Annual Financial Report
FIDELITY EUROPEAN VALUES PLC
ANNUAL FINANCIAL REPORT, PROXY FORM AND ADDITIONAL DISCLOSURES TO THE
PRELIMINARY RESULTS FOR THE YEAR ENDED
31 DECEMBER 2012
Further to the voluntary disclosure of the Company's annual results for the
year ended 31 December 2012by way of a preliminary announcement dated 27
February2013, in accordance with the Disclosure and Transparency Rules ("the
Rules") 4.1.3 and 6.3.5(2) this announcement contains the text of the
preliminary announcement dated 27 February 2013together with the additional
text in compliance with the Rules.
The Company's annual report and financial statements for the year ended 31
December 2012together with the accompanying proxy form will shortly be
submitted to the National Storage Mechanism (NSM) and will shortly be available
for inspection:
www.hemscott.com/nsm.do
(Documents will usually be available for inspection within two business days of
this notice being given)
The annual report and financial statements will shortly be available on the
Company's website at
https://www.fidelity.co.uk/static/pdf/common/investment-trusts/european/annual-report12.pdf
Jenny Thompson
FIL Investments International
Company Secretary
11 March 2013
01737 836 869
FIDELITY EUROPEAN VALUES PLC
For the year ended 31 December 2012
Preliminary Announcement of Year End Results
Chairman's Statement
I have pleasure in presenting the Annual Report of Fidelity European Values PLC
for the year ended 31 December 2012.
PERFORMANCE
European equities advanced in 2012 following a volatile 2011. After a difficult
second quarter, in which anxieties were once again heightened by concerns over
the sovereign debt crisis, markets turned a corner in July when European
Central Bank ("ECB") President Mario Draghi stated that the ECB would do
"whatever it takes" to save the Eurozone. Sentiment improved further after the
ECB announced that it had agreed to an unlimited bond purchase programme to
lower borrowing costs for some indebted Eurozone nations. Towards the end of
the year, risk appetite increased on optimism that US lawmakers would reach an
agreement on budget talks to avert the so-called fiscal cliff.
Against this backdrop, I am pleased to report that the net asset value ("NAV")
per share of the Company returned 24.7% and outperformed its Benchmark, the
FTSE World Europe (ex UK) Index, which returned 17.8%. Stock selection was the
prime driver of performance. In particular, holdings in the financials,
industrials and healthcare sectors performed well. However, there were some
stock specific disappointments, especially in the energy sector, which held
back returns. Overall, the focus remains on companies with solid balance sheets
and growing dividends. Gearing which was held in a range of 5% - 15% during the
year, also aided performance. A detailed review of the performance of the
portfolio is provided in the Manager's Review in the Annual Report. (All
figures are in sterling and are on a total return basis).
DISCOUNT MANAGEMENT
The Board continues to adopt an active discount management policy and share
buybacks have been made during the year. Whilst the primary purpose of our
policy is to reduce share price volatility in relation to net asset value,
buying in shares at a discount also results in an enhancement to NAV per share.
Your Board has sanctioned share buybacks over the course of 2012 amounting to
2.7% of the issued share capital of the Company, a much lower figure than the
11.6% repurchased in 2011. The great majority of the repurchases took place in
the first half of the year whilst markets were weak. Further details may be
found in the Directors' Report in the Annual Report.
I am pleased to report that the lower level of share price volatility relative
to the NAV apparent in the second half of 2011 has continued into 2012.
Furthermore, the level of discount has narrowed from 14.2% at the start of the
year to 9.9% at the year end. This has given rise to a share price total return
of 31.3% for 2012, ahead of the NAV total return of 24.7%.
Improved sentiment towards continental European equity markets has undoubtedly
been a factor behind the narrowing of the discount. Re-establishing our
historically good performance record against the Benchmark Index, under Sam
Morse's management, has likewise been important.
DIVIDENDS
The Board intends to continue with its practice of paying out earnings in full.
