Fidelity European Values PLC

Transcription

1 Fidelity European Values PLC Interim Report For the 6 months ended 30 June 2007 Managed by

2 Contents Investment Objective & Performance Summary 1 Summary of Results 2 Interim Report 3 Top 20 Holdings 5 Financial Statements 6 Investor Information 15 Directory 16

3 Investment Objective The investment objective of the Company is to achieve long term capital growth from the stockmarkets of continental Europe. Performance total return (includes reinvested income) 6 months to From launch 30 June November 1991 Net asset value per share +12.1% +1,455.0% Share price +10.7% +1,341.1% FTSE World Europe (ex UK) Index +10.9% % Standardised performance on a total return basis 30/06/02 30/06/03 30/06/04 30/06/05 30/06/06 to to to to to 30/06/03 30/06/04 30/06/05 30/06/06 30/06/07 Net asset value per share -1.8% +25.7% +33.9% +25.4% +24.8% Share price -13.6% +30.2% +41.7% +21.8% +24.1% (Sources: Fidelity and Datastream.) (Past performance is not a guide to future returns. The value of your investment can go down as well as up.) Fidelity European Values PLC Interim Report 2007 Page 1

4 Summary of Results 30 June 31 December % change Assets Total assets employed m 906.1m +7.5 Shareholders funds 870.1m 801.7m +8.5 Borrowings as % of shareholders funds 12.0% 13.0% Net asset value per share (NAV) 1,433.00p 1,283.77p Stockmarket Data FTSE World Europe (ex UK) Index Share price 2 period end 1,335.00p 1,211.00p high 1,398.00p 1,232.00p low 1,195.00p p (Discount)/premium 2 period end (6.8%) (5.7%) high (3.7%) 5.1% low (6.8%) (11.3%) Returns for the six months to 30 June Capital return per ordinary share p 48.11p Capital + revenue return per ordinary share p 60.78p Total Returns 3 for the six months to 30 June NAV per share +12.1% +5.5% Share price +10.7% -3.2% FTSE World Europe (ex UK) Index +10.9% +5.9% 1 Total assets less liabilities, excluding loan liabilities. 2 The high and low figures relate to the six month period to 30 June 2007 and the year to 31 December Includes reinvested income. (Sources: Fidelity and Datastream.) (Past performance is not a guide to future returns. The value of your investment can go down as well as up.) Page 2 Fidelity European Values PLC Interim Report 2007

5 Interim Report RECENT DEVELOPMENTS A number of developments for your Company have occurred over recent months. New Directors We are delighted to welcome two new Directors to the Board with effect from 1 June 2007, namely Mr James Robinson and Mr Humphrey van der Klugt. Mr Robinson was Chief Investment Officer, Investment Trusts and Director of Hedge Funds at Henderson Global Investors prior to his retirement in He is a Chartered Accountant and has 27 years investment experience. Mr van der Klugt is also a Chartered Accountant and was previously a Director of Schroder Investment Management Limited. He had a 22 year career at Schroders where he was a member of the Group Investment and Asset Allocation Committees. Change in management fee The Company agreed a new management fee which has been implemented with effect from 1 January The new arrangement replaces the previous structure with a performance related fee and in summary provides for:- 1. A quarterly base fee of % (plus applicable VAT) of net assets. There will be no additional company secretarial fee. 2. An annual performance related fee of 20% of any change in net asset value in excess of the returns on the FTSE World Europe (ex UK) Index plus 0.5%. Both net asset value and Index will be calculated on a total return basis, while the net asset value will be based on the weighted average number of shares in issue. VAT Shareholders may be aware of the test case in respect of whether VAT should be charged on the management expenses of investment trusts. The judgement of the European Court of Justice was given in June 2007 and it was ruled that the company involved in the test TOTAL RETURN PERFORMANCE FOR THE 6 MONTHS TO 30 JUNE ' 31 Dec 06 ' 31 Jan 07 NAV ' 28 Feb 07 ' 31 Mar 07 Share price ' 30 Apr 07 ' 31 May % +10.9% +10.7% ' 30 Jun 07 FTSE World Europe (ex UK) Index (Sources: Fidelity and Datastream.) (Past performance is not a guide to future returns. The value of your investment can go down as well as up.) case was entitled to an exemption from VAT. The implications of the judgement are still not totally clear but shareholders can be assured that the results of this case are being followed very closely by the Board and further information will be provided in due course. PERFORMANCE During the first six months of the year, the net asset value of the portfolio rose by 12.1%, compared with a return of 10.9% for the FTSE World Europe (ex UK) Index, in sterling terms and on a total return basis. MARKET REVIEW European equity markets performed strongly during the first six months of 2007, despite a number of obstacles. In February 2007, investor confidence was lowered by a global sell-off due largely to a downturn in the Chinese market and speculation about a slowdown in the US, with a particular focus on the US sub prime market. In early June, markets were hit by another bout of nerves, as government bond yields in the US and Fidelity European Values PLC Interim Report 2007 Page 3

