Half-yearly Report

FIDELITY EUROPEAN VALUES PLC

 

Preliminary announcement of unaudited half year results for the six months
ended 30 June 2007

 

RECENT DEVELOPMENTS

A number of developments for your Company have occurred over recent months.

 

New Directors

We are delighted to welcome two new Directors to the Board with effect from 1
June 2007, namely Mr James Robinson and Mr Humphrey van der Klugt. Mr Robinson
was Chief Investment Officer, Investment Trusts and Director of Hedge Funds at
Henderson Global Investors prior to his retirement in 2005. He is a Chartered
Accountant and has 27 years' investment experience. Mr van der Klugt is also a
Chartered Accountant and was previously a Director of Schroder Investment
Management Limited. He had a 22 year career at Schroders where he was a member
of the Group Investment and Asset Allocation Committees.

 

Change in management fee

The Company agreed a new management fee which has been implemented with effect
from 1 January 2007.

 

The new arrangement replaces the previous structure with a performance related
fee and in summary provides for:-

 

1. A quarterly base fee of 0.2125% (plus applicable VAT) of net assets. There
will be no additional company secretarial fee.

 

2. An annual performance related fee of 20% of any change in net asset value in
excess of the returns on the FTSE World Europe (ex UK) (£) index plus 0.5%.
Both net asset value and index will be calculated on a total return basis,
while the net asset value will be based on the weighted average number of
shares in issue.

 

VAT

Shareholders may be aware of the test case in respect of whether VAT should be
charged on the management expenses of investment trusts. The judgement of the
European Court of Justice was given in June 2007 and it was ruled that the
company involved in the test case was entitled to an exemption from VAT. The
implications of the judgement are still not totally clear but shareholders can
be assured that the results of this case are being followed very closely by the
Board and further information will be provided in due course.

 

PERFORMANCE

During the first six months of the year, the net asset value of the portfolio
rose by 12.1%, compared with a return of 10.9% for the FTSE World Europe (ex
UK) Index, in sterling terms and on a total return basis.

 

MARKET REVIEW

European equity markets performed strongly during the first six months of 2007,
despite a number of obstacles. In February 2007, investor confidence was
lowered by a global sell-off due largely to a downturn in the Chinese market
and speculation about a slowdown in the US, with a particular focus on the US
subprime market. In early June, markets were hit by another bout of nerves, as
government bond yields in the US and elsewhere rose sharply. This prompted
further concerns about the movement of interest rates to keep in check economic
growth and inflation around the globe. However, in similar situations in the
past bourses have been relatively resilient to this type of macroeconomic news.

 

The European economy continues to expand at a stronger pace than has been
generally expected. It continues to be supported by positive surveys of
business and consumer confidence, strong investment and falling unemployment.

 

The European Central Bank (ECB) raised interest rates by 0.25% in both March
and June to end the review period at 4.00%. The ECB's monetary policy is to
maintain inflation rates below, but close to, 2% over the medium term in order
to maintain price stability. Given that the current rate falls within this
area, inflation appears to be in check.

 

PORTFOLIO MANAGER REPORT

Over the six-month period, stock selection within the construction, electricity
and utilities sectors proved rewarding. Construction stocks were buoyed by
merger speculation across the industry, while in the electricity sector, shares
in French power generation company Electricite de France were buoyed by its
strong prospects and plans to build atomic power stations in the UK. A holding
in German utilities firm E.ON also added value, after it announced impressive
expansion plans. A low weighting in pharmaceutical companies has proven
beneficial, as firms have been hurt by negative news about key products, the
product pipeline and concerns over the regulatory environment.

 

During the review period, the manager reduced his exposure to financial stocks
in light of worries over the profit cycle as a result of rising provisions and
slowing revenue growth. Notable sales were in the investment banking sector,
and more specifically, a number of Spanish banks. The manager increased the
portfolio's exposure to industrial stocks, which are benefiting from strong
demand globally. In terms of market capitalisation, the manager has increased
the weighting in small and mid-cap stocks, as volatility in the stock market
during 2007 has provided good opportunities to invest in attractively valued
lower capitalisation companies.

 

OUTLOOK

Despite recent concerns in the markets, which have been less resilient since
the period end, equity valuations do not look overstretched.  European equities
appear to offer fair value compared with other asset classes, including bonds.

 

Growth and inflation remain at the forefront of investors' minds. However,
European GDP continues to grow at a speed that is stronger than many economists
have predicted. Positive economic data on business and manufacturing
confidence, as well as falling unemployment and healthy exports, have boosted
the region.