The objective is one of long term capital growth and we will not seek to
influence the Manager to determine the level of income of your Company's
portfolio in any particular year.
The Board has decided to recommend a final dividend of 27.75 pence per share
for the year ended 31 December 2012 (2011: 26.50 pence). This dividend will be
payable on 24 May 2013 to shareholders on the register at close of business on
15 March 2013 (ex-dividend date 13 March 2013).
The proposed dividend increase for 2012 over 2011 is therefore 4.7%. Whilst we
emphasise that the increase is a function of stock selection and cannot be
extrapolated into the future, our Portfolio Manager, Sam Morse, continues to
focus on companies which are able to grow their dividends as being one of the
underlying factors in his stock selection. A further explanation of the
investment process can be found in the Annual Report.
PERFORMANCE OVER ONE YEAR, FIVE YEARS AND SINCE LAUNCH TO 31 DECEMBER 2012 (ON
A TOTAL RETURN BASIS) (%)
NAV Share FTSE
price World
Europe
(ex
UK)
Index1
One year +24.7 +31.3 +17.8
Five years +8.6 +6.6 -5.1
Since launch (1991) +1,608.6 +1,453.8 +474.3
1 Data prior to the year ended 31 December 2011 is on a net of tax basis
Sources: Fidelity and Datastream as at 31 December 2012
Past performance is not a guide to future returns
GEARING
The Company gears through the use of long Contracts For Difference ("CFDs"). As
at 31 December 2012, the level of gearing was 11.1% and the Board has been
working within a range of 5% - 15%. Gearing made a positive contribution to
performance during the year, as can be seen from the attribution analysis in
the Annual Report.
It is pleasing to note that the move to using CFDs as a means of gearing the
portfolio, introduced in 2011 in place of traditional bank loans, has been
positive. Operationally it has worked smoothly and it has been significantly
cheaper for the Company, with finance costs reducing from £2,617,000 in 2011 to
just £326,000 in 2012; and this in spite of gearing levels actually on average
being higher in 2012.
PERFORMANCE FEES
Investment performance was strong during the year and a performance fee is
payable, all cumulative past underperformance against the Benchmark Index
having been made good. The base fee paid and payable to the Manager is charged
fully against revenue. The performance fee is charged against capital. Further
details are included in the Directors' Report in the Annual Report.
DIRECTORATE
Simon Duckworth will step down from the Board at the conclusion of the business
of the Annual General Meeting on 16 May 2013. Simon has served on the Board for
just over 10 years and on behalf of the Board I would like to take this
opportunity to thank him for his invaluable contribution to the Company. We
wish him well in his future endeavours. In preparation for this, I am delighted
to confirm that Marion Sears was appointed a non-executive Director of the
Company on 17 January 2013 following a search using an external agency. Marion
has extensive commercial and investment experience and is currently the Senior
Independent non-executive Director of Dunelm Group plc, and a non-executive
Director of Octopus AIM VCT plc and Persimmon plc. Further details are included
in her biography in the Annual Report.
In accordance with the UK Corporate Governance Code for Directors of FTSE 350
companies the entire Board is subject to annual election and re-election. The
Directors' biographies can be found in the Annual Report. The Directors have a
wide range of appropriate skills and experience to make up a balanced board for
your Company. With the exception of Simon Fraser, in the opinion of the Board,
all other Directors are independent.
Simon Fraser, due to his previous employment relationship with the Manager and
his directorship of another investment trust managed by Fidelity, namely
Fidelity Japanese Values PLC, is deemed non-independent by the UK Corporate
Governance Code. The Board is convinced that Simon Fraser's experience serves
the Company well; and the Directors support unanimously his continued position
as a Director of the Company.
In line with good corporate governance, the Board had an independent,
externally facilitated assessment of its performance during 2012. The
evaluation reported that the performance and contribution of the Board was
effective and all Directors were committed to their roles. There were no areas
of concern reported.
The Board has considered the proposals for the election and re-election of all
of the Directors and recommends to shareholders that they vote in favour of the
proposals.
