Final Results

FIDELITY EUROPEAN VALUES PLC For the year ended 31 December 2011 Announcement of Year End Results I have pleasure in presenting the Preliminary Announcement of Fidelity European Values PLC for the year ended 31 December 2011. PERFORMANCE Investors entered 2011 in an upbeat mood following a pick up of economic growth and positive stockmarket returns in 2010. However, the Arab spring, Japanese tsunami, continued sovereign debt issues in Europe and concerns over global economic growth swept aside this wave of optimism and pessimism prevailed. In Europe, the sovereign debt crisis, fears that Greece will leave the euro and the contagion effects on other indebted nations, such as Italy, dominated the headlines and investor sentiment. As a result, European equities proved to be volatile throughout the year and underperformed other asset classes. Against this backdrop, the net asset value ("NAV") per share of the Company returned -11.5%, but it outperformed its benchmark, the FTSE World Europe (ex UK) Index, which returned -14.7%, both figures being on a total return basis. Overall, companies with defensive characteristics whose earnings are less correlated to economic growth outperformed companies with more cyclical business models; and financials struggled once again. The Company benefited from holdings in the healthcare, food producers and tobacco sectors. However, returns were held back by positions in the financials sector. A more detailed review of the performance of the portfolio is provided in the Manager's Review. Whilst the NAV total return was -11.5%, the share price total return was -8.6% over 2011, with the share price discount to NAV having narrowed slightly over the period. It is of course unattractive to see negative returns, but, to look at the situation more positively, there are many fine and strong companies with wide international businesses quoted on the European stock exchanges and it is encouraging to see this loss limited to 8.6%, against a tumultuous and largely negative political backdrop. DISCOUNT MANAGEMENT The Board remains active in discount management, including buying back shares at a discount. This is a practice it has adopted since launch and buybacks have continued during the year, during which the level of discount has narrowed. The purpose of buybacks is to reduce share price volatility and it also results in an enhancement to the NAV per share. Further details of share buybacks made during the year may be found in the Directors' Report in the annual report. In summary, your Board has sanctioned share buybacks over the course of 2011 amounting to just over 10% of the issued share capital of the Company. Yet the discount remained at 14.2% at the year end. In part, this is a reflection on European equities being out of favour in relation to other asset classes. Whilst it is frustrating that the discount remains wide for the time being, we have been able to help dampen the level of share price volatility against net asset value; and this we believe is strongly in the interests of shareholders and it will continue to be an objective of the Board. 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 26.50 pence per share for the year ended 31 December 2011 (2010: final dividend 15.75p). This dividend will be payable on 25 May 2012 to shareholders on the register at close of business on 16 March 2012 (ex-dividend date 14 March 2012). The proposed dividend increase for 2011 over 2010 is therefore 68%. Whilst we would continue emphasising that the increase is a function of stock selection and cannot be extrapolated into the future, there are two positive factors shareholders may like to note. Firstly, the fall in European share prices has taken place even as underlying earnings and dividend growth has been positive, thereby enhancing the yield on the market. The dividend yield on the FTSE World Europe (ex UK) index at 31 December 2011 was 4.38% Secondly, your Portfolio Manager, Sam Morse, who took over management of the portfolio from 1 January 2011, focuses 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 2011 (on a total return basis) NAV Share price FTSE World Europe (ex UK) Index1 One year -11.5% -8.6% -14.7% Five years -1.3% -9.1% -7.3% Since launch (1991) +1,269.8% +1,083.3% +390.0% Source: Fidelity and Datastream as at 31 December 2011 Basis: bid-bid with net income reinvested Past performance is not a guide to future returns 1 Data prior to the year ended 31 December 2011 is on a net of tax basis INVESTMENT POLICY AND GEARING During the year, shareholders approved a change in investment policy predominantly to allow the introduction of Contracts For Difference ("CFDs") for gearing purposes. Following the repayment of the drawn down variable rate unsecured credit facility from Lloyds TSB