 

In light of developments in the credit markets in the last month, merger &
acquisition activity may slow for some types of transaction, but in the current
environment we would anticipate that this activity will not completely cease. 
Earnings have been a key support for the equity market over the past few years.
However, the profit cycle is relatively extended now and, therefore, the
medium-term risk remains one of timing and when the profit cycle begins to
slow.

 

We believe that stock selection, based on in-depth company analysis, will
continue to be crucial in outperforming the benchmark index.

 

By order of the Board

Fidelity Investments International

8 August 2007

 

Enquiries: 

Rebecca Burtonwood - Fidelity Investments International - 01737 836869

Press enquiries:

Sam Slator - Fidelity Investments International - 01737 837847

 

Issued by Fidelity Investments International.  Authorised and regulated in the
UK by the Financial Services Authority.

 

CB31906/NA

 

 


FIDELITY EUROPEAN VALUES PLC

 

Income Statement for the six months ended 30 June

 

                    for the six months    for the year ended   for the six months ended  
                           ended                                                         
                                                                                         
                         30.06.07              31.12.06                30.06.06          
                                                                                         
                         unaudited             audited                unaudited          
                                                                                         
                                                                                         
                                                                                         
                  revenue capital   total revenue capital   total revenue capital   total
                                                                                         
            Notes   £'000   £'000   £'000   £'000   £'000   £'000   £'000   £'000   £'000
                                                                                         
                                                                                         
                                                                                         
Gains on               -   84,531  84,531      -  115,258 115,258      -   31,714  31,714
investments                                                                              
                                                                                         
                                                                                         
                                                                                         
Income          2  20,839       -  20,839  21,631      -   21,631  18,189       -  18,189
                                                                                         
                                                                                         
                                                                                         
Investment        (4,058) (1,639) (5,697) (9,961)      -  (9,961) (4,843)      -  (4,843)
management                                                                               
and                                                                                      
performance                                                                              
fees                                                                                     
                                                                                         
                                                                                         
                                                                                         
Other               (349)      -    (349)   (986)      -    (986)   (476)      -    (476)
expenses                                                                                 
                                                                                         
                                                                                         
                                                                                         
Exchange               54   (452)   (398)      55   (311)   (256)      17    (31)    (14)
gains/                                                                                   
(losses)                                                                                 
                                                                                         
                                                                                         
                                                                                         
Exchange               -     (53)    (53)       -   2,260   2,260      -    (941)   (941)
(losses)/                                                                                
gains on                                                                                 
loans                                                                                    
                                                                                         
                                                                                         
                                                                                         
Net return         16,486  82,387  98,873  10,739 117,207 127,946  12,887  30,742  43,629
before                                                                                   
finance                                                                                  
costs and                                                                                
taxation                                                                                 
                                                                                         
                                                                                         
                                                                                         
Interest          (2,032)      -  (2,032) (4,976)      -  (4,976) (2,501)      -  (2,501)
payable                                                                                  
                                                                                         
                                                                                         
                                                                                         
Net return         14,454  82,387  96,841   5,763 117,207 122,970  10,386  30,742  41,128
on ordinary                                                                              
activities                                                                               
before                                                                                   
taxation                                                                                 
                                                                                         
                                                                                         
                                                                                         
Taxation on     3 (2,575)      -  (2,575) (2,407)   (482) (2,889) (2,414)  (482)  (2,896)
return on                                                                                
ordinary                                                                                 
activities                                                                               
                                                                                         
                                                                                         
                                                                                         
Net return         11,879  82,387  94,266   3,356 116,725 120,081   7,972  30,260  38,232
on ordinary                                                                              
activities                                                                               
after                                                                                    
taxation                                                                                 
for the                                                                                  
period                                                                                   
                                                                                         
                                                                                         
                                                                                         
Return per      4  19.26p 133.58p 152.84p   5.34p 185.68p 191.02p  12.67p  48.11p  60.78p
ordinary                                                                                 
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.

 

These financial statements have been prepared in accordance with the AIC
Statement of Recommended Practice ("SORP") issued in January 2003 and revised
in December 2005.