CONTINUATION VOTE
In accordance with the Articles of Association of the Company, an ordinary
resolution that the Company continue as an investment trust for a further two
years was passed at the 2011 Annual General Meeting. A further continuation
vote will take place at this year's Annual General Meeting. The Company's
performance record has been excellent since launch with a NAV increase of
1,608.6% compared to an increase in the Benchmark Index of 474.3% (on a total
return basis). During the past 12 months the Company's NAV has outperformed the
Index by 6.9% on a total return basis and is also ahead of the Index over 3, 5
and 10 years. Therefore your Board recommends that shareholders vote in favour
of the continuation vote. A further continuation vote will take place at the
Annual General Meeting in 2015.
ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held at Fidelity's offices at
25 Cannon Street, London EC4M 5TA (St Paul's or Mansion House tube stations) on
Thursday 16 May 2013 at midday. Full details of the meeting are given in the
Annual Report and I look forward to talking with as many shareholders as
possible on this occasion.
CONCLUSION
Investors who stayed the course in continental European equities have been
rewarded with an excellent year. Indeed, Europe was one of the strongest areas
for equity investment in 2012.
There are a large number of high quality companies quoted on continental
European bourses, many also with extensive businesses in Asia and around the
world. Value will `out'; such stocks had become overly depressed by the waves
of poor sentiment surrounding the political situation in Europe, low economic
growth and budget deficits which have to be financed, high unemployment
especially in Southern Europe and of course the Euro.
Whilst equities have regained poise, the outlook for earnings and dividend
growth is generally muted and one cannot pretend that the underlying political
and economic situation in Europe has improved dramatically. It does seem likely
that at some point in 2013 some of the worries will once again come to the
fore; and it follows that we may well see setbacks and volatility ahead. Our
response is to continue to focus on finding and investing in strong companies
which offer fundamental value and the prospect of making decent returns from
current valuation levels. We are fortunate to have a wide choice of investment
opportunities across the region.
Humphrey van der Klugt
Chairman
26 February 2013
MANAGER'S REVIEW
PERFORMANCE REVIEW
As shown in the Financial Summary in the Annual Report, the NAV per share of
the Company returned 24.7% in the year to 31 December 2012, outperforming the
FTSE World Europe (ex UK) Index, which returned 17.8%. (All performance figures
are quoted on a total return basis and in sterling).
MARKET BACKGROUND
2012 was a much better year for the European markets.
The turning point, in terms of confidence, came in July, when Mario Draghi,
President of the European Central Bank ("ECB"), reassured market participants
by stating that the ECB would act as the lender of last resort to highly
indebted sovereign states to limit the risk of any nation exiting the Eurozone.
His plan, titled "outright monetary transactions" ("OMT"), envisaged unlimited
purchases of short-dated sovereign bonds but only on the proviso that new
borrowers (such as Spain or Italy) would have to commit to a programme to
improve their deficit and debt outlook while existing borrowers (such as
Greece, Portugal and Ireland) would have to demonstrate access to credit
markets. No action on OMT was required in the second half of the year. Draghi's
re-assuring words were sufficient to bring down sovereign bond yields in Spain
and Italy, quite dramatically, giving local politicians hope that they could
avoid signing up to a programme with fiscal conditions imposed by the ECB.
Before July, the sovereign debt crisis had reared its ugly head again, when it
became clear that global growth was likely to slow as the fiscal cliff
approached in the US and as the slowing rate of growth in China, and other
emerging economies, became increasingly evident. This dragged markets down in
the second quarter, such that almost all the progress of the first quarter was
reversed.
Following Draghi's commitment, however, the market enjoyed a strong
reversionary rally, despite earnings and dividends continuing to be revised
down. Leadership was provided by areas of the market, such as financials and
other cyclical sectors, that had hitherto been weak. Lowly valued companies and
sectors were re-appraised in a more confident and liquid environment. Telecoms
and utilities, however, continued to struggle as dividends were cut. In the
end, 2012 ended up being a very rewarding year for investors in European
companies. This was not predicted by many at the outset of the year.
