Interim Results

FIDELITY EUROPEAN VALUES PLC

 

Preliminary Announcement of Unaudited Interim Results
for the six months ended 30 June 2006

 
Interim report

 

Performance

 

In sterling terms and on a total return basis, the net asset value rose, during
the first six months of the year, by 5.5% to 1,152.99p per share, compared with
a return of 5.9% for the FTSE World Europe (ex UK) Index.  At the beginning of
the period the shares unusually stood at a premium to net asset value but the
discount rose to 6.3% at the end of the period.  As a result the share price
total return was -3.2%.  This widening of the discount recognises the more
volatile markets.

 

Market Review

 

Following a very strong start to 2006, European equity markets experienced a
correction in May and June.  This was triggered by the release of
higher-than-expected core inflation figures in the US.  In addition, fears over
further increases in interest rates in the US and elsewhere, together with
concerns over the continued high oil price, worried markets across the globe. 

 

Notably, European inflation jumped to 2.5% in May and, therefore, above the 2%
target level set by the European Central Bank (ECB).  This led the ECB to raise
its benchmark rate in June, by a quarter of a percentage point to 2.75%, the
second increase in four months.

 

Economic growth accelerated in the eurozone to 0.6% in the first quarter of
2006, compared with 0.3% in the final three months of 2005.  Business and
consumer confidence continued to improve, while the unemployment rate fell in
the region.

 

Portfolio Manager Report

 

Over the six-month period, stock selection within the industrial engineering
and construction sectors proved rewarding.  A positive pricing environment and
robust demand for products boosted engineering companies, while the
construction sector has benefited from corporate activity.  However, exposure
to pharmaceuticals proved detrimental as other riskier areas of the market
performed better.  Specific holdings in the aerospace & defence sector also
hurt returns, notably EADS, the parent company of Airbus.  However, the holding
was reduced prior to the recent profit warning.  In addition, oil & gas
producers hurt returns.  Notably, OMV, an Austrian oil refining company saw its
share price fall during the latter part of the review period following a failed
takeover bid.

 

In recent months, the manager added to holdings where the recent stock market
pullback had corrected overstretched valuations and so provided opportunities
to buy stocks where their valuations were reasonable.  As a result, the manager
added to stocks in the oil services sector and cyclical stocks.  Furthermore,
exposure to financials, where the manager found attractive opportunities in the
banking and insurance sectors, was increased.

 

Overall, the broad structural changes to the portfolio's exposure have been: a
reduction in emerging Europe; increased core Europe; and increased large-cap,
although the latter continues to be an underweight exposure.

 

Outlook

 

The macroeconomic outlook for the European economy continues to show signs of
improvement, with falling unemployment and improving consumer confidence. 
Company earnings have been rising and merger and acquisition activity has been
robust.  Companies are continuing to restructure and cut costs, and this is
feeding through to healthy earnings.

 

For a bottom-up stock picker, the recent stock-market correction is challenging
as sentiment is driving the market rather than underlying earnings power.
However, market corrections can also provide excellent buying opportunities in
companies where share price moments have penalised very strong fundamentals. 
We continue to believe that stock selection, based on in-depth company
analysis, will be crucial in outperforming the benchmark index.

 

By order of the Board

Fidelity Investments International

2 August 2006

 

Enquiries: 

Miss Rebecca Burtonwood - Fidelity Investments International - 01737 836869

Mr Stephen Westwood - Fidelity Investments International - 0207 961 4477

 

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

 

CB27836/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                                                         
                                                                                         
                         30.06.06              31.12.05                30.06.05          
                                                                                         
                         unaudited             audited                unaudited          
                                                                                         
                                                                                         
                                                                                         
                  revenue capital   total revenue capital   total revenue capital   total
                                                                                         
            Notes   £'000   £'000   £'000   £'000   £'000   £'000   £'000   £'000   £'000
                                                                                         
                                                                                         
                                                                                         
Gains on               -   31,714  31,714      -  175,905 175,905      -   60,033  60,033
investments                                                                              
                                                                                         
                                                                                         
                                                                                         
Income          2  18,189       -  18,189  16,965      -   16,965  13,980       -  13,980
                                                                                         
                                                                                         
                                                                                         