 


FIDELITY EUROPEAN VALUES PLC

 

Reconciliation of Movements in Shareholders' Funds

 

                      called-up   share    capital  capital    capital revenue    total
                          share premium redemption  reserve    reserve reserve   equity
                        capital account    reserve realised unrealised                 
                                                                                       
                          £'000   £'000      £'000    £'000      £'000   £'000    £'000
                                                                                       
                Notes                                                                  
                                                                                       
Opening                  15,725  58,615        100  424,750    183,734   5,684  688,608
shareholders'                                                                          
funds: 1                                                                               
January 2006                                                                           
                                                                                       
                                                                                       
                                                                                       
Net recognised                -       -          -   96,466   (66,206)       -   30,260
gains/(losses)                                                                         
for the period                                                                         
                                                                                       
                                                                                       
                                                                                       
Revenue after                 -       -          -        -          -   7,972    7,972
taxation                                                                               
                                                                                       
                                                                                       
                                                                                       
Dividend paid       7         -       -          -        -          - (1,573)  (1,573)
                                                                                       
                                                                                       
                                                                                       
Closing                  15,725  58,615        100  521,216    117,528  12,083  725,267
shareholders'                                                                          
funds: 30 June                                                                         
2006                                                                                   
                                                                                       
                                                                                       
                                                                                       
Opening                  15,725  58,615        100  424,750    183,734   5,684  688,608
shareholders'                                                                          
funds: 1                                                                               
January 2006                                                                           
                                                                                       
                                                                                       
                                                                                       
Net recognised                -       -          -  148,343   (31,618)       -  116,725
gains/(losses)                                                                         
for the year                                                                           
                                                                                       
                                                                                       
                                                                                       
Repurchase of       9     (114)       -        114  (5,453)          -       -  (5,453)
shares                                                                                 
                                                                                       
                                                                                       
                                                                                       
Revenue after                 -       -          -        -          -   3,356    3,356
taxation                                                                               
                                                                                       
                                                                                       
                                                                                       
Dividend paid       7         -       -          -        -          - (1,573)  (1,573)
                                                                                       
                                                                                       
                                                                                       
Closing                  15,611  58,615        214  567,640    152,116   7,467  801,663
shareholders'                                                                          
funds: 31                                                                              
December 2006                                                                          
                                                                                       
                                                                                       
                                                                                       
Net recognised                -       -          -   70,111     13,915       -   84,026
gains for the                                                                          
period                                                                                 
                                                                                       
                                                                                       
                                                                                       
Repurchase of       9     (433)       -        433 (22,635)          -       - (22,635)
shares                                                                                 
                                                                                       
                                                                                       
                                                                                       
Investment                    -       -          -  (1,639)          -       -  (1,639)
management and                                                                         
performance                                                                            
fees to capital                                                                        
                                                                                       
                                                                                       
                                                                                       
Revenue after                 -       -          -        -          -  11,879   11,879
taxation                                                                               
                                                                                       
                                                                                       
                                                                                       
Dividend paid       7         -       -          -        -          - (3,243)  (3,243)
                                                                                       
                                                                                       
                                                                                       
Closing                  15,178  58,615        647  613,477    166,031  16,103  870,051
shareholders'                                                                          
funds: 30 June                                                                         
2007                                                                                   
                                                                                       

 

 


FIDELITY EUROPEAN VALUES PLC

 

Balance Sheet as at 30 June

 

                                         30.06.07    31.12.06   30.06.06 
                                                                         
                                        unaudited     audited   unaudited
                                                                         
                                  Notes    £'000       £'000       £'000 
                                                                         
                                                                         
                                                                         
Fixed assets                                                             
                                                                         
Investments held at fair value            966,136     901,497     833,960
through profit or loss                                                   
                                                                         
                                                                         
                                                                         
                                                                         
                                                                         
Current assets                                                           
                                                                         
Debtors                                    22,005       3,506       7,296
                                                                         
Cash at bank                                4,895       4,718       6,118
                                                                         
                                                                         
                                                                         
                                                                         
                                                                         
                                           26,900       8,224      13,414
                                                                         
                                                                         
                                                                         
Creditors - amounts falling due                                          
within one year                                                          
                                                                         
Fixed rate unsecured loans            8  (10,109)    (10,104)    (62,369)
                                                                         
Other creditors                          (18,526)     (3,652)     (7,764)
                                                                         
                                                                         
                                                                         
                                                                         
                                                                         
                                         (28,635)    (13,756)    (70,133)
                                                                         
                                                                         
                                                                         
                                                                         
                                                                         
Net current liabilities                   (1,735)     (5,532)    (56,719)
                                                                         
                                                                         
                                                                         
                                                                         
                                                                         
Total assets less current                 964,401     895,965     777,241
liabilities                                                              
                                                                         
                                                                         
                                                                         
                                                                         
                                                                         
Creditors - amounts falling due                                          
after more than one year                                                 
                                                                         
Fixed rate unsecured loans            8  (94,350)    (94,302)    (51,974)
                                                                         
                                                                         
                                                                         
                                                                         
                                                                         
