Fidelity European Values PLC
Half-Yearly results for the six months
ended 30 June 2020 (unaudited)
Financial Highlights:
-
The Board of Fidelity European Values PLC (the “Company”)
recommends an interim dividend of 2.60
pence per share.
-
The Company recorded a net asset value (“NAV”) total return of
+3.0% compared to a total return of -1.9% for the Company's
Benchmark Index
-
The discount to NAV widened over the period from 6.2% to 7.4%,
due to a share price total return of +1.7%.
-
The EU’s European Recovery Fund is a strong political and
economic statement
Contacts
For further information, please contact:
Smita Amin
Company Secretary
01737 836347
FIL Investments International
PORTFOLIO MANAGER’S HALF-YEARLY
REVIEW
PERFORMANCE REVIEW
During the first six months of the year the net asset value (“NAV”)
total return was +3.0% compared to a total return of -1.9% for the
FTSE World Europe (ex UK) Index which is the Company’s Benchmark
Index. The share price total return was +1.7%, which is below the
NAV total return because of a widening of the share price discount
to NAV. (All figures in UK sterling.)
MARKET REVIEW
Continental European markets were very volatile in the first half
of this year. The first quarter was one of the worst on record
while the second was one of the best. Overall, share prices
declined during the review period, although this was cushioned by
the weakness of the pound which depreciated seven percent against
the euro.
The catalyst of this volatility was, of course, the uncertainty
caused by the Coronavirus (COVID-19) pandemic which brought much of
the world to a standstill and caused markets to crash during the
first quarter. Share prices recovered rapidly during the second
quarter as central banks and governments responded to a looming
economic crisis with an awesome barrage of monetary and fiscal
easing.
Lockdowns, to control the spread of COVID-19, have, inevitably,
resulted in significant downward revisions to economic growth
forecasts. Encouragingly, however, this appears to have galvanised
the European Union (“EU”) into action with the announcement, among
other fiscal remedies, of an euro
750bn “Recovery Fund” to support its members’ economies with
a range of infrastructure and renewable energy projects. As always,
the substance of the package will be subject to scrutiny and
ultimate implementation, but the initiative has been greeted as a
step in the right direction, particularly by investors wary of a
new Eurozone crisis.
Shorter term earnings and dividends for European companies have
suffered substantial cuts too in the wake of the pandemic. Indeed,
dividends have, unusually, proven even less resilient than earnings
for a range of reasons including regulatory constraints in the
financial sectors and political pressure to restrain payments to
shareholders, particularly in France. Some companies have also not been able
to pay dividends due to fundamental pressure on liquidity as
revenues ground to a halt. While the equity markets’ resilience,
despite these downgrades to earnings and dividends, may suggest
that investors view these reductions as transitory, the reductions
in long term bond yields, and the liquidity being pumped into
markets by central banks, will support the valuation of equities
for some time to come.
Sector returns, in general, have diverged dramatically over the
review period. Although the pandemic’s impact on activity was the
main determinant of performance, other factors also played their
roles. Most notably, the growing focus on environmental, social and
governance (ESG) standards influenced fund flows and sector
performance too. Sectors such as energy, that were on the wrong
side of both, performed particularly poorly. Technology, at the
other extreme, was the outstanding beneficiary as the pandemic
appeared likely to accelerate structural trends such as the shift
to on-line and the digitalisation of companies.
PORTFOLIO MANAGER’S REPORT
The Company’s NAV increased slightly in the six months to
30 June 2020, performing better than
the Benchmark Index which declined slightly.
The Company’s focus on companies with strong balance sheets
provided notable resilience during the first quarter as equity
markets fell precipitously. Pleasingly, the Company was able to
keep pace with the Benchmark in the second quarter partly thanks to
a slight increase in gearing after the Company closed all its short
positions and went ex-dividend. Overall, relative performance was
encouraging during the review period although absolute returns were
lacklustre.
The relative outperformance was helped by stock-picking. Swedish
Match was, once again, the stand-out performer reporting strong
first quarter results as the company benefited from the on-going
success of Zyn, the nicotine pouch business in the United States, and from consumers stocking
up on their products as lockdowns began. At the other end of the
spectrum, many of the Company’s bank holdings performed poorly as
investors worried about the outlook for bad debts. Traffic-related
companies, such as MTU and Atlantia, also performed poorly as did
Sodexo, the contract caterer, which struggled given the closure of
most offices and the cancellation of most events.
In terms of activity, two holdings were sold during the review
period. Royal Dutch Shell was
disposed early in the year after the company published
disappointing fourth quarter results which made it clear that there
was no prospect of dividend growth. Iliad, the French telecoms
company, was also sold, partly in a tender offer by the majority
share owner Xavier Niel.
Three new positions were acquired: Enel, an Italian utility
company, which stands to benefit from the continued growth of
renewable energy, SIG Combibloc, a Swiss packaging company and
Zurich Insurance which should benefit from improved premium pricing
after a difficult year for claims in 2020.