Investment                                                                               
management                                                                               
                                                                                         
Fee               (4,843)      -  (4,843) (8,252)      -  (8,252) (3,631)      -  (3,631)
                                                                                         
                                                                                         
                                                                                         
Other               (476)      -    (476)   (920)      -    (920)   (448)      -    (448)
expenses                                                                                 
                                                                                         
                                                                                         
                                                                                         
Exchange               17    (31)    (14)      54   (213)   (159)      66   (280)   (214)
gains/                                                                                   
(losses)                                                                                 
                                                                                         
                                                                                         
                                                                                         
Exchange                                                                                 
(losses)/                                                                                
gains on                                                                                 
                                                                                         
Loans                  -    (941)   (941)       -     702     702      -    2,815   2,815
                                                                                         
                                                                                         
                                                                                         
Net return                                                                               
before                                                                                   
finance                                                                                  
                                                                                         
costs and          12,887  30,742  43,629   7,847 176,394 184,241   9,967  62,568  72,535
taxation                                                                                 
                                                                                         
                                                                                         
                                                                                         
Interest          (2,501)      -  (2,501) (3,801)      -  (3,801) (1,617)      -  (1,617)
payable                                                                                  
                                                                                         
                                                                                         
                                                                                         
Net return                                                                               
on ordinary                                                                              
                                                                                         
activities         10,386  30,742  41,128   4,046 176,394 180,440   8,350  62,568  70,918
before                                                                                   
taxation                                                                                 
                                                                                         
                                                                                         
                                                                                         
Taxation on                                                                              
return on                                                                                
                                                                                         
ordinary        3 (2,414)  (482)  (2,896) (2,274)    (65) (2,339) (1,973)      -  (1,973)
activities                                                                               
                                                                                         
                                                                                         
                                                                                         
Net return                                                                               
on ordinary                                                                              
                                                                                         
activities                                                                               
after                                                                                    
taxation                                                                                 
                                                                                         
for the             7,972  30,260  38,232   1,772 176,329 178,101   6,377  62,568  68,945
period                                                                                   
                                                                                         
                                                                                         
                                                                                         
Return per                                                                               
ordinary                                                                                 
                                                                                         
Share           4  12.67p  48.11p  60.78p   2.82p 280.32p 283.14p  10.14p  99.46p 109.60p
                                                                                         

 

 

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 revenue account of the Company.

 

These financial statements have been prepared in accordance with the AITC
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  305,447    127,785   5,013 512,685
shareholders'                                                                          
funds: 1 January                                                                       
2005                                                                                   
                                                                                       
                                                                                       
                                                                                       
Net recognised                 -       -          -   56,991      5,577       -  62,568
gains for the                                                                          
period                                                                                 
                                                                                       
                                                                                       
                                                                                       
Revenue after                  -       -          -        -          -   6,377   6,377
taxation                                                                               
                                                                                       
                                                                                       
                                                                                       
Dividend paid        7         -       -          -        -          - (1,101) (1,101)
                                                                                       
                                                                                       
                                                                                       
Closing                   15,725  58,615        100  362,438    133,362  10,289 580,529
shareholders'                                                                          
funds: 30 June                                                                         
2005                                                                                   
                                                                                       
                                                                                       
                                                                                       
Opening                   15,725  58,615        100  305,447    127,785   5,013 512,685
shareholders'                                                                          
funds: 1 January                                                                       
2005                                                                                   
                                                                                       
                                                                                       
                                                                                       
Net recognised                 -       -          -  119,303     55,949       - 175,252
gains for the                                                                          
year                                                                                   
                                                                                       
                                                                                       
                                                                                       
Revenue after                  -       -          -        -          -   1,772   1,772
taxation                                                                               
                                                                                       
                                                                                       
                                                                                       
Dividend paid        7         -       -          -        -          - (1,101) (1,101)
                                                                                       
                                                                                       
                                                                                       
Closing                   15,725  58,615        100  424,750    183,734   5,684 688,608
shareholders'                                                                          
funds: 31                                                                              
December 2005                                                                          
                                                                                       
                                                                                       
                                                                                       
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                                                                                   
                                                                                       

 

 

FIDELITY EUROPEAN VALUES PLC

 

