Half-year Report

Fidelity European Trust PLC

Half-Yearly results for the six months ended 30 June 2021 (unaudited)

Financial Highlights:

• The Board of Fidelity European Trust PLC (the “Company”) recommends an interim dividend of 2.65 pence per share.

• The Company recorded a net asset value (“NAV”) total return of +12.9%, compared with a total return of +10.9% gains for the FTSE World Europe (ex UK) Index.

• Increased gearing of the company was a significant contributor to performance.

• Semiconductor company, ASML, and luxury good companies LVMH Moët Hennessy and Hermes International, were strong performers over the period.

• The Company continues to focus on cash generative companies with strong balance sheets which have the potential to grow their dividends consistently over the next three to five years.

Contacts

For further information, please contact:

Anna-Marie Davis
Company Secretary
01737 834798
FIL Investments International

PORTFOLIO MANAGER’S HALF-YEARLY REVIEW

PERFORMANCE REVIEW
During the first six months of the year, on a UK sterling basis, the net asset value (“NAV”) total return was +12.9% compared to a total return of +10.9% for the FTSE World Europe (ex UK) Index which is the Company’s Benchmark Index. The share price total return was +7.6%, which is below the NAV total return because of a widening of the share price discount to NAV.

MARKET REVIEW
Continental European markets were strong again in the first half of this year, extending their impressive recovery from the sell-off early last year when the Coronavirus pandemic went global.

The early running, in the first quarter of this year, was made by economy-sensitive sectors that would be expected to benefit most from an economic rebound if governments were to ease pandemic-related restrictions. It was not long, however, before the narrative shifted. During the first quarter results season, investors started to be concerned about the potential impact of input inflation on company margins. Inflation expectations have indeed been rising and a key debate is whether inflationary pressures will ultimately prove transitory as Sam Morse, your Portfolio Manager, expects, or whether the pandemic has ushered in a new inflationary era and a consequent normalisation in both bond yields and the duration of economic cycles. This debate has led to a see-sawing leadership of the market between value, growth, cyclicals and defensives. Ultimately, however, a rising tide has lifted (almost) all boats such that overall returns, even if dampened somewhat in sterling terms by the continuing appreciation of the pound, have been good.

PORTFOLIO MANAGER’S REPORT
The Company’s cautious approach has often meant that it has struggled, in the past, to keep up with the Benchmark Index when equity markets rise rapidly. It was pleasing, therefore, that the NAV outperformed over the six months. The increased gearing of the Company to a structurally higher level, as discussed in the 2020 Annual Report, is a significant contributor to the increased outperformance.

The contribution from stock-picking has been mixed during this period. ASML, which is a supplier to the microchip industry, continued to perform very strongly as a well-publicised shortage in semiconductors led to announcements of increased capital spending by many of their customers. The luxury goods companies, LVMH Moët Hennessy and Hermes International, were also strong performers as results exceeded expectations and in recognition that improved on-line offerings in response to pandemic restrictions are bringing new customers and incremental turnover, particularly in China.

Some of the Company’s holdings in the health care sector were, by contrast, poor performers. Fresenius Medical Care and Grifols both issued disappointing trading updates due to challenges posed by the pandemic. Both businesses also suffered from the weaker dollar given their reliance on the US market. Enel, Italy’s largest utility company, suffered along with the sector on general concerns about returns from renewables projects given growing competition from large oil companies. Enel was also hampered by political and economic concerns relating to the Latin America countries in which it does a sizeable portion of its business. Finally, Telenor, the incumbent telecoms business in Norway, performed poorly mainly due to the coup in Myanmar where it also operates -- the company recently announced that it has sold that operation for a much-reduced price, compared to previous valuations by analysts.

Five Highest Contributors to NAV total return	Sector	Country	%
ASML	Information Technology	Netherlands	+0.7
Partners Group	Financials	Switzerland	+0.5
LVMH Moët Hennessy	Consumer Discretionary	France	+0.4
Hermes International	Consumer Discretionary	France	+0.4
Novartis	Health Care	Switzerland	+0.3

Five Highest Detractors to NAV total return	Sector	Country	%
Enel	Utilities	Italy	-0.5
Telenor	Communication Services	Norway	-0.2
Grifols	Health Care	Spain	-0.2
Prosus	Consumer Discretionary	Netherlands	-0.2
3i Group	Financials	UK	-0.2

OUTLOOK
Following the pandemic melt-down, the global economy has recovered more quickly and more strongly than many of us expected. As a result, earnings and dividend expectations for continental European companies have continued to be upgraded. This may carry on, given pent-up savings among consumers and with many services still due to reopen fully. Of course, much is already discounted in share prices that are at elevated levels compared to history. That has been true for some time, however. It is the corollary of low bond yields. Investors should be cautious when it appears to be “as good as it gets” because the stock market is an effective, and increasingly rapid, discounting machine. Your Portfolio Manager believes, however, that it is more likely that these high levels of valuation will persist as earnings continue to rise, allowing for further increases in share prices.