Total net assets                          870,051     801,663     725,267
                                                                         
                                                                         
                                                                         
                                                                         
                                                                         
Capital and reserves                                                     
                                                                         
Called up share capital                    15,178      15,611      15,725
                                                                         
Share premium account                      58,615      58,615      58,615
                                                                         
Capital redemption reserve                    647         214         100
                                                                         
Capital reserve - realised                613,477     567,640     521,216
                                                                         
Capital reserve - unrealised              166,031     152,116     117,528
                                                                         
Revenue reserve                            16,103       7,467      12,083
                                                                         
                                                                         
                                                                         
                                                                         
                                                                         
Total equity shareholders' funds          870,051     801,663     725,267
                                                                         
                                                                         
                                                                         
                                                                         
                                                                         
Net asset value per ordinary          5 1,433.00p   1,283.77p   1,152.99p
share                                                                    
                                                                         
                                                                         
                                                                         

 


FIDELITY EUROPEAN VALUES PLC

 

Cash Flow Statement for the six months ended 30 June

 

                                  30.06.07    31.12.06     30.06.06 
                                                                    
                                 unaudited     audited    unaudited 
                                                                    
                                     £'000       £'000        £'000 
                                                                    
                                                                    
                                                                    
Operating activities                                                
                                                                    
Investment income received           17,487      16,969       14,561
                                                                    
Interest received                       217         302          92 
                                                                    
Investment management fee paid      (5,189)     (9,671)      (4,779)
                                                                    
Directors' fees paid                   (34)        (94)         (40)
                                                                    
Other cash payments                   (385)       (675)        (365)
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
Net cash inflow from operating       12,096       6,831        9,469
activities                                                          
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
Returns on investments and                                          
servicing of finance                                                
                                                                    
Interest paid                       (2,049)     (4,977)      (2,514)
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
Net cash outflow from returns       (2,049)     (4,977)      (2,514)
on investments and servicing                                        
of finance                                                          
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
Taxation                                                            
                                                                    
Overseas taxation recovered             866         874          185
                                                                    
                                                                    
                                                                    
Taxation recovered                      866         874          185
                                                                    
                                                                    
                                                                    
Financial investment                                                
                                                                    
Purchase of investments           (461,110)   (724,793)    (400,157)
                                                                    
Disposal of investments             475,496     738,088      397,430
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
Net cash inflow/(outflow) from       14,386      13,295      (2,727)
financial investments                                               
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
Equity dividend paid                (3,243)     (1,573)      (1,573)
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
Net cash inflow before               22,056      14,450        2,840
financing                                                           
                                                                    
                                                                    
                                                                    
Financing                                                           
                                                                    
Repurchase of ordinary shares      (21,168)     (5,435)            -
                                                                    
4.595% credit facility drawn         10,109           -            -
down                                                                
                                                                    
4.335% credit facility drawn         10,191           -            -
down                                                                
                                                                    
4.335% credit facility repaid      (10,109)           -            -
                                                                    
4.1465% credit facility repaid     (10,191)           -            -
                                                                    
4.38% fixed rate unsecured                -      43,783            -
loan drawn down                                                     
                                                                    
4.1465% credit facility drawn             -      10,104            -
down                                                                
                                                                    
4.96% fixed rate unsecured                -    (33,679)            -
loan repaid                                                         
                                                                    
5.54% fixed rate unsecured                -    (26,943)            -
loan repaid                                                         
                                                                    
                                                                    
                                                                    
Net cash outflow from              (21,168)    (12,170)            -
financing                                                           
                                                                    
                                                                    
                                                                    
Increase in cash                        888       2,280        2,840
                                                                    
 


Notes to the Financial Statements

 

1.     Accounting policies

 

        The interim financial statements have been prepared on the basis of the
accounting policies set out in the Company's annual report and financial
statements dated 31 December 2006.

 

2.     Income

       

                          30.06.07 31.12.06  30.06.06
                                                     
                         unaudited  audited unaudited
                                                     
                             £'000    £'000     £'000
                                                     
UK dividends                     -        -         1
                                                     
Overseas dividends          20,559   21,305    18,083
                                                     
Overseas scrip dividends        77        -         -
                                                     
Deposit interest               203      326       105
                                                     
                            20,839   21,631    18,189
                                                     

 

3.     Taxation on return on ordinary activities

 

                   30.06.07               31.12.06                  30.06.06      
                                                                                  
                  unaudited                audited                 unaudited      
                                                                                  
          revenue   capital total revenue  capital   total revenue   capital total
                                                                                  
            £'000     £'000 £'000   £'000    £'000   £'000   £'000     £'000 £'000
                                                                                  
Overseas    3,341         - 3,341   3,960      282   4,242   3,404       282 3,686
taxation                                                                          
suffered                                                                          
                                                                                  