Balance Sheet as at 30 June

 

                                         30.06.06    31.12.05   30.06.05 
                                                                         
                                        unaudited     audited   unaudited
                                                                         
                                  Notes    £'000       £'000       £'000 
                                                                         
                                                                         
                                                                         
Fixed assets                                                             
                                                                         
Investments held at fair value            833,960     800,634     658,516
through profit or loss                                                   
                                                                         
                                                                         
                                                                         
                                                                         
                                                                         
Current assets                                                           
                                                                         
Debtors                                     7,296       1,712       8,545
                                                                         
Cash at bank                                6,118       3,259       9,484
                                                                         
                                                                         
                                                                         
                                                                         
                                                                         
                                           13,414       4,971      18,029
                                                                         
                                                                         
                                                                         
Creditors - amounts falling due                                          
within one year                                                          
                                                                         
Fixed rate unsecured loans            8  (62,369)    (61,855)           -
                                                                         
Other creditors                           (7,764)     (3,596)     (8,646)
                                                                         
                                                                         
                                                                         
                                                                         
                                                                         
                                         (70,133)    (65,451)     (8,646)
                                                                         
                                                                         
                                                                         
                                                                         
                                                                         
Net current (liabilities)/assets         (56,719)    (60,480)       9,383
                                                                         
                                                                         
                                                                         
                                                                         
                                                                         
Total assets less current                 777,241     740,154     667,899
liabilities                                                              
                                                                         
                                                                         
                                                                         
                                                                         
                                                                         
Creditors - amounts falling due                                          
after more than one year                                                            
                                                                         
Fixed rate unsecured loans            8  (51,974)    (51,546)    (87,370)
                                                                         
                                                                         
                                                                         
                                                                         
                                                                         
Total net assets                          725,267     688,608     580,529
                                                                         
                                                                         
                                                                         
                                                                         
                                                                         
Capital and reserves                                                     
                                                                         
Called up share capital                    15,725      15,725      15,725
                                                                         
Share premium account                      58,615      58,615      58,615
                                                                         
Capital redemption reserve                    100         100         100
                                                                         
Capital reserve - realised                521,216     424,750     362,438
                                                                         
Capital reserve - unrealised              117,528     183,734     133,362
                                                                         
Revenue reserve                            12,083       5,684      10,289
                                                                         
                                                                         
                                                                         
                                                                         
                                                                         
Total equity shareholders' funds          725,267     688,608     580,529
                                                                         
                                                                         
                                                                         
                                                                         
                                                                         
Net asset value per ordinary          5 1,152.99p   1,094.71p     922.89p
share                                                                    
                                                                         
                                                                         
                                                                         

 

FIDELITY EUROPEAN VALUES PLC

 

Cash Flow Statement for the six months ended 30 June

 

                                  30.06.06    31.12.05     30.06.05 
                                                                    
                                 unaudited     audited    unaudited 
                                                                    
                                     £'000       £'000        £'000 
                                                                    
                                                                    
                                                                    
Operating activities                                                
                                                                    
Investment income received           14,561      13,882       11,062
                                                                    
Interest received                       92          117           70
                                                                    
Investment management fee paid      (4,779)     (7,496)      (3,345)
                                                                    
Directors' fees paid                   (40)        (75)         (37)
                                                                    
Other cash payments                   (365)       (921)        (864)
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
Net cash inflow from operating        9,469       5,507        6,886
activities                                                          
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
Returns on investments and                                          
servicing of finance                                                
                                                                    
Interest paid                       (2,514)     (3,673)        (807)
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
Net cash outflow from returns                                       
on investments                                                      
                                                                    
and servicing of finance            (2,514)     (3,673)        (807)
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
Taxation                                                            
                                                                    
Overseas taxation recovered             185         874          140
                                                                    
                                                                    
                                                                    
Taxation recovered                      185         874          140
                                                                    
                                                                    
                                                                    
Financial investment                                                
                                                                    
Purchase of investments           (400,157)   (557,685)    (270,624)
                                                                    