The post-pandemic dynamics of supply and demand, not to mention low inventories, are leading to shortages across many areas, such as semiconductors, as noted above. There is also a base effect in terms of input prices given the sharp rise in commodity prices year on year. Companies that do not have pricing power, which are often the strongest performers in value rallies, may suffer a margin squeeze if they are not able to pass higher input prices on to their customers. Many “steady-Eddie” companies with pricing power, such as consumer staples companies, like Nestlé, have lagged the steep recovery in the market on a one-year view, but may be better placed to weather this new challenge.

Longer term concerns remain regarding continental Europe’s demographics, lack of productivity, high levels of government debt and fiscal imbalances. Progress has been made on some fronts: for example, the Euro 750 billion “recovery” fund is in train and spending should boost countries such as Italy and Spain in coming years. Politics, as always, simmers in the background with investors reading the runes of regional ballots to try to determine the likely results of important national elections to come in 2022. It appears, at this stage, that incumbents will retain pole position leading into next year’s races but fragmentation continues: the far-right Fratelli is gaining ground in Italy, the conservative Xavier Bertrand is strengthening his leadership credentials in French polls, while the Greens have surged, then faded somewhat in Germany – it is no coincidence that the “E” of ESG (environmental, social and governance) is growing in prominence in politics as it is in investment circles.

Your Company will continue, as always, to focus on cash generative companies with strong balance sheets which have the potential to grow their dividends consistently over the next three to five years. While many of these companies looked relatively expensive a year ago, on through-cycle multiples, that is less so now.

BY ORDER OF THE BOARD
FIL INVESTMENTS INTERNATIONAL
2 August 2021

TWENTY LARGEST HOLDINGS AS AT 30 JUNE 2021

The Gross Asset Exposures shown below measure exposure to market price movements as a result of owning shares and derivative instruments. The Balance Sheet Value is the actual value of the portfolio. Where a contract for difference (“CFD”) is held, the Balance Sheet Value reflects the profit or loss on the contract since it was opened and is based on how much the share price of the underlying share has moved.

	Gross Asset Exposure		Balance  Sheet  Value  £000
	£000	%1
Long Exposures – shares unless otherwise stated
Nestlé
Food Producers	92,256	6.8	92,256
ASML
Technology Hardware & Equipment	80,940	6.0	80,940
LVMH Moët Hennessy
Personal Goods	71,744	5.3	71,744
Roche
Pharmaceuticals & Biotechnology	69,015	5.1	69,015
L'Oréal
Personal Goods	56,669	4.2	56,669
SAP
Software & Computer Services	49,115	3.6	49,115
Enel
Electricity	48,054	3.5	48,054
Sanofi (long CFD)
Pharmaceuticals & Biotechnology	47,149	3.5	395
EssilorLuxottica
Medical Equipment & Services	46,440	3.4	46,440
Novo Nordisk
Pharmaceuticals & Biotechnology	46,161	3.4	46,161
Deutsche Böerse Group
Investment Banking & Brokerage Services	45,836	3.4	45,836
Legrand (long CFD)
Electronic & Electrical Equipment	43,635	3.2	635
Partners Group
Investment Banking & Brokerage Services	41,985	3.1	41,985
Linde (long CFD)
Chemicals	41,338	3.0	704
Swedish Match
Tobacco	40,737	3.0	40,737
TotalEnergies
Oil, Gas & Coal	40,346	3.0	40,346
Schindler Holding
Industrial Engineering	35,991	2.5	35,991
3i Group
Investment Banking & Brokerage Services	33,834	2.5	33,834
Hermes International
Personal Goods	32,738	2.4	32,738
Symrise
Chemicals	31,413	2.3	31,413
	-------------	-------------	-------------
Twenty largest long exposures	995,396	73.2	865,008
Other long exposures	467,855	34.4	459,686
	-------------	-------------	-------------
Total long exposures before long futures2,3	1,463,251	107.6	1,324,694
	========	========	========
Long Futures
Euro Stoxx 50 Future September 20203	59,631	4.4	(962)
	-------------	-------------	-------------
Total long exposures after long futures3	1,522,882	112.0	1,323,732
	========	========	========
Short Exposures
Short CFD (1 holding)3	5,603	0.4	764
	-------------	-------------
Gross Asset Exposure3,4	1,528,485	112.4
	========	========
Portfolio Fair Value5			1,324,496
Net current assets (excluding derivative assets and liabilities)			35,418
			-------------
Shareholders' Funds (per Balance Sheet below)			1,359,914
			========

1  Gross Asset Exposure is expressed as a percentage of Shareholders’ Funds.

2  Total long exposures before long futures comprises investments of £1,322,774,000 and long CFDs of £140,477,000.

3  See Note 13  below.

4  Gross Asset Exposure comprises market exposure to investments of £1,322,774,000 plus market exposure to all derivative instruments of £205,711,000. Derivative instruments comprise long CFDs of £140,477,000, long futures of £59,631,000 and short CFDs of £5,603,000.

