Interim Results

FIDELITY EUROPEAN VALUES PLC

 

Preliminary Announcement of Unaudited Results

 

For the six months ended 30 June 2005

 

Performance

 

During the first six months of the year, the net asset value of the portfolio
rose by 13.5% to 922.89p per share, compared with a return of 5.9% for the FTSE
World Europe (ex UK) Index, in sterling terms on a total return basis.  (Past
performance is not a guide to future returns.)

 

Market Review

 

The performance of European equities during the first six months of 2005 was
influenced by a combination of concerns over the strength of the economic
recovery and USeconomic news. The French and Dutch 'No' votes to the European
Constitution referendum had little impact on European equity markets. However,
the votes weighed on the euro, which weakened relative to the US dollar, the
currency falling from $1.36 to $1.21 during the six months.

 

In terms of the economy, European economic growth accelerated in the first
three months of 2005 to 0.5% quarter-on-quarter. Despite this reasonable
first-quarter growth, the underlying components of GDP suggest that growth in
Europe, particularly consumer expenditure, remains slow.

 

Portfolio Manager Report

 

Over the six-month period, performance was helped by successful stock selection
and sector allocation. In particular, stock selection within the oil & gas
sector proved rewarding, with a particularly strong contribution from the
refining-related companies; OMV, Magyar Olaj-es Gazipari Rt, ERG and Polski
Koncern Naftowy. Other large holdings which performed well included European
Aeronautic Defence & Space (aerospace), SAP (German software) and Verbund
(Austrian utility).

 

The general structure of the portfolio remained unchanged, with a bias to
medium-sized and smaller companies combined with the manager's approach of
searching for undervalued companies. However, the manager increased the
weighting in larger-sized companies as their valuations are attractive.

 

The country weightings have become much more balanced between peripheral and
core countries. At sector level, the weighting in telecommunication stocks,
which peaked in March 2003, was substantially reduced. The Manager believes
that a number of growth-oriented sectors have attractive valuations and
consequently the portfolio's exposure to pharmaceutical and software stocks was
increased.

 

Outlook

 

After a period of relatively stable economic outlook, the European Commission
has recently reduced its economic growth forecast for 2005, from 2.0% down to
1.6%. In particular, the economies of Italy, Germany, Franceand Portugalhave
weakened, while Irelandand Spainare improving.

 

The euro has fallen relative to the dollar since the start of 2005. The
weakening of the single currency is a positive trend for exporters and
dollar-correlated technology stocks. However, it is not clear whether this
trend change will be durable. The European Central Bank (ECB) policy has been
for an unchanged 2% interest rate over the last two years and the most recent
data appears to increase the chances of rate reductions, although policy
statements of the ECB have not supported this view.

 

Political instability and terrorism continue to weigh on investor sentiment,
however stock markets have so far shown resilience and we continue to believe
that stock selection based on in depth company analysis will be the key factor
in achieving good performance.

 

GEARING

 

On 20 June 2005the Company entered into a facility with Lloyds TSB Bank plc.
The loan was for an amount of €40m at a fixed rate of 3.23% for a period of
five years. The loan was drawn down in full on 22 June 2005and will be
repayable on 22 June 2010. The proceeds of the loan are being invested in a
manner consistent with the Company's investment objective. Loans held by the
Company now total €130m.

 

The Company's level of net gearing is now 14% and the Board will ensure that in
normal circumstances net gearing is below 20%.

 

DIVIDEND

 

The Company is not proposing to pay an interim dividend.