6 Interim Report elsewhere rose sharply. This prompted further concerns about the movement of interest rates to keep in check economic growth and inflation around the globe. However, in similar situations in the past bourses have been relatively resilient to this type of macroeconomic news. The European economy continues to expand at a stronger pace than has been generally expected. It continues to be supported by positive surveys of business and consumer confidence, strong investment and falling unemployment. The European Central Bank ( ECB ) raised interest rates by 0.25% in both March and June to end the review period at 4.00%. The ECB s monetary policy is to maintain inflation rates below, but close to, 2% over the medium term in order to maintain price stability. Given that the current rate falls within this area, inflation appears to be in check. PORTFOLIO MANAGER REPORT Over the six-month period, stock selection within the construction, electricity and utilities sectors proved rewarding. Construction stocks were buoyed by merger speculation across the industry, while in the electricity sector, shares in French power generation company Electricite de France were buoyed by its strong prospects and plans to build atomic power stations in the UK. A holding in German utilities firm E.ON also added value, after it announced impressive expansion plans. A low weighting in pharmaceutical companies has proven beneficial, as firms have been hurt by negative news about key products, the product pipeline and concerns over the regulatory environment. During the review period, the portfolio manager reduced his exposure to financial stocks in light of worries over the profit cycle as a result of rising provisions and slowing revenue growth. Notable sales were in the investment banking sector, and more specifically, a number of Spanish banks. The portfolio manager increased the portfolio s exposure to industrial stocks, which are benefiting from strong demand globally. In terms of market-capitalisation, the portfolio manager has increased the weighting in small and mid-cap stocks, as volatility in the stock market during 2007 has provided good opportunities to invest in attractively valued lower-capitalisation companies. OUTLOOK Despite recent concerns in the markets, which have been less resilient since the period end, equity valuations do not look overstretched. European equities appear to offer fair value compared with other asset classes, including bonds. Growth and inflation remain at the forefront of investors minds. However, European GDP continues to grow at a speed that is stronger than many economists have predicted. Positive economic data on business and manufacturing confidence, as well as falling unemployment and healthy exports, have boosted the region. In light of developments in the credit markets in the last month, merger & acquisition activity may slow for some types of transaction, but in the current environment we would anticipate that this activity will not completely cease. Earnings have been a key support for the equity market over the past few years. However, the profit cycle is relatively extended now and, therefore, the medium-term risk remains one of timing and when the profit cycle begins to slow. We believe that stock selection, based on in-depth company analysis, will continue to be crucial in outperforming the benchmark Index. By order of the Board Fidelity Investments International 8 August 2007 Page 4 Fidelity European Values PLC Interim Report 2007

7 Top 20 Holdings as at 30 June 2007 Market Value Holding 000 % E.ON German generator and distributor of electricity and gas 40, Siemens German manufacturer of industrial and consumer products 33, Societe Generale de Paris French bank 33, Allianz European insurance and financial services company 33, Electricite de France French electricity company 25, AXA French insurance company 23, Unicredito Italiano Italian bank 20, Roche Holdings Swiss developer and manufacturer of pharmaceutical and chemical products 19, UBS Swiss bank 18, Alfa Laval Swedish engineering company 17, Statoil ASA Norwegian integrated oil and gas company 16, ABN AMRO Dutch bank providing banking services internationally 16, Swatch Group Swiss watch manufacturer 15, Reed Elsevier Dutch publisher and information provider 15, Commerzbank German bank 15, Investor Swedish company conducting private activities internationally 15, Suez French distributor of electricity and natural gas 13, Arcelor Mittal Dutch based global steel producer 13, Hennes & Mauritz Swedish fashion retailer 13, Deutsche Boerse German based international financial marketplace operator 13, Top 20 holdings 413, % total assets less liabilities, excluding fixed term loan liabilities. Fidelity European Values PLC Interim Report 2007 Page 5