5  Portfolio Fair Value comprises investments of £1,322,774,000 plus derivative assets of £2,684,000 less derivative liabilities of £962,000 (per the Balance Sheet, below).

INTERIM MANAGEMENT REPORT AND DIRECTORS’ RESPONSIBILITY STATEMENT

REVISED MANAGEMENT FEE
As reported in the Annual Report for the year ended 31 December 2020, the Board agreed a revised fee with the Manager, FIL Investment Services (UK) Limited, with effect from 1 April 2021. The first tier of the previous fee structure, which is an annual rate of 0.85 per cent on the first £400 million of the Company’s net assets remained unchanged. However, the previous rate of 0.75 per cent on net assets in excess of £400 million reduced to 0.65 per cent, thus achieving a saving on overall percentage costs for shareholders. Details of the total fee paid to the Manager for the provision of investment management services for the six months ended 30 June 2021 is in Note 5 below.

INTERIM DIVIDEND
The Board does not influence the Portfolio Manager by imposing any income objective in any particular period and the investment focus on companies capable of growing their dividends remains. The Board acknowledges that both capital and income growth are components of performance, as reflected in the investment objective of the Company. It therefore has a policy whereby it seeks to pay a progressive dividend in normal circumstances and to pay dividends twice yearly in order to smooth dividend payments for the reporting year. Investment trusts have an income advantage which is particularly important during difficult times, when the dividends of many companies in the portfolio are under pressure. Unlike open-ended funds, investment trusts can hold back some of the income they receive in good years, thereby building up revenue reserves, which can then be used to supplement dividends to shareholders at a time when companies in the portfolio may be cutting or cancelling their dividends. This pattern may continue while variants of the COVID-19 virus still remains in broad circulation. The Board has over the past few years augmented revenue reserves and it also has the authority to pay dividends from capital reserves if required. Accordingly, the Board’s intention in the medium term is to pay nominal increases in total annual dividends, utilising reserves if necessary, as it did for the payment of the final dividend for the year ended 31 December 2020.

The Company’s revenue return for the six months to 30 June 2021 was 5.28 pence per share (30 June 2020: 3.99 pence). The Board has declared an interim dividend of 2.65 pence per share which is a modest increase of 1.9% on the 2.60 pence per share paid as the interim dividend in 2020. This will be paid on 29 October 2021 to shareholders on the register at close of business on 24 September 2021 (ex-dividend date 23 September 2021).

DISCOUNT MANAGEMENT AND TREASURY SHARES
The Board has an active discount management policy, the primary purpose of which is to reduce discount volatility. It seeks to maintain the discount in single digits in normal market conditions. Buying shares at a discount also results in an enhancement to the NAV per share.

In order to assist in managing the discount, the Board has shareholder approval to hold ordinary shares repurchased by the Company in Treasury, rather than cancelling them. Shares in Treasury are then available to be re-issued at NAV per share or at a premium to NAV per share, facilitating the management of and enhancing liquidity in the Company’s shares.

In the reporting period and up to the date of this report, the Company has not repurchased any ordinary shares into Treasury or for cancellation.

PRINCIPAL RISKS AND UNCERTAINTIES
The Board, with the assistance of the Alternative Investment Fund Manager (FIL Investment Services (UK) Limited/the “Manager”), has developed a risk matrix which, as part of the risk management and internal controls process, identifies the key existing and emerging risks and uncertainties faced by the Company.

The Board considers that the principal risks and uncertainties faced by the Company comprise of market risk; performance risk; key person risk; economic and political risk; environmental, social and governance risk; discount control risk; gearing and derivatives risk; operational risk from cybercrime; pandemic risk; tax and regulatory risks; and third party service providers operational risks. Information on each of these risks is given in the Strategic Report section of the Annual Report for the year ended 31 December 2020. A copy of the Annual Report can be found on the Company’s pages of the Manager’s website at www.fidelity.co.uk/europe.

These principal risks and uncertainties have not materially changed during the six months to 30 June 2021 and are equally applicable to the remaining six months of the Company’s financial year. Risks from emerging new variants of COVID-19 continue, including the availability of suitable vaccines to tackle the new variants.

CORONAVIRUS (COVID-19)
With the pandemic continuing and new variants of the virus appearing, it is evident that the arrival of vaccines does not necessarily mean an end of COVID-19. It is, potentially, difficult for the formulations of the various vaccines to keep up with variants of the disease. Despite the Government’s easing of lockdown measures, risks remain and these are being kept under constant review by the Board and the Manager. Investors should be prepared for market fluctuations and remember that holding shares in the Company should be considered to be a long term investment. These risks are somewhat mitigated by the investment trust structure of the Company which means that no forced sales need to take place to deal with any redemptions. Therefore, investments can be held over a longer time horizon.

