
manufacturing base. The country’s production and supply chain ecosystems
remain deeply integrated across a wide range of global industries – from
advanced manufacturing to the electric vehicle (EV) supply chain. A strong
focus on investment in research and development (R&D), along with sheer scale
benefits, are driving gains in competitiveness for many companies. Many
Chinese companies with meaningful overseas exposure have demonstrated global
competitiveness through market share gains, even amid previous tariff hikes
during US President Trump’s first term. While the portion of overseas sales
is growing, over 95% of revenues for companies within the MSCI China Index
(the Company’s Benchmark Index) are still derived domestically, a fact
seemingly often overlooked by markets.
However, domestic conditions were more mixed. Consumer confidence remains weak
amid a subdued property market recovery, and household spending has yet to
regain momentum despite healthy balance sheets and high savings levels. Early
signs of home price stabilisation in tier-one cities were encouraging, but
recent data points have been less positive. Stabilisation here will be crucial
to strengthening consumer confidence in my view.
Policy remained supportive but measured. Authorities have maintained a mix of
fiscal and monetary support, prioritising controlled stabilisation through
targeted, reactive policy adjustments over broad stimulus. Meanwhile, market
focus has shifted towards sectors benefiting from significant innovation, AI
development, and the government’s “anti-involution” campaign, which aims
to reduce excessive, profit-eroding competition and industrial overcapacity.
These initiatives are designed to address deflationary pressures and promote
greater efficiency, contributing to market consolidation and a healthier
long-term market environment.
We have noticed improved corporate governance and strong capital return trends
across Chinese companies. Many firms have raised dividends, undertaken share
buybacks and adopted more disciplined capital allocation practices, signalling
a stronger alignment between management and investors.
PERFORMANCE AND PORTFOLIO REVIEW
The Company’s net asset value (NAV) rose by 29.7% over the six
months to 30 September 2025, significantly outperforming the MSCI China Index,
which gained 18.0%. The share price increased by 28.7% over the same period,
with the discount to NAV widening slightly from 7.3% at the start of the
period to end at 8.2%. (All performance data are on a total return basis.)
Core holdings in the consumer and industrials sectors, many aligning with
advanced manufacturing and innovation themes, were the main contributors to
performance. The Company also benefited from limited exposure to the EV brands
and e-commerce sectors, where fierce price competition has pressured profit
margins and share prices.
Within the Company’s portfolio, our holding in leading automotive LiDAR
supplier Hesai Group performed
strongly. The company returned to profitability and delivered robust revenue
growth in the second quarter of 2025, beating expectations on both volume and
margin. Investor sentiment was further supported by its announcement of a
planned Hong Kong listing.
Meanwhile, Pony.ai , a leading
autonomous driving and robotaxi player, was also among the top contributors,
despite notable post-listing volatility. Its shares advanced on continued
strong development of the business, with new robotaxi operation approvals in
cities like Shanghai and overseas markets such as the UAE, along with
continued gains in unit economics as hardware costs decline. The company is
nearing profitability on a single-vehicle basis, paving the way for further
scale-driven efficiency. Fleet expansion and new international partnerships
with major mobility operators, such as Uber, also strengthened its ecosystem
and market position. Having first invested in Pony.ai as a private company, we
retain conviction in its technology leadership, integrated ecosystem and
long-term growth potential as China advances towards next-generation mobility.
In Industrials, holdings in Dongfang Electric
and Morimatsu International Holdings
, two leading diversified equipment and modular system makers, added
value. Shares in Dongfang surged on market optimism around major hydropower
projects and expectations of an earnings recovery. Morimatsu also gained,
supported by robust new orders in the pharmaceutical sector, led by a capex
rebound in the pharma sector globally.
Limited exposure to industries that had previously attracted strong investor
enthusiasm, notably EVs and e-commerce, benefited performance. EV
manufacturers BYD and
Xiaomi faced challenges amid intensifying
competition. Xiaomi’s debut model attracted significant investor interest,
boosting sales and brand recognition. However, high valuation multiples proved
difficult to sustain as margin pressure and weaker-than-expected second
results weighed on sentiment. BYD also faced mounting pressure from aggressive
price cuts across the industry, which continue to squeeze margins. Avoiding
both names proved rewarding.
In the e-commerce and service platform space we remain cautious given
intensifying competition industry wide. Against this backdrop, the lack of
exposure to food delivery giant Meituan
and e-commerce platform JD.com
proved beneficial. Conversely, Alibaba Group Holding
performed strongly, supported by renewed investor interest in
AI applications, solid cloud results and signs of stabilisation in its core
e-commerce business, partly helped by the synergy effect from its new food
delivery business. However, our underweight position relative to the MSCI
China Index limited the positive contribution.
Some long-term consumer-related positions weighed on returns, including
Hisense Home Appliances Group , a major
appliances and electronics manufacturer, and LexinFintech
Holdings , a leading consumer finance lender. LexinFintech
retreated after a period of strong gains, as investors took profits on solid
earnings results. Hisense missed its second quarter revenue and profit
estimates due to weakness in central air conditioning amid reduced trade-in
support and a weak property market.
CURRENT PORTFOLIO POSITIONING
China remains a fertile ground for structural growth opportunities,
particularly in sectors benefiting from rapid technological innovation, such
as automation, electric vehicles, AI and advanced manufacturing. Meanwhile,
the fruits of strong R&D in healthcare and ongoing import substitution in tech
hardware and high-end industrial components further broaden the opportunity
set.
The Company remains focused on domestically driven sectors such as healthcare,
consumer, and select parts of industrials — areas less exposed to external
shocks and closely aligned with China’s long-term strategic priorities. We
continue to favour companies with scalable growth potential, sustainable
competitive advantage, and strong management teams, which are better
positioned to weather market volatility amid economic uncertainty.
Industrials remain the Company’s largest sector overweight exposure versus
the Benchmark Index. A key holding in the sector is Full
Truck Alliance (FTA) , China’s dominant digital freight
matching platform. By leveraging powerful network effects to match shippers
with truckers more efficiently than traditional offline brokers, FTA offers
durable growth potential as the logistics industry in China continues a
structural shift to online.
We also invested in Ehang Holdings .
The company offers early exposure to the next generation of urban air mobility
as the world’s first eVTOL (electric vertical take-off and landing)
manufacturer licensed to carry passengers commercially. Backed by strong
policy support in China, the company holds a clear first-mover advantage, with
commercialisation expected to begin gradually over the next three to five
years. Its technological leadership and regulatory certification give it a
strong lead versus competitors, while risk-reward remains attractive relative
to its long-term growth potential in this transformative transport market.
While the consumer sector faces a more cautious earnings outlook, select
franchises that can successfully tap into evolving consumer behaviour are
demonstrating resilient growth, even in a challenging economic environment.
Sportswear and outdoor gear remain areas of structural expansion, supported by
rising participation rates and consumers’ willingness to pay premiums for
functionality and health-related benefits. In addition, travel-related proxies
continue to benefit from the ongoing shift toward experience-based consumption
rather than spending on goods. These are among several categories that remain
underpenetrated and offer attractive long-term growth potential.
We initiated a position in Xtep International
, a leading domestic sportswear brand specialising in the fast-growing
running segment. Benefiting from the trading-down trend in sportswear, Xtep is
well positioned as a market share gainer, combining affordability with brand
relevance. The strong growth of its premium Saucony brand broadens product mix
and supports margin expansion. The company is trading at a compelling
valuation with solid and improving dividends. In the food and beverage
industry we added China Resources Beer
to the portfolio. It is trading at attractive valuations relative to its
solid market position and it is improving its product mix through ongoing
premiumisation.