Five Highest Contributors to NAV
total return |
Sector |
Country |
% |
Swedish Match |
Consumer Staples |
Sweden |
+1.2 |
Deutsche Boerse |
Financials |
Germany |
+0.6 |
ASML |
Information Technology |
Netherlands |
+0.5 |
Airbus |
Industrials |
France |
+0.5 |
Fresenius Medical Care |
Healthcare |
Germany |
+0.5 |
Five Highest Detractors to NAV
total return |
Sector |
Country |
% |
ABN AMRO Bank |
Financials |
Netherlands |
-0.8 |
Sodexo |
Consumer Discretionary |
France |
-0.6 |
DNB |
Financials |
Norway |
-0.5 |
MTU Aero Engines |
Industrials |
Germany |
-0.5 |
3i Group |
Financials |
UK |
-0.5 |
OUTLOOK
The second half of this year is likely to be testing; not least
because the pandemic is not yet over. Herd immunity or a vaccine
are distant on the horizon so further waves and lockdowns appear
inevitable. Central banks and governments are doing their utmost to
support economies, and markets, but in doing so are potentially
creating new problems for the future. Many companies that would
otherwise have gone out of business will limp along, with reduced
levels of staffing, such that many industries will continue to be
oversupplied. Consumers are likely to remain wary and companies
will hesitate before investing. Any economic recovery is likely to
be fitful and anaemic. Equity markets have already bounced back
strongly in the second quarter of this year so further progress
will rely on a recovery in earnings and dividends much stronger
than your Portfolio Manager currently anticipates, given that
valuations, in aggregate, are already full. Presidential elections
in the United States, not to
mention the negotiations around a new relationship between the
United Kingdom and the EU, have
the potential to create moments of panic or relief in the second
half of this year.
Your Portfolio Manager will, however, as always, stay fully
invested because, as has been demonstrated time and again, equities
do well over the long term even through many crises and despite
many bleak outlooks. Your Portfolio Manager will also continue to
focus on attractively-valued companies which are able to sustain
consistent dividend growth. As mentioned before, consistency in
dividend growth has become more challenging for many continental
European companies, including some of those held in the portfolio.
Determining the best course of action will be decided on a case by
case basis with an eye on valuation. Although execution of this
investment strategy has become more complicated, its merit will not
diminish especially in what is likely to continue to be an
unusually volatile environment.
By order of the Board
FIL INVESTMENTS INTERNATIONAL
3 August 2020
INTERIM MANAGEMENT REPORT AND
DIRECTORS’ RESPONSIBILITY STATEMENT
COMPANY NAME CHANGE
As reported in the Annual Report for the year ended 31 December 2019, the Board announced its
intention to change the Company’s name from Fidelity European
Values PLC to Fidelity European Trust PLC. The reason for this was
to align the Company’s name more closely to its objective, and to
avoid confusion with value products. It had been expected that the
name change would have been effective on 12
May 2020, the date of the Company’s Annual General Meeting,
and following the requisite statutory filings. However, the impact
of COVID-19, and the resultant Government’s Stay at Home Measures,
have caused substantial delays in the usual statutory filing
process. It is not currently possible to deliver the required
documents in person to Companies House for action on the same day,
which would provide shareholders and the market appropriate
certainty about the date of the Company’s name change. It still
remains the Board’s intention to change the name of the Company to
Fidelity European Trust PLC. However, until this can be executed
with Companies House at a planned future date, the Board has
decided that the Company should continue as Fidelity European
Values PLC at least until 30 September
2020. The delay in the name change was announced on the
London Stock Exchange on 6 May
2020.
Whenever the change to the Company’s name is made, it will
retain its existing ticker (FEV.L), SEDOL (BK1PKQ9) and ISIN
(GB00BK1PKQ95). An announcement will be made on the London Stock
Exchange ahead of the change in name taking effect.
INTRODUCTION OF CO-PORTFOLIO MANAGER
The Board has agreed with Fidelity to appoint Marcel Stotzel as a
Co-Portfolio Manager alongside Sam
Morse, the Company’s Portfolio Manager. Marcel and Sam have
worked closely together in recent years. Marcel is a very talented
analyst and investor, with extensive experience in European
companies. Marcel will help Sam with oversight of his different
strategies and mandates and will assist in client servicing and
marketing.
The move to a Co-Portfolio Manager structure should strengthen
the investment process by introducing greater challenge and also
increase the ability to meet more companies and, effectively, be in
two places at once. Marcel as Co-Portfolio Manager, will have a
permanent association with the Company, and will share a common
investment approach and complementary investment experience.
BOARD CHANGES
Having served on the Board for ten years as a non-executive
Director, Dr Robin Niblett stepped
down from the Board at the conclusion of the Annual General Meeting
on 12 May 2020. As Dr Niblett’s
successor, Sir Ivan Rogers was
appointed on the Board as a non-executive Director on 1 January 2020.
INTERIM DIVIDEND
The Board’s dividend policy, which was updated last year, is to pay
dividends twice yearly in order to smooth the dividend payments for
the reporting year. The Company’s revenue return for the six months
to 30 June 2020 was 3.99 pence per share.
The Board has declared an interim dividend of 2.60 pence per share which is a modest 0.4%
increase on the 2.59 pence per share
paid as the interim dividend in 2019. This will be paid on
30 October 2020 to shareholders on
the register on 25 September 2020
(ex-dividend date 24 September 2020). The Board’s policy is to
seek to pay a progressive dividend in normal circumstances. Owing
to COVID-19 and its economic effects, however, some companies have
cut or cancelled their dividend payments this year, and this
pattern is likely to continue while the virus remains in broad
circulation. Accordingly, the Board’s present intention during this
period is to pay nominal increases in total annual dividends,
utilising reserves as necessary. Should company dividend practices
be judged, once the crisis is over, to have changed on a permanent
rather than temporary basis, then the Board will reconsider its
dividend paying policy at that time.
Shareholders may choose to reinvest their dividends for
additional shares in the Company. Details of the Dividend
Reinvestment Plan can be found in the Half-Yearly Report.
DISCOUNT MANAGEMENT AND TREASURY SHARES
The Board operates an active discount management policy, the
primary purpose of which is to reduce discount volatility. Buying
shares at a discount also results in an enhancement to the NAV per
share. As a consequence, the Board seeks to maintain the discount
in single digits in normal market conditions. In order to assist in
managing the discount, the Board has shareholder approval to hold
in Treasury ordinary shares repurchased by the Company, rather than
cancelling them. These shares are then available to re-issue at NAV
per share or at a premium to NAV, facilitating the management of
and enhancing liquidity in the Company’s shares.