The Manager carries on reviewing its business continuity plans and operational resilience strategies on an ongoing basis and continues to take all reasonable steps in meeting its regulatory obligations and to assess operational risks, the ability to continue operating and the steps it needs to take to serve and support its clients, including the Board. The Manager continues to look after the safety of employees, and allows employees to work from home and had until recently, split team working for those staff whose work was deemed necessary to be carried out in an office. Return to the office is on a reduced occupancy and follows social distancing guidelines. The Manager will continue to follow Government recommendations and guidance for COVID-19 restriction and self-isolation rules.

Investment team key activities, including those of portfolio managers, analysts and trading/ support functions, have continued to perform well despite the operational challenges posed by working from home or when split team arrangements have been in place.

The Company’s other third party service providers have also implemented similar measures to ensure business disruption can be kept to a minimum.

TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES
The Manager has delegated the Company’s portfolio management and the role of Company Secretary to FIL Investments International. Transactions with the Manager and related party transactions with the Directors are disclosed in Note 14 to the Financial Statements below.

GOING CONCERN STATEMENT
The Directors have considered the Company’s investment objective, risk management policies, liquidity risk, credit risk, capital management policies and procedures, the nature of its portfolio and its expenditure and cash flow projections. They have considered the liquidity of the Company’s portfolio of investments (being mainly securities which are readily realisable) and the projected income and expenditure. The Directors are satisfied that the Company is financially sound and has sufficient resources to meet all of its liabilities and ongoing expenses and can continue in operational existence for a period of at least twelve months from the date of this Half-Yearly Report. Accordingly, they continue to adopt the going concern basis in preparing these Financial Statements.

This conclusion also takes into account the Board’s assessment of the ongoing risks from COVID-19 and evolving variants as set out on the previously.

Continuation votes are held every two years and the next continuation vote will be put to shareholders at the Annual General Meeting in 2023.

BY ORDER OF THE BOARD
FIL INVESTMENTS INTERNATIONAL
2 August 2021

DIRECTORS’ RESPONSIBILITY STATEMENT
The Disclosure and Transparency Rules (“DTR”) of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Interim Management Report and Financial Statements.

The Directors confirm to the best of their knowledge that:

a)  the condensed set of Financial Statements contained within the Half-Yearly Report has been prepared in accordance with the Financial Reporting Council’s Standard FRS 104: Interim Financial Reporting; and

b)  the Portfolio Manager’s Half-Yearly Review and the Interim Management Report include a fair review of the information required by DTR 4.2.7R and 4.2.8R.

In line with previous years, the Half-Yearly Report has not been audited or reviewed by the Company’s Independent Auditor.

The Half-Yearly Report was approved by the Board on 2 August 2021 and the above responsibility statement was signed on its behalf by Vivian Bazalgette, Chairman.

FINANCIAL STATEMENTS

INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2021

		Six months ended 30 June 2021 unaudited			Six months ended 30 June 2020 unaudited			Year ended 31 December 2020 audited
	Notes	Revenue  £000	Capital  £000	Total  £000	Revenue  £000	Capital  £000	Total  £000	Revenue  £000	Capital  £000	Total  £000
Gains on investments		–	116,714	116,714	–	12,987	12,987	–	89,664	89,664
Gains on derivative instruments		–	21,176	21,176	–	5,215	5,215	–	2,768	2,768
Income	4	26,335	–	26,335	18,950	–	18,950	25,552	–	25,552
Investment management fees	5	(1,171)	(3,513)	(4,684)	(1,061)	(3,182)	(4,243)	(2,225)	(6,674)	(8,899)
Other expenses		(426)	–	(426)	(428)	–	(428)	(845)	–	(845)
Foreign exchange losses		–	(258)	(258)	–	(129)	(129)	–	(175)	(175)
		-------------	-------------	-------------	-------------	-------------	-------------	-------------	-------------	-------------
Net return on ordinary activities before finance costs and taxation		24,738	134,119	158,857	17,461	14,891	32,352	22,482	85,583	108,065
Finance costs	6	(59)	(179)	(238)	(57)	(173)	(230)	(89)	(265)	(354)
		-------------	-------------	-------------	-------------	-------------	-------------	-------------	-------------	-------------
Net return on ordinary activities before taxation		24,679	133,940	158,619	17,404	14,718	32,122	22,393	85,318	107,711
Taxation on return on ordinary activities	7	(2,943)	–	(2,943)	(986)	–	(986)	(1,325)	–	(1,325)
		-------------	-------------	-------------	-------------	-------------	-------------	-------------	-------------	-------------
Net return on ordinary activities after taxation for the period		21,736	133,940	155,676	16,418	14,718	31,136	21,068	85,318	106,386
		========	========	========	========	========	========	========	========	========
Return per ordinary share	8	5.28p	32.55p	37.83p	3.99p	3.58p	7.57p	5.12p	20.74p	25.86p
		========	========	========	========	========	========	========	========	========

The Company does not have any other comprehensive income. Accordingly the net return on ordinary activities after taxation for the period is also the total comprehensive income for the period and no separate Statement of Comprehensive Income has been presented.

