FIDELITY EUROPEAN TRUST PLC
Half-Yearly Results for the six months ended 30 June 2024 (unaudited)
Financial
Highlights:
-
The
Board of Fidelity European Trust PLC (the “Company”) declares an
interim dividend of 3.60 pence per
share, an increase of 10.4% on the prior year.
-
In the six-month period ended 30
June 2024, the Company reported a net asset value (NAV)
return of +7.6% and ordinary share price total return of +10.6%
outperforming the Benchmark Index, the FTSE World Europe (ex UK)
Index, which returned +7.1%.
-
Holdings in ASML, Novo Nordisk and 3i Group were key
drivers of performance.
Contacts
For further information, please
contact:
Smita Amin
Company Secretary
01737 836347
Portfolio Managers’ Half-Yearly Review
Performance Review
During the first six months of the year, the net asset value
(“NAV”) total return was +7.6% compared to a total return of +7.1%
for the FTSE World Europe (ex UK) Index, which is the Company’s
Benchmark Index. The share price total return was +10.6%, which is
above the NAV total return because of a narrowing of the share
price discount to NAV. (All figures in UK sterling.)
Market Review
In the first half of this year, continental European markets were
boosted by the resilience of global economic growth and the
anticipation of interest rate reductions given lower rates of
inflation. The European Central Bank (ECB) duly obliged with a
quarter of a percentage point cut in its interest rate in early
June, following cuts by the Swiss and Swedish central
banks.
Despite the Labour Party having a big lead in the polls ahead of
the UK general election, UK sterling appreciated by 2% against the
Euro during the six month period. Therefore, in Euro terms, the
continental European benchmark rose by more than 9%, with many of
the constituent country markets hitting all time highs, before
cooling off somewhat at the very end of the period when President
Macron of France unexpectedly
announced snap parliamentary elections.
The “growth” themes that had led markets higher last year continued
to dominate performance in this period. The perceived long-term
impact of generative Artificial Intelligence (“AI”) remained an
area of optimism, not only for specific technology providers, but
also for corporate productivity in general. Obesity medications,
which have to date seen strong launches, also continued to attract
investors’ admiration. In addition, some “value” sectors also
performed very strongly, in particular the banking sector, which
continued to report substantial earnings and dividends, helped by
high levels of net interest income and low levels of credit
losses.
PORTFOLIO MANAGERS’
REPORT
The company’s NAV total return outperformed the Company’s Benchmark
over the six month reporting period. The gearing of the Company,
given rising markets, was the main contributor to this
outperformance. The contribution from stock-picking was mixed
during this period.
Two of the largest holdings in the Company, namely ASML (AI) and
Novo Nordisk (obesity), saw impressive gains as a result of the
themes mentioned above. 3i Group also continued to climb following
a positive presentation, highlighting the longer-term growth
potential of its largest investment Action, its continental
European discount retail group. Two of the Company’s Southern
European bank holdings — Intesa Sanpaolo and Bankinter — were also
very strong performers, in keeping with the banking sector.
Bankinter has recovered well from a poor twelve month period when
investors’ confidence was rattled by the regional banking crisis in
the US.
Detractors from performance included a number of names in the
consumer sector, such as L’Oréal, Nestlé and LVMH Moët Hennessy.
Consumers in the US have been more restrained now that pandemic
savings have been spent. The recovery in consumer spending in
China has been more anaemic than
expected, and has not been able to offset weaker trends elsewhere.
Finally, there were a number of stock-specific disappointments. The
most notable was Dassault Systèmes, which reported disappointing
results and a muted outlook particularly relating to Medidata, a
supplier of software for clinical trials, which they acquired in
2019.