We also increased exposure to the leading online travel agency
Trip.com following its share price weakness on
concerns over near-term margin contraction due to increased international
expansion investment and rising competition. We see this as an opportunity to
add to a long-term structural winner with domestic dominance and growing
global reach.
The holding in Alibaba was increased during the period, reflecting improving
e-commerce fundamentals, strong growth potential the cloud business and
strengthening execution. Near-term profits remain constrained by investment in
local services, but this should strengthen its ecosystem and engagement. The
cloud business remains a key growth driver, leveraging proprietary AI
technology to extend its competitive edge, while a higher dividend and stock
buyback quota strengthen its investment appeal.
In consumer durables, a position in Aux Electrics
was established. The mass-market air-conditioner manufacturer
stands to benefit from China’s consumption downgrade as demand shifts toward
affordable products. Its strong exposure to emerging markets supports a robust
overseas outlook, while low valuations and an attractive dividend yield
provide downside support.
Within unlisted investments, we added HashKey Holdings
, the leading Hong Kong-based crypto exchange, offering
leveraged exposure to the city’s regulated crypto trading market. With a
strong market position and close alignment with policymakers, the company is
well placed to benefit from growth in the market and potential regulatory
easing, providing meaningful long-term upside optionality.
These additions were funded by profit-taking in financials, such as long-held
insurer exposure to Ping An Insurance (Group) Company of
China , amid an unfavourable interest rate environment. We
also exited positions in consumer finance lender LexinFintech and
QFin Holding following strong gains since late
2024 and amid signs of weaker credit trends and lingering uncertainty around
new loan facilitation regulations.
Beyond these large sector exposures, and compared to the Index, we remain
overweight in real estate, broadly neutral in Information Technology (IT) and
communication services, and underweight in financials, mainly through an
underweight in banks, where we see fewer opportunities.
We have outlined our five largest holdings below.
GEARING
Our approach to managing the Company’s market exposure remains
consistent. We adjust exposure in line with the opportunities we see,
generally increasing it when valuations are more attractive versus
fundamentals and reducing it when the outlook is less compelling, or prices
appear stretched. We continue to believe that the sensible use of gearing can
enhance long-term capital and income returns, allowing us to take advantage of
volatility in the Chinese market. During the six months ended 30 September
2025 we continued to use contracts for difference (CFDs) as a flexible and
cost-effective method to increase exposure when opportunities arose.
Over the period, the Company’s net market exposure averaged around 119%,
with net gearing falling to 19.6% at the end of the period from 20.5% at the
start. Overall, gearing contributed positively over the six months, adding
3.0% to relative returns.
OUTLOOK
As we move into the latter stages of the year, the backdrop for
Chinese equities appears increasingly constructive. Chinese policymakers have
approved the 15th Five-Year Plan proposal at the Fourth Plenum, reaffirming
the country’s commitment to building a ‘moderately prosperous society.’
The plan targets steady and sustainable growth, while emphasising
technological self-sufficiency and stronger domestic demand. Meanwhile, the
recent meeting between Presidents Xi and Trump in Busan produced a positive
outcome, with both sides agreeing to extend tariff truces, suspend selected
trade levies, and re-establish regular communication channels. Together, these
developments point to a more predictable policy and external environment for
companies and investors alike.
Policy support remains broadly accommodative in pursuit of these goals.
Authorities continue to rely on targeted fiscal easing and flexible monetary
tools to sustain growth and maintain liquidity.
A key element of the current policy framework is the government’s
‘anti-involution’ campaign, which aims to address deflationary pressures
arising from excessive and inefficient competition, including fast-growing
sectors such as EV and solar energy, and in some traditional industries such
as paper and cement. The intent is to reduce excess capacity and destructive
competition, while preserving confidence among private enterprises. Early
evidence suggests that, while existing capacity has not been materially
reduced, the pace of new capacity expansion is likely to slow. This should
allow excess supply to be absorbed over time, supporting margins and
profitability if demand holds up. The potential for consolidation may still be
underappreciated by the market.
A more stable property sector also remains critical to restoring consumer
confidence. Recent trends have been mixed, with both new and existing home
prices falling further in September as policy support waned during what is
typically a strong season, although Tier 1 cities such as Beijing, Shanghai
and Hangzhou continued to show modest gains. I continue to believe
stabilisation in the housing market is important for a broader recovery in
household sentiment, which in turn is key to reviving domestic consumption.
For now, the consumer environment remains subdued, and although there is
divergent performance across categories, pockets of resilience can be found.
Well-positioned franchises adapting to shifting consumer preferences continue
to show growth, while weak investor sentiment has created some of the most
attractively valued opportunities in the market.
Despite these cyclical challenges, China’s structural strengths remain
clear. The country continues to lead globally in manufacturing scale,
innovation, and technological upgrading. Its export profile is shifting away
from the US towards other emerging markets, while Chinese firms continue
moving further up the value chain. Rapid adoption of AI, highlighted by the
success of domestic champions such as DeepSeek, demonstrates the ongoing
strength of China’s innovation. Combined with its leadership in areas such
as electric vehicles, digital infrastructure and smart manufacturing, these
trends reinforce China’s long-term competitiveness and its role as a key
driver of global productivity growth.
Following a strong recovery year to date, equity valuations have somewhat
normalised. The MSCI China Index now trades at around 13 times 12-month
forward earnings, still more than 40% below the prospective multiple of the
S&P 500. Recent performance has become increasingly concentrated in high-beta
and momentum-driven segments such as technology and AI, while widening
dispersion continues to create selective opportunities where fundamentals and
share prices have diverged. In this environment we remain focused on companies
with durable earnings visibility, exposure to structural growth themes and
disciplined capital allocation. We see particular promise in advanced
manufacturing, automation, and technology-enabled industrials; areas aligned
with policy priorities and capable of compounding value over time. The
consumer sector remains a key area of focus given low expectations and
valuations, along with the potential for consumer confidence to gradually
return.
DALE NICHOLLS
Portfolio Manager
8 December 2025
SPOTLIGHT ON THE TOP FIVE HOLDINGS AS AT 30 SEPTEMBER 2025
The top five holdings comprise 35.1% of the Company’s Net Assets.
Industry Communication Services
Tencent Holdings
% of Net Assets
14.3%
Tencent Holdings has a dominant position in China’s digital ecosystem with a
broad portfolio across social networking, gaming, digital content, and
financial technology. Its flagship platforms, WeChat and QQ, provide deep user
engagement and form a highly integrated ecosystem that connects communication,
entertainment, and commerce. As China’s internet user growth moderates and
the internet industry focuses increasingly on monetisation, Tencent is well
placed to utilise AI to deepen user engagement and enhance monetisation.
Furthermore, the company continues to diversify into higher-margin businesses
such as short-form video, mini-programmes, and e-commerce services, while
gaming remains a key growth driver supported by a strong pipeline of domestic
and international titles.
Industry Consumer Discretionary
Alibaba Group Holding
% of Net Assets
9.5%
Alibaba Group Holding is a leading technology conglomerate with a dominant
position in China’s e-commerce and cloud computing markets. Its cloud
division, Alibaba Cloud, is the largest in China and one of the most advanced
globally, serving as a key pillar of long-term growth. The company performed
well during the reporting period, supported by renewed investor interest in AI
applications, solid cloud results, and signs of stabilisation in its core
e-commerce business – partly helped by synergies from its new food delivery
operation. Alibaba’s renewed strategic focus on operational efficiency, user
experience, and disciplined capital allocation reinforces its competitive
position in a maturing domestic market. It has also announced significant
capital expenditure to strengthen its cloud infrastructure, enhance AI
capabilities, and expand data services, positioning it to capture the
structural demand for digital transformation across industries.
