Final Results
FIDELITY EUROPEAN VALUES PLC
Preliminary Announcement of Unaudited Results
For the year ended 31 December 2005
I have pleasure in presenting the annual report of Fidelity European Values PLC
for the year ended 31 December 2005.
Performance
Continental European equities delivered another year of strong returns during
2005. Corporate earnings growth was healthy and a recovery in the level of
takeover activity helped drive the market higher, despite continued concerns
over energy prices and lacklustre economic growth in the eurozone. During the
review period, the net asset value ('NAV') per share of the Company returned
34.8%, strongly outperforming the benchmark FTSE World Europe (ex UK) Index,
which returned 23.4%. The strong relative outperformance was primarily due to
successful stock selection by the investment manager, but also due to the
portfolio's gearing, which had a positive impact on the total return of the
NAV. The shares ended the year trading at a premium of 2.1% to the underlying
asset value per share. A detailed review of the performance of the portfolio is
provided in the Manager's Review in the Annual Report. Over the longer term, in
the five years to 31 December 2005 the NAV has increased 80.2% compared with a
benchmark rise of 4.2%. Since launch these figures are 1080.9% and 341.6%
respectively. (All figures are on a total return basis.)
Gearing
The Board believes that gearing will continue to benefit shareholders in the
long term and during the year to 31 December 2005, gearing was increased twice.
On 20 June 2005 the Company entered into a facility for €40m at a fixed rate of
3.23% for a period of five years. The loan was drawn down in full on 22 June
2005 and will be repayable on 22 June 2010. On 21 November 2005 the Company
entered into a further facility for €35m at a fixed rate of 3.54% for a period
of three years. The loan was drawn down in full on 22 November 2005 and will be
repayable on 24 November 2008. In both cases the facilities are with Lloyds TSB
Bank plc and are being invested in a manner consistent with the Company's
investment objective.
The Company's level of net gearing is now 14.1% and the Board will ensure that
in normal circumstances net gearing is below 20%. The Board is responsible for
the level of gearing in the Company and continues to review it on a regular
basis. It is estimated that gearing enhanced the NAV by four per cent over the
year.
Dividend
Your Board has decided to recommend a final dividend of 2.5 pence per share for
the year ending 31 December 2005 (2004: 1.75 pence). The dividend will be
payable on 22 May 2005 to shareholders on the register at close of business on
24 March 2006 (ex-dividend date 22 March 2006). The Board believes very
strongly that total return (income and capital) is the key performance
indicator. We reiterate that we will not therefore restrict the Investment
Manager even if this leads to lower dividends in future.
Directorate
Mr David Simpson retires by rotation and, being eligible, has offered himself
for re-election. Mr Simpson's investment experience and Chairmanship of the
Company's Audit Committee have been extremely valuable. Mr Simon Fraser is
subject to annual re-election under the Listing Rules due to his employment
relationship with the Manager. This relationship with a senior member of the
Company's Manager who assumes the responsibility of being a Director of the
Company is considered important. All of the other Directors are totally
independent and this provides an appropriate balance.
The Board has considered the proposal for the re-election of both of these
Directors and recommends to shareholders that they vote in favour of the
proposals.
Due to my tenure on the Board exceeding nine years I am subject to annual
re-election and offer myself for such re-election. My fellow Directors have
again met in my absence for the purpose of considering my eligibility for
re-election. They considered that my experience, my independence of mind and
the manner in which I have filled the role of Chairman over the last four years
has been beneficial to the Company and they confirmed that they wish me to
continue as Chairman. They are recommending that I be re-elected as a Director
at the forthcoming Annual General Meeting.
Continuation Vote
At the 2005 Annual General Meeting, shareholders voted in favour of the
ordinary resolution that the Company continue as an investment trust for a
further two years. The next continuation vote will take place at the Annual
General Meeting in 2007.
Directors' Remuneration
Each year the Board reviews Directors' fees in the light of increases in
workload and the risks of being a non-executive director. Fees paid by
companies in its peer group and elsewhere in the industry are considered. The
Board has agreed that the Chairman's fee be increased to £24,000 (2004: £
22,000) with effect from 1 January 2006. All other fees for Directors will
remain the same. This total is within the £150,000 maximum aggregate payable as
laid down in the Company's Articles of Association.