Disposal of investments             397,430     504,390      243,809
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
Net cash outflow from               (2,727)    (53,295)     (26,815)
financial investments                                               
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
Equity dividend paid                (1,573)     (1,101)      (1,101)
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
Net cash inflow/(outflow)             2,840    (51,688)     (21,697)
before financing                                                    
                                                                    
                                                                    
                                                                    
Financing                                                           
                                                                    
3.23% fixed rate unsecured                -      26,625       26,625
loan drawn down                                                     
                                                                    
3.54% fixed rate unsecured                -      23,919            -
loan drawn down                                                     
                                                                    
                                                                    
                                                                    
Net cash inflow from financing            -      50,544       26,625
                                                                    
                                                                    
                                                                    
Increase/(decrease) in cash           2,840     (1,144)        4,928
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    

 

 

 

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 2005.

 

2.     Income

       

                    30.06.06 31.12.05  30.06.05
                                               
                   unaudited  audited unaudited
                                               
                       £'000    £'000     £'000
                                               
UK dividends               1      325       178
                                               
Overseas dividends    18,083   16,517    13,741
                                               
Deposit interest         105      123        61
                                               
                      18,189   16,965    13,980
                                               

 

3.     Taxation on return on ordinary activities

 

                   30.06.06               31.12.05                30.06.05      
                                                                                
                  unaudited                audited               unaudited      
                                                                                
          revenue   capital total revenue  capital total revenue   capital total
                                                                                
            £'000     £'000 £'000   £'000    £'000 £'000   £'000     £'000 £'000
                                                                                
Overseas    3,404       282 3,686   3,066       26 3,092   2,559         - 2,559
taxation                                                                        
suffered                                                                        
                                                                                
Overseas    (790)         - (790)   (753)        - (753)   (586)         - (586)
taxation                                                                        
recovered                                                                       
                                                                                
Tax         (200)       200     -    (39)       39     -       -         -     -
(credit)/                                                                       
charge                                                                          
for use                                                                         
of                                                                              
revenue                                                                         
expenses                                                                        
                                                                                
            2,414       482 2,896   2,274       65 2,339   1,973         - 1,973
                                                                                

 

4.     Return per ordinary share

 

                                 30.06.06               31.12.05                30.06.05        
                                                                                                
                          revenue capital  total revenue capital   total revenue capital   total
                                                                                                
Return per ordinary share  12.67p  48.11p 60.78p   2.82p 280.32p 283.14p  10.14p  99.46p 109.60p
                                                                                                

 

        Basic returns per ordinary share are based on the return on ordinary
activities after taxation of £7,972,000 (31.12.05: £1,772,000; 30.06.05: £
6,377,000), the capital appreciation in the period of £30,260,000 (31.12.05: £
176,329,000; 30.06.05: £62,568,000) and on 62,903,233 ordinary shares
(31.12.05: 62,903,233; 30.06.05: 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 £
725,267,000 (31.12.05: £688,608,000; 30.06.05: £580,529,000) and on 62,903,233
ordinary shares (31.12.05: 62,903,233; 30.06.05: 62,903,233), being the number
of ordinary shares in issue at the period end.

 

6.     Costs of Investment Transactions

       

                                                    30.06.06 31.12.05  30.06.05
                                                                               
                                                   unaudited  audited unaudited
                                                                               
                                                       £'000    £'000     £'000
                                                                               
Included in the gains on investments are the                                   
following costs of investment transactions:                                    
                                                                               
Purchases expenses                                       478      773       358
                                                                               
Sales expenses                                           461      686       314
                                                                               
                                                         939    1,459       672
                                                                               

 

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 30.06.06 relates to the year ended 31.12.05.

 

 

8.     Loan Facilities

        The fixed rate loan from National Australia Bank of €40,000,000 was
drawn down in two tranches:  €33,000,000 on 24 December 2001 and €7,000,000 on
28 December 2001, for a period of five years at an interest rate of 5.54% per
annum.  The loan is repayable on 29 December 2006.

 

        The fixed rate loan from The Royal Bank of Scotland plc of €50,000,000
was drawn down on 28 December 2001 for a period of five years at an interest
rate of 4.96% per annum.  The loan is repayable on 29 December 2006.

 

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

 

9.     Unaudited Financial Statements

        The results for the six months to 30 June 2006 and 30 June 2005, 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 2005 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.