Final Results
FIDELITY EUROPEAN VALUES PLC
Preliminary Announcement of Unaudited Results
For the year ended 31 December 2004
Performance - Continental European equities enjoyed another year of positive
returns during 2004. The first half of the year was somewhat mixed, but during
the latter part of the year, equities rallied to close the year higher. During
the review period, the net asset value ('NAV') per share of the Company
returned 25.9%, strongly outperforming the benchmark FTSE World Europe (ex UK)
Index, which returned 13.2%. The strong relative outperformance was primarily
due to successful stock selection by the Investment Manager, but also due to
the portfolio's gearing, which had a positive impact on the total return of the
NAV. The shares ended the year trading at a discount of 5.8% to the underlying
net asset value per share. (All figures are in sterling and are on a total
return basis. Please note that past performance is not a guide to future
returns. The value of investments can go down as well as up, and may be
affected by exchange rate fluctuations.)
Gearing - As stated previously the Board is responsible for the level of
gearing in the Company and reviews it on a regular basis. The level of gearing
fell slightly during the year as a result of the increase in net assets. It is
estimated that gearing enhanced the net asset value by almost 3%. We believe
that gearing will continue to benefit shareholders in the long term.
The Company's level of net gearing is now 11.4% and the Board will ensure that
in normal circumstances net gearing is below 20%.
Dividend - Your Board has decided to recommend a final dividend of 1.75 pence
per share for the year ending 31 December 2004 (2003: nil - an interim dividend
of 1.50 pence per share was paid). The dividend will be payable on 23 May 2005
to shareholders on the register at close of business on 18 March 2005
(ex-dividend date 16 March 2005). Your Board believes very strongly that total
return (income and capital) is the key performance indicator. As mentioned in
my previous statements, we will not therefore restrict the Investment Manager
even if this leads to lower dividends in future.
Directorate - Mr Simon Duckworth retires by rotation and, being eligible, has
offered himself for re-election. Mr Duckworth is a valuable Board member, with
a proven track record in private and public service. Mr Simon Fraser continues
to serve as a Director of the Company and I believe that there is value in
having a senior member of the Company's Manager who assumes the responsibility
of being a Director of the Company. As mentioned in last year's annual report,
Mr Fraser is now subject to annual re-election under the Listing Rules due to
his employment relationship with the Manager. All of the other Directors are
totally independent and this provides an appropriate balance.
Due to my tenure on the Board exceeding nine years I am now subject to annual
re-election going forward and I offer myself for such re-election. My fellow
Directors have met in my absence for the purpose of considering 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 3
years has been beneficial to the Company. They confirmed that they wish me to
continue as Chairman and they are recommending that I be re-elected as a
Director at the forthcoming Annual General Meeting.
The Board has considered the proposal for the re-election of each of the
above-named 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 will be proposed at the forthcoming Annual
General Meeting. In view of the Company's outstanding performance record (an
increase of 774.2% since launch compared to an increase in the benchmark index
of 257.9%, and over two years, an increase of 74.0% compared to an increase in
the benchmark index of 46.1%) your Board recommends that shareholders vote in
favour of the resolution. There will be a further continuation vote at the
Annual General Meeting in 2007.
Directors' remuneration - In recent years there has been a considerable
increase in the workload and in the risks of being a non-executive director.
The Board has taken note of this fact and of the recent review of Directors'
fees undertaken by the AITC. As a result fees have been increased with effect
from 1 January 2005 to £22,000 (previously: £18,500) per annum for the
Chairman, £18,000 (previously: £15,000) per annum for the Chairman of the Audit
Committee and £16,000 (previously: £13,500) per annum for Directors. Whilst
total fees payable are within the overall limit set by the Company's Articles
of Association, a resolution will be proposed at the forthcoming Annual General
Meeting to increase this limit to £150,000. This will provide scope for further
increases in future years.
Annual General Meeting - The Annual General Meeting of the Company is due to
take place on 19 May 2005 at midday at Fidelity's offices at 25 Cannon Street.
Full details of the meeting are given in the Company's annual report and I look
forward to meeting you then.
Outlook - The macro-economic outlook for Europe remains mixed. As a region, the
European economy continues to grow at a slow pace and inflationary pressures
are muted. There does not appear to be much risk of a rise in interest rates,
at least in the near term. However, there is an expectation of continued
reforms initiated by governments and at the corporate level. In addition,
Europe looks attractive relative to other developed world regions. The region
has the potential for stronger consumer spending; it has a higher savings rate,
a trade and current account surplus and equity valuations appear cheap compared
to the US. The enlargement of the European Union ('EU') reached several
milestones in 2004 with 10 new member countries admitted in May; and 3 further
countries including Turkey engaged in active discussions. The EU enlargement
represents an important opportunity with the inclusion in the EU political
union of many countries with large populations and dynamic economic
development.