8 Income Statement for the six months ended unaudited revenue capital total Notes Gains on investments 84,531 84,531 Income 2 20,839 20,839 Investment management and performance fees (4,058) (1,639) (5,697) Other expenses (349) (349) Exchange gains/(losses) 54 (452) (398) Exchange (losses)/gains on loans (53) (53) Net return before finance costs and taxation 16,486 82,387 98,873 Interest payable (2,032) (2,032) Net return on ordinary activities before taxation 14,454 82,387 96,841 Taxation on return on ordinary activities 3 (2,575) (2,575) Net return on ordinary activities after taxation for the period 11,879 82,387 94,266 Return per ordinary share p p p A Statement of Total Recognised Gains and Losses has not been prepared as there are no gains and losses other than those reported in this Income Statement. The total column of the Income Statement is the profit and loss account of the Company. These financial statements have been prepared in accordance with the AIC Statement of Recommended Practice (SORP) issued in January 2003 and revised in December Page 6 Fidelity European Values PLC Interim Report 2007

9 for the year ended for the six months ended audited unaudited revenue capital total revenue capital total , ,258 31,714 31,714 21,631 21,631 18,189 18,189 (9,961) (9,961) (4,843) (4,843) (986) (986) (476) (476) 55 (311) (256) 17 (31) (14) 2,260 2,260 (941) (941) 10, , ,946 12,887 30,742 43,629 (4,976) (4,976) (2,501) (2,501) 5, , ,970 10,386 30,742 41,128 (2,407) (482) (2,889) (2,414) (482) (2,896) 3, , ,081 7,972 30,260 38, p p p 12.67p 48.11p 60.78p Fidelity European Values PLC Interim Report 2007 Page 7

10 Reconciliation of Movement in Shareholders Funds called-up share share premium capital account Notes Opening shareholders funds: 1 January ,725 58,615 Net recognised gains/(losses) for the period Revenue after taxation Dividend paid 7 Closing shareholders funds: 30 June ,725 58,615 Opening shareholders funds: 1 January ,725 58,615 Net recognised gains/(losses) for the period Repurchase of shares 9 (114) Revenue after taxation Dividend paid 7 Closing shareholders funds: 31 December ,611 58,615 Net recognised gains for the period Investment management and performance fees to capital Repurchase of shares 9 (433) Revenue after taxation Dividend paid 7 Closing shareholders funds: 30 June ,178 58,615 Page 8 Fidelity European Values PLC Interim Report 2007

11 capital capital capital redemption reserve reserve revenue total reserve realised unrealised reserve equity , ,734 5, ,608 96,466 (66,206) 30,260 7,972 7,972 (1,573) (1,573) , ,528 12, , , ,734 5, , ,343 (31,618) 116, (5,453) (5,453) 3,356 3,356 (1,573) (1,573) , ,116 7, ,663 70,111 13,915 84,026 (1,639) (1,639) 433 (22,635) (22,635) 11,879 11,879 (3,243) (3,243) , ,031 16, ,051 Fidelity European Values PLC Interim Report 2007 Page 9

12 Balance Sheet Fixed assets unaudited audited unaudited Notes Investments at fair value through profit or loss 966, , ,960 Current assets Debtors 22,005 3,506 7,296 Cash at bank 4,895 4,718 6,118 Creditors amounts falling due within one year 26,900 8,224 13,414 Fixed rate unsecured loans 8 (10,109) (10,104) (62,369) Other creditors (18,526) (3,652) (7,764) (28,635) (13,756) (70,133) Net current liabilities (1,735) (5,532) (56,719) Total assets less current liabilities 964, , ,241 Creditors amounts falling due after more than one year Fixed rate unsecured loans 8 (94,350) (94,302) (51,974) Total net assets 870, , ,267 Capital and reserves Called up share capital 15,178 15,611 15,725 Share premium account 58,615 58,615 58,615 Capital redemption reserve Capital reserve realised 613, , ,216 Capital reserve unrealised 166, , ,528 Revenue reserve 16,103 7,467 12,083 Total equity shareholders funds 870, , ,267 Net asset value per ordinary share 5 1,433.00p 1,283.77p 1,152.99p Page 10 Fidelity European Values PLC Interim Report 2007