PORTFOLIO REVIEW
Your Manager continues to focus on identifying and investing in attractively
valued companies, with sound balance sheets, which can deliver consistent
dividend growth. The portfolio is constructed from the "bottom up"; this means
that stock selection drives sector and country positioning rather than the
other way around. Your Manager does, however, apply "top-down" risk control to
make sure that the Company will not be blown too far off course, relative to
its European Benchmark, in the event of a change in the economic or market
back-drop.
In 2012, the NAV outperformed a rising Benchmark by around 7%. The bulk of this
outperformance came in the fi rst half of the year when the market made little
absolute progress; the NAV struggled to keep up with a rapidly rising market in
the second half of the year. The strong relative performance, over the whole
year, was mainly achieved through stock selection although gearing also
contributed.
In terms of stock selection, the key positive contributions came from many
different sectors ranging from economy-sensitive financials to the less
cyclical healthcare sector. KBC, a Belgian bank, saw a dramatic recovery in its
share price as the year progressed as fears of a rescue rights issue waned and
as the company demonstrated that it had a growing capacity to pay back capital
sourced from the Belgian and Flemish governments. Schibsted, a newspaper
company, which has developed a very attractive portfolio of on-line classified
websites, enjoyed a significant re-rating as investors began to appreciate the
sustainability of growth in some of their major on-line properties such as
Finn, Blocket and Leboncoin. Two winners from 2011 repeated their strong
performance in 2012. SAP, enjoyed another strong year as new products enhanced
the underlying growth of their core Enterprise Resource Planning business and
Novo-Nordisk performed well too on continuing growth in their insulin franchise
and anticipation of a new indication for Victoza in obesity.
Stocks which performed poorly during the year were largely victims of specific
issues rather than being dragged down by general concerns about their sector.
Swedish Match, a tobacco company, with a dominant smokeless franchise in
Scandinavia, performed poorly as the company lost market share in snus in
Sweden and appeared to lose pricing power in its premium brand and its value
brands by raising the latter's prices. If the competition follows suit, then
your Manager expects the shares to perform better. Saipem, a global leader in
the oil services industry, based in Italy, suffered as it became apparent that
major new oil projects, and cash flows, were being delayed. This was
exacerbated when it was announced that Italian prosecutors were investigating
possible corruption relating to a gas pipeline project in Algeria leading to
the resignation of the chief executive and the suspension of two other Saipem
executives. The holding in Saipem was reduced, given the increased risk
profile. Finally, Royal Dutch Shell, which is a large holding for your Company,
had a lacklustre year in terms of stock market performance, along with many
other large integrated oil companies, which did not keep pace with the market
rally in the second half of the year. Encouragingly, Royal Dutch Shell has
started to grow its dividend, which is covered by its cash flows even in
conservative oil-price scenarios, again, from an attractive and above-market
level.
OUTLOOK
While not expensive by historical standards, the European equity market is
certainly not as cheap as it was a year ago. Share prices have risen handsomely
but aggregate dividends paid by European companies have fallen marginally, such
that the Benchmark dividend yield of 3.7% at 31 December 2012 is now only at a
small premium to longer term averages.
If the market is going to continue on an upward path then dividend growth will
have to resume. Such growth may prove elusive because longer term issues such
as de-leveraging, rising unemployment and fiscal austerity in some countries,
will continue to restrain earnings and dividend growth in Europe. Elections in
Italy and, later in the year in Germany will cause some uncertainty too, both
for businesses and investors.
Optimists will point out that there has lately been an improvement in business
confidence which may, in time, lead to a pick-up in investment, employment and
economic growth. Commentators are also becoming more optimistic about the
outlook for growth in important economies such as the US and China, which would
certainly benefit those European-listed companies that derive much of their
revenues from outside Europe. Private clients and savings institutions still
hold large balances in cash and bonds; some of this may find its way into
equities, if the outlook for growth improves.