The total column of this statement represents the Income Statement of the Company. The revenue and capital columns are supplementary and presented for information purposes as recommended by the Statement of Recommended Practice issued by the AIC.

No operations were acquired or discontinued in the period and all items in the above statement derive from continuing operations.

STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 JUNE 2021

	Note	Share  capital  £000	Share  premium  account  £000	Capital  redemption  reserve  £000	Capital  reserve  £000	Revenue  reserve  £000	Total  shareholders’ funds  £000
Six months ended 30 June 2021 (unaudited)
Total shareholders’ funds at 31 December 2020		10,411	58,615	5,414	1,122,325	23,520	1,220,285
Net return on ordinary activities after taxation for the period		–	–	–	133,940	21,736	155,676
Dividend paid to shareholders	9	–	–	–	–	(16,047)	(16,047)
		--------------	--------------	--------------	--------------	--------------	--------------
Total shareholders’ funds at 30 June 2021		10,411	58,615	5,414	1,256,265	29,209	1,359,914
		========	========	========	========	========	========
Six months ended 30 June 2020 (unaudited)
Total shareholders’ funds at 31 December 2019		10,411	58,615	5,414	1,037,007	29,115	1,140,562
Net return on ordinary activities after taxation for the period		–	–	–	14,718	16,418	31,136
Dividend paid to shareholders	9	–	–	–	–	(15,965)	(15,965)
		--------------	--------------	--------------	--------------	--------------	--------------
Total shareholders’ funds at 30 June 2020		10,411	58,615	5,414	1,051,725	29,568	1,155,733
		========	========	========	========	========	========
Year ended 31 December 2020 (audited)
Total shareholders’ funds at 31 December 2019		10,411	58,615	5,414	1,037,007	29,115	1,140,562
Net return on ordinary activities after taxation for the year		–	–	–	85,318	21,068	106,386
Dividends paid to shareholders	9	–	–	–	–	(26,663)	(26,663)
		--------------	--------------	--------------	--------------	--------------	--------------
Total shareholders’ funds at 31 December 2020		10,411	58,615	5,414	1,122,325	23,520	1,220,285
		========	========	========	========	========	========

BALANCE SHEET AS AT 30 JUNE 2021
Company Number 2638812

	Notes	30 June  2021  unaudited  £000	31 December  2020  audited  £000	30 June  2020  unaudited  £000
Fixed assets
Investments	10	1,322,774	1,200,663	1,125,786
		-------------	--------------	--------------
Current assets
Derivative instruments	10	2,684	2,119	10,034
Debtors		9,183	5,814	11,490
Amounts held at futures clearing houses and brokers		4,724	5,977	6,113
Cash and cash equivalents		22,484	7,070	6,682
		-------------	--------------	--------------
		39,075	20,980	34,319
		========	========	========
Current liabilities
Derivative instruments	10	(962)	(403)	–
Other creditors		(973)	(955)	(4,372)
		--------------	--------------	--------------
		(1,935)	(1,358)	(4,372)
		--------------	--------------	--------------
Net current assets		37,140	19,622	29,947
		--------------	--------------	--------------
Net assets		1,359,914	1,220,285	1,155,733
		========	========	========
Capital and reserves
Share capital	11	10,411	10,411	10,411
Share premium account		58,615	58,615	58,615
Capital redemption reserve		5,414	5,414	5,414
Capital reserve		1,256,265	1,122,325	1,051,725
Revenue reserve		29,209	23,520	29,568
		--------------	--------------	--------------
Total shareholders’ funds		1,359,914	1,220,285	1,155,733
		========	========	========
Net asset value per ordinary share	12	330.50p	296.57p	280.88p
		========	========	========

NOTES TO THE FINANCIAL STATEMENTS

1 PRINCIPAL ACTIVITY
Fidelity European Trust PLC is an Investment Company incorporated in England and Wales with a premium listing on the London Stock Exchange. The Company’s registration number is 2638812, and its registered office is Beech Gate, Millfield Lane, Lower Kingswood, Tadworth, Surrey, KT20 6RP. The Company has been approved by HM Revenue & Customs as an Investment Trust under Section 1158 of the Corporation Tax Act 2010 and intends to conduct its affairs so as to continue to be approved.

2 PUBLICATION OF NON-STATUTORY ACCOUNTS
The Financial Statements in this Half-Yearly Report have not been audited by the Company’s Independent Auditor and do not constitute statutory accounts as defined in section 434 of the Companies Act 2006 (the “Act”). The financial information for the year ended 31 December 2020 is extracted from the latest published Financial Statements of the Company. Those Financial Statements were delivered to the Registrar of Companies and included the Independent Auditor’s Report which was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Act.