Top Five Stock Contributors (on a relative
basis)
|
Sector
|
Country
|
%
|
ASML
|
Information Technology
|
Netherlands
|
0.8
|
Novo Nordisk
|
Health Care
|
Denmark
|
0.8
|
3i Group
|
Financials
|
UK
|
0.6
|
SAP
|
Information Technology
|
Germany
|
0.5
|
Bankinter
|
Financials
|
Spain
|
0.3
|
|
|
|
=========
|
Top Five Stock Detractors (on a relative
basis)
|
Sector
|
Country
|
%
|
Dassault Systèmes
|
Information Technology
|
France
|
-0.5
|
L'Oréal
|
Consumer Staples
|
France
|
-0.5
|
Partners Group
|
Financials
|
Switzerland
|
-0.4
|
Nestlé
|
Consumer Staples
|
Switzerland
|
-0.4
|
SIG Group
|
Materials
|
Switzerland
|
-0.3
|
|
|
|
=========
|
Outlook
The COVID-19 global pandemic — a “once in a century” event — has
set off a long-lasting chain reaction that is unpredictable and
makes fools of forecasters (including the Company’s Portfolio
Managers!). We thought the rapid and steep monetary tightening
which followed the pandemic would end in recession, as it so often
does, following an inversion of the yield curve. That has not, to
date, been the case. Indeed, the global economy has been much more
resilient than anticipated and corporate earnings have held up well
supporting stock markets around the world. As highlighted above,
many stock markets are reaching all-time highs. However, we are now
seeing some signs of consumers reining in their spending,
particularly in the US. Consumption is the main growth engine of
developed economies. Is this an early warning sign that the dreaded
recession is upon us just as the optimists declare victory? To add
to this, there is considerable geopolitical uncertainty expected
post the US elections, not least the potential changes in US
foreign policy when it comes to the tragic Ukraine war. In the event of a downturn,
stubborn inflationary pressures could prevent a rapid easing in
monetary policy. Continental European governments remain heavily
indebted and are already running substantial budget deficits so
fiscal easing would also be constrained. Valuations no longer
discount an economic malaise. So, in short, we are cautious and see
the stock market as being vulnerable if the outlook worsens and
sentiment shifts to be more negative.
Whatever the constitution of the new French government following
the result of the French parliamentary elections, we have little
optimism regarding the short or long-term outlook for the French
domestic economy for the same reasons that we are gloomy about the
outlook for the domestic economies of Europe (which represent about one third of the
sales and profits of continental European companies). Ageing
populations, low productivity, high and growing levels of
government debt, etc., will mean that growth is likely to remain
anaemic. Thankfully, domestic France represents a relatively small
percentage of sales and profits for continental European
companies.
However, whatever our views on the outlook, we will maintain
gearing within the prescribed range and we will continue to focus
on attractively valued companies with strong balance sheets that
should be resilient, and able to grow dividends, even in a more
difficult environment.
SAM
MORSE
Portfolio Manager
MARCEL STÖTZEL
Co-Portfolio Manager
2 August 2024
Twenty Largest Holdings as at 30
June 2024
The Asset Exposures shown below measure exposure to market price
movements as a result of owning shares and derivative instruments.
The Fair Value is the realisable value of the investments as
reported in the Balance Sheet. Where a contract for difference
(“CFD”) is held, the Fair Value reflects the profit or loss on the
contract since it was opened and is based on how much the share
price of the underlying share has moved.
|
Asset Exposure
|
Fair
Value
|
|
£’000
|
%1
|
£’000
|
Long Exposures – shares unless otherwise
stated
|
|
|
|
Novo Nordisk
|
|
|
|
Pharmaceuticals & Biotechnology
|
135,335
|
8.0
|
135,335
|
ASML
|
|
|
|
Technology Hardware & Equipment
|
126,510
|
7.5
|
126,510
|
Nestlé
|
|
|
|
Food Producers
|
92,647
|
5.5
|
92,647
|
SAP (long CFD)
|
|
|
|
Software & Computer Services
|
76,830
|
4.6
|
4,792
|
LVMH Moët Hennessy
|
|
|
|
Personal Goods
|
73,704
|
4.4
|
73,704
|
TotalEnergies
|
|
|
|
Oil, Gas & Coal
|
73,565
|
4.4
|
73,565
|
Roche
|
|
|
|
Pharmaceuticals & Biotechnology
|
67,402
|
4.0
|
67,402
|
L'Oréal
|
|
|
|
Personal Goods
|
58,593
|
3.5
|