In the six months to 30 June 2020
and as at the date of this report, the Company has not repurchased
any ordinary shares into Treasury or for cancellation.
PRINCIPAL RISKS AND UNCERTAINTIES
The Board, with the assistance of the Alternative Investment Fund
Manager (FIL Investment Services (UK) Limited (the “Manager”)), has
developed a risk matrix which, as part of the risk management and
internal controls process, has identified the key risks and
uncertainties faced by the Company. These principal risks and
uncertainties fall into the following categories: market risk;
performance risk; key person risk; economic and political risk;
discount control risk; gearing risk; derivatives risk; operational
risks from cybercrime and other significant events such as the
COVID-19 pandemic; tax and regulatory risks; and third party
service providers operational risks. Information on each of these
risks is given in the Strategic Report section of the Annual Report
for the year ended 31 December 2019
which can be found on the Company’s pages of the Manager’s website
at www. fidelityinvestmenttrusts.com.
These risks and uncertainties have not materially changed during
the six months to 30 June 2020, with
the exception of the impact of the risks arising from COVID-19, and
are equally applicable to the remaining six months of the Company’s
financial year.
CORONAVIRUS (COVID-19)
The risks arising from COVID-19 are being kept under constant
review by the Board and the Manager. The Manager has contingency
plans in place to allow for the continuation of Fidelity’s
operations and to look after the safety of their employees.
Investors should be prepared for market fluctuations and
remember that holding shares in the Company should be considered to
be a long term investment. These risks are somewhat mitigated by
the investment trust structure of the Company which means that no
forced sales will need to take place to deal with any redemptions.
Therefore, investments in the Company’s portfolio can be held over
a longer time horizon.
The Manager is keeping its business continuity plans and
operational resilience strategies under constant review and will
take all reasonable steps to continue meeting its regulatory
obligations and to assess operational risks, the ability to
continue operating and the steps it needs to take to serve and
support its clients, including the Board. For example, to enhance
its resilience, the Manager has mandated work from home
arrangements and implemented split team working for those whose
work is deemed necessary to be carried out in the office. The
Manager has also imposed self-isolation arrangements on staff in
line with Government recommendations and guidance. The Company’s
other third party service providers have also implemented similar
measures to ensure business disruption can be kept to a
minimum.
TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES
The Manager has delegated the Company’s portfolio management and
company secretariat services to FIL Investments International.
Transactions with the Manager and related party transactions with
the Directors are disclosed in Note 14 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
(being mainly securities which are readily realisable) and its
expenditure and cash flow projections and have concluded that the
Company has adequate resources to continue in operational existence
for the foreseeable future. Thus, they continue 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 risks arising from COVID-19.
Continuation votes are held every two years and the next
continuation vote will be put to shareholders at the Annual General
Meeting in 2021.
By order of the Board
FIL INVESTMENTS INTERNATIONAL
3 August 2020
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 the Half-Yearly Report has been
prepared in accordance with the Financial Reporting Council’s
Standard FRS 104: Interim Financial Reporting; and
b) the Interim Management Report, together
with the Portfolio Manager’s Half-Yearly Review above, includes a
fair review of the information required by DTR 4.2.7R and
4.2.8R.
In line with previous years, 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 3 August 2020 and the above responsibility
statement was signed on its behalf by Vivian Bazalgette, Chairman.
TWENTY LARGEST HOLDINGS AS AT 30 JUNE
2020
The Gross Asset Exposures shown below and on the next page
measure exposure to market price movements as a result of owning
shares and derivative instruments. The Balance Sheet Value is the
actual value of the portfolio. Where a contract for difference
(“CFD”) is held, the Balance Sheet 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 share has moved.
Long Exposures – shares unless otherwise stated |
Gross Asset Exposure |
Balance
Sheet
Value
£’000 |
£’000 |
%1 |
Nestlé |
|
|
|
Packaged Food |
87,439 |
7.6 |
87,439 |
|
-------------- |
-------------- |
-------------- |
Roche |
|
|
|
Pharmaceuticals |
70,525 |
6.1 |
70,525 |
|
-------------- |
-------------- |
-------------- |
SAP |
|
|
|
Software |
52,873 |
4.6 |
52,873 |
|
-------------- |
-------------- |
-------------- |
ASML |
|
|
|
Semiconductors |
49,890 |
4.3 |
49,890 |
|
-------------- |
-------------- |
-------------- |
LVMH Moët Hennessy |
|
|
|
Personal Goods |
48,674 |
4.2 |
48,674 |
|
-------------- |
-------------- |
-------------- |
Sanofi (long CFD) |
|
|
|
Pharmaceuticals |
46,974 |
4.1 |
7,259 |
|
-------------- |
-------------- |
-------------- |
L'Oréal |
|
|
|