What about the Eurozone crisis? Is it really all over? So far Draghi's words
have done the trick, in terms of reducing the tail-risk of a Eurozone
disintegration, with no real action or OMT required. There is, of course, still
a risk that complacency sets in, such that much needed progress on structural
reforms and deficit reduction is deferred, risking the possibility that the
sovereign debt crisis returns rapidly if global growth stalls again.
To summarise, your Manager is cautiously optimistic about the outlook for your
Company but future returns are likely to be more modest than those enjoyed in
2012 given that the starting level is that much higher.
FIL Investments International
26 February 2013
PRINCIPAL RISKS AND UNCERTAINTIES
The Board confirms that there is an ongoing process for identifying, evaluating
and managing the principal risks faced by the Company. The process is regularly
reviewed by the Board in accordance with the Financial Reporting Council's
"Internal Control: Revised Guidance for Directors".
The Board is responsible for the Company's system of internal control and for
reviewing its effectiveness. An internal controls report providing an
assessment of risks, together with controls to mitigate these risks, is
prepared by the Manager and considered by the Audit Committee.
The Board also determines the nature and extent of any risks it is willing to
take in order to achieve its strategic objectives.
Market Risk
The Company's assets consist mainly of listed securities and the principal
risks are therefore market related such as market downturn, interest rate
movements, and exchange rate movements. The Portfolio Manager's success or
failure to protect and increase the Company's assets against this background
are core to the Company's continued success.
Risks to which the Company is exposed and which form part of the market risks
category are included in Note 18 to the financial statements in the Annual
Report together with summaries of the policies for managing these risks. These
comprise: market price risk, liquidity risk, counterparty risk, credit risk and
derivative instruments risks.
A key area of risk for the Company remains the fiscal crisis facing some
Eurozone countries, although the likelihood of this has decreased, as outlined
in the Manager's Review above. If the crisis returns, this could have an
adverse impact on asset values and a very severe event in the Eurozone could
lead to disruption to markets and operational challenges for market
participants. The Manager's businesses in Europe and Asia have been considering
the consequences of different Eurozone scenarios for some time, and have
developed contingency plans to prepare for a range of possible outcomes.
Performance Risk
The achievement of the Company's performance objective relative to the market
requires the application of risk. Strategy, asset allocation and stock
selection might lead to underperformance of the Benchmark Index. Management of
the risks set out above is carried out by the Board which, at each Board
meeting, considers the asset allocation of the portfolio and the risk
associated with particular countries and industry sectors within the parameters
of the investment objective. The Portfolio Manager is responsible for actively
monitoring the portfolio selected in accordance with the asset allocation
parameters and seeks to ensure that individual stocks meet an acceptable risk/
reward profile.
Income/Dividend Risk
The Company's objective is capital growth and, as explained in the Chairman's
Statement in the Annual Report and above, the Portfolio Manager is not
constrained in any way to determine the level of income. The Board monitors
this risk through the receipt of detailed income reports and forecasts which
are considered at each meeting.
Share Price Risk
The price of the Company's shares as well as its discount to NAV, are factors
which are not within the Company's total control. Some short term influence
over the discount may be exercised by the use of share repurchases at
acceptable prices. Details of repurchases during the year are given in the
Annual Report. The Company's share price, NAV and discount volatility are
monitored daily by the Manager and considered by the Board at each of its
meetings.
Gearing Risk
The Company has the option to invest up to the total of any loan facilities or
to use Contracts for Difference ("CFDs") to invest in equities. The principal
risk is that while in a rising market the Company will benefit from gearing, in
a falling market the impact would be detrimental. Other risks are that the cost
of gearing may be too high or that the term of the gearing inappropriate in
relation to market conditions. The Company currently has no bank loans and
geared exposure is being achieved through the use of long CFDs. This has
reduced the cost of gearing as outlined in the Chairman's Statement and
provides greater flexibility. The Board regularly considers gearing and gearing
risk and sets limits accordingly. Further details are provided in the
Investment Policy.