13 Cash Flow Statement Operating activities unaudited audited unaudited Investment income received 17,487 16,969 14,561 Interest received Investment management fee paid (5,189) (9,671) (4,779) Directors' fees paid (34) (94) (40) Other cash payments (385) (675) (365) Net cash inflow from operating activities 12,096 6,831 9,469 Returns on investments and servicing of finance Interest paid (2,049) (4,977) (2,514) Net cash outflow from returns on investments and servicing of finance (2,049) (4,977) (2,514) Taxation Overseas taxation recovered Taxation recovered Financial investment Purchase of investments (461,110) (724,793) (400,157) Disposal of investments 475, , ,430 Net cash inflow/(outflow) from financial investments 14,386 13,295 (2,727) Equity dividend paid (3,243) (1,573) (1,573) Net cash inflow before financing 22,056 14,450 2,840 Financing Repurchase of ordinary shares (21,168) (5,435) 4.595% credit facility drawn down 10, % credit facility drawn down 10, % credit facility repaid (10,109) % credit facility repaid (10,191) 4.38% fixed rate unsecured loan drawn down 43, % credit facility drawn down 10, % fixed rate unsecured loan repaid (33,679) 5.54% fixed rate unsecured loan repaid (26,943) Net cash outflow from financing (21,168) (12,170) Increase in cash 888 2,280 2,840 Fidelity European Values PLC Interim Report 2007 Page 11

14 Notes to the Financial Statements 1. ACCOUNTING POLICIES The interim financial statements have been prepared on the basis of the accounting policies set out in the Company s annual report and financial statements dated 31 December INCOME unaudited audited unaudited UK dividends 1 Overseas dividends 20,559 21,305 18,083 Overseas scrip dividends 77 Deposit interest ,839 21,631 18, TAXATION ON RETURN ON ORDINARY ACTIVITIES unaudited audited unaudited revenue capital total revenue capital total revenue capital total Overseas taxation suffered 3,341 3,341 3, ,242 3, ,686 Overseas taxation recovered (766) (766) (1,353) (1,353) (790) (790) Tax (credit)/charge for use of revenue expenses (200) 200 (200) 200 2,575 2,575 2, ,889 2, , RETURN PER ORDINARY SHARE unaudited audited unaudited Revenue 19.26p 5.34p 12.67p Capital p p 48.11p p p 60.78p Returns per ordinary share are based on the net revenue return on ordinary activities after taxation of 11,879,000 ( : 3,356,000; : 7,972,000), the capital return in the period of 82,387,000 ( : 116,725,000; : 30,260,000) and the total return in the period of 94,266,000 ( : 120,081,000; : 38,232,000) and on 61,674,171 ordinary shares ( : 62,864,314; : 62,903,233), being the weighted average number of shares in issue during the period. Page 12 Fidelity European Values PLC Interim Report 2007

15 Notes to the Financial Statements 5. NET ASSET VALUE PER ORDINARY SHARE The net asset value per ordinary share is based on net assets of 870,051,000 ( : 801,663,000; : 725,267,000) and on 60,715,551 ordinary shares ( : 62,445,652; : 62,903,233), being the number of ordinary shares in issue at the period end. 6. COSTS OF INVESTMENT TRANSACTIONS Included in the gains on investments are the following costs of investment transactions: unaudited audited unaudited Purchase expenses Sales expenses ,063 1, DIVIDENDS No dividend has been declared in respect of the current period. The dividend shown on the Reconciliation of Movements in Shareholders' Funds for the six months ended relates to the year ended LOAN FACILITIES The fixed rate loan from Lloyds TSB Bank plc of euro 40,000,000 was drawn down on 22 June 2005 for a period of five years at an interest rate of 3.23% per annum. The loan is repayable on 22 June The fixed rate loan from Lloyds TSB Bank plc of euro 35,000,000 was drawn down on 22 November 2005 for a period of three years at an interest rate of 3.54% per annum. The loan is repayable on 24 November The fixed rate loan from Barclays Bank plc of euro 65,000,000 was drawn down on 29 December 2006 for a period of five years at an interest rate of 4.38% per annum. The loan is repayable on 15 December The Company has entered into a euro 25,000,000 credit facility agreement with Lloyds TSB Bank plc which expires on 15 December An amount of euro 15,000,000 was drawn down on 29 June 2007 for a period of 90 days at an interest rate of 4.595% per annum. Fidelity European Values PLC Interim Report 2007 Page 13

16 Notes to the Financial Statements 9. SHARE REPURCHASES The following share repurchases for cancellation were made in the period: unaudited audited unaudited Number of shares repurchased and cancelled 1,730, ,581 Average price per share 1,308.31p 1,191.70p Total cost including stamp duty and commission 22,635,000 5,453, UNAUDITED FINANCIAL STATEMENTS The results for the six months to 30 June 2007 and 30 June 2006, which are unaudited, constitute non-statutory accounts within the meaning of s240 of the Companies Act The figures and financial information for the year ended 31 December 2006 are extracted from the latest published financial statements. These financial statements, on which the auditors gave an unqualified report, have been delivered to the Registrar of Companies. Page 14 Fidelity European Values PLC Interim Report 2007