Personal Goods |
43,168 |
3.7 |
43,168 |
|
-------------- |
-------------- |
-------------- |
Novo Nordisk |
|
|
|
Healthcare Services |
39,824 |
3.4 |
39,824 |
|
-------------- |
-------------- |
-------------- |
Enel |
|
|
|
Electricity |
39,814 |
3.4 |
39,814 |
|
-------------- |
-------------- |
-------------- |
Swedish Match |
|
|
|
Tobacco |
36,655 |
3.2 |
36,655 |
|
-------------- |
-------------- |
-------------- |
Total |
|
|
|
Oil & Gas |
36,010 |
3.1 |
36,010 |
|
-------------- |
-------------- |
-------------- |
Deutsche Boerse |
|
|
|
Financial Services |
34,997 |
3.0 |
34,997 |
|
-------------- |
-------------- |
-------------- |
Linde (long CFD) |
|
|
|
Chemicals |
32,691 |
2.8 |
1,724 |
|
-------------- |
-------------- |
-------------- |
Symrise |
|
|
|
Chemicals |
31,183 |
2.7 |
31,183 |
|
-------------- |
-------------- |
-------------- |
EssilorLuxottica |
|
|
|
Health Care Equipment &
Services |
31,119 |
2.7 |
31,119 |
|
-------------- |
-------------- |
-------------- |
3i Group |
|
|
|
Financial Services |
27,689 |
2.4 |
27,689 |
|
-------------- |
-------------- |
-------------- |
Legrand |
|
|
|
Electronic & Electrical
Equipment |
27,026 |
2.4 |
27,026 |
|
-------------- |
-------------- |
-------------- |
Telenor |
|
|
|
Mobile Telecommunications |
26,784 |
2.3 |
26,784 |
|
-------------- |
-------------- |
-------------- |
Fresenius Medical Care |
|
|
|
Healthcare Services |
24,932 |
2.2 |
24,932 |
|
-------------- |
-------------- |
-------------- |
Partners Group |
|
|
|
Financial Services |
24,505 |
2.1 |
24,505 |
|
-------------- |
-------------- |
-------------- |
Twenty largest long
exposures |
812,772 |
70.3 |
742,090 |
|
-------------- |
-------------- |
-------------- |
Other long exposures |
392,679 |
34.0 |
392,679 |
|
======== |
======== |
======== |
Total long exposures before long
futures2,3 |
1,205,451 |
104.3 |
1,134,769 |
|
======== |
======== |
======== |
Long Futures |
|
|
|
Euro Stoxx 50 Future September
20203 |
40,438 |
3.5 |
1,051 |
|
-------------- |
-------------- |
-------------- |
Gross Asset
Exposure3,4 |
1,245,889 |
107.8 |
|
|
-------------- |
-------------- |
|
Portfolio Fair
Value5 |
|
|
1,135,820 |
|
|
|
-------------- |
Net current assets (excluding
derivative assets and liabilities) |
|
|
19,913 |
|
|
|
======== |
Shareholders’ Funds (per the
Balance Sheet below) |
|
|
1,155,733 |
|
|
|
======== |
1 Gross Asset Exposure is expressed as a percentage
of Shareholders' Funds.
2 Total long exposures before long futures comprises
investments of £1,125,786,000 and long CFDs of £79,665,000.
3 See Note 13 below.
4 Gross Asset Exposure comprises market exposure to
investments of £1,125,786,000 plus market exposure to all
derivative instruments of £120,103,000. Derivative instruments
comprise long CFDs of £79,665,000 and long futures of
£40,438,000.
5 Portfolio Fair Value comprises investments of
£1,125,786,000 plus derivative assets of £10,034,000 (per the
Balance Sheet below).
FINANCIAL STATEMENTS
INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2020
|
|
six months ended 30 June 2020
unaudited |
six months ended 30 June 2019
unaudited |
year ended 31 December 2019
audited |
Notes |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Gains on investments |
|
– |
12,987 |
12,987 |
– |
157,063 |
157,063 |
– |
183,944 |
183,944 |
Gains on derivative instruments |
|
– |
5,215 |
5,215 |
– |
7,806 |
7,806 |
– |
17,516 |
17,516 |
Income |
4 |
18,950 |
– |
18,950 |
28,016 |
– |
28,016 |
34,201 |
– |
34,201 |
Investment management fees |
5 |
(1,061) |
(3,182) |
(4,243) |
(1,010) |
(3,030) |
(4,040) |
(2,119) |
(6,357) |
(8,476) |
Other expenses |
|
(428) |
– |
(428) |
(406) |
– |
(406) |
(857) |
– |
(857) |
Foreign exchange (losses)/gains |
|
– |
(129) |
(129) |
– |
505 |
505 |
– |
199 |
199 |
|
|
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
Net return on ordinary activities
before finance costs and taxation |
|
17,461 |
14,891 |
32,352 |
26,600 |
162,344 |
188,944 |
31,225 |
195,302 |
226,527 |
Finance costs |
6 |
(57) |
(173) |
(230) |
(140) |
(419) |
(559) |
(254) |
(760) |
(1,014) |
|
|
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
Net return on ordinary activities
before taxation |
|
17,404 |
14,718 |
32,122 |
26,460 |
161,925 |
188,385 |
30,971 |
194,542 |
225,513 |
Taxation on return on ordinary
activities |
7 |
(986) |
– |
(986) |
(1,587) |
– |
(1,587) |
(2,155) |
– |
(2,155) |
|
|
======== |
======== |
======== |
======== |
======== |
======== |
======== |
======== |
======== |
Net return on ordinary activities
after taxation for the period |
|
16,418 |
14,718 |
31,136 |
24,873 |
161,925 |
186,798 |
28,816 |
194,542 |
223,358 |
|
|
======== |
======== |
======== |
======== |
======== |
======== |
======== |
======== |
======== |
Return per ordinary
share |
8 |
3.99p |
3.58p |
7.57p |
6.04p |
39.32p |
45.36p |
7.00p |
47.26p |
54.26p |
|
|
======== |
======== |
======== |
======== |
======== |
======== |
======== |
======== |
======== |
The Company does not have any other comprehensive income.
Accordingly the net return on ordinary activities after taxation
for the period is also the total comprehensive income for the
period and no separate Statement of Comprehensive Income has been
presented.
The total column of this statement represents the Income
Statement of the Company. The revenue and capital columns are
supplementary and presented for information purposes as recommended
by the Statement of Recommended Practice issued by the AIC.