Tax and Regulatory Risks
A breach of Section 1158 of the Corporation Tax Act 2010 could lead to a loss
of investment trust status, resulting in the Company being subject to tax on
capital gains. A breach of other legal and regulatory rules may lead to
suspension from listing on the Stock Exchange or a qualified audit report. The
Board receives regular reports from the Manager confirming regulatory
compliance during the year.
There are a number of prospective regulations which could impact the Company.
Of greatest significance is the Alternative Investment Fund Managers Directive
("AIFMD"). The implementation date for the Directive is scheduled to be July
2013 but with a transitional period whereby investment trusts will not be
required to apply for AIFMD authorisation until July 2014. The Board monitors
the changes at each Board meeting and is provided with regular briefings from
the Association of Investment Companies as well as details of industry and the
Manager's lobbying activities.
Operational Risks
The Company has no employees and relies on a number of third party service
providers, principally the Manager, Registrar and Custodian. The Company is
dependent on the Manager's control systems and those of its Custodian and
Registrar, both of which are monitored and managed by the Manager in the
context of the Company's assets and interests on behalf of the Board.
The security of the Company's assets, dealing procedures, accounting records
and the maintenance of regulatory and legal requirements, among other things,
rely on the effective operation of such systems.
The Manager, Registrar and Custodian are subject to a risk-based programme of
internal audits by the Manager. In addition, service providers' own internal
controls reports are received by the Board and any concerns investigated.
While it is believed that the likelihood of poor governance, compliance and
operational administration by third party service providers is low, the
financial consequences, for example, of cyber crime, could be serious,
including the associated reputational damage to the Company.
Other Risks
A continuation vote takes place every two years. This takes the form of an
ordinary resolution to shareholders which requires a simple majority of votes
cast in favour to ensure that the Company continues in existence for a further
two years until the next continuation vote is put to shareholders. There is a
risk that shareholders do not vote in favour of the continuation vote during
periods when performance is poor. Further details are provided in the
Chairman's Statement, in relation to the next continuation vote and a review of
the Company's performance.
RELATED PARTIES
Mr Fraser was employed by the FIL Limited group until the end of December 2008.
Mr Fraser is a Director of Barclays PLC and Barclays Bank PLC. Mr Fraser had no
influence over the decision by Barclays Bank PLC in its former lending
relationship with the Company.
FIL Limited has no interest in shares of the Company (2011: same).
No Director is under a contract of service with the Company and no contracts
existed during or at the end of the financial period in which any Director was
materially interested and which were significant in relation to the Company's
business, except as disclosed previously in relation to Mr Fraser's interest in
the Management Agreement and his directorship of Barclays Bank PLC. There have
been no other related party transactions requiring disclosure under Financial
Reporting Standard 8. The interests of the Directors in the ordinary shares of
the Company as at 31 December 2012 and 31 December 2011 are shown in the Annual
Report.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the annual report and financial
statements in accordance with applicable law and regulations. Company law
requires the Directors to prepare financial statements for each financial
period. Under that law they have elected to prepare the financial statements in
accordance with UK Generally Accepted Accounting Practice.
The financial statements are required by law to give a true and fair view of
the state of affairs of the Company and of the profit or loss for the period.
In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the financial statements;
and
• prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for ensuring that adequate accounting records are
kept which disclose with reasonable accuracy at any time the financial position
of the Company and to enable them to ensure that its financial statements
comply with the Companies Act 2006. They are also responsible for safeguarding
the assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Under applicable law and regulations the Directors are also responsible for
preparing a Directors' Report, including a Business Review, a Directors'
Remuneration Report and a Corporate Governance Statement that comply with that
law and those regulations. The Directors are responsible for the maintenance
and integrity of the corporate and financial information included on the
Company's pages of the Manager's website www.fi delity.co.uk/its. Visitors to
the website need to be aware that legislation in the United Kingdom governing
the preparation and dissemination of the financial statements may differ from
legislation in their own jurisdictions.