 

By order of the Board

Fidelity Investments International

22 July 2005

 

Enquiries: Barbara Powley - Fidelity Investments International 01737 836 883  

 

Issued by Fidelity Investments International.  Authorised and regulated by the
Financial Services Authority.
CB23439

 

 

FIDELITY EUROPEAN VALUES PLC

 

Statement of Total Return
   for the six months ended         for the year ended          for the six months ended 
                                                                        
            30.06.05                   31.12.04                   30.06.04         
                                                                        
            unaudited                audited restated           unaudited restated    
                                                                        

 

              revenue capital   total  revenue  capital   total  revenue  capital  total 
                                                                                         
               £'000    £'000   £'000    £'000    £'000   £'000    £'000   £'000   £'000 
                                                                                         
Gains on            -   60,705  60,705       -   106,079 106,079       -   20,901  20,901
investments                                                                              
                                                                                         
Costs of            -    (672)   (672)        -  (1,286) (1,286)        -   (748)   (748)
investment                                                                               
transactions                                                                             
                                                                                         
Income  -      13,919        -  13,919   12,465       -   12,465   10,066      -   10,066
Dividend                                                                                 
                                                                                         
                   61        -      61       81        -      81       38       -      38
- Interest                                                                               
                                                                                         
Investment    (3,631)       -  (3,631)  (5,882)       -  (5,882)  (2,809)      -  (2,809)
management                                                                               
fee                                                                                      
                                                                                         
Other           (448)       -    (448)    (902)       -    (902)    (441)      -    (441)
expenses                                                                                 
                                                                                         
Exchange           66    (280)   (214)     (22)    (294)   (316)     (3)    (348)   (351)
gains/                                                                                   
(losses)                                                                                 
                                                                                         
Exchange            -    2,815   2,815        -      (2)     (2)        -   3,150   3,150
gains/                                                                                   
(losses) on                                                                              
loans                                                                                    
                                                                                         
Net return      9,967   62,568  72,535    5,740  104,497 110,237    6,851  22,955  29,806
before                                                                                   
finance costs                                                                            
and taxation                                                                             
                                                                                         
Interest      (1,617)       -  (1,617)  (3,239)       -  (3,239)  (1,570)      -  (1,570)
payable                                                                                  
                                                                                         
Return on       8,350   62,568  70,918    2,501  104,497 106,998    5,281  22,955  28,236
ordinary                                                                                 
activities                                                                               
before                                                                                   
taxation                                                                                 
                                                                                         
Taxation on   (1,973)       -  (1,973)  (1,254)    (315) (1,569)  (1,209)      -  (1,209)
return on                                                                                
ordinary                                                                                 
activities                                                                               
                                                                                         
Return on       6,377   62,568  68,945    1,247  104,182 105,429    4,072  22,955  27,027
ordinary                                                                                 
activities                                                                               
after                                                                                    
taxation for                                                                             
the period                                                                               
                                                                                         
Return per                     109.60p                   167.60p                   42.97p
ordinary                                                                                 
share                                                                                    
                                                                                         

 

These financial statements have been prepared in accordance with the AITC
Statement of Recommended Practice (SORP) issued in January 2003 and changes to
the accounting policies as set out in Note 1.

 

Dividend - No dividend has been declared in the current period (31.12.04: 
1.75p; 30.06.04:  nil).

 



FIDELITY EUROPEAN VALUES PLC

 

Balance Sheet

 

                           30.06.05 31.12.04  30.06.04
                                                      
                          unaudited  audited unaudited
                                    restated          
                                                      
                             £'000    £'000     £'000 
                                                      
Fixed assets                                          
                                                      
Investments                 658,516  572,722   494,432
                                                      
Current assets                                        
                                                      
Debtors                       8,545    1,690     5,951
                                                      
Cash at bank                  9,484    4,455     1,166
                                                      
                             18,029    6,145     7,117
                                                      
Creditors - amounts                                   
falling due within one                                
year                                                  
                                                      
Other creditors             (8,646)  (2,623)   (6,859)
                                                      
Net current assets            9,383    3,522       258
                                                      
Total assets less current   667,899  576,244   494,690
liabilities                                           
                                                      
Creditors - amounts                                   
falling due after more                                
than one year                                         
                                                      
