Fidelity European Trust PLC
Half-Yearly results for the six months
ended 30 June 2021 (unaudited)
Financial Highlights:
- The Board of Fidelity European Trust PLC (the “Company”)
recommends an interim dividend of 2.65
pence per share.
- The Company recorded a net asset value (“NAV”) total return of
+12.9%, compared with a total return of +10.9% gains for the FTSE
World Europe (ex UK) Index.
- Increased gearing of the company was a significant contributor
to performance.
- Semiconductor company, ASML, and luxury good companies LVMH
Moët Hennessy and Hermes International, were strong performers over
the period.
- The Company continues to focus on cash generative companies
with strong balance sheets which have the potential to grow their
dividends consistently over the next three to five years.
Contacts
For further information, please
contact:
Anna-Marie Davis
Company Secretary
01737 834798
FIL Investments International
PORTFOLIO MANAGER’S HALF-YEARLY REVIEW
PERFORMANCE REVIEW
During the first six months of the year, on a UK sterling basis,
the net asset value (“NAV”) total return was +12.9% compared to a
total return of +10.9% for the FTSE World Europe (ex UK) Index
which is the Company’s Benchmark Index. The share price total
return was +7.6%, which is below the NAV total return because of a
widening of the share price discount to NAV.
MARKET REVIEW
Continental European markets were strong again in the first half of
this year, extending their impressive recovery from the sell-off
early last year when the Coronavirus pandemic went global.
The early running, in the first quarter of this year, was made
by economy-sensitive sectors that would be expected to benefit most
from an economic rebound if governments were to ease
pandemic-related restrictions. It was not long, however, before the
narrative shifted. During the first quarter results season,
investors started to be concerned about the potential impact of
input inflation on company margins. Inflation expectations have
indeed been rising and a key debate is whether inflationary
pressures will ultimately prove transitory as Sam Morse, your Portfolio Manager, expects, or
whether the pandemic has ushered in a new inflationary era and a
consequent normalisation in both bond yields and the duration of
economic cycles. This debate has led to a see-sawing leadership of
the market between value, growth, cyclicals and defensives.
Ultimately, however, a rising tide has lifted (almost) all boats
such that overall returns, even if dampened somewhat in sterling
terms by the continuing appreciation of the pound, have been
good.
PORTFOLIO MANAGER’S REPORT
The Company’s cautious approach has often meant that it has
struggled, in the past, to keep up with the Benchmark Index when
equity markets rise rapidly. It was pleasing, therefore, that the
NAV outperformed over the six months. The increased gearing of the
Company to a structurally higher level, as discussed in the 2020
Annual Report, is a significant contributor to the increased
outperformance.
The contribution from stock-picking has been mixed during this
period. ASML, which is a supplier to the microchip industry,
continued to perform very strongly as a well-publicised shortage in
semiconductors led to announcements of increased capital spending
by many of their customers. The luxury goods companies, LVMH Moët
Hennessy and Hermes International, were also strong performers as
results exceeded expectations and in recognition that improved
on-line offerings in response to pandemic restrictions are bringing
new customers and incremental turnover, particularly in
China.
Some of the Company’s holdings in the health care sector were,
by contrast, poor performers. Fresenius Medical Care and Grifols
both issued disappointing trading updates due to challenges posed
by the pandemic. Both businesses also suffered from the weaker
dollar given their reliance on the US market. Enel, Italy’s largest
utility company, suffered along with the sector on general concerns
about returns from renewables projects given growing competition
from large oil companies. Enel was also hampered by political and
economic concerns relating to the Latin
America countries in which it does a sizeable portion of its
business. Finally, Telenor, the incumbent telecoms business in
Norway, performed poorly mainly
due to the coup in Myanmar where
it also operates -- the company recently announced that it has sold
that operation for a much-reduced price, compared to previous
valuations by analysts.