Industry Consumer Discretionary
PDD Holdings
% of Net Assets
4.9%
PDD Holdings is China’s third-largest e-commerce platform by Gross
Merchandise Value (GMV), known for its efficiency in supply chain management
and cost control. Its proprietary traffic distribution model enables it to
offer low-cost products and steadily capture market share. The company’s
international expansion, via its fast-growing app Temu, has extended
operations to more than 50 countries. By leveraging China’s manufacturing
base to meet global demand, PDD has established a scalable and cross-border
commerce model.
Industry Communication Services
ByteDance (unlisted)
% of Net Assets
3.7%
ByteDance is one of the largest internet entertainment companies in China and
among the few with notable success in overseas markets, primarily through
TikTok. The company continues to demonstrate exceptional product innovation
and development capabilities within the social media business, capturing a
growing share of user time and engagement. Despite its scale, ByteDance
remains under-monetised, with major platforms such as Douyin and TikTok still
in the early stages of advertising monetisation. This offers meaningful upside
potential as monetisation efficiency improves and ad load increases. Its
ecosystem benefits from powerful content recommendation algorithms, data-led
service integration and strong user engagement. Despite ongoing uncertainty
surrounding TikTok’s US operations, ByteDance’s growth prospects remain
robust. This resilience is underpinned by its strong financial performance,
international expansion, and leadership in AI innovation.
Industry Information Technology
Pony.ai
% of Net Assets
2.7%
Pony.ai is a leading autonomous vehicle technology company in China. Strong
government support for the development of homegrown autonomous driving
solutions provides a favourable policy backdrop. The company’s technology
leadership, demonstrated by smooth ride performance and advanced handling of
extreme situations, reinforces its competitive edge. As China aims to
demonstrate readiness in autonomous mobility and potentially export its
technology, Pony.ai is well positioned to benefit from rising adoption and the
gradual commercial rollout of robotaxi services.
Twenty Largest Holdings as at 30 September 2025
The Asset Exposures shown below measure the exposure of the Company’s
portfolio to market price movements in the shares and convertible bonds owned
or in the shares underlying the derivative instruments. The Fair Value is the
value the portfolio could be sold for and is the value
shown on the Statement of Financial Position. Where a contract for difference
(“CFD”) is held, the fair value reflects the profit or loss on the
contract since it was opened and is based on how much the share price of the
underlying shares has moved.
Asset Exposure Fair Value
£’000
£’000 % 1
Long Exposures – shares unless otherwise stated
Tencent Holdings (shares and long CFDs)
Communication Services 248,658 14.3 153,568
Alibaba Group Holding (shares and long CFDs)
Consumer Discretionary 165,570 9.5 70,248
PDD Holdings
Consumer Discretionary 84,945 4.9 84,945
ByteDance (unlisted)
Communication Services 64,462 3.7 64,462
Pony.ai
Information Technology 46,282 2.7 46,282
Hesai Group
Consumer Discretionary 37,284 2.1 37,284
Contemporary Amperex Technology (shares and long CFDs)
Industrials 35,143 2.0 16,685
China Foods (shares and long CFD)
Consumer Staples 34,008 2.0 (2,605)
Trip.com Group
Consumer Discretionary 33,808 1.9 33,808
NetEase
Communication Services 30,991 1.8 30,991
Venturous Holdings (unlisted)
Financials 30,299 1.7 30,299
Full Truck Alliance (long CFD)
Industrials 29,847 1.7 (1,423)
Crystal International Group
Consumer Discretionary 29,250 1.7 29,250
Ping An Insurance (Group) Company of China (long CFDs)
Financials 27,122 1.6 (300)
Chime Biologics Convertible Bond (unlisted)
Health Care 26,882 1.5 26,882
Sinotrans (shares and long CFD)
Industrials 26,166 1.5 13,011
Tuhu Car
Industrials 25,283 1.5 25,283
H World Group
Consumer Discretionary 24,973 1.4 24,973
Hisense Home Appliances Group (long CFD)
Consumer Discretionary 23,834 1.4 (2,572)
Zijin Mining Group
Materials 22,874 1.3 22,874
--------------- --------------- ---------------
Twenty largest long exposures 1,047,681 60.2 703,945
Other long exposures 1,300,123 74.6 968,980
--------------- --------------- ---------------
Total long exposures before hedges (145 companies) 2,347,804 134.8 1,672,925
========= ========= =========
Less: hedging exposures
Hang Seng Index (future) (104,773) (6.0) (1,118)
Hang Seng China Enterprises Index (future) (93,574) (5.4) (708)
--------------- --------------- ---------------
Total hedging exposures (198,347) (11.4) (1,826)
========= ========= =========
Total long exposures after the netting of hedges 2,149,457 123.4 1,671,099
========= ========= =========
Short exposures
Short CFDs (4 holdings) 65,806 3.8 (5,290)
--------------- --------------- ---------------
Gross Asset Exposure 2 2,215,263 127.2
========= =========
Portfolio Fair Value 3 1,665,809
Net current assets (excluding derivative instruments) 75,967
---------------
Net Assets 1,741,776
=========
1 Asset Exposure expressed as a percentage of Net Assets.
2 Gross Asset Exposure comprises market exposure to
investments of £1,655,634,000 plus market exposure to derivative instruments
of £559,629,000.
3 Portfolio Fair Value comprises investments of
£1,655,634,000 plus derivative assets of £31,845,000 less derivative
liabilities of £21,670,000.
Interim Management Report
UNLISTED INVESTMENTS
The Company can invest up to 15% of its Net Assets plus Borrowings
in unlisted securities which carry on business, or have significant interests,
in China. The limit is applied at the time of purchase.
The Directors believe that the ability to invest in unlisted securities is a
differentiating factor for the Company and can be a source of additional
investment performance. It allows the Portfolio Manager to take advantage of
the growth trajectory of early-stage companies before they potentially become
listed. This can offer good opportunities for patient and long-term investors.
In the reporting period, a purchase of shares was made in Hashkey Holdings in
August 2025 at a cost of £22,669,000. No companies from the portfolio gained
quotations on stock exchanges during the period under review.
At the period end, the Company had seven unlisted investments valued at
£171,953,000 being 9.9% of its Net Assets (31 March 2025: six unlisted
investments valued at £136,044,000 being 9.6% of Net Assets).
Overview of the Unlisted Investments Valuation Process
Unlisted investments in the Company’s portfolio are held at fair
value, which is defined as the value that would be paid for a holding in an
open-market transaction. The Manager’s Fair Value Committee (“FVC”),
which is independent of the Portfolio Manager, provides recommended fair
values to the Directors.
Twice yearly, ahead of the Company’s interim and year end, the Audit and
Risk Committee receives a detailed presentation from the FVC, Fidelity’s
unlisted investments specialist and Kroll (independent third-party valuers).
This allows the Board to satisfy itself that the unlisted investments in the
Company’s portfolio are carried at an appropriate value in accordance with
Accounting Policies Notes 2 (e) and (l) on pages 64 to 66 of the Annual Report
for the year ended 31 March 2025 which can be found on the Company’s pages
of the Manager’s website at
www.fidelity.co.uk/china . The
external Auditor attends the unlisted valuations meeting held ahead of the
Company’s year end.
Workings of the Fair Value Committee
The valuation of each unlisted investment is set by the Manager’s
FVC and includes input from the analysts covering the securities, Fidelity’s
unlisted investments specialist and also advised upon by independent
third-party valuers, Kroll.