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 JUNE 2020
|
Notes |
share
capital
£’000 |
Share
premium
account
£’000 |
Capital
redemption
reserve
£’000 |
capital
reserve
£’000 |
revenue
reserve
£’000 |
Total
shareholders’
funds
£’000 |
Six months ended 30 June 2020
(unaudited) |
|
|
|
|
|
|
|
Total shareholders' funds at 31
December 2019 |
|
10,411 |
58,615 |
5,414 |
1,037,007 |
29,115 |
1,140,562 |
Net return on ordinary activities
after taxation for the period |
|
– |
– |
– |
14,718 |
16,418 |
31,136 |
Dividend paid to shareholders |
9 |
– |
– |
– |
– |
(15,965) |
(15,965) |
|
|
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
Total shareholders' funds at 30
June 2020 |
|
10,411 |
58,615 |
5,414 |
1,051,725 |
29,568 |
1,155,733 |
|
|
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
Six months ended 30 June 2019
(unaudited) |
|
|
|
|
|
|
|
Total shareholders' funds at 31
December 2018 |
|
10,411 |
58,615 |
5,414 |
844,043 |
36,828 |
955,311 |
Net return on ordinary activities
after taxation for the period |
|
– |
– |
– |
161,925 |
24,873 |
186,798 |
Repurchase of ordinary shares |
11 |
– |
– |
– |
(1,591) |
– |
(1,591) |
Dividend paid to shareholders |
9 |
– |
– |
– |
– |
(25,872) |
(25,872) |
|
|
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
Total shareholders' funds at 30
June 2019 |
|
10,411 |
58,615 |
5,414 |
1,004,377 |
35,829 |
1,114,646 |
|
|
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
Year ended 31 December 2019
(audited) |
|
|
|
|
|
|
|
Total shareholders' funds at 31
December 2018 |
|
10,411 |
58,615 |
5,414 |
844,043 |
36,828 |
955,311 |
Net return on ordinary activities
after taxation for the year |
|
– |
– |
– |
194,542 |
28,816 |
223,358 |
Repurchase of ordinary shares |
11 |
– |
– |
– |
(1,578) |
– |
(1,578) |
Dividends paid to shareholders |
9 |
– |
– |
– |
– |
(36,529) |
(36,529) |
|
|
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
Total shareholders' funds at 31
December 2019 |
|
10,411 |
58,615 |
5,414 |
1,037,007 |
29,115 |
1,140,562 |
|
|
======== |
======== |
======== |
======== |
======== |
======== |
BALANCE SHEET AS AT 30 JUNE
2020
Company Number 2638812
|
Notes |
30
June
2020
unaudited
£’000 |
31
December
2019
audited
£’000 |
30
June
2019
unaudited
£’000 |
Fixed assets |
|
|
|
|
Investments |
10 |
1,125,786 |
1,108,702 |
1,084,330 |
|
|
-------------- |
-------------- |
-------------- |
Current assets |
|
|
|
|
Derivative instruments |
10 |
10,034 |
16,576 |
8,856 |
Debtors |
|
11,490 |
5,134 |
9,535 |
Amounts held at futures clearing
houses and brokers |
|
6,113 |
2,029 |
640 |
Fidelity Institutional Liquidity
Fund |
|
106 |
46 |
38 |
Cash at bank |
|
6,576 |
9,444 |
15,252 |
|
|
-------------- |
-------------- |
-------------- |
|
|
34,319 |
33,229 |
34,321 |
|
|
-------------- |
-------------- |
-------------- |
Creditors |
|
|
|
|
Derivative instruments |
10 |
– |
(457) |
(648) |
Other creditors |
|
(4,372) |
(912) |
(3,357) |
|
|
-------------- |
-------------- |
-------------- |
|
|
(4,372) |
(1,369) |
(4,005) |
|
|
-------------- |
-------------- |
-------------- |
Net current assets |
|
29,947 |
31,860 |
30,316 |
|
|
-------------- |
-------------- |
-------------- |
Net assets |
|
1,155,733 |
1,140,562 |
1,114,646 |
|
|
======== |
======== |
======== |
Capital and reserves |
|
|
|
|
Share capital |
11 |
10,411 |
10,411 |
10,411 |
Share premium account |
|
58,615 |
58,615 |
58,615 |
Capital redemption reserve |
|
5,414 |
5,414 |
5,414 |
Capital reserve |
|
1,051,725 |
1,037,007 |
1,004,377 |
Revenue reserve |
|
29,568 |
29,115 |
35,829 |
|
|
-------------- |
-------------- |
-------------- |
Total shareholders’
funds |
|
1,155,733 |
1,140,562 |
1,114,646 |
|
|
======== |
======== |
======== |
Net asset value per ordinary
share |
12 |
280.88p |
277.19p |
270.90p |
|
|
======== |
======== |
======== |
NOTES TO THE FINANCIAL STATEMENTS
1 PRINCIPAL ACTIVITY
Fidelity European Values PLC is an Investment Company incorporated
in England and Wales with a premium listing on the London
Stock Exchange. The Company’s registration number is 2638812, 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 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 December 2019 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 BASIS OF PREPARATION
The Company prepares its Financial Statements on a going concern
basis and in accordance with UK Generally Accepted Accounting
Practice (“UK GAAP”) and FRS 102: The Financial Reporting Standard
applicable in the UK and Republic of
Ireland, issued by the Financial Reporting Council. The
Financial Statements are also prepared in accordance with the
Statement of Recommended Practice: Financial Statements of
Investment Trust Companies and Venture Capital Trusts (“SORP”)