Five Highest Contributors to NAV
total return |
Sector |
Country |
% |
ASML |
Information Technology |
Netherlands |
+0.7 |
Partners Group |
Financials |
Switzerland |
+0.5 |
LVMH Moët Hennessy |
Consumer Discretionary |
France |
+0.4 |
Hermes International |
Consumer Discretionary |
France |
+0.4 |
Novartis |
Health Care |
Switzerland |
+0.3 |
Five Highest Detractors to NAV total
return |
Sector |
Country |
% |
Enel |
Utilities |
Italy |
-0.5 |
Telenor |
Communication Services |
Norway |
-0.2 |
Grifols |
Health Care |
Spain |
-0.2 |
Prosus |
Consumer Discretionary |
Netherlands |
-0.2 |
3i Group |
Financials |
UK |
-0.2 |
OUTLOOK
Following the pandemic melt-down, the global economy has recovered
more quickly and more strongly than many of us expected. As a
result, earnings and dividend expectations for continental European
companies have continued to be upgraded. This may carry on, given
pent-up savings among consumers and with many services still due to
reopen fully. Of course, much is already discounted in share prices
that are at elevated levels compared to history. That has been true
for some time, however. It is the corollary of low bond yields.
Investors should be cautious when it appears to be “as good as it
gets” because the stock market is an effective, and increasingly
rapid, discounting machine. Your Portfolio Manager believes,
however, that it is more likely that these high levels of valuation
will persist as earnings continue to rise, allowing for further
increases in share prices.
The post-pandemic dynamics of supply and demand, not to mention
low inventories, are leading to shortages across many areas, such
as semiconductors, as noted above. There is also a base effect in
terms of input prices given the sharp rise in commodity prices year
on year. Companies that do not have pricing power, which are often
the strongest performers in value rallies, may suffer a margin
squeeze if they are not able to pass higher input prices on to
their customers. Many “steady-Eddie” companies with pricing power,
such as consumer staples companies, like Nestlé, have lagged the
steep recovery in the market on a one-year view, but may be better
placed to weather this new challenge.
Longer term concerns remain regarding continental Europe’s
demographics, lack of productivity, high levels of government debt
and fiscal imbalances. Progress has been made on some fronts: for
example, the Euro 750 billion
“recovery” fund is in train and spending should boost countries
such as Italy and Spain in coming years. Politics, as always,
simmers in the background with investors reading the runes of
regional ballots to try to determine the likely results of
important national elections to come in 2022. It appears, at this
stage, that incumbents will retain pole position leading into next
year’s races but fragmentation continues: the far-right Fratelli is
gaining ground in Italy, the
conservative Xavier Bertrand is
strengthening his leadership credentials in French polls, while the
Greens have surged, then faded somewhat in Germany – it is no coincidence that the “E” of
ESG (environmental, social and governance) is growing in prominence
in politics as it is in investment circles.
Your Company will continue, as always, to focus on cash
generative companies with strong balance sheets which have the
potential to grow their dividends consistently over the next three
to five years. While many of these companies looked relatively
expensive a year ago, on through-cycle multiples, that is less so
now.
BY ORDER OF THE BOARD
FIL INVESTMENTS INTERNATIONAL
2 August 2021
TWENTY LARGEST HOLDINGS AS AT 30 JUNE
2021
The Gross Asset Exposures shown below 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.
|
Gross Asset Exposure |
Balance
Sheet
Value
£’000 |
|
£’000 |
%1 |
Long Exposures – shares unless
otherwise stated |
|
|
|
Nestlé |
|
|
|
Food Producers |
92,256 |
6.8 |
92,256 |
ASML |
|
|
|
Technology Hardware &
Equipment |
80,940 |
6.0 |
80,940 |
LVMH Moët Hennessy |
|
|
|
Personal Goods |
71,744 |
5.3 |
71,744 |
Roche |
|
|
|
Pharmaceuticals &
Biotechnology |
69,015 |
5.1 |
69,015 |
L'Oréal |
|
|
|
Personal Goods |
56,669 |
4.2 |
56,669 |
SAP |
|
|
|
Software & Computer
Services |
49,115 |
3.6 |
49,115 |
Enel |
|
|
|
Electricity |
48,054 |
3.5 |
48,054 |
Sanofi (long CFD) |
|
|
|
Pharmaceuticals &
Biotechnology |
47,149 |
3.5 |
395 |
EssilorLuxottica |
|
|
|
Medical Equipment &
Services |
46,440 |
3.4 |
46,440 |
Novo Nordisk |
|
|
|
Pharmaceuticals &
Biotechnology |
46,161 |
3.4 |
46,161 |
Deutsche Böerse Group |
|
|
|
