Final Results
FIDELITY EUROPEAN VALUES PLC
Preliminary Announcement of Results
For the year ended 31 December 2008
CHAIRMAN'S STATEMENT
I have pleasure in presenting the annual report of Fidelity European Values PLC
for the year ended 31 December 2008.
PERFORMANCE
2008 was a very challenging year for both the European economy and European
stockmarkets. It is, therefore, disappointing but not surprising to have to
report a fall in the Company's net asset value. In 2008 the net asset value per
share declined 17.5% but significantly outperformed its benchmark (the FTSE
World Europe (ex UK) Index) which fell 24.6%. This relative performance is
encouraging, given the very difficult economic and stockmarket background, and
can be attributed to two factors.
Firstly the Board decided to reduce the net gearing to zero towards the end of
2007 and this clearly helped performance given the fall in share prices through
2008. We continually review our gearing with our Manager (and have retained the
capacity to reinstate it), but feel the immediate outlook too uncertain.
Following the repayment of a fixed term loan of €35m in November 2008, the
Company has fixed term loans of €105m in aggregate with a further €25m
available by way of a revolving credit facility.
Secondly and more importantly share selection, particularly in the banking and
telecommunication sectors, was well executed. This was particularly encouraging
since Sudipto Banerji took over the management of the portfolio from Tim
McCarron during the year. I wish Tim well in his future career with Fidelity
and thank him for his excellent contribution. I also hope and believe that
Sudipto's good start augurs well for the long term future of your Company.
A detailed review of the performance of the portfolio is provided in the
Manager's Review.
DISCOUNT MANAGEMENT
The Board will be active in issuing shares at a premium and buying back shares
at a discount; a continuation of practice since launch. The purpose of this is
to reduce share price volatility and results in an enhancement to the NAV. Over
the last six months share buybacks have been made, further details of which may
be found in the Directors' Report in the annual report.
At the close of business on 31 December 2008 the Company's share price fell to
990.00p per share, significantly below the trading price during that day. This
was due entirely to a small trade badly executed ten minutes before the market
closed (there is a lesson for us all in the timing and execution of such a
transaction). This resulted in a discount level of 16.4%, much higher than
normally exists or the Board intends. The discount narrowed in the New Year and
at the time of writing the share price is 800.50p per share and the discount is
12.6%.
DIVIDEND
I wish to reiterate that the Board will not influence the Manager in any way to
determine the level of income of your Company's portfolio; it will remain the
Board's policy to pay out earnings in full. The Board has decided to recommend
a final dividend of 23.26 pence per share for the year ended 31 December 2008
(2007: 13.75 pence). This dividend will be payable on 29 May 2009 to
shareholders on the register at close of business on 20 March 2009 (ex-dividend
date 18 March 2009).
In addition this year, it has been decided that the £7.4m VAT on investment
management fees plus interest reclaimed following the decision of the European
Court of Justice will be returned to shareholders by way of a special dividend
of 13.24p per share. The dividend payment, record and ex-dividend dates will be
the same as for the proposed final dividend.
DIRECTORATE
As explained in my Chairman's Statement last year, David Simpson will retire
from the Board after the Annual General Meeting. He has served as a Director
since 1998 and I would like to thank David for his contribution to the Company
and personally for the quality and independence of advice that he has given me
over the years. His investment experience and work as Senior Independent
Director and Chairman of the Audit Committee have been extremely valuable. I am
delighted to confirm that Mr van der Klugt will be appointed Senior Independent
Director and Chairman of the Audit Committee with effect from Mr Simpson's
retirement. I look forward to working with Mr van der Klugt in this role. He
has already contributed greatly to Board discussions, including very detailed
work on the VAT reclaim.
This year two Directors will retire and, being eligible, offer themselves for
re-election. As detailed in the biographies in the Annual Report the Directors
have a wide range of appropriate skills and experience to make up a balanced
Board for your Company.
I am subject to annual re-election due to my tenure on the Board exceeding nine
years and Mr Fraser is subject to annual re-election under the Listing Rules
due to his recent employment relationship with the Manager and his directorship
of another investment trust managed by Fidelity, namely Fidelity Japanese
Values PLC. Mr Fraser retired from Fidelity at the end of 2008, but remains a
Senior Advisor. Both I and the Board are pleased that he has agreed to continue
his directorship of this Company. In my case, my fellow Directors met in my
absence and considered my eligibility for re-election. They considered that my
experience, my independence of mind and the manner in which I have filled the
role of Chairman over the last seven years have been beneficial to the Company
and they confirmed that they wish me to continue as Chairman. In particular the
Board believes that my finalisation of the agreement on the repayment of VAT
illustrated my independence well. As previously announced, I plan to retire
following the 2010 Annual General Meeting having retained my role to ensure a
smooth transition to the new Portfolio Manager.