58,593
|
EssilorLuxottica
|
|
|
|
Medical Equipment & Services
|
56,079
|
3.3
|
56,079
|
3i Group
|
|
|
|
Investment Banking & Brokerage Services
|
49,769
|
2.9
|
49,769
|
Hermès International
|
|
|
|
Personal Goods
|
47,208
|
2.8
|
47,208
|
Legrand (long CFD)
|
|
|
|
Electronic & Electrical Equipment
|
45,366
|
2.7
|
(2,067)
|
Partners Group
|
|
|
|
Investment Banking & Brokerage Services
|
44,027
|
2.6
|
44,027
|
Sanofi
|
|
|
|
Pharmaceuticals & Biotechnology
|
43,126
|
2.5
|
43,126
|
Long Exposures – shares unless otherwise
stated
|
|
|
|
Deutsche Börse Group
|
|
|
|
Investment Banking & Brokerage Services
|
42,980
|
2.5
|
42,980
|
Assa Abloy
|
|
|
|
Construction & Materials
|
40,715
|
2.4
|
40,715
|
Linde (long CFD)
|
|
|
|
Chemicals
|
39,348
|
2.3
|
25
|
Sampo
|
|
|
|
Non-Life Insurance
|
36,380
|
2.1
|
36,380
|
Kone
|
|
|
|
Industrial Engineering
|
34,975
|
2.1
|
34,975
|
Intesa Sanpaolo
|
|
|
|
Banks
|
34,853
|
2.1
|
34,853
|
|
---------------
|
---------------
|
---------------
|
Twenty largest long exposures
|
1,219,412
|
72.2
|
1,060,618
|
|
=========
|
=========
|
=========
|
Other long exposures
|
586,379
|
34.8
|
568,018
|
|
---------------
|
---------------
|
---------------
|
Total long exposures before long
futures2,3
|
1,805,791
|
107.0
|
1,628,636
|
|
=========
|
=========
|
=========
|
Long Futures
|
|
|
|
EURO STOXX 50 Future September 20243
|
69,923
|
4.1
|
531
|
|
---------------
|
---------------
|
---------------
|
Total long exposures after long
futures3
|
1,875,714
|
111.1
|
1,629,167
|
|
=========
|
=========
|
=========
|
Short Exposures
|
|
|
|
Short CFDs (1 Holding)
|
12,990
|
0.8
|
(257)
|
|
---------------
|
---------------
|
---------------
|
Gross Asset Exposure3,4
|
1,888,704
|
111.9
|
|
|
=========
|
=========
|
|
Portfolio Fair Value5
|
|
|
1,628,910
|
Net current assets (excluding derivative assets and
liabilities)
|
|
|
59,173
|
|
|
|
---------------
|
Shareholders’ Funds (per Balance Sheet
below)
|
|
|
1,688,083
|
|
|
|
=========
|
1 Asset
Exposure is expressed as a percentage of Shareholders’
Funds.
2 Total
long exposures before long futures comprises investments of
£1,626,177,000 and long CFDs of £179,614,000.
3 See
Note 13 below.
4 Gross
Asset Exposure comprises market exposure to investments of
£1,626,177,000 plus market exposure to all derivative instruments
of £262,527,000. Derivative instruments comprise long CFDs of
£179,614,000, long futures of £69,923,000 and short CFDs of
£12,990,000.
5 Portfolio
Fair Value comprises investments of £1,626,177,000 plus derivative
assets of £5,348,000 less derivative liabilities of £2,615,000 (per
the Balance Sheet below).
Interim Management Report and Directors’ Responsibility
Statement
Interim Dividend
As part of their investment process, the Portfolio Managers focus
on companies capable of growing their dividends over time. The
Board does not impose any income objective in any particular
period, recognising that both capital and income growth are
components of performance, as reflected in the investment objective
of the Company. The Board does, however, have a policy whereby it
seeks to pay a progressive dividend in normal circumstances, paid
twice yearly in order to smooth dividend payments for the reporting
year. Unlike open-ended funds such as OEICs, investment trusts can
hold back some of the income they receive in good years, thereby
building up revenue reserves that can then be used to supplement
dividends during challenging times.
The Company’s revenue return for the six months to 30 June 2024 was 8.38
pence per ordinary share (30 June
2023: 7.38 pence). The Board
has declared an interim dividend of 3.60
pence per ordinary share which is an increase of 10.4% on
the 3.26 pence per ordinary share
paid as the interim dividend in 2023. This will be paid on
25 October 2024 to shareholders on
the register at close of business on 20
September 2024 (ex-dividend date 19
September 2024).
Shareholders may choose to reinvest their dividends for additional
shares in the Company.
Discount Management and Treasury Shares
The Board has an active discount management policy, the primary
purpose of which is to reduce discount volatility. It seeks to
maintain the discount in single digits in normal market conditions.
Buying shares at a discount also results in an enhancement to the
NAV per ordinary share.