Kroll, as independent valuers, undertake a detailed review of each of the
unlisted investments on a quarterly basis. The Board is provided with
quarterly updates from the FVC, which include recommendations from the
analysts’ and Fidelity’s unlisted investments specialist, enabling the
Board to have oversight of and confidence in Fidelity’s process. Outside of
the normal quarterly cycle, the unlisted investments are monitored daily for
trigger events such as funding rounds or news affecting fundamentals which may
require the FVC to adjust the valuation price as soon as the Fidelity analyst
has been consulted. In addition to this, the unlisted investments are
monitored on a weekly basis within a comparable movement model. If the average
movement of the selected proxies is +/-15%, a revaluation of the relevant
investment is considered.
GEARING
The Board continues to believe that the judicious use of gearing (a
benefit of the investment trust 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. The Company currently has no bank loans and solely
uses contracts of differences (CFDs) for gearing purposes as these tend to be
at lower costs than prevailing longer-dated borrowing. Net gearing at the
period end was 19.6% compared to 20.9% as at 31 March 2025. The impact of
gearing was positive during the reporting period, adding 3.0% to returns.
DISCOUNT MANAGEMENT
The Board believes that investors are best served when the share
price trades closely to its NAV per share. It recognises that the share price
is affected by the interaction of supply and demand in the market based on
investor sentiment towards China, as well as the performance of the
Company’s portfolio. A discount control mechanism is in place whereby the
Board seeks to maintain the Company’s discount in single digits in normal
market conditions. The Directors 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.
The Board undertook active discount management in the reporting period and
authorised the repurchase of 9,033,042 shares for cancellation at a cost of
£25,275,000, representing 1.58% of the issued share capital of the Company as
at 30 September 2025. As well as helping to limit discount volatility, these
share repurchases have benefited remaining shareholders as the NAV per share
has been increased by purchasing shares at a discount. Subsequent to the
period end and up to the latest practicable date of this report, the Company
has repurchased 9,022,797 shares for cancellation.
ONGOING CHARGES RATIO AND MANAGEMENT FEE
The Ongoing Charges Ratio (the costs of running the Company) for the
six months ended 30 September 2025 was 0.93% on an annualised basis (31 March
2025: 0.89%). The increase was due to the end of the fee holiday granted by
the Manager in relation to the abrdn China Investment Company (“ACIC”)
transaction on 14 March 2024. The variable element of the management fee was a
charge of 0.14% (31 March 2025: credit of 0.15%). Therefore, the Ongoing
Charges Ratio, including the variable element, for the reporting period was
1.07% (31 March 2025: 0.74%).
Following a reduction in the base management fee paid to the Manager for the
financial year ended 31 March 2024 as a result of the combination with ACIC,
there have been no further changes to the fee arrangements in the period under
review.
PRINCIPAL AND EMERGING RISKS
The Board, with the assistance of the Manager (FIL Investments
Services (UK) Limited), 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 faced by the Company.
The Board considers that the principal risks and uncertainties faced by the
Company continue to fall into the following risk categories: geopolitical;
market and economic (including currency risk); investment performance
(including gearing risk); marketplace competition and discount management;
unlisted securities; key person; cybercrime and information security,
including business continuity and operational risks. Information on each of
these risks is given in the Strategic Report section of the Annual Report on
pages 27 to 30 for the year ended 31 March 2025 which can be found on the
Company’s pages of the Manager’s website at
www.fidelity.co.uk/china.
The principal risks and uncertainties remain substantially the same as those
at the last year end. There continue to be increased geopolitical tensions and
economic and market events, including tensions such as those between China and
the US over trade and tariffs, implications of China/Taiwan relations, the
potential for North Korean aggression and its impact on the Asia region.
Geopolitics remains a risk for Chinese equities and there is increased global
economic uncertainty from tariff wars and the ongoing conflict in Ukraine.
There were some positive outcomes from the meeting between US President Trump
and Chinese President Xi Jinping with headline wins on both sides. The talks
produced several concessions on major trade barriers including tariffs, port
fees, export controls, and sanctions. The Board and the Manager remain
vigilant in monitoring existing and emerging risks.
Climate change continues to be a key principal risk confronting asset managers
and how this may impact the Company as a risk on investment valuations and
potentially shareholder returns. It can potentially impact the operations of
investee companies, their supply chains and their customers. Additional risks
may also arise from increased regulations, costs and net-zero programmes which
can all impact investment returns. The Board notes the Manager’s ESG
considerations, including climate change, in the Company’s investment
process and how it may affect investment valuations and potentially
shareholder returns.
AI is an important structural theme for China’s economy. The Board and the
Manager continue to monitor the emerging risks and rewards posed by the rapid
advancement of artificial intelligence (AI) and technology and how this 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
computer power, there are risks from its increasing use and manipulation with
the potential to harm, including a heightened threat to cybersecurity.
Market fluctuations will impact the values of shares in the Company and
investors should remember that holding shares in the Company should be
considered to be a long-term investment. Risks are mitigated by the investment
trust structure of the Company which means that the Portfolio Manager is not
required to trade to meet investor redemptions. Therefore, investments in the
Company’s portfolio can be held over a longer time horizon.
The Manager has appropriate business continuity and operational resilience
plans in place to ensure the continued provision of services. This includes
investment team key activities, including those of portfolio managers,
analysts and trading/support functions. The Manager reviews its operational
and business continuity resilience strategies on an ongoing basis and
continues to take all reasonable steps in meeting its regulatory obligations,
assess its ability to continue operating and the steps it needs to take to
serve and support its clients, including the Board.
The Company’s other third-party service providers also have similar measures
in place to ensure that business disruption is kept to a minimum.
TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES
The Manager has delegated the Company’s investment management to
FIL Investment Management (Hong Kong) Limited and the role of company
secretary to FIL Investments International. Transactions with the Manager and
related party transactions with the Directors are disclosed in Note 15 to the
Financial Statements below.
GOING CONCERN STATEMENT
The Directors have considered the Company’s investment objective,
risk management policies, liquidity risk, credit risk, capital management
policies and procedures, the nature of its portfolio and its expenditure and
cash flow projections. The Directors, having considered the liquidity of the
Company’s portfolio of investments (being mainly securities which are
readily realisable) and the projected income and expenditure, are satisfied
that the Company is financially sound and has adequate resources to meet all
of its liabilities and ongoing expenses and can continue in operational
existence for a period of at least twelve months from the date of this
Half-Yearly Report.
This conclusion also takes into account the Board’s assessment of the
ongoing risks as outlined above.
Accordingly, the Financial Statements of the Company have been prepared on a
going concern basis.
The Company will hold its first continuation vote at the AGM in 2029 and every
five years thereafter.
By Order of the Board
FIL INVESTMENTS INTERNATIONAL
8 December 2025
Directors’ Responsibility Statement
The Disclosure and Transparency Rules (“DTR”) of the UK Listing Authority
require the Directors to confirm their responsibilities in relation to the
preparation and publication of the Interim Management Report and Financial
Statements.
The Directors confirm to the best of their knowledge that:
a) the condensed set of Financial Statements contained
within this Half-Yearly Report has been prepared in accordance with the
International Accounting Standards 34: Interim Financial Reporting; and
b) the Portfolio Manager’s Half-Yearly Review and the
Interim Management Report above include a fair review of the information
required by DTR 4.2.7R and 4.2.8R.
The Half-Yearly Report has not been audited or reviewed by the Company’s
Independent Auditor.
The Half-Yearly Report was approved by the Board on 8 December 2025 and the
above responsibility statement was signed on its behalf by Mike Balfour,
Chairman.