issued by the Association of Investment Companies (“AIC”) in
October 2019. FRS 104: Interim
Financial Reporting has also been applied in preparing this
condensed set of Financial Statements. The accounting policies
followed are consistent with those disclosed in the Company’s
Annual Report and Financial Statements for the year ended
31 December 2019.
4 INCOME
|
six
months
ended
30.06.20
unaudited
£’000 |
six
months
ended
30.06.19
unaudited
£’000 |
year ended
31.12.19
audited
£’000 |
Investment income |
|
|
|
Overseas dividends |
15,705 |
24,621 |
29,019 |
Overseas scrip dividends |
219 |
347 |
795 |
UK dividends |
673 |
1,145 |
2,058 |
|
-------------- |
-------------- |
-------------- |
|
16,597 |
26,113 |
31,872 |
|
-------------- |
-------------- |
-------------- |
Derivative income |
|
|
|
Income recognised from futures
contracts |
675 |
428 |
567 |
Dividends received on long CFDs |
1,615 |
1,431 |
1,658 |
Interest received on long
CFDs1 |
36 |
20 |
45 |
|
-------------- |
-------------- |
-------------- |
|
2,326 |
1,879 |
2,270 |
|
-------------- |
-------------- |
-------------- |
Investment and derivative
income |
18,923 |
27,992 |
34,142 |
|
======== |
======== |
======== |
Other interest |
|
|
|
Interest received on deposits and
money market funds |
27 |
24 |
48 |
Interest received on tax
reclaims |
– |
– |
11 |
|
-------------- |
-------------- |
-------------- |
|
27 |
24 |
59 |
|
-------------- |
-------------- |
-------------- |
Total income |
18,950 |
28,016 |
34,201 |
|
======== |
======== |
======== |
1 Due to negative interest rates during the
reporting period, the Company received interest on its long
CFDs.
No special dividends have been recognised in capital during the
period (six months ended 30 June
2019: £nil and year ended 31 December
2019: £nil).
5 INVESTMENT MANAGEMENT FEES
|
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Six months ended 30 June 2020
(unaudited) |
|
|
|
Investment management fees |
1,061 |
3,182 |
4,243 |
|
-------------- |
-------------- |
-------------- |
Six months ended 30 June 2019
(unaudited) |
|
|
|
Investment management fees |
1,010 |
3,030 |
4,040 |
|
-------------- |
-------------- |
-------------- |
Year ended 31 December 2019
(audited) |
|
|
|
Investment management fees |
2,119 |
6,357 |
8,476 |
|
======== |
======== |
======== |
FIL Investment Services (UK) Limited is the Company's
Alternative Investment Fund Manager and has delegated portfolio
management to FIL Investments International ("FII"). Both companies
are Fidelity group companies.
FII charges investment management fees at an annual rate of
0.85% of net assets up to £400 million and 0.75% of net assets in
excess of £400 million. Fees are payable monthly in arrears and are
calculated on a daily basis.
6 FINANCE COSTS
|
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Six months ended 30 June 2020
(unaudited) |
|
|
|
Interest paid on
deposits1 |
18 |
54 |
72 |
Interest paid on short
CFDs1 |
7 |
21 |
28 |
Dividends paid on short CFDs |
32 |
98 |
130 |
|
-------------- |
-------------- |
-------------- |
|
57 |
173 |
230 |
|
======== |
======== |
======== |
Six months ended 30 June 2019
(unaudited) |
|
|
|
Interest paid on
deposits1 |
6 |
18 |
24 |
Interest paid on short
CFDs1 |
20 |
59 |
79 |
Dividends paid on short CFDs |
114 |
342 |
456 |
|
-------------- |
-------------- |
-------------- |
|
140 |
419 |
559 |
|
======== |
======== |
======== |
Year ended 31 December 2019
(audited) |
|
|
|
Interest paid on
deposits1 |
30 |
89 |
119 |
Interest paid on short
CFDs1 |
27 |
81 |
108 |
Dividends paid on short CFDs |
197 |
590 |
787 |
|
-------------- |
-------------- |
-------------- |
|
254 |
760 |
1,014 |
|
======== |
======== |
======== |
1 Due to negative interest rates during the
reporting period, the Company paid interest on its short CFDs and
deposits.
7 TAXATION ON RETURN ON ORDINARY
ACTIVITIES
|
six months
ended
30.06.20
unaudited
£’000 |
six months
ended
30.06.19
unaudited
£’000 |
year ended
31.12.19
audited
£’000 |
Overseas taxation |
986 |
1,587 |
2,155 |
|
======== |
======== |
======== |
8 RETURN PER ORDINARY SHARE
|
six months
ended
30.06.20
unaudited |
six months
ended
30.06.19
unaudited |
year ended
31.12.19
audited |
Revenue return per ordinary
share |
3.99p |
6.04p |
7.00p |
Capital return per ordinary
share |
3.58p |
39.32p |
47.26p |
|
-------------- |
-------------- |
-------------- |
Total return per ordinary
share |
7.57p |
45.36p |
54.26p |
|
======== |
======== |
======== |
The return per ordinary share is based on the net return on
ordinary activities 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 |
Net revenue return on ordinary
activities after taxation for the period |
16,418 |
24,873 |
28,816 |
Net capital return on ordinary
activities after taxation for the period |
14,718 |
161,925 |
194,542 |
|
-------------- |
-------------- |
-------------- |
Net total return on ordinary
activities after taxation for the period |
31,136 |
186,798 |
223,358 |
|
======== |
======== |
======== |
|
number |
number |
number |
Weighted average number of ordinary
shares held outside of Treasury during the period |
411,466,049 |
411,828,509 |
411,645,789 |
|
========== |
========== |
========== |
9 DIVIDENDS PAID TO SHAREHOLDERS
|
six
months
ended
30.06.20
unaudited
£’000 |
six
months
ended
30.06.19
unaudited
£’000 |
year ended
31.12.19
audited
£’000 |
Final dividend of 3.88 pence per
ordinary share for the year ended 31 December 2019 |
15,965 |
– |
– |
Interim dividend of 2.59 pence per
ordinary share for the year ended 31 December 2019 |
– |
– |
10,657 |
Final dividend of 6.28 pence per
ordinary share for the year ended 31 December 2018 |
– |
25,872 |
25,872 |
|
-------------- |
-------------- |
-------------- |
|
15,965 |
25,872 |
36,529 |
|
======== |
======== |
======== |
The Company has declared an interim dividend for the six month
period to 30 June 2020 of
2.60 pence per ordinary share (2019:
2.59 pence). The interim dividend
will be paid on 30 October 2020 to
shareholders on the register on 25 September
2020 (ex-dividend date 24 September
2020). The total cost of this interim dividend, which has
not been included as a liability in these Financial Statements, is
£10,698,000 (2019: £10,657,000). This amount is based on the number
of ordinary shares held outside of Treasury at the date of this
report.