17 Investor Information CONTACT INFORMATION Private investors can call free on am to 6pm, seven days a week. Financial advisers can call free on am to 6pm, on any business day. Existing shareholders who have specific queries regarding their holding, for example a change of address, should contact the appropriate administrator: Holders of ordinary shares the Company s Registrars, Capita Registrars, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU. Telephone: Details of individual shareholdings and other information can also be obtained from the Registrars website: Fidelity ISA/PEP investors Fidelity, using the freephone number given above, or by writing to UK Customer Service, Financial Administration Services Limited, Oakhill House, 130 Tonbridge Road, Hildenborough, Kent TN11 9DZ. Fidelity Share Plan investors Fidelity Investment Trust Share Plan, Lloyds TSB Registrars, The Causeway, Worthing, West Sussex BN99 6DA. Telephone: Fidelity ShareNetwork: General enquiries should be made to Fidelity Investments International, the Investment Manager and Secretary, at the Company s registered office: Fidelity Investments International, Investment Trusts, Beech Gate, Millfield Lane, Lower Kingswood, Tadworth, Surrey KT20 6RP. Telephone: Fax: FINANCIAL CALENDAR 30 June 2007 interim period end 8 August 2007 announcement of interim results to 30 June End August 2007 publication of interim report 31 December 2007 financial year end March 2008 publication of annual report May 2008 Annual General Meeting Fidelity European Values PLC Interim Report 2007 Page 15

18 Directory BOARD OF DIRECTORS Robert Walther (Chairman) Simon Duckworth Simon Fraser James Robinson David Simpson (Audit Committee Chairman and Senior Independent Director) Humphrey van der Klugt MANAGER, SECRETARY AND REGISTERED OFFICE Fidelity Investments International Beech Gate, Millfield Lane Lower Kingswood Tadworth Surrey, KT20 6RP FINANCIAL ADVISERS AND STOCKBROKERS Winterflood Investment Trusts The Atrium Building Cannon Bridge 25 Dowgate Hill London, EC4R 2GA INDEPENDENT AUDITORS Grant Thornton UK LLP* Chartered Accountants and Registered Auditors 30 Finsbury Square London, EC2P 2YU BANKERS AND CUSTODIAN JP Morgan Chase Bank (London Branch) 125 London Wall London, EC2Y 5AJ REGISTRARS Capita Registrars The Registry 34 Beckenham Road Beckenham Kent, BR3 4TU LAWYERS Slaughter and May One Bunhill Row London, EC1Y 8YY *Following the recent merger of RSM Robson Rhodes LLP with Grant Thornton UK LLP. The Fidelity Individual Savings Account ( ISA ) is offered and managed by Financial Administration Services Limited. The Fidelity Investment Trust Share Plan is managed by Fidelity Investments International. Both companies are authorised and regulated by the Financial Services Authority. The Fidelity Investment Trust Share Plan is administered by Lloyds TSB Registrars and shares will be held in the name of Lloyds TSB Registrars Savings Nominees Limited. The value of savings and eligibility to invest in an ISA will depend on individual circumstances and all tax rules may change in the future. Fidelity investment trusts are managed by Fidelity Investments International. Fidelity only gives information about its own products and services and does not provide investment advice based on individual circumstances. Should you wish to seek advice, please contact a Financial Adviser. For the purposes of Sections 21 and 25 of the Financial Services and Markets Act 2000, the content of this report has been approved by Fidelity Investments International. Issued by Fidelity Investments International. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only. Investees should also note that the views expressed may no longer be current and may have already been acted upon by Fidelity. Fidelity, Fidelity International and the Pyramid Logo are trademarks of Fidelity International Limited. Issued by Fidelity Investments International, authorised and regulated in the UK by the Financial Services Authority. CB31907/na Page 16 Fidelity European Values PLC Interim Report 2007

19 The printing inks used for this report are made from vegetable based oils and 95% of cleaning solvents are recycled for further use. The electricity was all generated from renewable sources and on average 87% of any waste associated with this production will be recycled. Printed using pureprint environmental print technology by a CarbonNeutral company, registered to the Environmental Management System, ISO and EMAS, the Eco Management and Audit Scheme. The FSC logo identifies products which contain wood from well managed forests certified in accordance with the rules of the Forest Stewardship Council. This document is printed on Revive 50:50, a paper containing 50% recovered fibre & 50% virgin fibre. Pulps used are elemental chlorine free, manufactured at a mill with the ISO Environmental Management System. Cert no. SGS-COC-0620

20