Investment Banking & Brokerage
Services |
45,836 |
3.4 |
45,836 |
Legrand (long CFD) |
|
|
|
Electronic & Electrical
Equipment |
43,635 |
3.2 |
635 |
Partners Group |
|
|
|
Investment Banking & Brokerage
Services |
41,985 |
3.1 |
41,985 |
Linde (long CFD) |
|
|
|
Chemicals |
41,338 |
3.0 |
704 |
Swedish Match |
|
|
|
Tobacco |
40,737 |
3.0 |
40,737 |
TotalEnergies |
|
|
|
Oil, Gas & Coal |
40,346 |
3.0 |
40,346 |
Schindler Holding |
|
|
|
Industrial Engineering |
35,991 |
2.5 |
35,991 |
3i Group |
|
|
|
Investment Banking & Brokerage
Services |
33,834 |
2.5 |
33,834 |
Hermes International |
|
|
|
Personal Goods |
32,738 |
2.4 |
32,738 |
Symrise |
|
|
|
Chemicals |
31,413 |
2.3 |
31,413 |
|
------------- |
------------- |
------------- |
Twenty largest long
exposures |
995,396 |
73.2 |
865,008 |
Other long exposures |
467,855 |
34.4 |
459,686 |
|
------------- |
------------- |
------------- |
Total long exposures before long
futures2,3 |
1,463,251 |
107.6 |
1,324,694 |
|
======== |
======== |
======== |
Long Futures |
|
|
|
Euro Stoxx 50 Future September
20203 |
59,631 |
4.4 |
(962) |
|
------------- |
------------- |
------------- |
Total long exposures after long
futures3 |
1,522,882 |
112.0 |
1,323,732 |
|
======== |
======== |
======== |
Short Exposures |
|
|
|
Short CFD (1
holding)3 |
5,603 |
0.4 |
764 |
|
------------- |
------------- |
|
Gross Asset
Exposure3,4 |
1,528,485 |
112.4 |
|
|
======== |
======== |
|
Portfolio Fair
Value5 |
|
|
1,324,496 |
Net current assets (excluding
derivative assets and liabilities) |
|
|
35,418 |
|
|
|
------------- |
Shareholders' Funds (per Balance
Sheet below) |
|
|
1,359,914 |
|
|
|
======== |
1 Gross Asset Exposure is expressed as a
percentage of Shareholders’ Funds.
2 Total long exposures before long
futures comprises investments of £1,322,774,000 and long CFDs of
£140,477,000.
3 See Note 13 below.
4 Gross Asset Exposure comprises market
exposure to investments of £1,322,774,000 plus market exposure to
all derivative instruments of £205,711,000. Derivative instruments
comprise long CFDs of £140,477,000, long futures of £59,631,000 and
short CFDs of £5,603,000.
5 Portfolio Fair Value comprises
investments of £1,322,774,000 plus derivative assets of £2,684,000
less derivative liabilities of £962,000 (per the Balance Sheet,
below).
INTERIM MANAGEMENT REPORT AND DIRECTORS’ RESPONSIBILITY
STATEMENT
REVISED MANAGEMENT FEE
As reported in the Annual Report for the year ended 31 December 2020, the Board agreed a revised fee
with the Manager, FIL Investment Services (UK) Limited, with effect
from 1 April 2021. The first tier of
the previous fee structure, which is an annual rate of 0.85 per
cent on the first £400 million of the Company’s net assets remained
unchanged. However, the previous rate of 0.75 per cent on net
assets in excess of £400 million reduced to 0.65 per cent, thus
achieving a saving on overall percentage costs for shareholders.
Details of the total fee paid to the Manager for the provision of
investment management services for the six months ended
30 June 2021 is in Note 5 below.
INTERIM DIVIDEND
The Board does not influence the Portfolio Manager by imposing any
income objective in any particular period and the investment focus
on companies capable of growing their dividends remains. The Board
acknowledges that both capital and income growth are components of
performance, as reflected in the investment objective of the
Company. It therefore has a policy whereby it seeks to pay a
progressive dividend in normal circumstances and to pay dividends
twice yearly in order to smooth dividend payments for the reporting
year. Investment trusts have an income advantage which is
particularly important during difficult times, when the dividends
of many companies in the portfolio are under pressure. Unlike
open-ended funds, investment trusts can hold back some of the
income they receive in good years, thereby building up revenue
reserves, which can then be used to supplement dividends to
shareholders at a time when companies in the portfolio may be
cutting or cancelling their dividends. This pattern may continue
while variants of the COVID-19 virus still remains in broad
circulation. The Board has over the past few years augmented
revenue reserves and it also has the authority to pay dividends
from capital reserves if required. Accordingly, the Board’s
intention in the medium term is to pay nominal increases in total
annual dividends, utilising reserves if necessary, as it did for
the payment of the final dividend for the year ended 31 December 2020.