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 within 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 table below sets out
the Company’s fair value hierarchy:
30 June 2020 (unaudited) |
level 1
£’000 |
level 2
£’000 |
level 3
£’000 |
total
£’000 |
Financial assets at fair value
through profit or loss |
|
|
|
|
Investments |
1,125,786 |
– |
– |
1,125,786 |
Derivative instrument assets |
1,051 |
8,983 |
– |
10,034 |
|
-------------- |
-------------- |
-------------- |
-------------- |
|
1,126,837 |
8,983 |
– |
1,135,820 |
|
-------------- |
-------------- |
-------------- |
-------------- |
Financial liabilities at fair
value through profit or loss |
|
|
|
|
Derivative instrument
liabilities |
– |
– |
– |
– |
|
======== |
======== |
======== |
======== |
31 December 2019 (audited) |
level
1
£’000 |
level
2
£’000 |
level
3
£’000 |
total
£’000 |
Financial assets at fair value
through profit or loss |
|
|
|
|
Investments |
1,108,702 |
– |
– |
1,108,702 |
Derivative instrument assets |
– |
16,576 |
– |
16,576 |
|
-------------- |
-------------- |
-------------- |
-------------- |
|
1,108,702 |
16,576 |
– |
1,125,278 |
|
-------------- |
-------------- |
-------------- |
-------------- |
Financial liabilities at fair
value through profit or loss |
|
|
|
|
Derivative instrument
liabilities |
(137) |
(320) |
– |
(457) |
|
======== |
======== |
======== |
======== |
30 June 2019 (unaudited) |
level
1
£’000 |
level
2
£’000 |
level
3
£’000 |
total
£’000 |
Financial assets at fair value
through profit or loss |
|
|
|
|
Investments |
1,084,330 |
– |
– |
1,084,330 |
Derivative instrument assets |
242 |
8,614 |
– |
8,856 |
|
-------------- |
-------------- |
-------------- |
-------------- |
|
1,084,572 |
8,614 |
– |
1,093,186 |
|
-------------- |
-------------- |
-------------- |
-------------- |
Financial liabilities at fair
value through profit or loss |
|
|
|
|
Derivative instrument
liabilities |
– |
(648) |
– |
(648) |
|
======== |
======== |
======== |
======== |
11 SHARE CAPITAL
|
30 June
2020
unaudited |
31
December 2019
audited |
30 June
2019
unaudited |
number of
shares |
£’000 |
number of
shares |
£’000 |
number of
shares |
£’000 |
Issued, allotted and fully
paid |
|
|
|
|
|
|
Ordinary shares of 2.5 pence each
held outside of Treasury |
|
|
|
|
|
|
Beginning of the period |
411,466,049 |
10,286 |
412,172,826 |
10,304 |
412,172,826 |
10,304 |
Ordinary shares repurchased into
Treasury |
– |
– |
(706,777) |
(18) |
(706,777) |
(18) |
|
----------------- |
-------------- |
----------------- |
-------------- |
-------------- |
-------------- |
End of the period |
411,466,049 |
10,286 |
411,466,049 |
10,286 |
411,466,049 |
10,286 |
|
----------------- |
-------------- |
----------------- |
-------------- |
-------------- |
-------------- |
Ordinary shares of 2.5 pence each
held in Treasury1 |
|
|
|
|
|
|
Beginning of the period |
4,981,861 |
125 |
4,275,084 |
107 |
4,275,084 |
107 |
Ordinary shares repurchased into
Treasury |
– |
– |
706,777 |
18 |
706,777 |
18 |
|
----------------- |
-------------- |
----------------- |
-------------- |
-------------- |
-------------- |
End of the period |
4,981,861 |
125 |
4,981,861 |
125 |
4,981,861 |
125 |
|
----------------- |
-------------- |
----------------- |
-------------- |
-------------- |
-------------- |
Total share capital |
|
10,411 |
|
10,411 |
|
10,411 |
|
|
======== |
|
======== |
|
======== |
1 Ordinary shares held in Treasury carry no rights
to vote, to receive a dividend or to participate in a winding up of
the Company.
There were no ordinary shares repurchased into Treasury during
the period (year ended 31 December
2019: cost of £1,578,000 (net of stamp duty) and six months
ended 30 June 2019: cost of
£1,591,000).
12 NET ASSET VALUE PER ORDINARY SHARE
The net asset value per ordinary share is based on net assets of
£1,155,733,000 (31 December 2019:
£1,140,562,000 and 30 June 2019:
£1,114,646,000) and on 411,466,049 (31
December 2019: 411,466,049 and 30
June 2019: 411,466,049) ordinary shares, being the number of
ordinary shares of 2.5 pence each
held outside of Treasury at the period end. 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 and, therefore, shares held in Treasury have no
dilutive effect.