FINANCIAL STATEMENTS
Statement of Comprehensive Income for the six months ended 30 September 2025
Six months ended 30 September 2025 Six months ended 30 September 2024 Year ended 31 March 2025
unaudited Unaudited audited
Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Revenue
Investment income 4 32,631 – 32,631 40,731 – 40,731 46,862 – 46,862
Derivative income 4 12,965 – 12,965 11,720 – 11,720 13,747 – 13,747
Other income 4 1,714 – 1,714 676 – 676 2,090 – 2,090
---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Total income 47,310 – 47,310 53,127 – 53,127 62,699 – 62,699
========= ========= ========= ========= ========= ========= ========= ========= =========
Gains on investments at fair value through profit or loss – 274,661 274,661 – 72,009 72,009 – 249,875 249,875
Gains on derivative instruments – 93,083 93,083 – 73,226 73,226 – 57,121 57,121
Foreign exchange (losses)/gains – (1,359) (1,359) – (3,263) (3,263) – 1,769 1,769
---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Total income and gains 47,310 366,385 413,695 53,127 141,972 195,099 62,699 308,765 371,464
========= ========= ========= ========= ========= ========= ========= ========= =========
Expenses
Investment management fees 5 (1,528) (5,592) (7,120) (1,108) (2,267) (3,375) (2,469) (5,572) (8,041)
Other expenses (592) (18) (610) (593) (5) (598) (1,211) (32) (1,243)
---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Profit before finance costs and taxation 45,190 360,775 405,965 51,426 139,700 191,126 59,019 303,161 362,180
Finance costs 6 (1,874) (5,621) (7,495) (2,901) (8,703) (11,604) (5,774) (17,324) (23,098)
---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Profit before taxation 43,316 355,154 398,470 48,525 130,997 179,522 53,245 285,837 339,082
Taxation 7 (841) – (841) (1,341) 322 (1,019) (1,070) – (1,070)
---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Profit after taxation for the period 42,475 355,154 397,629 47,184 131,319 178,503 52,175 285,837 338,012
========= ========= ========= ========= ========= ========= ========= ========= =========
Earnings per ordinary share 8 8.64p 72.28p 80.92p 9.05p 25.20p 34.25p 10.18p 55.75p 65.93p
========= ========= ========= ========= ========= ========= ========= ========= =========
The Company does not have any income or expenses that are not included in the
profit after taxation for the period. Accordingly, the profit after taxation
for the period is also the total comprehensive income for the period.
The total column of this statement represents the Company’s Statement of
Comprehensive Income.
The revenue and capital columns are supplementary and presented for
information purposes as recommended by the Statement of Recommended Practice
issued by the AIC.
All the profit and total comprehensive income is attributable to the equity
shareholders of the Company. There are no minority interests.
No operations were acquired or discontinued in the period and all items in the
above statement derive from continuing operations.
Statement of Changes in Equity for the six months ended 30 September 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
Six months ended 30 September 2025 (unaudited)
Total equity at 31 March 2025 5,805 338,107 1,412 74,052 922,363 72,063 1,413,802
Repurchase of ordinary shares for cancellation 13 (91) – 91 (25,275) – – (25,275)
Profit after taxation for the period – – – – 355,154 42,475 397,629
Dividend paid to shareholders 9 – – – – – (44,380) (44,380)
---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Total equity at 30 September 2025 5,714 338,107 1,503 48,777 1,277,517 70,158 1,741,776
========= ========= ========= ========= ========= ========= =========
Six months ended 30 September 2024 (unaudited)
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 ACIC transaction and issuance of shares – (636) – – – – (636)
Repurchase of ordinary shares for cancellation 13 (93) – 93 (18,509) – – (18,509)
Profit after taxation for the period – – – – 131,319 47,184 178,503
Dividend paid to shareholders 9 – – – – – (33,355) (33,355)
---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Total equity at 30 September 2024 6,020 337,631 1,197 122,352 767,845 67,072 1,302,117
========= ========= ========= ========= ========= ========= =========
Year ended 31 March 2025 (audited)
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 13 (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
========= ========= ========= ========= ========= ========= =========
Statement of Financial Position as at 30 September 2025
Company number 7133583
Notes 30 September 2025 31 March 2025 30 September 2024
unaudited audited unaudited
£’000 £’000 £’000
Non-current assets
Investments at fair value through profit or loss 10 1,655,634 1,346,238 1,188,207
---------------- ---------------- ----------------
Current assets
Derivative instruments 10 31,845 9,938 104,457
Amounts held at futures clearing houses and brokers 28,652 33,760 29,585
Other receivables 11 8,996 7,295 14,450
Cash and cash equivalents 67,886 49,691 8,827
---------------- ---------------- ----------------
137,379 100,684 157,319
========= ========= =========
Current liabilities
Derivative instruments 10 (21,670) (24,838) (17,133)
Other payables 12 (29,567) (8,282) (4,068)
Bank overdraft – – (22,208)
---------------- ---------------- ----------------
(51,237) (33,120) (43,409)
---------------- ---------------- ----------------
Net current assets 86,142 67,564 113,910
========= ========= =========
Net assets 1,741,776 1,413,802 1,302,117
========= ========= =========
Equity attributable to equity shareholders
Share capital 13 5,714 5,805 6,020
Share premium account 338,107 338,107 337,631
Capital redemption reserve 1,503 1,412 1,197
Other reserve 48,777 74,052 122,352
Capital reserve 1,277,517 922,363 767,845
Revenue reserve 70,158 72,063 67,072
---------------- ---------------- ----------------
Total equity 1,741,776 1,413,802 1,302,117
========= ========= =========
Net asset value per ordinary share 14 358.53p 285.71p 252.18p
========= ========= =========
Statement of Cash Flows for the six months ended 30 September 2025
Six months Six months Year ended
ended ended 31 March
30 September 30 September 2025
2025 2024 audited
unaudited unaudited £’000
£’000 £’000
Operating activities
Cash inflow from investment income 28,389 37,082 45,209
Cash inflow from derivative income 11,937 9,593 14,002
Cash inflow from other income 1,714 676 2,090
Cash outflow from Directors’ fees (126) (107) (249)
Cash outflow from other payments (6,691) (3,755) (9,433)
Cash outflow from costs relating to the ACIC transaction and issuance of shares – (636) –
Cash outflow from the purchase of investments (396,515) (308,988) (651,563)
Cash outflow from the purchase of derivatives (4,929) (1,137) (2,242)
Cash outflow from the settlement of derivatives (191,551) (172,503) (436,471)
Cash inflow from the sale of investments 385,545 349,903 716,551
Cash inflow from the settlement of derivatives 264,037 153,184 507,321
Cash inflow/(outflow) from amounts held at futures clearing houses and brokers 5,108 (4,996) (9,171)
---------------- ---------------- ----------------
Net cash inflow from operating activities before servicing of finance 96,918 58,316 176,044
========= ========= =========
Financing activities
Cash inflow from the Fidelity contribution in respect of the transaction with ACIC – 100 –
Cash outflow from overdraft interest paid (366) (48) (80)
Cash outflow from CFD interest paid (6,929) (11,274) (22,478)
Cash outflow from short CFD dividends paid (414) (287) (321)
Cash outflow from the repurchase of ordinary shares for cancellation (25,275) (18,670) (66,988)
Cash outflow from dividends paid to shareholders (44,380) (33,355) (33,355)
---------------- ---------------- ----------------
Cash outflow from financing activities (77,364) (63,534) (123,222)
========= ========= =========
Net increase/(decrease) in cash at bank 19,554 (5,218) 52,822
Cash and cash equivalent at the start of the period 49,691 7,858 7,858
Bank overdraft at the start of the period – (12,758) (12,758)
Effect of foreign exchange movements (1,359) (3,263) 1,769
---------------- ---------------- ----------------
Cash and cash equivalents at the end of the period 67,886 (13,381) 49,691
========= ========= =========
Represented by:
Cash at bank – 8,826 49,691
Amount held in Fidelity Institutional Liquidity Fund 67,886 1 –
Bank overdraft – (22,208) –
---------------- ---------------- ----------------
67,886 (13,381) 49,691
========= ========= =========
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 Publication of Non-statutory Accounts
The Financial Statements in this Half-Yearly Report have not been
audited or reviewed by the Company’s Independent Auditor and do not
constitute statutory accounts as defined in section 434 of the Companies Act
2006 (the “Act”). The financial information for the year ended 31
March 2025, is extracted from the latest published Financial
Statements of the Company. Those Financial Statements were delivered to the
Registrar of Companies and included the Independent Auditor’s Report which
was unqualified and did not contain a statement under either section 498(2) or
498(3) of the Act.