Fixed rate unsecured       (87,370) (63,559)  (60,407)
loans                                                 
                                                      
Total net assets            580,529  512,685   434,283
                                                      
Capital and reserves                                  
                                                      
Called up share capital      15,725   15,725    15,725
                                                      
Share premium account        58,615   58,615    58,615
                                                      
Capital redemption              100      100       100
reserve                                               
                                                      
Capital reserve -           362,438  305,447   292,588
realised                                              
                                                      
Capital reserve -           133,362  127,785    59,414
unrealised                                            
                                                      
Revenue reserve              10,289    5,013     7,841
                                                      
Total equity                580,529  512,685   434,283
shareholders' funds                                   
                                                      
Net asset value per         922.89p  815.04p   690.40p
ordinary share                                        
                                                      



FIDELITY EUROPEAN VALUES PLC

 

Cash Flow Statement

 

                            30.06.05  31.12.04  30.06.04
                                                        
                           unaudited   audited unaudited
                                                        
                               £'000     £'000     £'000
                                                        
Operating activities                                    
                                                        
Investment income received    11,062    10,873     8,384
                                                        
Interest received                 70        72        38
                                                        
Investment management fee    (3,345)   (5,601)   (2,703)
paid                                                    
                                                        
Directors' fees paid            (37)      (52)      (17)
                                                        
Other cash payments            (864)     (874)     (349)
                                                        
Net cash inflow from           6,886     4,418     5,353
operating activities                                    
                                                        
Returns on investments and                              
servicing of finance                                    
                                                        
Interest paid                  (807)   (3,239)   (1,579)
                                                        
Net cash outflow from          (807)   (3,239)   (1,579)
returns on investments and                              
servicing of finance                                    
                                                        
Taxation                                                
                                                        
Overseas taxation                140       399       189
recovered                                               
                                                        
Taxation recovered               140       399       189
                                                        
Financial investment                                    
                                                        
Purchase of investments    (270,624) (382,807) (216,418)
                                                        
Disposals of investments     243,809   385,297   213,310
                                                        
Net cash (outflow)/inflow   (26,815)     2,490   (3,108)
from financial investment                               
                                                        
Equity dividend paid         (1,101)     (944)     (944)
                                                        
Net cash (outflow)/inflow   (21,697)     3,124      (89)
before financing                                        
                                                        
Financing                                               
                                                        
3.23% fixed rate unsecured    26,625         -         -
loan drawn down                                         
                                                        
Net cash inflow from          26,625         -         -
financing                                               
                                                        
Increase/(decrease) in         4,928     3,124      (89)
cash                                                    
                                                        


 

The results for the six months to 30 June 2005 and 30 June 2004, which are
unaudited, constitute non statutory accounts within the meaning of s240 of the
Companies Act 1985. The figures and financial information for the year ended 31
December 2004 are extracted from the latest published accounts and have been
restated as disclosed below in Notes 4 and 5. Those accounts, on which the
auditors gave an unqualified report, have been delivered to the Registrar of
Companies.

1. Accounting policies

 

The interim financial statements have been prepared on the basis of the
accounting policies set out in the Company's annual report and accounts dated
31 December 2004 except as stated below.

UK GAAP is converging with International Financial Reporting Standards ('IFRS')
and the following Financial Reporting Standards ('FRS') have been introduced:

FRS26: 'Financial Instruments: Measurement' requires that quoted investments
are valued at fair value which is deemed to be bid price.  The Company's
investments have accordingly been re-valued to bid price but no adjustments
have been made to the prior periods' results as the Company has taken advantage
of Paragraph 108D of the Standard and disclosed the effect of valuing the
investments at bid price. 

FRS26 also requires that where investments are held at fair value through the
profit and loss account the transactions costs should be recognised as a
separate item from gains and losses on investments.

FRS21:  'Events after the Balance Sheet Date' states that dividends declared
and approved by the Company after the balance sheet date should not be
recognised as a liability of the Company at the balance sheet date.  Prior year
results have accordingly been restated and this is shown below in Notes 4 and
5.