In order to assist in managing the discount, the Board has
shareholder approval to hold ordinary shares repurchased by the
Company in Treasury, rather than cancelling them. Shares in
Treasury are then available to be re-issued at NAV per ordinary
share or at a premium to NAV per ordinary share, facilitating the
management of and enhancing liquidity in the Company’s
shares.
In the reporting period and up to the date of this report, the
discount remained in single digits and the Company did not
repurchase any ordinary shares into Treasury or for
cancellation.
Principal Risks and Uncertainties
The Board, with the assistance of the Manager (FIL Investment
Services (UK) Limited), has developed a risk matrix which, as part
of the risk management and internal controls process, identifies
the key existing and emerging risks and uncertainties faced by the
Company.
The Board considers that the principal risks and uncertainties
faced by the Company continue to fall into the following
categories: geopolitical, economic and market risks; investment
performance (including the use of derivatives and gearing) risk;
regulatory (including tax) risk; key person risk; environmental,
social and governance (ESG) risks; cybercrime and information
security risks; discount control risk; and business continuity
risk. Information on each of these risks is given in the Strategic
Report section of the Annual Report for the year ended 31 December 2023 which can be found on the
Company’s pages of the Manager’s website at
www.fidelity.co.uk/europe.
While the principal risks and uncertainties remain the same as
those at the last year end, the magnitude of their uncertainty
continues to grow with the ongoing conflicts in Ukraine and the Middle East, deglobalisation trends and
significant supply disruption, fears of global recession amid
inflationary pressures and financial distress dominating political
risks and industry concerns. Trade and technology concerns between
the US and China, and China and Taiwan, are exacerbating economic headwinds,
such as the cost of living crisis, inflation, high interest rates
and the threat of cyberattacks on critical infrastructure. The
Board remains vigilant about the changing scale of such
risks.
Climate change continues to be a key principal risk confronting
asset managers and their investors. Globally, climate change
effects are already being experienced in the form of changing
weather patterns. Climate change can potentially impact the
operations of investee companies, their supply chains and their
customers. Additional risks may also arise from increased
regulations, costs and net-zero programmes which can all impact
investment returns. The Board notes that the Manager has integrated
ESG considerations, including climate change, into the Company’s
investment process. The Board will continue to monitor how this may
impact the Company as a risk, the main risk being the impact on
investment valuations and potentially shareholder
returns.
The Board and the Manager are also monitoring the emerging risks
posed by the rapid advancement of artificial intelligence (AI) and
technology and how it may threaten the Company’s activities and its
potential impact on the portfolio and investee companies. Although
advances in computing power mean that AI is a powerful tool that
will impact society, there are risks from its increasing use and
manipulation with the potential to harm, including a heightened
threat to cybersecurity.
Investors should be prepared for market fluctuations and remember
that holding shares in the Company should be considered to be a
long-term investment. Risks are mitigated by the investment trust
structure of the Company which means that the Portfolio Managers
are not required to trade to meet investor redemptions. Therefore,
investments in the Company’s portfolio can be held over a
longer-time horizon.
The Manager has appropriate business continuity and operational
resilience plans in place to ensure the continued provision of
services. This includes investment team key activities, including
those of portfolio managers, analysts and trading/support
functions. The Manager reviews its operational resilience
strategies on an ongoing basis and continues to take all reasonable
steps in meeting its regulatory obligations, assess its ability to
continue operating and the steps it needs to take to serve and
support its clients, including the Board.
The Company’s other third-party service providers also have similar
measures in place to ensure that business disruption is kept to a
minimum.
Transactions with the Manager and Related
Parties
The Manager has delegated the Company’s portfolio management and
company secretariat services to FIL Investments International.
Transactions with the Manager and related party transactions with
the Directors are disclosed in Note 14 to the Financial Statements
below.
Going Concern Statement
The Directors have considered the Company’s investment objective,
risk management policies, liquidity risk, credit risk, capital
management policies and procedures, the nature of its portfolio and
its expenditure and cash flow projections. The Directors, having
considered the liquidity of the Company’s portfolio of investments
(being mainly securities which are readily realisable) and the
projected income and expenditure, are satisfied that the Company is
financially sound and has adequate resources to meet all of its
liabilities and ongoing expenses and can continue in operational
existence for a period of at least twelve months from the date of
this Half-Yearly Report.