The Company’s revenue return for the six months to 30 June 2021 was 5.28
pence per share (30 June 2020:
3.99 pence). The Board has declared
an interim dividend of 2.65 pence per
share which is a modest increase of 1.9% on the 2.60 pence per share paid as the interim dividend
in 2020. This will be paid on 29 October
2021 to shareholders on the register at close of business on
24 September 2021 (ex-dividend date
23 September 2021).
DISCOUNT MANAGEMENT AND TREASURY SHARES
The Board has an active discount management policy, the primary
purpose of which is to reduce discount volatility. It seeks to
maintain the discount in single digits in normal market conditions.
Buying shares at a discount also results in an enhancement to the
NAV per share.
In order to assist in managing the discount, the Board has
shareholder approval to hold ordinary shares repurchased by the
Company in Treasury, rather than cancelling them. Shares in
Treasury are then available to be re-issued at NAV per share or at
a premium to NAV per share, facilitating the management of and
enhancing liquidity in the Company’s shares.
In the reporting period and up to 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, 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 comprise of market risk; performance risk; key
person risk; economic and political risk; environmental, social and
governance risk; discount control risk; gearing and derivatives
risk; operational risk from cybercrime; pandemic risk; 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 2020. A copy of the Annual Report can
be found on the Company’s pages of the Manager’s website at
www.fidelity.co.uk/europe.
These principal risks and uncertainties have not materially
changed during the six months to 30 June
2021 and are equally applicable to the remaining six months
of the Company’s financial year. Risks from emerging new variants
of COVID-19 continue, including the availability of suitable
vaccines to tackle the new variants.
CORONAVIRUS (COVID-19)
With the pandemic continuing and new variants of the virus
appearing, it is evident that the arrival of vaccines does not
necessarily mean an end of COVID-19. It is, potentially, difficult
for the formulations of the various vaccines to keep up with
variants of the disease. Despite the Government’s easing of
lockdown measures, risks remain and these are being kept under
constant review by the Board and the Manager. 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 need to
take place to deal with any redemptions. Therefore, investments can
be held over a longer time horizon.
The Manager carries on reviewing its business continuity plans
and operational resilience strategies on an ongoing basis and
continues to take all reasonable steps in 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. The Manager continues to
look after the safety of employees, and allows employees to work
from home and had until recently, split team working for those
staff whose work was deemed necessary to be carried out in an
office. Return to the office is on a reduced occupancy and follows
social distancing guidelines. The Manager will continue to follow
Government recommendations and guidance for COVID-19 restriction
and self-isolation rules.
Investment team key activities, including those of portfolio
managers, analysts and trading/ support functions, have continued
to perform well despite the operational challenges posed by working
from home or when split team arrangements have been in place.
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
the role of Company Secretary 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 and
its expenditure and cash flow projections. They have considered the
liquidity of the Company’s portfolio of investments (being mainly
securities which are readily realisable) and the projected income
and expenditure. The Directors are satisfied that the Company is
financially sound and has sufficient 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. Accordingly, they continue to adopt the
going concern basis in preparing these Financial Statements.
This conclusion also takes into account the Board’s assessment
of the ongoing risks from COVID-19 and evolving variants as set out
on the previously.
Continuation votes are held every two years and the next
continuation vote will be put to shareholders at the Annual General
Meeting in 2023.
BY ORDER OF THE BOARD
FIL INVESTMENTS INTERNATIONAL
2 August 2021
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 Portfolio Manager’s
Half-Yearly Review and the Interim Management Report include 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 2 August 2021 and the above responsibility
statement was signed on its behalf by Vivian Bazalgette, Chairman.