Overseas    (766)         - (766) (1,353)        - (1,353)   (790)         - (790)
taxation                                                                          
recovered                                                                         
                                                                                  
Tax             -         -     -   (200)      200       -   (200)       200     -
(credit)/                                                                         
charge                                                                            
for use                                                                           
of                                                                                
revenue                                                                           
expenses                                                                          
                                                                                  
            2,575         - 2,575   2,407      482   2,889   2,414       482 2,896
                                                                                  

 

4.     Return per ordinary share

 

            30.06.07  31.12.06    30.06.06
                                          
           unaudited   audited   unaudited
                                          
Revenue       19.26p     5.34p      12.67p
                                          
Capital      133.58p   185.68p      48.11p
                                          
             152.84p   191.02p      60.78p
                                          

 

        Returns per ordinary share are based on the net revenue return on
ordinary activities after taxation of £11,879,000 (31.12.06: £3,356,000;
30.06.06: £7,972,000), the capital return in the period of £82,387,000
(31.12.06: £116,725,000; 30.06.06: £30,260,000) and the total return in the
period of £94,266,000 (31.12.06: £120,081,000; 30.06.06: £38,232,000) and on
61,674,171 ordinary shares (31.12.06: 62,864,314; 30.06.06: 62,903,233), being
the weighted average number of shares in issue during the period.

 

5.     Net Asset Value per Share

 

The basic net asset value per ordinary share is based on net assets of £
870,051,000 (31.12.06: £801,663,000; 30.06.06: £725,267,000) and on 60,715,551
ordinary shares (31.12.06: 62,445,652; 30.06.06: 62,903,233), being the number
of ordinary shares in issue at the period end.

 

6.     Costs of Investment Transactions

 

Included in the gains on investments are the following costs of investment
transactions:

       

                    30.06.07 31.12.06  30.06.06
                                               
                   unaudited  audited unaudited
                                               
                       £'000    £'000     £'000
                                               
Purchases expenses       576      857       478
                                               
Sales expenses           487      828       461
                                               
                       1,063    1,685       939
                                               

 

 

7.     Dividends

 

No dividend has been declared in respect of the current period.  The dividend
shown on the Reconciliation of Movements in Shareholders' Funds for the six
months ended 30.06.07 relates to the year ended 31.12.06.

 

8.     Loan Facilities

 

        The fixed rate loan from Lloyds TSB Bank plc of euro 40,000,000 was
drawn down on 22 June 2005 for a period of five years at an interest rate of
3.23% per annum.  The loan is repayable on 22 June 2010.

 

        The fixed rate loan from Lloyds TSB Bank plc of euro 35,000,000 was
drawn down on 22 November 2005 for a period of three years at an interest rate
of 3.54% per annum.  The loan is repayable on 24 November 2008.

 

        The fixed rate loan from Barclays Bank plc of euro 65,000,000 was drawn
down on 29 December 2006for a period of five years at an interest rate of 4.38%
per annum.  The loan is repayable on 15 December 2011.

 

        The Company has entered into a euro 25,000,000 credit facility
agreement with Lloyds TSB Bank plc which expires on 15 December 2011.  An
amount of euro 15,000,000 was drawn down on 29 June 2007 for a period 90 days
at an interest rate of 4.595% per annum.

 

9.     Share Repurchases

 

        The following share repurchases were made in the period:

 

                                           30.06.07  31.12.06  30.06.06
                                                                       
                                          unaudited   audited unaudited
                                                                       
Number of shares repurchased              1,730,101   457,581         -
                                                                       
Average price per share                   1,329.05p 1,191.70p         -
                                                                       
Total cost including stamp duty and               £         £         -
commission                               22,635,000 5,453,000          
                                                                       

 

 

10.  Unaudited Financial Statements

       

The results for the six months to 30 June 2007 and 30 June 2006, which are
unaudited, constitute non-statutory accounts within the meaning of s240 of the
Companies Act 1985.  The figures and financial information for the year ended
31 December 2006 are extracted from the latest published financial statements. 
These financial statements, on which the auditors gave an unqualified report,
have been delivered to the Registrar of Companies.

 

        Copies of the interim report will be posted to shareholders as soon as
practicable.  Copies will also be available to the public from the Company's
registered office, Beech Gate, Millfield Lane, Lower Kingswood, Tadworth,
Surrey KT20 6RP.