3 Accounting Policies
(i) Basis of Preparation
These Half-Yearly Financial Statements have been prepared in
accordance with UK-adopted International Accounting Standard 34: Interim
Financial Reporting and use the same accounting policies as set out in the
Company’s Annual Report and Financial Statements for the year ended 31 March
2025. Those Financial Statements were prepared in accordance with UK-adopted
International Accounting Standards (“IFRS”) in conformity with the
requirements of the Companies Act 2006, IFRC interpretations and, as far as it
is consistent with IFRS, 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.
(ii) Going Concern
The Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for a period of at
least twelve months from the date of approval of these Financial Statements.
Accordingly, the Directors consider it appropriate to adopt the going concern
basis of accounting in preparing these Financial Statements. This conclusion
also takes into account the Board’s assessment of the ongoing risks as
disclosed in the Going Concern Statement above.
4 Income
Six months Six months Year
ended ended ended
30 September 2025 30 September 2024 31 March 2025
unaudited unaudited audited
£’000 £’000 £’000
Investment income
Overseas dividends 32,143 40,459 46,590
Overseas scrip dividends 488 272 272
---------------- ---------------- ----------------
32,631 40,731 46,862
========= ========= =========
Derivative income
Dividends received on long CFDs 12,912 11,375 13,152
Interest received on CFDs 53 345 595
---------------- ---------------- ----------------
12,965 11,720 13,747
========= ========= =========
Other income
Interest received on bank deposits, collateral and money market funds 1,714 676 2,090
---------------- ---------------- ----------------
Total income 47,310 53,127 62,699
========= ========= =========
No special dividends have been recognised in capital during the period (six
months ended 30 September 2024 and year ended 31 March 2025: £1,493,000).
5 Investment Management Fees
Revenue Capital Total
£’000 £’000 £’000
Six months ended 30 September 2025 (unaudited)
Investment management fee – base 1,528 4,583 6,111
Investment management fee – variable – 1,009 1,009
---------------- ---------------- ----------------
1,528 5,592 7,120
========= ========= =========
Six months ended 30 September 2024 (unaudited)
Investment management fee – base 1,242 3,727 4,969
Investment management fee – variable – (1,058) (1,058)
Investment management fee – base (waived in respect of ACIC combination) (134) (402) (536)
---------------- ---------------- ----------------
1,108 2,267 3,375
========= ========= =========
Year ended 31 March 2025 (audited)
Investment management fee – base 2,648 7,942 10,590
Investment management fee – variable – (1,834) (1,834)
Investment management fee – base (waived in respect of ACIC combination) (179) (536) (715)
---------------- ---------------- ----------------
2,469 5,572 8,041
========= ========= =========
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.
The base investment management fee is charged at an annual rate of 0.85% on
the first £1.5 billion of Net Assets, reducing to 0.65% of Net Assets over
£1.5 billion.
In 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.
In the prior year, 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 have
been payable by the enlarged Company to the Manager being recognised in the
year to 31 March 2025.
Fees are payable monthly in arrears and are calculated on a daily basis.
The base management fee has been allocated 75% to capital reserve in
accordance with the Company’s accounting policies.
6 Finance Costs
Revenue Capital Total
£’000 £’000 £’000
Six months ended 30 September 2025 (unaudited)
Interest on overdrafts 92 275 367
Interest paid on CFDs 1,678 5,035 6,713
Dividends paid on short CFDs 104 311 415
---------------- ---------------- ----------------
1,874 5,621 7,495
========= ========= =========
Six months ended 30 September 2024 (unaudited)
Interest on overdrafts 12 36 48
Interest paid on CFDs 2,817 8,452 11,269
Dividends paid on short CFDs 72 215 287
---------------- ---------------- ----------------
2,901 8,703 11,604
========= ========= =========
Year ended 31 March 2025 (audited)
Interest paid on overdrafts 20 60 80
Interest paid on CFDs 5,674 17,023 22,697
Dividends paid on short CFDs 80 241 321
---------------- ---------------- ----------------
5,774 17,324 23,098
========= ========= =========
Finance costs have been allocated 75% to capital reserve in accordance with
the Company’s accounting policies.
7 Taxation
Revenue Capital Total
£’000 £’000 £’000
Six months ended 30 September 2025 (unaudited)
UK corporation tax – – –
Overseas taxation charge 841 – 841
---------------- ---------------- ----------------
Taxation charge for the period 841 – 841
========= ========= =========
Six months ended 30 September 2024 (unaudited)
UK corporation tax 322 (322) –
Overseas taxation charge 1,019 – 1,019
---------------- ---------------- ----------------
Taxation charge for the period 1,341 (322) 1,019
========= ========= =========
Year ended 31 March 2025 (audited)
UK corporation tax – – –
Overseas taxation charge 1,070 – 1,070
---------------- ---------------- ----------------
Taxation charge for the year 1,070 – 1,070
========= ========= =========
8 EARNINGS PER ORDINARY SHARE
Six months Six months Year
ended ended ended
30 September 2025 30 September 2024 31 March 2025
unaudited unaudited unaudited
Revenue earnings per ordinary share 8.64p 9.05p 10.18p
Capital earnings per ordinary share 72.28p 25.20p 55.75p
--------------- --------------- ---------------
Total earnings per ordinary share 80.92p 34.25p 65.93p
========= ========= =========
The earnings per ordinary share is based on the profit after taxation for the
period divided by the weighted average number of ordinary shares held outside
of Treasury during the period, as shown below:
£’000 £’000 £’000
Revenue profit after taxation for the period 42,475 47,184 52,175
Capital profit after taxation for the period 355,154 131,319 285,837
--------------- --------------- ---------------
Total profit after the taxation for the period 397,629 178,503 338,012
========= ========= =========
Number Number Number
Weighted average number of ordinary shares held outside of Treasury 491,359,813 521,153,833 512,652,970
========== ========== ==========
9 DIVIDEND PAID TO SHAREHOLDERS
Six months Six months Year
ended ended ended
30 September 2025 30 September 2024 31 March 2025
unaudited unaudited unaudited
£’000 £’000 £’000
Ordinary dividend of 8.00 pence per share paid for the year ended 31 March 2025 39,449 – –
Special dividend of 1.00 pence per share paid for the year ended 31 March 2025 4,931 – –
Ordinary dividend of 6.40 pence per share paid for the year ended 31 March 2024 – 33,355 33,355
--------------- --------------- ---------------
44,380 33,355 33,355
========= ========= =========
No dividend has been declared for the six months ended 30 September 2025 (six
months ended 30 September 2024: £nil).