We continue to believe that stock selection based on in-depth company analysis
will be the key factor in achieving good performance over the coming year.
Robert Walther
28 February 2005
Enquiries: Barbara Powley, Fidelity Investments International - 01737 836 883
Issued by Fidelity Investments International. Authorised and regulated by the
Financial Services Authority.
CB21606
FIDELITY EUROPEAN VALUES PLC
Statement of Total Return (incorporating the revenue account1) - unaudited
For the year ended 31 December 2004
2004 2003
restated3
revenue capital total revenue capital total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - 104,793 104,793 - 115,874 115,874
Dividend income 12,465 - 12,465 11,058 - 11,058
Interest income 81 - 81 177 - 177
Investment management fee (5,882) - (5,882) (4,674) - (4,674)
Other expenses (902) - (902) (942) - (942)
Exchange (losses)/gains (22) (294) (316) - 490 490
Exchange losses on loans - (2) (2) - (4,974) (4,974)
Repurchase of shares - - - - (926) (926)
Net return before finance 5,740 104,497 110,237 5,619 110,464 116,083
costs and taxation
Interest payable (3,239) - (3,239) (3,283) - (3,283)
Return on ordinary activities 2,501 104,497 106,998 2,336 110,464 112,800
before taxation
Taxation on return on (1,254) (315) (1,569) (1,120) - (1,120)
ordinary activities
Return on ordinary activities 1,247 104,182 105,429 1,216 110,464 111,680
after taxationfor the year
attributable to equity
shareholders
Dividend (1,101) - (1,101) (941) - (941)
Transfer to reserves 146 104,182 104,328 275 110,464 110,739
Return per ordinary share 1.98p 165.62p 167.60p 1.93p 175.56p 177.49p
(note 2)
1. The revenue column on this statement represents the profit and loss account
of the Company.
2. Returns per ordinary share are based on the net revenue return on ordinary
activities after taxation of £1,247,000 (2003: £1,216,000), and the capital
appreciation in the year of £104,182,000 (2003: appreciation of £110,464,000)
and on 62,903,233 ordinary shares (2003: 62,918,844), being the weighted
average number of ordinary shares in issue during the year.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the year.
3. Restatement - The capital net return before finance costs and taxation for
the year ended 31 December 2003 has been restated from £115,438,000 to £
110,464,000. This restatement was agreed as exchange gains/(losses) are now
included as part of the net return before finance costs rather than as a
finance cost. This restatement has no impact on the Company's return on
ordinary activities for the year ended 31 December 2003.
FIDELITY EUROPEAN VALUES PLC
Balance Sheet - unaudited as at 31 December 2004
2004 2003
£'000 £'000
Fixed assets
Investments 572,722 469,500
Current assets
Debtors 1,690 7,234
Cash at bank 4,455 1,249
6,145 8,483
Creditors - amounts falling due within one year (3,724) (7,170)
Net current assets 2,421 1,313
Total assets less current liabilities 575,143 470,813
Creditors - amounts falling due after more than
one year
Fixed rate unsecured loans (63,559) (63,557)
Total net assets 511,584 407,256
Capital and reserves
Called up share capital 15,725 15,725
Share premium account 58,615 58,615
Capital redemption reserve 100 100
Capital reserve - realised 305,447 245,461
Capital reserve - unrealised 127,785 83,589
Revenue reserve 3,912 3,766
Total equity shareholders' funds 511,584 407,256
Net asset value per ordinary share: 813.29p 647.43p
FIDELITY EUROPEAN VALUES PLC
Cash Flow Statement - unaudited
For the year ended 31 December 2004
2004 2003
£'000 £'000
Operating activities
Investment income received 10,873 9,397
Interest received 72 185
Investment management fee paid (5,601) (4,397)
Directors' fees paid (52) (26)
Other cash payments (874) (582)
Net cash inflow from operating activities 4,418 4,577
Returns on investments and servicing of finance
Interest paid (3,239) (3,300)
Net cash outflow from returns on investments and (3,239) (3,300)
servicing of finance
Taxation
Overseas taxation recovered 399 194
Taxationrecovered 399 194
Financial investment
Purchases of investments (382,807) (364,163)
Disposals of investments 385,297 357,652
Net cash inflow/(outflow)from financial investment 2,490 (6,511)
Equity dividend paid (944) (754)
Net cash inflow/(outflow)before financing 3,124 (5,794)
Financing
Repurchase of ordinary shares - (926)
Net cash outflow from financing - (926)
Increase/(decrease)in cash 3,124 (6,720)
The above statements have been prepared on the basis of the accounting policies
as set out in the most recently published set of annual financial statements.
The figures for the year to 31 December 2003 have been extracted from the
accounts for the year ended 31 December 2003 which have been delivered to the
Registrar of Companies and on which the Auditors gave an unqualified report.
The annual report and accounts will be posted to shareholders as soon as is
practicable and in any event no later than 19 April 2005.
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