FINANCIAL STATEMENTS
INCOME STATEMENT FOR THE SIX MONTHS
ENDED 30 JUNE 2021
|
|
Six
months ended 30 June 2021
unaudited |
Six
months ended 30 June 2020
unaudited |
Year
ended 31 December 2020
audited |
|
Notes |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Gains on investments |
|
– |
116,714 |
116,714 |
– |
12,987 |
12,987 |
– |
89,664 |
89,664 |
Gains on derivative instruments |
|
– |
21,176 |
21,176 |
– |
5,215 |
5,215 |
– |
2,768 |
2,768 |
Income |
4 |
26,335 |
– |
26,335 |
18,950 |
– |
18,950 |
25,552 |
– |
25,552 |
Investment management fees |
5 |
(1,171) |
(3,513) |
(4,684) |
(1,061) |
(3,182) |
(4,243) |
(2,225) |
(6,674) |
(8,899) |
Other expenses |
|
(426) |
– |
(426) |
(428) |
– |
(428) |
(845) |
– |
(845) |
Foreign exchange losses |
|
– |
(258) |
(258) |
– |
(129) |
(129) |
– |
(175) |
(175) |
|
|
------------- |
------------- |
------------- |
------------- |
------------- |
------------- |
------------- |
------------- |
------------- |
Net return on ordinary activities
before finance costs and taxation |
|
24,738 |
134,119 |
158,857 |
17,461 |
14,891 |
32,352 |
22,482 |
85,583 |
108,065 |
Finance costs |
6 |
(59) |
(179) |
(238) |
(57) |
(173) |
(230) |
(89) |
(265) |
(354) |
|
|
------------- |
------------- |
------------- |
------------- |
------------- |
------------- |
------------- |
------------- |
------------- |
Net return on ordinary activities
before taxation |
|
24,679 |
133,940 |
158,619 |
17,404 |
14,718 |
32,122 |
22,393 |
85,318 |
107,711 |
Taxation on return on ordinary
activities |
7 |
(2,943) |
– |
(2,943) |
(986) |
– |
(986) |
(1,325) |
– |
(1,325) |
|
|
------------- |
------------- |
------------- |
------------- |
------------- |
------------- |
------------- |
------------- |
------------- |
Net return on ordinary activities
after taxation for the period |
|
21,736 |
133,940 |
155,676 |
16,418 |
14,718 |
31,136 |
21,068 |
85,318 |
106,386 |
|
|
======== |
======== |
======== |
======== |
======== |
======== |
======== |
======== |
======== |
Return per ordinary
share |
8 |
5.28p |
32.55p |
37.83p |
3.99p |
3.58p |
7.57p |
5.12p |
20.74p |
25.86p |
|
|
======== |
======== |
======== |
======== |
======== |
======== |
======== |
======== |
======== |
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 2021
|
Note |
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 2021
(unaudited) |
|
|
|
|
|
|
|
Total shareholders’ funds at 31
December 2020 |
|
10,411 |
58,615 |
5,414 |
1,122,325 |
23,520 |
1,220,285 |
Net return on ordinary activities
after taxation for the period |
|
– |
– |
– |
133,940 |
21,736 |
155,676 |
Dividend paid to shareholders |
9 |
– |
– |
– |
– |
(16,047) |
(16,047) |
|
|
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
Total shareholders’ funds at 30
June 2021 |
|
10,411 |
58,615 |
5,414 |
1,256,265 |
29,209 |
1,359,914 |
|
|
======== |
======== |
======== |
======== |
======== |
======== |
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 |
|
|
======== |
======== |
======== |
======== |
======== |
======== |
Year ended 31 December 2020
(audited) |
|
|
|
|
|
|
|
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 year |
|
– |
– |
– |
85,318 |
21,068 |
106,386 |
Dividends paid to shareholders |
9 |
– |
– |
– |
– |
(26,663) |
(26,663) |
|
|
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
-------------- |
Total shareholders’ funds at 31
December 2020 |
|
10,411 |
58,615 |
5,414 |
1,122,325 |
23,520 |
1,220,285 |
|
|
======== |
======== |
======== |
======== |
======== |
======== |
BALANCE SHEET AS AT 30 JUNE
2021
Company Number 2638812
|
Notes |
30 June
2021
unaudited
£’000 |
31 December
2020
audited
£’000 |
30 June
2020
unaudited
£’000 |
Fixed assets |
|
|
|
|
Investments |
10 |
1,322,774 |
1,200,663 |
1,125,786 |
|
|
------------- |
-------------- |
-------------- |
Current assets |
|
|
|
|
Derivative instruments |
10 |
2,684 |
2,119 |
10,034 |
Debtors |
|
9,183 |