10 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 as disclosed
in the Company’s Annual Report for the year ended 31 March 2025 (Accounting
Policies Notes 2 (e), (l) and (m) on pages 64 to 66). The table below sets out
the Company’s fair value hierarchy:
30 September 2025 (unaudited) Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
Financial assets at fair value through profit or loss
Investments 1,483,681 – 171,953 1,655,634
Derivative instrument assets – 31,845 – 31,845
--------------- --------------- --------------- ---------------
1,483,681 31,845 171,953 1,687,479
========= ========= ========= =========
Financial liabilities at fair value through profit or loss
Derivative instrument liabilities (1,826) (19,844) – (21,670)
========= ========= ========= =========
31 March 2025 (audited) Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
Financial assets at fair value through profit or loss
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)
========= ========= ========= =========
30 September 2024 (unaudited) Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
Financial assets at fair value through profit or loss
Investments 1,045,496 13,806 128,905 1,188,207
Derivative instrument assets 132 104,325 – 104,457
--------------- --------------- --------------- ---------------
1,045,628 118,131 128,905 1,292,664
========= ========= ========= =========
Financial liabilities at fair value through profit or loss
Derivative instrument liabilities (13,635) (3,498) – (17,133)
========= ========= ========= =========
The table below sets out the movements in level 3 investments during the
period:
30 September 2025 31 March 2025 30 September 2024
unaudited audited unaudited
£’000 £’000 £’000
Level 3 investments at the beginning of the period 136,044 157,008 157,008
Purchases at cost 22,669 20,251 12,414
Sales proceeds – (14,410) (14,410)
Sales gains – 960 960
Transfers out of level 3 – at cost 1 – (42,208) (17,316)
Unrealised gains/(losses) recognised in the Statement of Comprehensive Income 13,240 14,443 (9,751)
--------------- --------------- ---------------
Level 3 investments at the end of the period 171,953 136,044 128,905
========= ========= =========
1 Financial instruments are transferred out of level 3
when they become listed.
During the period, £73,000 income has been recognised from the unlisted
investments (six months ended 30 September 2024 and year ended 31 March 2025:
£nil).
Level 3 investments (unlisted and delisted investments)
30 September 2025 31 March 2025 30 September 2024
£’000 £’000 £’000
ByteDance 64,463 55,005 35,450
Venturous Holdings 30,299 30,258 21,303
Chime Biologics 26,882 26,194 25,627
DJI International 20,064 17,123 15,591
Fujian Yangteng Innovation 7,549 7,464 –
Hashkey Holdings 22,696 - –
Pony.ai - - 30,934
--------------- --------------- ---------------
171,953 136,044 128,905
========= ========= =========
The sensitivity analysis below illustrates how the unobservable inputs used in
the valuation methodologies of the unlisted assets impact the fair value as at
30 September 2025
Significant unobservable inputs
Valuation approach Fair value Key unobservable inputs Other unobservable inputs Range Sensitivity to changes in significant unobservable inputs
£’000*
Market approach using comparable Traded multiples or calibration factors 92,076 TEV/LTM revenue multiple 1 a,b,c,d 1.95x – 3.5x If TEV/LTM revenue multiple moved by +/- 10%, the fair value would change by £1,725,000 and -£1,709,000
TEV/LTM EBITDA multiple 2 a,b,c,d 7.25x – 8.25x If TEV/LTM EBITDA multiple moved by +/- 10%, the fair value would change by £1,574,000 and -£1,538,000
TEV/FY+1 revenue multiple 3 a,b,c,d 1.55x – 3.25x If TEV/FY+1 revenue multiple moved by +/- 10%, the fair value would change by £1,106,000 and -£1,091,000
TEV/FY+1 EBITDA multiple 4 a,b,c,d 5.0x – 6.0x If TEV/FY+1 EBITDA multiple moved by +/- 10%, the fair value would change by £1,525,000 and -£1,490,000
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 £1,042,000 and -£1,042,000
Sum of the parts e 30,299 Selection of comparable companies and relevant indices c (10.0%) – 10.0% If the market factor of the comparable companies moved by +/- 5% the fair value would change by £543,000 and -£543,000
Scenario analysis considering a range of exit scenarios f 26,882 Discount rate c,d 16.5% – 17.5% If the discount rate moved by +/- 10% the fair value would change by £182,000 and -£159,000
Recent transaction prices g 94,707 n/a c n/a n/a
=========
* An asset may be valued using multiple approaches therefore this column is
not expected to represent the total of level 3 investments held at the end of
the period.
1 Total enterprise value (TEV) divided by the last twelve
months (LTM) revenue.
2 Total enterprise value (TEV) divided by the last twelve
months (LTM) earnings before interest, taxes, depreciation and amortisation
(EBITDA).
3 Total enterprise value (TEV) divided by the next twelve
months forecasted revenue (FY+1).
4 Total enterprise value (TEV) divided by the next twelve
months (FY+1) forecasted earnings before interest, taxes, depreciation and
amortisation (EBITDA).
5 Price to earnings (P/E) divided by the last twelve
months (LTM) revenue.
The sensitivity analysis below illustrates how the unobservable inputs used in
the valuation methodologies of the unlisted assets impact the fair value as at
30 September 2024
Significant unobservable inputs
Valuation approach Fair value Key unobservable inputs Other unobservable inputs Range Sensitivity to changes in significant unobservable inputs
£’000*
Market approach using comparable Traded multiples or calibration factors 50,041 TEV/LTM revenue multiple 1 a,b,c,d 1.95x – 3.5x If TEV/LTM revenue multiple moved by +/- 10%, the fair value would change by £887,000 and -£905,000
TEV/LTM EBITDA multiple 2 a,b,c,d 7.25x – 8.25x If TEV/LTM EBITDA multiple moved by +/- 10%, the fair value would change by £431,000 and -£335,000
TEV/FY+1 revenue multiple 3 a,b,c,d 1.55x – 3.25x If TEV/FY+1 revenue multiple moved by +/- 10%, the fair value would change by £416,000 and -£320,000
TEV/FY+1 EBITDA multiple 4 a,b,c,d 5.0x – 6.0x If TEV/FY+1 EBITDA multiple moved by +/- 10%, the fair value would change by £425,000 and -£329,000
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 £878,000 and -£878,000
Sum of the parts e 21,303 Selection of comparable companies and relevant indices c (10.0%) – 10.0% If the market factor of the comparable companies moved by +/- 5% the fair value would change by £548,000
and -£548,000
Scenario analysis considering a range of exit scenarios f 56,561 Discount rate c,d 16.5% – 17.5% If the discount rate moved by +/- 10% the fair value would change by £507,000 and -£522,000
Recent transaction prices g 35,450 n/a c n/a n/a
=========
* An asset may be valued using multiple approaches therefore this column is
not expected to represent the total of level 3 investments held at the end of
the period.
1 Total enterprise value (TEV) divided by the last twelve
months (LTM) revenue.
2 Total enterprise value (TEV) divided by the last twelve
months (LTM) earnings before interest, taxes, depreciation and amortisation
(EBITDA).
3 Total enterprise value (TEV) divided by the next twelve
months forecasted revenue (FY+1).
4 Total enterprise value (TEV) divided by the next twelve
months (FY+1) forecasted earnings before interest, taxes, depreciation and
amortisation (EBITDA).