3 ACCOUNTING POLICIES
(i) Basis of Preparation
The Company prepares its Financial Statements on a going concern basis and in accordance with UK Generally Accepted Accounting Practice (“UK GAAP”) and FRS 102: The Financial Reporting Standard applicable in the UK and Republic of Ireland, issued by the Financial Reporting Council. The Financial Statements are also prepared in accordance with the Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture Capital Trusts (“SORP”) issued by the Association of Investment Companies (“AIC”), in October 2019. FRS 104: Interim Financial Reporting has also been applied in preparing this condensed set of Financial Statements. The accounting policies followed are consistent with those disclosed in the Company’s Annual Report and Financial Statements for the year ended 31 December 2020.

(ii) Going Concern
The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for a period of at least twelve months from the date of approval of these Financial Statements. Accordingly, the Directors consider it appropriate to adopt the going concern basis of accounting in preparing these Financial Statements. This conclusion also takes into account the Board’s assessment of the continuing risks arising from COVID-19 and evolving variants.

4 INCOME

	Six months  ended  30.06.21  unaudited  £000	Six months  ended  30.06.20  unaudited  £000	Year ended  31.12.20  audited  £000
Investment income
Overseas dividends	21,029	15,705	20,179
Overseas scrip dividends	512	219	936
UK dividends	750	673	748
UK scrip dividends	–	–	509
	--------------	--------------	--------------
	22,291	16,597	22,372
	========	========	========
Derivative income
Income recognised from futures contracts	1,299	675	1,040
Dividends received on long CFDs	2,408	1,615	1,894
Interest received on long CFDs1	337	36	206
	--------------	--------------	--------------
	4,044	2,326	3,140
	========	========	========
Investment and derivative income	26,335	18,923	25,512
	========	========	========
Other interest
Interest received on collateral, bank deposits and money market funds	–	27	31
Interest received on tax reclaims	–	–	9
	--------------	--------------	--------------
	–	27	40
	========	========	========
Total income	26,335	18,950	25,552
	========	========	========

1  Due to negative interest rates during the reporting period, the Company received interest on its long CFDs.

Special dividends of £82,000 have been recognised in capital during the period (six months ended 30 June 2020 and year ended 31 December 2020: £nil).

5 INVESTMENT MANAGEMENT FEES

	Revenue  £000	Capital  £000	Total  £000
Six months ended 30 June 2021 (unaudited)
Investment management fees	1,171	3,513	4,684
	========	========	========
Six months ended 30 June 2020 (unaudited)
Investment management fees	1,061	3,182	4,243
	========	========	========
Year ended 31 December 2020 (audited)
Investment management fees	2,225	6,674	8,899
	========	========	========

FIL Investment Services (UK) Limited is the Company’s Alternative Investment Fund Manager and has delegated portfolio management to FIL Investments International (“FII”). Both companies are Fidelity group companies.

From 1 April 2021, FII charges investment management fees at an annual rate of 0.85% of net assets up to £400 million and 0.65% of net assets in excess of £400 million. Prior to this date, the investment management fees were charged at an annual rate of 0.85% of net assets up to £400 million and 0.75% of net assets in excess of £400 million. Fees are payable monthly in arrears and are calculated on a daily basis.

Investment management fees have been allocated 75% to capital reserve in accordance with the Company’s accounting policies.

6 FINANCE COSTS

	Revenue  £000	Capital  £000	Total  £000
Six months ended 30 June 2021 (unaudited)
Interest paid on collateral and bank deposits1	13	41	54
Interest paid on CFDs1	46	138	184
	--------------	--------------	--------------
	59	179	238
	========	========	========
Six months ended 30 June 2020 (unaudited)
Interest paid on collateral and bank deposits1	18	54	72
Interest paid on CFDs1	7	21	28
Dividends paid on short CFDs	32	98	130
	--------------	--------------	--------------
	57	173	230
	========	========	========
Year ended 31 December 2020 (audited)
Interest paid on collateral and bank deposits1	30	91	121
Interest paid on CFDs1	26	77	103
Dividends paid on short CFDs	33	97	130
	--------------	--------------	--------------
	89	265	354
	========	========	========

1  Due to negative interest rates during the reporting period, the Company paid interest on its short CFDs and deposits.

Finance costs have been allocated 75% to capital reserve in accordance with the Company’s accounting policies.

7 TAXATION ON RETURN ON ORDINARY ACTIVITIES

	Six months  ended  30.06.21  unaudited  £000	Six months  ended  30.06.20  unaudited  £000	Year ended  31.12.20  audited  £000
Overseas taxation	2,943	986	1,325
	========	========	========

8 RETURN PER ORDINARY SHARE

	Six months  ended  30.06.21  unaudited	Six months  ended  30.06.20  unaudited	Year ended  31.12.20  audited
Revenue return per ordinary share	5.28p	3.99p	5.12p
Capital return per ordinary share	32.55p	3.58p	20.74p
	--------------	--------------	--------------
Total return per ordinary share	37.83p	7.57p	25.86p
	========	========	========

The return per ordinary share is based on the net return on ordinary activities after taxation for the period divided by the weighted average number of ordinary shares held outside Treasury during the period, as shown below:

	£000	£000	£000
Net revenue return on ordinary activities after taxation	21,736	16,418	21,068
Net capital return on ordinary activities after taxation	133,940	14,718	85,318
	---------------	---------------	---------------
Net total return on ordinary activities after taxation	155,676	31,136	106,386
	========	========	========

	Number	Number	Number
Weighted average number of ordinary shares held outside Treasury during the period	411,466,049	411,466,049	411,466,049
	==========	==========	==========

9 DIVIDENDS PAID TO SHAREHOLDERS

	Six months  ended  30.06.21  unaudited  £000	Six months  ended  30.06.20  unaudited  £000	Year ended  31.12.20  audited  £000
Final dividend of 3.90 pence per ordinary share for the year ended 31 December 2020	16,047	–	–
Interim dividend of 2.60 pence per ordinary share for the year ended 31 December 2020	–	–	10,698
Final dividend of 3.88 pence per ordinary share for the year ended 31 December 2019	–	15,965	15,965
	---------------	---------------	---------------
	16,047	15,965	26,663
	========	========	========

The Company has declared an interim dividend for the six month period to 30 June 2021 of 2.65 pence per ordinary share (2020: 2.60 pence). The interim dividend will be paid on 29 October 2021 to shareholders on the register on 24 September 2021 (ex-dividend date 23 September 2021). The total cost of this interim dividend, which has not been included as a liability in these Financial Statements, is £10,904,000 (2020: £10,698,000). This amount is based on the number of ordinary shares held outside Treasury at the date of this report.

10 FAIR VALUE HIERARCHY
The Company is required to disclose the fair value hierarchy that classifies its financial instruments measured at fair value at one of three levels, according to the relative reliability of the inputs used to estimate the fair values.

Classification	Input
Level 1	Valued using quoted prices in active markets for identical assets
Level 2	Valued by reference to inputs other than quoted prices included in level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly.
Level 3	Valued by reference to valuation techniques using inputs that are not based on observable market data

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset. The table below sets out the Company’s fair value hierarchy:

30 June 2021 (unaudited)	Level 1  £000	Level 2  £000	Level 3  £000	Total  £000
Financial assets at fair value through profit or loss
Investments	1,322,774	–	–	1,322,774
Derivative instrument assets	–	2,684	–	2,684
	--------------	--------------	--------------	--------------
	1,322,774	2,684	–	1,325,458
	========	========	========	========
Financial liabilities at fair value through profit or loss
Derivative instrument liabilities	(962)	–	–	(962)
	========	========	========	========

31 December 2020 (audited)	Level 1  £000	Level 2  £000	Level 3  £000	Total  £000
Financial assets at fair value through profit or loss
Investments	1,200,663	–	–	1,200,663
Derivative instrument assets	481	1,638	–	2,119
	--------------	--------------	--------------	--------------
	1,201,144	1,638	–	1,202,782
	========	========	========	========
Financial liabilities at fair value through profit or loss
Derivative instrument liabilities	–	(403)	–	(403)
	========	========	========	========

30 June 2020 (unaudited)	Level 1  £000	Level 2  £000	Level 3  £000	Total  £000
Financial assets at fair value through profit or loss
Investments	1,125,786	–	–	1,125,786
Derivative instrument assets	1,051	8,983	–	10,034
	--------------	---------------	---------------	---------------
	1,126,837	8,983	–	1,135,820
	========	========	========	========
Financial liabilities at fair value through profit or loss
Derivative instrument liabilities	–	–	–	–
	========	========	========	========

11 SHARE CAPITAL

	30 June 2021 unaudited		31 December 2020 audited			30 June 2020 unaudited
	Number of  shares	£000		Number of  shares	£000		Number of  shares	£000
Issued, allotted and fully paid
Ordinary shares of 2.5 pence each held outside Treasury
Beginning and end of the period	411,466,049	10,286		411,466,049	10,286		411,466,049	10,286
Ordinary shares of 25 pence each held in Treasury1
Beginning and end of the period	4,981,861	125		4,981,861	125		4,981,861	125
		---------------			---------------			---------------
Total share capital		10,411			10,411			10,411
		========			========			========

1  Ordinary shares held in Treasury carry no rights to vote, to receive a dividend or to participate in a winding up of the Company.

There were no ordinary shares repurchased into Treasury during the current or prior periods.

12 NET ASSET VALUE PER ORDINARY SHARE
The calculation of the net asset value per ordinary share is based on the following:

	30.06.21  unaudited	31.12.20  audited	30.06.20  unaudited
Total shareholders’ funds	£1,359,914,000	£1,220,285,000	£1,155,733,000
Ordinary shares held outside Treasury at period end	411,466,049	411,466,049	411,466,049
Net asset value per ordinary share	330.50p	296.57p	280.88p
	============	============	============

It is the Company’s policy that shares held in Treasury will only be reissued at net asset value per ordinary share or at a premium to net asset value per ordinary share and, therefore, shares held in Treasury have no dilutive effect.