5,814 |
11,490 |
Amounts held at futures clearing
houses and brokers |
|
4,724 |
5,977 |
6,113 |
Cash and cash equivalents |
|
22,484 |
7,070 |
6,682 |
|
|
------------- |
-------------- |
-------------- |
|
|
39,075 |
20,980 |
34,319 |
|
|
======== |
======== |
======== |
Current liabilities |
|
|
|
|
Derivative instruments |
10 |
(962) |
(403) |
– |
Other creditors |
|
(973) |
(955) |
(4,372) |
|
|
-------------- |
-------------- |
-------------- |
|
|
(1,935) |
(1,358) |
(4,372) |
|
|
-------------- |
-------------- |
-------------- |
Net current assets |
|
37,140 |
19,622 |
29,947 |
|
|
-------------- |
-------------- |
-------------- |
Net assets |
|
1,359,914 |
1,220,285 |
1,155,733 |
|
|
======== |
======== |
======== |
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 |
|
1,256,265 |
1,122,325 |
1,051,725 |
Revenue reserve |
|
29,209 |
23,520 |
29,568 |
|
|
-------------- |
-------------- |
-------------- |
Total shareholders’
funds |
|
1,359,914 |
1,220,285 |
1,155,733 |
|
|
======== |
======== |
======== |
Net asset value per ordinary
share |
12 |
330.50p |
296.57p |
280.88p |
|
|
======== |
======== |
======== |
NOTES TO THE FINANCIAL STATEMENTS
1 PRINCIPAL ACTIVITY
Fidelity European Trust 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 2020 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
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 2020.
(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 continuing risks arising
from COVID-19 and evolving variants.
4 INCOME
|
Six months
ended
30.06.21
unaudited
£’000 |
Six months
ended
30.06.20
unaudited
£’000 |
Year ended
31.12.20
audited
£’000 |
Investment income |
|
|
|
Overseas dividends |
21,029 |
15,705 |
20,179 |
Overseas scrip dividends |
512 |
219 |
936 |
UK dividends |
750 |
673 |
748 |
UK scrip dividends |
– |
– |
509 |
|
-------------- |
-------------- |
-------------- |
|
22,291 |
16,597 |
22,372 |
|
======== |
======== |
======== |
Derivative income |
|
|
|
Income recognised from futures
contracts |
1,299 |
675 |
1,040 |
Dividends received on long CFDs |
2,408 |
1,615 |
1,894 |
Interest received on long
CFDs1 |
337 |
36 |
206 |
|
-------------- |
-------------- |
-------------- |
|
4,044 |
2,326 |
3,140 |
|
======== |
======== |
======== |
Investment and derivative
income |
26,335 |
18,923 |
25,512 |
|
======== |
======== |
======== |
Other interest |
|
|
|
Interest received on collateral,
bank deposits and money market funds |
– |
27 |
31 |
Interest received on tax
reclaims |
– |
– |
9 |
|
-------------- |
-------------- |
-------------- |
|
– |
27 |
40 |
|
======== |
======== |
======== |
Total income |
26,335 |
18,950 |
25,552 |
|
======== |
======== |
======== |
1 Due to negative interest rates during
the reporting period, the Company received interest on its long
CFDs.
Special dividends of £82,000 have been recognised in capital
during the period (six months ended 30 June
2020 and year ended 31 December
2020: £nil).
5 INVESTMENT MANAGEMENT FEES
|
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Six months ended 30 June 2021
(unaudited) |
|
|
|
Investment management fees |
1,171 |
3,513 |
4,684 |
|
======== |
======== |
======== |
Six months ended 30 June 2020
(unaudited) |
|
|
|
Investment management fees |
1,061 |
3,182 |
4,243 |
|
======== |
======== |
======== |
Year ended 31 December 2020
(audited) |
|
|
|
Investment management fees |
2,225 |
6,674 |
8,899 |
|
======== |
======== |
======== |
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.
From 1 April 2021, FII charges
investment management fees at an annual rate of 0.85% of net assets
up to £400 million and 0.65% of net assets in excess of £400
million. Prior to this date, the investment management fees were
charged 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.
Investment management fees have been allocated 75% to capital
reserve in accordance with the Company’s accounting policies.