Annual General Meeting
The Annual General Meeting of the Company is due to take place on 19 May 2006
at midday at Fidelity's offices at 25 Cannon Street. Full details of the
meeting are given in the Annual Report and I look forward to meeting you then.
Management Agreement
The management agreements between Fidelity and the Fidelity branded investment
trusts have been subject to review recently. In recognition of the tendency by
the industry to decrease notice periods in such agreements, the Board has
agreed to reduce the notice period in place from twelve months to six months. I
am keen to emphasise that this in no way reflects a change in relationship with
or attitude towards the Manager.
Outlook
The outlook for the European economy is improving. There have been signs that
the region's high level of unemployment, which has held back consumer spending,
could be decreasing.
The European Central Bank ('ECB') has raised interest rates twice since
December, the first rises in rates in five years. However, these rises are from
low nominal levels and the ECB policy remains 'accommodative'. Corporate
profits growth has been revised upwards, which provides a positive backdrop for
the equity market. We continue to believe that stock selection based on
in-depth company analysis will continue to be the key in outperforming the
index over the coming year.
This trust has had two investment managers since it started in 1991, both of
whom have performed extraordinarily well. Both have taken strong views on stock
allocation and the Board has always encouraged this approach. The Board
recognises that this investment style has given, and will continue to give,
significant deviation of performance from that of the European index. I felt it
important making this clear to investors, since we are all aware that
investments can go down as well as up.
Robert Walther
Chairman
6 March 2006
Enquiries:
Stephen Westwood, Head of Investment Trusts, Fidelity Investments International
- 020 7961 4477
Rebecca Burtonwood, Company Secretary, Fidelity Investments International
- 01737 836 869
Issued by Fidelity Investments International. Authorised and regulated by the
Financial Services Authority.
CB26241
FIDELITY EUROPEAN VALUES PLC
Income Statement
- unaudited - for the year ended 31 December (1)
2005 2004
restated
(2)
revenue capital total revenue capital total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - 175,905 175,905 - 104,793 104,793
Income
- Dividend 16,842 - 16,842 12,465 - 12,465
- Interest 123 - 123 81 - 81
Investment management fee (8,252) - (8,252) (5,882) - (5,882)
Other expenses (920) - (920) (902) - (902)
Exchange gains/(losses) 54 (213) (159) (22) (294) (316)
Exchange gains/(losses) - 702 702 - (2) (2)
on loans
Net return before finance 7,847 176,394 184,241 5,740 104,497 110,237
costs and taxation
Interest payable (3,801) - (3,801) (3,239) - (3,239)
Net return on ordinary 4,046 176,394 180,440 2,501 104,497 106,998
activities before
taxation
Taxation on return on (2,274) (65) (2,339) (1,254) (315) (1,569)
ordinary activities*
Net return on ordinary 1,772 176,329 178,101 1,247 104,182 105,429
activities after taxation
for the year attributable
to equity shareholders
Return per ordinary share 2.82p 280.32p 283.14p 1.98p 165.62p 167.60p
(3)
A Statement of Total Recognised Gains and Losses has not been prepared as there
are no gains and losses other than those reported in this Income Statement. All
revenue and capital items in the Income Statement derive from continuing
operations. No operations were acquired or discontinued in the year.
* This relates to overseas taxation only.