 

2. Statement of Total Return

The total column of the Statement of Total Return is the profit and loss
account of the Company. 

 

3. Taxation on return on ordinary activities

 

                                         30.06.05              31.12.04              30.06.04       
                                                                                                    
                                         unaudited              audited              unaudited      
                                                                                                    
                                   revenue capital total revenue capital total revenue capital total
                                                                                                    
                                   £'000   £'000   £'000 £'000   £'000   £'000 £'000   £'000   £'000
                                                                                                    
Overseas taxation suffered           1,973       - 1,973   1,566       3 1,569   1,209       - 1,209
                                                                                                    
Tax (credit)/                                                                                       
                                                                                                    
charge for use of revenue expenses       -       -     -   (312)     312     -       -       -     -
                                                                                                    
                                     1,973       - 1,973   1,254     315 1,569   1,209       - 1,209
                                                                                                    

 

4. Prior year adjustments and restatements

 

                                                           30.06.05      31.12.04   
                                                                                    
                                                         Shareholders' Shareholders'
                                                                                    
                                                             funds         funds    
                                                                                    
                                                             £'000         £'000    
                                                                                    
Opening balance as previously stated                           511,584       407,256
                                                                                    
Effect of prior year adjustment as a result of a change                             
                                                                                    
in accounting policy regarding the treatment of proposed                            
                                                                                    
dividends                                                        1,101           944
                                                                                    
Opening balance as restated                                    512,685       408,200
                                                                                    
Effect of changing prices at 1 January 2005                    (1,077)             -
                                                                                    
Other recognised gains for the period                           63,645       104,182
                                                                                    
Revenue after taxation                                           6,377         1,247
                                                                                    
Dividend                                                       (1,101)         (944)
                                                                                    
                                                                                    
                                                                                    
                                                               580,529       512,685
                                                                                    

 

The capital net return before finance costs and taxation for the period ended
30 June 2004 has been restated from £19,802,000 to £22,952,000. This
restatement has been necessary as exchange gains/(losses) have been included as
part of the net return before finance costs at 31 December 2004 rather than a
finance cost. This restatement has no impact on the Company's return on
ordinary activities for the period ended 30 June 2004.

 

5. Statement of changes in equity for the 6 months ended 30 June 2005

 

                           Share   Share    Capital  Capital    Capital Revenue
                         capital premium redemption  reserve    reserve reserve
                                 account  reserve £ realised unrealised        
                                   £'000       '000    £'000      £'000        
                                                                               
                           £'000                                          £'000
                                                                               
At 1 January 2004: as                                                          
previously stated         15,725  58,615        100  245,461     83,589   3,766
                                                                               
Effect of prior year                                                           
adjustment as a result                                                         
of a change in the                                                             
accounting policy                                                              
regarding the treatment                                                        
of proposed dividends          -       -          -        -          -     944
                                                                               
At 1 January 2004: as                                                          
restated                  15,725  58,615        100  245,461     83,589   4,710
                                                                               
Net recognised gain for                                                        
the year                       -       -          -   59,986     44,196   1,247
                                                                               
Dividend to shareholders       -       -          -        -          -   (944)
                                                                               
At 31 December 2004:as                                                         
restated                  15,725  58,615        100  305,447    127,785   5,013
                                                                               
Net recognised gain for                                                        
the period                     -       -          -   56,991      5,577   6,377
                                                                               
Dividend to shareholders       -       -          -        -          - (1,101)
                                                                               
At 30 June 2005           15,725  58,615        100  362,438    133,362  10,289
                                                                               

 

 

Copies of the interim report will be posted to shareholders as soon as
practicable. Copies will also be available to the public at the Company's
registered office, Beech Gate, Millfield Lane, Lower Kingswood, Tadworth,
Surrey KT20 6RP.