5 Price to earnings (P/E) divided by the last twelve
months (LTM) revenue.
a. Selection of comparable companies
The fair value is determined by examining the market valuations of
similar publicly traded firms. This approach involves identifying peer
companies with similar industry characteristics, size, growth prospects, and
financial metrics. Key valuation multiples such as Price-to-Earnings (P/E),
Enterprise Value-to-EBITDA (EV/EBITDA), and Price-to-Sales (P/S) are
calculated for each comparable company. These multiples are then applied to
the target company’s corresponding financial figures to derive an estimated
value range. The selection of comparable companies is evaluated at each
valuation.
b. Selection of appropriate benchmarks
A benchmark-based valuation methodology estimates the fair value of
a company by comparing its financial and operational metrics to a set of
relevant industry or market benchmarks. These benchmarks may include sector
averages, historical performance standards, or key financial ratios such as
return on equity (ROE), profit margins, or revenue growth rates. The selection
of appropriate benchmarks is assessed individually for each investment and
updated regularly.
c. Selection of alternative valuation methodologies
Fair value is be determined using a variety of valuation
methodologies, each suited to different types of investments and contexts.
Common alternative approaches include the income approach, which estimates
fair value based on the present value of expected future cash flows, utilizing
discounted cash flow (DCF) models and estimated weighted average cost of
capital (WACC) discount rates.
d. Estimate of sustainable earnings
The approach focuses on normalized earnings, either forecasted over
the next 12 months or adjusted to reflect a sustainable, long-term level that
smooths out cyclical fluctuations and one-time events. Analysts typically use
forward-looking metrics such as projected net income or EBITDA, derived from
management guidance, analyst forecasts, or historical trends. These earnings
are then multiplied by a valuation multiple (e.g., P/E or EV/EBITDA) that
reflects market expectations and industry norms. The chosen multiple may be
based on comparable companies or historical averages. By focusing on earnings
that are expected to persist over time, the approach aims to provide a more
accurate and stable estimate of intrinsic value, especially in dynamic or
transitional market environments.
e. Sum of the Parts Valuation
Sum of parts valuation (SOTP) determines the overall value of a
company by assessing the individual worth of its various divisions or
segments, particularly effective where a company is a conglomerate and has
business units across multiple industries. The fair value of each business
unit or segment is derived separately in accordance with the 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.
No additional disclosures have been made in respect of the unlisted
investments as the underlying financial information is not publicly available.
11 OTHER RECEIVABLES
30 September 2025 31 March 2025 30 September 2024
unaudited audited unaudited
£’000 £’000 £’000
Securities sold for future settlement 1,388 3,926 6,834
Amounts receivable on settlement of derivatives 1,590 1,280 1,237
Accrued income 5,723 1,783 6,212
Taxation recoverable 11 11 11
Other receivables 284 295 156
--------------- --------------- ---------------
8,996 7,295 14,450
========= ========= =========
12 OTHER PAYABLES
30 September 2025 31 March 2025 30 September 2024
unaudited audited unaudited
£’000 £’000 £’000
Securities purchased for future settlement 23,823 3,084 2,296
Amounts payable on settlement of derivatives 2,846 2,986 –
Investment management fees payable 1,512 1,023 563
Accrued expenses 771 359 604
Finance costs payable 615 830 605
--------------- --------------- ---------------
29,567 8,282 4,068
========= ========= =========
13 SHARE CAPITAL
30 September 2025 30 September 2024 31 March 2025
unaudited unaudited audited
Number of Nominal value Number of Nominal value Number of Nominal value
shares £’000 shares £’000 shares £’000
Issued, allotted and fully paid
Ordinary shares of 1 pence each held outside of Treasury
Beginning of the period 494,840,250 4,950 525,681,434 5,258 525,681,434 5,258
Ordinary shares repurchased for cancellation (9,033,042) (91) (9,332,287) (93) (30,841,184) (308)
--------------- --------------- --------------- --------------- --------------- ---------------
End of the period 485,807,208 4,859 516,349,147 5,165 494,840,250 4,950
========= ========= ========= ========= ========= =========
Ordinary shares of 1 pence each held in Treasury 1
Beginning of the period 85,629,548 855 85,629,548 855 85,629,548 855
========= ========= ========= ========= ========= =========
Ordinary shares repurchased into Treasury – – – – – –
--------------- --------------- --------------- --------------- --------------- ---------------
End of the period 85,629,548 855 85,629,548 855 85,629,548 855
========= ========= ========= ========= ========= =========
Total share capital 5,714 6,020 5,805
========= ========= =========
During the period, the Company repurchased 9,033,042 (six months ended 30
September 2024: 9,332,287 shares and year ended 31 March 2025: 30,841,184
shares) ordinary shares for cancellation. The cost of repurchasing these
shares of £25,275,000 (six months ended 30 September 2024: £18,509,000 and
year ended 31 March 2025: £66,809,000) was charged to the Other reserve.
No ordinary shares were repurchased into Treasury during the period (six
months ended 30 September 2024 and year ended 31 March 2025: nil shares).
14 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.
30 September 2025 31 March 2025 30 September 2024
unaudited audited unaudited
Net assets £1,741,776,000 £1,413,802,000 £1,302,117,000
Ordinary shares held outside of Treasury 485,807,208 494,840,250 516,349,147
Net asset value per ordinary share 358.53p 285.71p 252.18p
========== ========== ==========
It is the Company’s policy that shares held in Treasury will only be
reissued at net asset value per ordinary share or at a premium to net asset
value per ordinary share so that shares held in Treasury have no dilutive
effect.
15 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 fee arrangements are given in Note 5 above.
During the period, the Company had the following transactions payable to
Fidelity:
Six months Six months Year
ended ended ended
30 September 2025 30 September 2024 31 March 2025
unaudited unaudited audited
£’000 £’000 £’000
Investment management fees 7,120 3,375 8,041
Marketing services 159 128 327
========== ========== ==========
At the Statement of Financial Position date, the following balances payable to
Fidelity were accrued and included in other creditors:
Six months Year Six months
ended ended ended
30 September 2025 31 March 2025 30 September 2024
unaudited audited unaudited
£’000 £’000 £’000
Investment management fees 1,512 1,023 563
Marketing services 74 47 81
========== ========== ==========
As at 30 September 2025, the Board consisted of six non-executive Directors
(shown in the Directory in the Half-Yearly Report), all of whom are considered
to be independent by the Board. None of the Directors have a service contract
with the Company.
The annual fee structure with effect from 1 April 2025 is as follows:
£
Chairman 55,500
Chairman of the Audit & Risk Committee 46,500
Senior Independent Director 43,500
Director 37,000
==========
As at 30 September 2025, the Directors held the following ordinary shares in
the Company:
Six months
ended
30 September 2025
unaudited
Mike Balfour 67,063
Alastair Bruce 43,800
Vanessa Donegan 16,287
Georgina Field 2,250
Gordon Orr –
Edward Tse –
==========
16 SUBSEQUENT EVENTS
No significant events have occurred since the end of the reporting
period which would impact the financial position of the Company.
The financial information contained in this Half-Yearly Results Announcement
does not constitute statutory accounts as defined in section 435 of the
Companies Act 2006. The financial information for the six months ended 30
September 2025 and 30 September 2024 has not been audited or reviewed by the
Company’s Independent Auditor.
The information for the year ended 31 March 2025 has been extracted from the
latest published audited financial statements, which have been filed with the
Registrar of Companies, unless otherwise stated. The report of the Auditor on
those financial statements contained no qualification or statement under
sections 498(2) or (3) of the Companies Act 2006.
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.
A copy of the Half-Yearly Report will shortly be submitted to the National
Storage Mechanism and will be available for inspection at
www.morningstar.co.uk/uk/NSM
The Half-Yearly Report will also be available on the Company's website at
www.
fidelity.co.uk/china where up to date information on the
Company, including daily NAV and share prices, factsheets and other
information can also be found.
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