This conclusion also takes into account the Board’s assessment of
the ongoing risks as outlined above.
Accordingly, the Financial Statements of the Company have been
prepared on a going concern basis.
Continuation votes are held every two years and the next
continuation vote will be put to shareholders at the Annual General
Meeting in 2025.
BY ORDER OF THE BOARD
FIL Investments International
2 August 2024
DIRECTORS’ RESPONSIBILITY STATEMENT
The Disclosure and Transparency Rules (“DTR”) of the UK Listing
Authority require the Directors to confirm their responsibilities
in relation to the preparation and publication of the Interim
Management Report and Financial Statements.
The Directors confirm to the best of their knowledge
that:
a) The
condensed set of Financial Statements contained within the
Half-Yearly Report has been prepared in accordance with the
Financial Reporting Council’s Standard FRS Interim Financial
Reporting; and
b) The
Portfolio Managers’ Half-Yearly Review and the Interim Management
Report above, include a fair review of the information required by
DTR 4.2.7R and 4.2.8R.
In line with previous years, the Half-Yearly Report has not been
audited or reviewed by the Company’s Independent
Auditor.
The Half-Yearly Report was approved by the Board on 2 August 2024 and the above responsibility
statement was signed on its behalf by Vivian Bazalgette, Chairman.
FINANCIAL STATEMENTS
Income Statement for the six months ended 30 June 2024
|
|
Six months ended 30 June 2024
unaudited
|
Six months ended 30 June 2023
unaudited
|
Year ended 31 December 2023
audited
|
|
Notes
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Gains on investments
|
|
–
|
76,095
|
76,095
|
–
|
94,641
|
94,641
|
–
|
165,905
|
165,905
|
Gains on derivative instruments
|
|
–
|
21,012
|
21,012
|
–
|
36,841
|
36,841
|
–
|
50,441
|
50,441
|
Income
|
4
|
41,081
|
–
|
41,081
|
35,816
|
–
|
35,816
|
47,221
|
–
|
47,221
|
Investment management fees
|
5
|
(1,437)
|
(4,311)
|
(5,748)
|
(1,303)
|
(3,910)
|
(5,213)
|
(2,625)
|
(7,877)
|
(10,502)
|
Other expenses
|
|
(521)
|
–
|
(521)
|
(507)
|
–
|
(507)
|
(967)
|
–
|
(967)
|
Foreign exchange losses
|
|
–
|
(1,577)
|
(1,577)
|
–
|
(2,599)
|
(2,599)
|
–
|
(1,464)
|
(1,464)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
Net return on ordinary activities before finance costs and
taxation
|
|
39,123
|
91,219
|
130,342
|
34,006
|
124,973
|
158,979
|
43,629
|
207,005
|
250,634
|
Finance costs
|
6
|
(1,488)
|
(4,463)
|
(5,951)
|
(908)
|
(2,724)
|
(3,632)
|
(2,138)
|
(6,414)
|
(8,552)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
Net return on ordinary activities before
taxation
|
|
37,635
|
86,756
|
124,391
|
33,098
|
122,249
|
155,347
|
41,491
|
200,591
|
242,082
|
Taxation on return on ordinary activities
|
7
|
(3,391)
|
–
|
(3,391)
|
(2,916)
|
–
|
(2,916)
|
(3,390)
|
–
|
(3,390)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
Net return on ordinary activities after taxation for the
period
|
|
34,244
|
86,756
|
121,000
|
30,182
|
122,249
|
152,431
|
38,101
|
200,591
|
238,692
|
Return per ordinary share
|
8
|
8.38p
|
21.22p
|
29.60p
|
7.38p
|
29.91p
|
37.29p
|
9.32p
|
49.08p
|
58.40p
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
The Company does not have any other comprehensive income.
Accordingly, the net return on ordinary activities after taxation
for the period is also the total comprehensive income for the
period and no separate Statement of Comprehensive Income has been
presented.
The total column of this statement represents the Income Statement
of the Company. The revenue and capital columns are supplementary
and presented for information purposes as recommended by the
Statement of Recommended Practice issued by the AIC.
No operations were acquired or discontinued in the period and all
items in the above statement derive from continuing
operations.