All other Directors are totally independent and this provides an appropriate
balance. The Board recognises the importance of continuity on the Board as well
as the need for refreshment from time to time. The Board has considered the
proposal for the re-election of the Directors and recommends to shareholders
that they vote in favour of the proposals.
Due to Mr Simpson's retirement this year and my proposed retirement in 2010,
the Board is currently considering the appointment of an additional Director.
External consultants will lead the initial search.
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 2007 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
1,197.6% compared to an increase in the benchmark Index of 359.1%. During the
past 12 months the Company has outperformed the Index by 7.1% (-17.5% compared
to an Index fall of 24.6%). 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 2011.
ANNUAL GENERAL MEETING
The Annual General Meeting of the Company is due to take place on 19 May 2009
at midday at Fidelity's offices at 25 Cannon Street. Full details of the
meeting are given in the Annual Report and I look forward to meeting you then.
OUTLOOK
The outlook for the European economy looks challenging. Across the developed
world economic growth is forecast to be negative in 2009 which is not a good
sign for European companies whose revenues depend upon international trade.
This means that company profits in the region will be under severe pressure
moving into 2009. There are other headwinds that weigh upon European companies
such as the overhang from a strong euro as well as tightening credit conditions
as a result of the global credit crunch. The European Central Bank (ECB) has
reduced interest rates in an effort to support economies, but some would argue
they have not gone far enough.
That said, a lot of the bad news has already been absorbed by the markets.
Company valuations in Europe are looking extremely attractive on a historical
basis and relative to other regions. For longer term investors there are now
some good stock picking opportunities to be found where company shares have
been indiscriminately sold without considering longer term fundamentals. In the
coming year, we will be seeking to take advantage of a weak environment to
invest in attractive companies for the longer term.
Robert Walther
Chairman
2 March 2009
Enquiries:
Chris Davies, FIL Investments International - 01737 837 723
Rebecca Burtonwood, Company Secretary, FIL Investments International - 01737 836 869
FIDELITY EUROPEAN VALUES PLC
Income Statement
- for the year ended 31 December 2008
2008 2007
revenue capital total revenue capital total
£'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on - (158,681) (158,681) - 98,812 98,812
investments
Income
- Dividend 23,757 - 23,757 23,322 - 23,322
- Interest 1,930 - 1,930 983 - 983
- Interest on VAT 1,429 - 1,429 - - -
recovered on investment
management fee
- Fidelity Institutional 2,534 - 2,534 - - -
Cash Fund plc
Investment management and (5,491) (7,458) (12,949) (8,002) - (8,002)
performance fee
VAT recovered on 5,995 - 5,995 - - -
investment management fee
Other expenses (875) - (875) (898) - (898)
Exchange (losses)/gains (107) 25,141 25,034 18 5,011 5,029
on other net assets
Exchange losses on loans - (26,695) (26,695) - (9,692) (9,692)
Net return/(loss)before 29,172 (167,693) (138,521) 15,423 94,131 109,554
finance costs and
taxation
Interest payable (4,427) - (4,427) (4,275) - (4,275)
Net return/(loss)on 24,745 (167,693) (142,948) 11,148 94,131 105,279
ordinary activities
before taxation
Overseas taxation on (2,619) - (2,619) (2,812) (97) (2,909)
return/(loss) on ordinary
activities
Taxation on expenses (1,509) 1,509 - - - -
charged to capital
Net return/(loss)on 20,617 (166,184) (145,567) 8,336 94,034 102,370
ordinary activities after
taxation for the year
Return/(loss)per ordinary 36.77p (296.35p) (259.58p) 13.79p 155.60p 169.39p
share (1)
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.