13 CAPITAL RESOURCES AND GEARING
The Company does not have any externally imposed capital
requirements. The financial resources of the Company comprise its
share capital and reserves, as disclosed on the Balance Sheet
above, and any gearing, which is achieved through the use of
derivative instruments. Financial resources are managed in
accordance with the Company’s investment policy and in pursuit of
its investment objective.
The Company’s gearing at the end of the period is shown
below:
|
gross
asset exposure |
net asset
exposure |
£'000 |
%1 |
£'000 |
%1 |
30 June 2020 (unaudited) |
|
|
|
|
Investments |
1,125,786 |
97.4 |
1,125,786 |
97.4 |
Long CFDs |
79,665 |
6.9 |
79,665 |
6.9 |
Long futures |
40,438 |
3.5 |
40,438 |
3.5 |
|
-------------- |
-------------- |
-------------- |
-------------- |
Total long exposures |
1,245,889 |
107.8 |
1,245,889 |
107.8 |
Short CFDs |
– |
– |
– |
– |
|
-------------- |
-------------- |
-------------- |
-------------- |
Gross/net asset exposure |
1,245,889 |
107.8 |
1,245,889 |
107.8 |
|
-------------- |
-------------- |
-------------- |
-------------- |
Shareholders’ funds |
1,155,733 |
|
1,155,733 |
|
|
-------------- |
-------------- |
-------------- |
-------------- |
Gearing2 |
|
7.8 |
|
7.8 |
|
|
======== |
|
======== |
31 December 2019
(audited) |
|
|
|
|
Investments |
1,108,702 |
97.2 |
1,108,702 |
97.2 |
Long CFDs |
72,774 |
6.4 |
72,774 |
6.4 |
Long futures |
26,151 |
2.3 |
26,151 |
2.3 |
|
-------------- |
-------------- |
-------------- |
-------------- |
Total long exposures |
1,207,627 |
105.9 |
1,207,627 |
105.9 |
Short CFDs |
13,973 |
1.2 |
(13,973) |
(1.2) |
|
-------------- |
-------------- |
-------------- |
-------------- |
Gross/net asset exposure |
1,221,600 |
107.1 |
1,193,654 |
104.7 |
|
-------------- |
-------------- |
-------------- |
-------------- |
Shareholders’ funds |
1,140,562 |
|
1,140,562 |
|
|
-------------- |
|
-------------- |
|
Gearing2 |
|
7.1 |
|
4.7 |
|
|
======== |
|
======== |
1 Exposure to the market expressed as a percentage
of shareholders' funds.
2 Gearing is the amount by which the gross/net asset
exposure exceeds shareholders' funds expressed as a percentage of
shareholders' funds.
|
gross
asset exposure |
net asset
exposure |
£'000 |
%1 |
£'000 |
%1 |
30 June 2019 (unaudited) |
|
|
|
|
Investments |
1,084,330 |
97.3 |
1,084,330 |
97.3 |
Long CFDs |
66,941 |
6.0 |
66,941 |
6.0 |
Long futures |
9,082 |
0.8 |
9,082 |
0.8 |
|
-------------- |
-------------- |
-------------- |
-------------- |
Total long exposures |
1,160,353 |
104.1 |
1,160,353 |
104.1 |
Short CFDs |
15,453 |
1.4 |
(15,453) |
(1.4) |
|
-------------- |
-------------- |
-------------- |
-------------- |
Gross/net asset exposure |
1,175,806 |
105.5 |
1,144,900 |
102.7 |
|
-------------- |
-------------- |
-------------- |
-------------- |
Shareholders’ funds |
1,114,646 |
|
1,114,646 |
|
|
-------------- |
-------------- |
-------------- |
-------------- |
Gearing2 |
|
5.5 |
|
2.7 |
|
|
======== |
|
======== |
1 Exposure to the market expressed as a percentage
of shareholders' funds.
2 Gearing is the amount by which the gross/net asset
exposure exceeds shareholders' funds expressed as a percentage of
shareholders' funds.
14 TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES
FIL Investment Services (UK) Limited is the Company’s Alternative
Investment Fund Manager and has delegated portfolio management
services and the role of company secretary to FIL Investments
International (“FII”), the Investment Manager. Both companies are
Fidelity group companies. Details of the fee arrangements are given
in Note 5 above.
During the period, fees for portfolio management services of
£4,243,000 (six months ended 30 June
2019: £4,040,000 and year ended 31
December 2019: £8,476,000) were payable to FII. At the
Balance Sheet date, fees for portfolio management services of
£733,000 (31 December 2019: £752,000 and 30 June 2019: £705,000) were accrued and included
in other creditors. FII also provides the Company with marketing
services. The total amount payable for these services during the
period was £80,000 (six months ended 30 June
2019: £80,000 and year ended 31
December 2019: £189,000). At the Balance Sheet date, £16,000
(31 December 2019: £7,000 and
30 June 2019: £2,000) for marketing
services was accrued and included in other creditors.
As at 30 June 2020, the Board
consisted of five 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 Chairman receives an annual fee of
£41,500, the Audit Committee Chair an annual fee of £32,500, the
Senior Independent Director an annual fee of £29,500 and each other
Director an annual fee of £27,000. The following members of the
Board hold ordinary shares in the Company: Vivian Bazalgette 30,000 shares, Fleur Meijs 28,970 shares, Sir Ivan Rogers nil shares, Marion Sears 25,475 shares and Paul Yates 32,000 shares.
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 June 2020
and 30 June 2019 has not been audited
or reviewed by the Company’s Independent Auditor.
The information for the year ended 31
December 2019 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.fidelityinvestmenttrusts.com where up to date
information on the Company, including daily NAV and share prices,
factsheets and other information can also be found.