We confirm that to the best of our knowledge the financial statements, prepared
in accordance with the applicable set of accounting standards, give a true and
fair view of the assets, liabilities, financial position and profit or loss of
the Company; and the Directors' Report includes a fair review of the
development and performance of the business and the position of the Company
together with a description of the principal risks and uncertainties it faces.
Approved by the Board on 26 February 2013 and signed on its behalf by Humphrey
van der Klugt, Chairman.
Enquiries:
Susan Platts-Martin - Head of Investment Trusts, FIL Investments International
- 01737 836916
Keren Holland - Corporate Communications, FIL Investments International - 0207
074 5262
Christopher Pirnie - Head of UK Company Secretariat, FIL Investment
International - 01737 837929
Income Statement for the year ended 31 December 2012
2012 2011
revenue capital total revenue capital total
£'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on - 93,403 93,403 - (94,320) (94,320)
investments
designated at fair
value through profit
or loss
Gains on derivative - 19,630 19,630 - 3,201 3,201
instruments held at
fair value through
profit or loss
Income* 18,518 - 18,518 22,831 - 22,831
Investment (4,929) (2,243) (7,172) (5,127) - (5,127)
management and
performance fees
Other expenses (629) - (629) (710) - (710)
Exchange losses on (76) (153) (229) (73) (2,639) (2,712)
other net assets
Exchange gains on - - - - 1,394 1,394
loans
---------- ---------- ---------- ---------- ---------- ----------
Net return/(loss) 12,884 110,637 123,521 16,921 (92,364) (75,443)
before finance costs
and taxation
Finance costs (326) - (326) (2,617) - (2,617)
---------- ---------- ---------- ---------- ---------- ----------
Net return/(loss) on 12,558 110,637 123,195 14,304 (92,364) (78,060)
ordinary activities
before taxation
Taxation on return/ (503) - (503) (1,511) 50 (1,461)
(loss) on ordinary
activities**
---------- ---------- ---------- ---------- ---------- ----------
Net return/(loss) on 12,055 110,637 122,692 12,793 (92,314) (79,521)
ordinary activities
after taxation for
the year
========== ========== ========== ========== ========== ==========
Return/(loss) per 27.78p 254.97p 282.75p 26.94p (194.42p) (167.48p)
ordinary share
========== ========== ========== ========== ========== ==========
2012 2011
£'000 £'000
*INCOME
Income from investments designated at fair value
through profit or loss
Overseas dividends 15,301 20,518
Overseas scrip dividends 1,435 1,987
UK dividends 570 244
---------- ----------
17,306 22,749
Income from derivative instruments held at fair value
through profit or loss
Dividends on long CFDs 1,162 -
---------- ----------
18,468 22,749
Other income
Deposit interest 50 46
Income from Fidelity Institutional Liquidity Fund plc - 36
---------- ----------
Total income 18,518 22,831
========== ==========
** Relates to overseas taxation only
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.
All revenue and capital items in the above statement derive from continuing
operations.
No operations were acquired or discontinued in the year.