Bank plc on 18 November 2011 and the unsecured bank loan from Barclays Bank PLC on 15 December 2011, the Company has no loans. However, the Company has obtained equivalent exposure, on a significantly more cost effective basis, to the market through the use of CFDs. As at 31 December 2011 the total portfolio exposure represented 108.6% of Shareholders' funds. Additional disclosures to the financial statements have been added explaining the Company's geared position through the use of CFDs, including details of how they are measured and how they are reported. Further details on the use of CFDs can be found in the Directors' Report in the annual report. CURRENCY HEDGING Shareholders will be aware that there are inevitably heightened risks in holding a portion of the portfolio in euro denominated shares at a time of considerable stresses for the euro. Although the portfolio has never been hedged out of European currencies into sterling since the Company was first formed in 1991, this is allowable and the Board has considered this option carefully. We continue to believe on balance that shareholders are looking for continental European exposure, including currency exposure, in making an investment choice; and on this basis euro exposure has not been hedged back into sterling. It should be noted that a large number of the underlying investments have significantly diversified businesses and non-euro income streams. Companies are also carrying out their own hedging operations, which may or may not be disclosed to the marketplace. Furthermore, from an operational standpoint, your Board has discussed arrangements and contingency plans with your Manager, should the Euro run into further difficulty. As a result of our overweight position in a number of non-Eurozone markets, the Company has a 14.1% underweight position in euro denominated stocks. PERFORMANCE FEES With effect from 1 January 2012 the Board entered into a newly negotiated performance fee arrangement with the Manager. We are pleased to inform you that the performance fee element has been reduced from 20% to 15%; and the upper limit of the performance related fee payable in any one year has been reduced from 1.5% to 1% of net asset value. It remains the case that the Manager must recoup any underperformance against the benchmark before any subsequent outperformance can be rewarded. Further details are included in the Directors' Report in the annual report. DIRECTORATE In accordance with the UK Corporate Governance Code for Directors of FTSE 350 companies the entire Board is subject to annual 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. It may interest shareholders to know that, again in line with good corporate governance, the Board has arranged for an independent, externally facilitated assessment of its performance to take place during 2012. The Board has considered the proposals for the 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 next year's Annual General Meeting. ANNUAL GENERAL MEETING The Annual General Meeting of the Company is due to take place on 16 May 2012 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 talking with as many shareholders as possible on this occasion. CONCLUSION European equities will have to contend with a wide range of complex factors in 2012, ranging from a lack of economic growth and high budget deficits and debt in the periphery, to the continued possibilities of a disorderly Greek exit from the euro and the consequences for the Eurozone as a whole of such an event. There also remains a worrying lack of competitiveness mainly in southern Europe, resulting in a `two speed' Eurozone, which has yet to be addressed satisfactorily in the political arena. There is a risk that aggregate earnings may fall in 2012. However, as already mentioned, there are many fine companies quoted on the continental European bourses, with strong and internationally competitive businesses. We support your Manager's view that overall valuations look attractive. Humphrey van der Klugt Chairman 6 March 2012 INCOME STATEMENT for the year ended 31 December 2011 2011 2010 revenue capital total revenue capital total £'000 £'000 £'000 £'000 £'000 £'000 (Losses)/gains on investments - (94,320) (94,320) - 33,621 33,621 designated at fair value through profit or loss Gains on derivative - 3,201 3,201 - - - instruments held at fair value through profit or loss Income* 22,831 - 22,831 18,883 - 18,883 Investment management fee (5,127) - (5,127) (5,036) - (5,036) Other expenses (710) - (710) (664) - (664) Exchange (losses)/gains on (73) (2,639) (2,712) 65 (4,808) (4,743) other net assets Exchange gains on loans - 1,394 1,394 - 4,153 4,153 Net return/(loss) before 16,921 (92,364) (75,443) 13,248 32,966 46,214 finance costs and taxation Finance costs (2,617) - (2,617) (3,025) - (3,025) Net