6 FINANCE COSTS
|
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Six months ended 30 June 2021
(unaudited) |
|
|
|
Interest paid on collateral and bank
deposits1 |
13 |
41 |
54 |
Interest paid on
CFDs1 |
46 |
138 |
184 |
|
-------------- |
-------------- |
-------------- |
|
59 |
179 |
238 |
|
======== |
======== |
======== |
Six months ended 30 June 2020
(unaudited) |
|
|
|
Interest paid on collateral and bank
deposits1 |
18 |
54 |
72 |
Interest paid on
CFDs1 |
7 |
21 |
28 |
Dividends paid on short CFDs |
32 |
98 |
130 |
|
-------------- |
-------------- |
-------------- |
|
57 |
173 |
230 |
|
======== |
======== |
======== |
Year ended 31 December 2020
(audited) |
|
|
|
Interest paid on collateral and bank
deposits1 |
30 |
91 |
121 |
Interest paid on
CFDs1 |
26 |
77 |
103 |
Dividends paid on short CFDs |
33 |
97 |
130 |
|
-------------- |
-------------- |
-------------- |
|
89 |
265 |
354 |
|
======== |
======== |
======== |
1 Due to negative interest rates during
the reporting period, the Company paid interest on its short CFDs
and deposits.
Finance costs have been allocated 75% to capital reserve in
accordance with the Company’s accounting policies.
7 TAXATION ON RETURN ON ORDINARY
ACTIVITIES
|
Six months
ended
30.06.21
unaudited
£’000 |
Six months
ended
30.06.20
unaudited
£’000 |
Year ended
31.12.20
audited
£’000 |
Overseas taxation |
2,943 |
986 |
1,325 |
|
======== |
======== |
======== |
8 RETURN PER ORDINARY SHARE
|
Six months
ended
30.06.21
unaudited |
Six months
ended
30.06.20
unaudited |
Year ended
31.12.20
audited |
Revenue return per ordinary
share |
5.28p |
3.99p |
5.12p |
Capital return per ordinary
share |
32.55p |
3.58p |
20.74p |
|
-------------- |
-------------- |
-------------- |
Total return per ordinary
share |
37.83p |
7.57p |
25.86p |
|
======== |
======== |
======== |
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 Treasury
during the period, as shown below:
|
£’000 |
£’000 |
£’000 |
Net revenue return on ordinary
activities after taxation |
21,736 |
16,418 |
21,068 |
Net capital return on ordinary
activities after taxation |
133,940 |
14,718 |
85,318 |
|
--------------- |
--------------- |
--------------- |
Net total return on ordinary
activities after taxation |
155,676 |
31,136 |
106,386 |
|
======== |
======== |
======== |
|
Number |
Number |
Number |
Weighted average number of ordinary
shares held outside Treasury during the period |
411,466,049 |
411,466,049 |
411,466,049 |
|
========== |
========== |
========== |
9 DIVIDENDS PAID TO SHAREHOLDERS
|
Six months
ended
30.06.21
unaudited
£’000 |
Six months
ended
30.06.20
unaudited
£’000 |
Year ended
31.12.20
audited
£’000 |
Final dividend of 3.90 pence per
ordinary share for the year ended 31 December 2020 |
16,047 |
– |
– |
Interim dividend of 2.60 pence per
ordinary share for the year ended 31 December 2020 |
– |
– |
10,698 |
Final dividend of 3.88 pence per
ordinary share for the year ended 31 December 2019 |
– |
15,965 |
15,965 |
|
--------------- |
--------------- |
--------------- |
|
16,047 |
15,965 |
26,663 |
|
======== |
======== |
======== |
The Company has declared an interim dividend for the six month
period to 30 June 2021 of
2.65 pence per ordinary share (2020:
2.60 pence). The interim dividend
will be paid on 29 October 2021 to
shareholders on the register on 24 September
2021 (ex-dividend date 23 September 2021). The total
cost of this interim dividend, which has not been included as a
liability in these Financial Statements, is £10,904,000 (2020:
£10,698,000). This amount is based on the number of ordinary shares
held outside 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 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 table below sets out
the Company’s fair value hierarchy:
30 June 2021 (unaudited) |
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total
£’000 |
Financial assets at fair value
through profit or loss |
|
|
|
|
Investments |
1,322,774 |
– |
– |
1,322,774 |
Derivative instrument assets |
– |
2,684 |
– |
2,684 |
|
-------------- |
-------------- |
-------------- |
-------------- |
|
1,322,774 |
2,684 |
– |
1,325,458 |
|
======== |
======== |
======== |
======== |
Financial liabilities at fair
value through profit or loss |
|
|
|
|
Derivative instrument
liabilities |
(962) |
– |
– |
(962) |
|
======== |
======== |
======== |
======== |
31 December 2020 (audited) |
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total
£’000 |
Financial assets at fair value
through profit or loss |
|
|
|
|
Investments |
1,200,663 |
– |
– |
1,200,663 |
Derivative instrument assets |
481 |
1,638 |
– |
2,119 |
|
-------------- |
-------------- |
-------------- |
-------------- |
|
1,201,144 |
1,638 |
– |
1,202,782 |
|
======== |
======== |
======== |
======== |
Financial liabilities at fair
value through profit or loss |
|
|
|
|
Derivative instrument
liabilities |
– |
(403) |
– |
(403) |
|
======== |
======== |
======== |
======== |
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 |
– |
– |
– |
– |
|
======== |
======== |
======== |
======== |
11 SHARE CAPITAL
|
30 June
2021
unaudited |
31
December 2020
audited |
30 June
2020
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 Treasury |
|
|
|
|
|
|
Beginning and end of the
period |
411,466,049 |
10,286 |
411,466,049 |
10,286 |
411,466,049 |
10,286 |
Ordinary shares of 25 pence each
held in Treasury1 |
|
|
|
|
|
|
Beginning and 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 current or prior periods.