Reconciliation of Movements in Shareholders' Funds for the year ended 31 De
cember 2012
share share capital capital revenue total
capital premium redemption reserve reserve equity
£'000 account reserve £'000 £'000 £'000
£'000 £'000
Opening shareholders' 12,362 58,615 3,463 572,985 13,117 660,542
funds: 1 January 2011
Net (loss)/return on - - - (92,314) 12,793 (79,521)
ordinary activities after
taxation for the year
Repurchase of ordinary (1,289) - 1,289 (55,664) - (55,664)
shares
Dividend paid to - - - - (7,740) (7,740)
shareholders
---------- ---------- ---------- ---------- ---------- ----------
Closing shareholders' funds: 11,073 58,615 4,752 425,007 18,170 517,617
31 December 2011
Net return on ordinary - - - 110,637 12,055 122,692
activities after taxation
for the year
Repurchase of ordinary (292) - 292 (12,457) - (12,457)
shares
Dividend paid to - - - - (11,578) (11,578)
shareholders
---------- ---------- ---------- ---------- ---------- ----------
Closing shareholders' funds: 10,781 58,615 5,044 523,187 18,647 616,274
31 December 2012
========== ========== ========== ========== ========== ==========
Balance Sheet as at 31 December 2012
Company number 2638812
2012 2011
£'000 £'000
Fixed assets
Investments designated at fair value through 583,938 504,409
profit or loss
---------- ----------
Current assets
Derivative assets held at fair value through 16,448 4,423
profit or loss
Debtors 1,940 887
Fidelity Institutional Liquidity Fund plc 30 31
Cash at bank 20,450 12,371
---------- ----------
38,868 17,712
---------- ----------
Creditors - amounts falling due within one
year
Derivative liabilities held at fair value (2,747) (1,314)
through profit or loss
Other creditors (3,785) (3,190)
---------- ----------
(6,532) (4,504)
---------- ----------
Net current assets 32,336 13,208
---------- ----------
Total net assets 616,274 517,617
========== ==========
Capital and reserves
Share capital 10,781 11,073
Share premium account 58,615 58,615
Capital redemption reserve 5,044 4,752
Capital reserve 523,187 425,007
Revenue reserve 18,647 18,170
---------- ----------
Total equity shareholders' funds 616,274 517,617
========== ==========
Net asset value per ordinary share 1,428.97p 1,168.57p
========== ==========
Cash Flow Statement for the year ended 31 December 2012
2012 2011
£'000 £'000
Operating activities
Investment income received 13,165 16,783
Income received on long CFDs 1,162 -
Deposit interest received 53 78
Investment management fee paid (4,721) (5,384)
Directors' fees paid (161) (107)
Other cash payments (675) (494)
---------- ----------
Net cash inflow from operating activities 8,823 10,876
---------- ----------
Finance costs
Interest paid on long CFDs and bank loans (335) (2,606)
---------- ----------
Net cash outflow from finance costs (335) (2,606)
---------- ----------
Overseas taxation recovered 1,106 2,608
---------- ----------
Financial investments
Purchase of investments (129,219) (278,237)
Disposal of investments 144,451 372,990
---------- ----------
Net cash inflow from financial investments 15,232 94,753
---------- ----------
Derivative activities
Proceeds of long CFD positions closed 9,038 92
---------- ----------
Net cash inflow from derivative activities 9,038 92
---------- ----------
Dividend paid to shareholders (11,578) (7,740)
---------- ----------
Net cash inflow before use of liquid 22,286 97,983
resources and financing
---------- ----------
Cash flow from management of liquid resources
Fidelity Institutional Liquidity Fund plc 1 21,502
---------- ----------
Net cash inflow from management of liquid 1 21,502
resources
---------- ----------
Net cash inflow before financing 22,287 119,485
---------- ----------
Financing
Repurchase of ordinary shares (14,055) (54,354)
Loans repaid - (54,418)
---------- ----------
Net cash outflow from financing (14,055) (108,772)
---------- ----------
Increase in cash 8,232 10,713
========== ==========
The above statements have been prepared on the basis of the accounting policies
as set out in the annual financial statements to 31 December 2012. This
preliminary statement was approved by the Board on 26 February 2013 and agreed
by the Auditor on 27 February 2013. It is not the Company's statutory financial
statements. The statutory financial statements for the financial year ended 31
December 2011 have been delivered to the Registrar of Companies. The statutory
financial statements for the financial year ended 31 December 2012 have been
approved and audited but have not yet been filed. The statutory financial
statements for the financial years ended 31 December 2011 and 31 December 2012
received unqualified audit reports, did not include a reference to any matters
to which the Auditor drew attention by way of emphasis without qualifying the
report and did not contain statements under section 498(2) and (3) of the
Companies Act 2006. The annual report and financial statements will be posted
to shareholders as soon as is practicable and in any event no later than 13
April 2013.
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