return/(loss) on ordinary 14,304 (92,364) (78,060) 10,223 32,966 43,189 activities before taxation Taxation on return/(loss) on (1,511) 50 (1,461) (2,262) (60) (2,322) ordinary activities** Net return/(loss) on ordinary 12,793 (92,314) (79,521) 7,961 32,906 40,867 activities after taxation for the year Return/(loss) per ordinary 26.94p (194.42p) (167.48p) 15.95p 65.91p 81.86p share 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. * Income 2011 2010 £'000 £'000 Income from investments designated at fair value through profit or loss Overseas dividends 20,518 18,344 Overseas scrip dividends 1,987 352 UK dividends 244 - 22,749 18,696 Other income Deposit interest 46 55 Income from Fidelity Institutional Liquidity Fund plc 36 132 Total income 22,831 18,883 ** Relates to overseas taxation only. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS for the year ended 31 December 2011 share share capital capital revenue total capital premium redemption reserve reserve equity £'000 account reserve £'000 £'000 £'000 £'000 £'000 Opening shareholders' 12,779 58,615 3,046 558,047 16,448 648,935 funds: 1 January 2010 Net return on ordinary - - - 32,906 7,961 40,867 activities after taxation for the year Repurchase of ordinary (417) - 417 (17,968) - (17,968) shares Dividend paid to - - - - (11,292) (11,292) shareholders Closing shareholders' 12,362 58,615 3,463 572,985 13,117 660,542 funds: 31 December 2010 Net (loss)/return on ordinary activities after taxation for the year - - - (92,314) 12,793 (79,521) Repurchase of ordinary (1,289) - 1,289 (55,664) - (55,664) shares Dividend paid to - - - - (7,740) (7,740) shareholders Closing shareholders' 11,073 58,615 4,752 425,007 18,170 517,617 funds: 31 December 2011 Balance Sheet as at 31 December 2011 2011 2010 £'000 £'000 Fixed assets Investments designated at fair value through 504,409 693,547 profit or loss Current assets Derivative assets held at fair value through 4,423 - profit or loss Debtors 887 2,106 Fidelity Institutional Liquidity Fund plc 31 21,533 Cash at bank 12,371 3,976 17,712 27,615 Creditors - amounts falling due within one year Derivative liabilities held at fair value (1,314) - through profit or loss Other creditors (3,190) (4,808) Fixed rate unsecured loan - (55,812) (4,504) (60,620) Net current assets/(liabilities) 13,208 (33,005) Total net assets 517,617 660,542 Capital and reserves Share capital 11,073 12,362 Share premium account 58,615 58,615 Capital redemption reserve 4,752 3,463 Capital reserve 425,007 572,985 Revenue reserve 18,170 13,117 Total equity shareholders' funds 517,617 660,542 Net asset value per ordinary share 1,168.57p 1,335.78p Cash Flow Statement for the year ended 31 December 2011 2011 2010 £'000 £'000 Operating activities Investment income received 16,783 14,713 Deposit interest received 78 188 Investment management fee paid (5,384) (4,958) Directors' fees paid (107) (112) Other cash payments (494) (735) Net cash inflow from operating activities 10,876 9,096 Servicing of derivatives and bank loans Interest paid on long CFDs and bank loans (2,606) (3,054) Net cash outflow from servicing of finance (2,606) (3,054) Taxation Taxation recovered 2,608 1,485 Taxation recovered 2,608 1,485 Financial investment Purchase of investments (278,237) (555,131) Disposal of investments 372,990 554,223 Net cash inflow/(outflow) from financial investment 94,753 (908) Derivative activities Proceeds of long CFD positions closed 92 - Net cash inflow from derivative activities 92 - Dividend paid to shareholders (7,740) (11,292) Net cash inflow/(outflow) before use of liquid resources 97,983 (4,673) and financing Cash flow from management of liquid resources Fidelity Institutional Liquidity Fund plc 21,502 24,290 Net cash inflow from management of liquid resources 21,502 24,290 Net cash inflow before financing 119,485 19,617 Financing Repurchase of ordinary shares (54,354) (19,590) Loans repaid (54,418) (33,147) Net cash outflow from financing (108,772) (52,737) Increase/(decrease) in cash 10,713 (33,120) 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 2011. This preliminary statement, which has been agreed with the Auditor, was approved by the Board on 6 March 2012. It is not the Company's statutory financial statements. The statutory financial statements for the financial year ended 31 December 2010 have been delivered to the Registrar of Companies. The statutory financial statements for the financial year ended 31 December 2011 have been approved and audited but have not yet been filed. The statutory financial statements for the financial years ended 31 December 2010 and 31 December 2011 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 12 April 2012.

Companies

Fidelity European Trust (FEV)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today