13 CAPITAL RESOURCES AND GEARING
The Company does not have any externally imposed capital requirements. The financial resources of the Company comprise its share capital and reserves, as disclosed on the Balance Sheet above, and any gearing, which is achieved through the use of derivative instruments. Financial resources are managed in accordance with the Company’s investment policy and in pursuit of its investment objective.

The Company’s gearing at the end of the period is shown below:

	Gross asset exposure		Net asset exposure
	£000	%1	£000	%1
30 June 2021 (unaudited)
Investments	1,322,774	97.3	1,322,774	97.3
Long CFDs	140,477	10.3	140,477	10.3
Long futures	59,631	4.4	59,631	4.4
	--------------	--------------	--------------	--------------
Total long exposures	1,522,882	112.0	1,522,882	112.0
Short CFDs	5,603	0.4	(5,603)	(0.4)
	--------------	--------------	--------------	--------------
Gross/net asset exposure	1,528,485	112.4	1,517,279	111.6
	--------------	--------------	--------------	--------------
Shareholders’ funds	1,359,914		1,359,914
	========		========
Gearing 2		12.4		11.6
		========		========
31 December 2020 (audited)
Investments	1,200,663	98.4	1,200,663	98.4
Long CFDs	99,355	8.1	99,355	8.1
Long futures	50,359	4.1	50,359	4.1
	--------------	--------------	--------------	--------------
Total long exposures	1,350,377	110.6	1,350,377	110.6
Short CFDs	13,922	1.2	(13,922)	(1.2)
	--------------	--------------	--------------	--------------
Gross/net asset exposure	1,364,299	111.8	1,336,455	109.4
	--------------	--------------	--------------	--------------
Shareholders’ funds	1,220,285		1,220,285
	========		========
Gearing 2		11.8		9.4
		========		========

1  Exposure to the market expressed as a percentage of shareholders’ funds.

2  Gearing is the amount by which the gross/net asset exposure exceeds shareholders’ funds expressed as a percentage of shareholders’ funds.

	Gross asset exposure		Net asset exposure
	£'000	%1	£'000	%1
30 June 2020 (unaudited)
Investments	1,125,786	97.4	1,125,786	97.4
Long CFDs	79,665	6.9	79,665	6.9
Long futures	40,438	3.5	40,438	3.5
	--------------	--------------	--------------	--------------
Total long exposures	1,245,889	107.8	1,245,889	107.8
Short CFDs	–	–	–	–
	--------------	--------------	--------------	--------------
Gross/net asset exposure	1,245,889	107.8	1,245,889	107.8
	--------------	--------------	--------------	--------------
Shareholders’ funds	1,155,733		1,155,733
	========		========
Gearing 2		7.8		7.8
		========		========

1  Exposure to the market expressed as a percentage of shareholders’ funds.

2  Gearing is the amount by which the gross/net asset exposure exceeds shareholders’ funds expressed as a percentage of shareholders’ funds.

14 TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES
FIL Investment Services (UK) Limited is the Company’s Alternative Investment Fund Manager and has delegated portfolio management services and the role of company secretary to FIL Investments International (“FII”), the Investment Manager. Both companies are Fidelity group companies. Details of the fee arrangements are given in Note 5 above.

During the period, fees for portfolio management services of £4,684,000 (six months ended 30 June 2020: £4,243,000 and year ended 31 December 2020: £8,899,000) were payable to FII. At the Balance Sheet date, fees for portfolio management services of £790,000 (31 December 2020: £806,000 and 30 June 2020: £733,000) were accrued and included in other creditors. FII also provides the Company with marketing services. The total amount payable for these services during the period was £56,000 (six months ended 30 June 2020: £80,000 and year ended 31 December 2020: £140,000). At the Balance Sheet date, fees for marketing services of £13,000 (31 December 2020: £6,000 and 30 June 2020: £16,000) were accrued and included in other creditors.

As at 30 June 2021, the Board consisted of five non-executive Directors (shown in the Directory in the Half-Yearly report), all of whom are considered to be independent by the Board. None of the Directors have a service contract with the Company. The Chairman receives an annual fee of £41,500, the Audit Committee Chairman an annual fee of £32,500, the Senior Independent Director an annual fee of £29,500 and each other Director an annual fee of £27,000. The following members of the Board hold ordinary shares in the Company: Vivian Bazalgette 30,000 shares, Fleur Meijs 28,970 shares, Sir Ivan Rogers nil shares, Marion Sears 25,475 shares and Paul Yates 32,000 shares.

The financial information contained in this Half-Yearly Results Announcement does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The financial information for the six months ended 30 June 2021 and 30 June 2020 has not been audited or reviewed by the Company’s Independent Auditor.

The information for the year ended 31 December 2020 has been extracted from the latest published audited financial statements, which have been filed with the Registrar of Companies, unless otherwise stated. The report of the Auditor on those financial statements contained no qualification or statement under sections 498(2) or (3) of the Companies Act 2006.

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.