FIDELITY EUROPEAN VALUES PLC
Reconciliation of Movements in Shareholders' Funds
- for the year ended 31 December2008
called share capital capital capital revenue total
up premium redemption reserve reserve reserve equity
share account reserve realised unrealised
capital
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Opening 15,611 58,615 214 567,640 152,116 7,467 801,663
shareholders'
funds: 1 January
2007
Net recognised - - - 127,956 (33,922) - 94,034
gains/(losses) for
the year
Repurchase of (874) - 874 (46,145) - - (46,145)
ordinary shares
Net revenue after - - - - - 8,336 8,336
taxation for the
year
Dividend paid to - - - - - (3,243) (3,243)
shareholders
Closing 14,737 58,615 1,088 649,451 118,194 12,560 854,645
shareholders'
funds: 31 December
2007
Net recognised - - - (62,415) (97,820) - (160,235)
capital losses for
the year
Repurchase of (1,009) - 1,009 (51,106) - - (51,106)
ordinary shares
Performance fee - - - (7,458) - - (7,458)
charged to capital
Taxation credited - - - 1,509 - - 1,509
to capital
Net revenue after - - - - - 20,617 20,617
taxation for the
year
Dividend paid to - - - - - (7,991) (7,991)
shareholders
Closing 13,728 58,615 2,097 529,981 20,374 25,186 649,981
shareholders'
funds:
31 December 2008
FIDELITY EUROPEAN VALUES PLC
Balance Sheet
- as at 31 December 2008
2008 2007
£'000 £'000
Fixed assets
Investments at fair value through profit or loss 657,544 848,119
Current assets
Debtors 1,890 4,543
Fidelity Institutional Cash Fund plc 48,764 -
Cash at bank 50,907 111,233
101,561 115,776
Creditors - amounts falling due within one year
Fixed rate unsecured loan - (25,755)
Other creditors (9,145) (6,230)
(9,145) (31,985)
Net current assets 92,416 83,791
Total assets less current liabilities 749,960 931,910
Creditors - amounts falling due after more than
one year
Fixed rate unsecured loans (99,979) (77,265)
Total net assets 649,981 854,645
Capital and reserves
Called up share capital 13,728 14,737
Share premium account 58,615 58,615
Capital redemption reserve 2,097 1,088
Capital reserve - realised 529,981 649,451
Capital reserve - unrealised 20,374 118,194
Revenue reserve 25,186 12,560
Total equity shareholders' funds 649,981 854,645
Net asset value per ordinary share 1,183.61p 1,449.76p
FIDELITY EUROPEAN VALUES PLC
Cash Flow Statement - for the year ended 31 December2008
2008 2007
£'000 £'000
Operating activities
Investment income received 18,280 19,971
Deposit interest received 6,162 628
Investment management fee paid (6,011) (8,841)
VAT recovered on investment management fee paid 6,043 -
Directors' fees paid (104) (62)
Other cash payments (762) (1,084)
Net cash inflow from operating activities 23,608 10,612
Returns on investments and servicing of finance
Interest paid (4,505) (4,265)
Net cash outflow from returns on investments and (4,505) (4,265)
servicing of finance
Taxation
Overseas taxation recovered 740 1,232
Taxationrecovered 740 1,232
Financial investment
Purchase of investments (937,042) (995,838)
Disposal of investments 982,820 1,152,214
Net cash inflowfrom financial investment 45,778 156,376
Dividend paidto shareholders (7,991) (3,243)
Net cash inflowbefore financing 57,630 160,712
Cash flow from management of liquid resources
Fidelity Institutional Cash Fund plc (48,764) -
Net cash outflow from management of liquid resources (48,764) -
Financing
Repurchase of ordinary shares (51,906) (45,361)
4.335% credit facility drawn down - 10,191
4.595% credit facility drawn down - 10,109
5.165% credit facility drawn down - 10,462
3.54% fixed rate unsecured loan repaid (29,736) -
4.1465% credit facility repaid - (10,191)
4.335% credit facility repaid - (10,109)
4.595% credit facility repaid - (10,462)
5.165% credit facility repaid - (11,078)
Net cash outflowfrom financing (81,642) (56,439)
(Decrease)/increasein cash (72,776) 104,273
1. Returns per ordinary share are based on the net revenue return on ordinary
activities after taxation of £20,617,000 (2007: £8,336,000), the capital loss
in the year of £166,184,000 (2007: return £94,034,000) and the total loss in
the year of £145,567,000 (2007: return £102,370,000) and on 56,077,724 ordinary
shares (2007: 60,434,721) being the weighted average number of ordinary shares
in issue during the year.
The above statements have been prepared on the basis of the accounting policies
as set out in the financial statements in the annual report to 31 December
2008. This preliminary statement, which has been agreed with the auditor, was
approved by the Board on 2 March 2009. It is not the Company's statutory
financial statements. The statutory financial statements for the financial
year ended 31 December 2007 have been delivered to the Registrar of Companies.
The statutory financial statements for the financial year ended 31 December
2008 have been approved and audited but have not yet been filed. The statutory
financial statements for the financial years ended 31 December 2007 and 31
December 2008 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 237(2) and
(3) of the Companies Act 1985.
The annual report and financial statements will be posted to shareholders as
soon as is practicable and in any event no later than 16 April 2009.
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