FIDELITY EUROPEAN VALUES PLC
Reconciliation of Movements in Shareholders' Funds
- unaudited - for the year ended 31 December(4)
Called Share Capital Capital Capital Revenue Total
up premium redemption reserve reserve reserve equity
share account reserve realised unrealised
capital
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Opening shareholders' 15,725 58,615 100 245,461 83,589 3,766 407,256
funds as previously
stated: 1 January
2004
Effect of prior year - - - - - 944 944
adjustment as a
result of a change in
accounting policy
regarding the
treatment of proposed
dividends
Opening shareholders' 15,725 58,615 100 245,461 83,589 4,710 408,200
funds as restated:
1 January 2004
Net recognised gains - - - 59,986 44,196 - 104,182
for the year
Revenue after - - - - - 1,247 1,247
taxation
Dividend paid - - - - - (944) (944)
Shareholders' funds 15,725 58,615 100 305,447 127,785 5,013 512,685
as restated:
31 December 2004
Effect of changing - - - - (1,077) - (1,077)
prices from middle
market to bid market
at 1 January
Net recognised gains - - - 119,303 57,026 - 176,329
for the year
Revenue after - - - - - 1,772 1,772
taxation
Dividend paid - - - - - (1,101) (1,101)
Closing shareholders' 15,725 58,615 100 424,750 183,734 5,684 688,608
funds:
31 December 2005
FIDELITY EUROPEAN VALUES PLC
Balance Sheet
- unaudited - as at 31 December
2005 2004
£'000 £'000
Fixed assets
Investments held at fair value through profit or 800,634 572,722
loss
Current assets
Debtors 1,712 1,690
Cash at bank 3,259 4,455
4,971 6,145
Creditors - amounts falling due within one year
Fixed rate unsecured loans (61,855) -
Other creditors (3,596) (2,623)
(65,451) (2,623)
Net current (liabilities)/assets (60,480) 3,522
Total assets less current liabilities 740,154 576,244
Creditors - amounts falling due after more than
one year
Fixed rate unsecured loans (51,546) (63,559)
Total net assets 688,608 512,685
Capital and reserves
Called up share capital 15,725 15,725
Share premium account 58,615 58,615
Capital redemption reserve 100 100
Capital reserve - realised 424,750 305,447
Capital reserve - unrealised 183,734 127,785
Revenue reserve 5,684 5,013
Total equity shareholders' funds 688,608 512,685
Net asset value per ordinary share: 1,094.71p 815.04p
FIDELITY EUROPEAN VALUES PLC
Cash Flow Statement
- unaudited- for the year ended 31 December
2005 2004
£'000 £'000
Operating activities
Investment income received 13,882 10,873
Interest received 117 72
Investment management fee paid (7,496) (5,601)
Directors' fees paid (75) (52)
Other cash payments (921) (874)
Net cash inflow from operating activities 5,507 4,418
Returns on investments and servicing of finance
Interest paid (3,673) (3,239)
Net cash outflow from returns on investments and (3,673) (3,239)
servicing of finance
Taxation
Overseas taxation recovered 874 399
Taxationrecovered 874 399
Financial investment
Purchase of investments (557,685) (382,807)
Disposal of investments 504,390 385,297
Net cash (outflow)/inflowfrom financial investment (53,295) 2,490
Equity dividend paid (1,101) (944)
Net cash (outflow)/inflowbefore financing (51,688) 3,124
Financing
3.23% fixed rate unsecured loan drawn down 26,625 -
3.54% fixed rate unsecured loan drawn down 23,919 -
Net cash inflow from financing 50,544 -
(Decrease)/increasein cash (1,144) 3,124
1. The Statement of Total Return is now called the Income Statement and the
total column, as opposed to the revenue column, is now the profit and loss
account of the Company.
2. Prior year adjustments and restatements
2005 2004
Shareholders' Shareholders'
funds funds
£'000 £'000
Opening balance as previously stated: 1 January 2004 511,584 407,256
Effect of prior year adjustment as a result of a 1,101 944
change in accounting policy regarding the treatment
of proposed dividends
Opening balance as restated: 1 January 2004 512,685 408,200
Effect of changing prices at 1 January 2005 (1,077) -
Other recognised gains for the period 176,329 104,182
Revenue after taxation 1,772 1,247
Dividend paid (1,101) (944)
Closing balance as restated: 31 December 2005 688,608 512,685
3. Returns per ordinary share are based on the net revenue return on ordinary
activities after taxation of £1,772,000 (2004: £1,247,000) and the capital
appreciation in the year of £176,329,000 (2004: £104,182,000) and on 62,903,233
ordinary shares (2004: 62,903,233) being the weighted average number of
ordinary shares in issue during the year.
4. The Reconciliation of Movements in Shareholders' Funds has been introduced
as a new primary statement. The dividends paid by the Company are now reported
through this statement.
The above statements have been prepared on the basis of the accounting policies
as set out in annual financial statements to 31 December 2005. The figures for
the year to 31 December 2004 have been extracted from the financial statements
for the year ended 31 December 2004 which have been delivered to the Registrar
of Companies and on which the Auditors gave an unqualified report.
The annual report and financial statements will be posted to shareholders as
soon as is practicable and in any event no later than 19 April 2006.
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