12 NET ASSET VALUE PER ORDINARY SHARE
The calculation of the net asset value per ordinary share is based
on the following:
|
30.06.21
unaudited |
31.12.20
audited |
30.06.20
unaudited |
Total shareholders’ funds |
£1,359,914,000 |
£1,220,285,000 |
£1,155,733,000 |
Ordinary shares held outside
Treasury at period end |
411,466,049 |
411,466,049 |
411,466,049 |
Net asset value per ordinary
share |
330.50p |
296.57p |
280.88p |
|
============ |
============ |
============ |
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 2021 (unaudited) |
|
|
|
|
Investments |
1,322,774 |
97.3 |
1,322,774 |
97.3 |
Long CFDs |
140,477 |
10.3 |
140,477 |
10.3 |
Long futures |
59,631 |
4.4 |
59,631 |
4.4 |
|
-------------- |
-------------- |
-------------- |
-------------- |
Total long exposures |
1,522,882 |
112.0 |
1,522,882 |
112.0 |
Short CFDs |
5,603 |
0.4 |
(5,603) |
(0.4) |
|
-------------- |
-------------- |
-------------- |
-------------- |
Gross/net asset exposure |
1,528,485 |
112.4 |
1,517,279 |
111.6 |
|
-------------- |
-------------- |
-------------- |
-------------- |
Shareholders’ funds |
1,359,914 |
|
1,359,914 |
|
|
======== |
|
======== |
|
Gearing2 |
|
12.4 |
|
11.6 |
|
|
======== |
|
======== |
31 December 2020
(audited) |
|
|
|
|
Investments |
1,200,663 |
98.4 |
1,200,663 |
98.4 |
Long CFDs |
99,355 |
8.1 |
99,355 |
8.1 |
Long futures |
50,359 |
4.1 |
50,359 |
4.1 |
|
-------------- |
-------------- |
-------------- |
-------------- |
Total long exposures |
1,350,377 |
110.6 |
1,350,377 |
110.6 |
Short CFDs |
13,922 |
1.2 |
(13,922) |
(1.2) |
|
-------------- |
-------------- |
-------------- |
-------------- |
Gross/net asset exposure |
1,364,299 |
111.8 |
1,336,455 |
109.4 |
|
-------------- |
-------------- |
-------------- |
-------------- |
Shareholders’ funds |
1,220,285 |
|
1,220,285 |
|
|
======== |
|
======== |
|
Gearing2 |
|
11.8 |
|
9.4 |
|
|
======== |
|
======== |
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 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 |
|
|
======== |
|
======== |
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
£4,684,000 (six months ended 30 June
2020: £4,243,000 and year ended 31
December 2020: £8,899,000) were payable to FII. At the
Balance Sheet date, fees for portfolio management services of
£790,000 (31 December 2020: £806,000 and 30 June 2020: £733,000) 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 £56,000 (six months ended 30 June
2020: £80,000 and year ended 31
December 2020: £140,000). At the Balance Sheet date, fees
for marketing services of £13,000 (31
December 2020: £6,000 and 30 June
2020: £16,000) were accrued and included in other
creditors.
As at 30 June 2021, 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 Chairman 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 2021
and 30 June 2020 has not been audited
or reviewed by the Company’s Independent Auditor.
The information for the year ended 31
December 2020 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.