Statement of Changes in Equity for the six months ended
30 June 2024
|
Notes
|
Share
capital
£’000
|
Share
premium
account
£’000
|
Capital
redemption
reserve
£’000
|
Capital
reserve
£’000
|
Revenue
reserve
£’000
|
Total
shareholder’
fund
£’000
|
Six months ended 30 June 2024
(unaudited)
|
|
|
|
|
|
|
|
Total shareholders’ funds at 31 December
2023
|
|
10,411
|
58,615
|
5,414
|
1,472,587
|
40,452
|
1,587,479
|
Net return on ordinary activities after taxation for the
period
|
|
–
|
–
|
–
|
86,756
|
34,244
|
121,000
|
Dividend paid to shareholders
|
9
|
–
|
–
|
–
|
–
|
(20,396)
|
(20,396)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
Total shareholders’ funds at 30 June
2024
|
|
10,411
|
58,615
|
5,414
|
1,559,343
|
54,300
|
1,688,083
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
Six months ended 30 June 2023
(unaudited)
|
|
|
|
|
|
|
|
Total shareholders’ funds at 31 December
2022
|
|
10,411
|
58,615
|
5,414
|
1,271,996
|
34,559
|
1,380,995
|
Net return on ordinary activities after taxation for the
period
|
|
–
|
–
|
–
|
122,249
|
30,182
|
152,431
|
Dividend paid to shareholders
|
9
|
–
|
–
|
–
|
–
|
(18,883)
|
(18,883)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
Total shareholders’ funds at 30 June
2023
|
|
10,411
|
58,615
|
5,414
|
1,394,245
|
45,858
|
1,514,543
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
Year ended 31 December 2023 (audited)
|
|
|
|
|
|
|
|
Total shareholders’ funds at 31 December
2022
|
|
10,411
|
58,615
|
5,414
|
1,271,996
|
34,559
|
1,380,995
|
Net return on ordinary activities after taxation for the
year
|
|
–
|
–
|
–
|
200,591
|
38,101
|
238,692
|
Dividends paid to shareholders
|
9
|
–
|
–
|
–
|
–
|
(32,208)
|
(32,208)
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
Total shareholders’ funds at 31 December
2023
|
|
10,411
|
58,615
|
5,414
|
1,472,587
|
40,452
|
1,587,479
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
Balance Sheet as at 30 June
2024
Company Number 2638812
|
Notes
|
30 June
2024
unaudited
£’000
|
31 December
2023
audited
£’000
|
30 June
2023
unaudited
£’000
|
Fixed assets
|
|
|
|
|
Investments
|
10
|
1,626,177
|
1,518,875
|
1,459,305
|
|
|
---------------
|
---------------
|
---------------
|
Current assets
|
|
|
|
|
Derivative instruments
|
10
|
5,348
|
886
|
3,919
|
Debtors
|
|
13,404
|
11,449
|
12,141
|
Amounts held at futures clearing houses and brokers
|
|
4,545
|
8,384
|
5,869
|
Cash and cash equivalents
|
|
42,633
|
52,804
|
36,362
|
|
|
---------------
|
---------------
|
---------------
|
|
|
65,930
|
73,523
|
58,291
|
|
|
=========
|
=========
|
=========
|
Current liabilities
|
|
|
|
|
Derivative instruments
|
10
|
(2,615)
|
(3,521)
|
(1,681)
|
Other creditors
|
|
(1,409)
|
(1,398)
|
(1,372)
|
|
|
---------------
|
---------------
|
---------------
|
|
|
(4,024)
|
(4,919)
|
(3,053)
|
|
|
=========
|
=========
|
=========
|
Net current assets
|
|
61,906
|
68,604
|
55,238
|
|
|
=========
|
=========
|
=========
|
Net assets
|
|
1,688,083
|
1,587,479
|
1,514,543
|
|
|
=========
|
=========
|
=========
|
Capital and reserves
|
|
|
|
|
Share capital
|
11
|
10,411
|
10,411
|
10,411
|
Share premium account
|
|
58,615
|
58,615
|
58,615
|
Capital redemption reserve
|
|
5,414
|
5,414
|
5,414
|
Capital reserve
|
|
1,559,343
|
1,472,587
|
1,394,245
|
Revenue reserve
|
|
54,300
|
40,452
|
45,858
|
|
|
---------------
|
---------------
|
---------------
|
Total shareholders’ funds
|
|
1,688,083
|
1,587,479
|
1,514,543
|
|
|
=========
|
=========
|
=========
|
Net asset value per ordinary share
|
12
|
413.01p
|
388.39p
|
370.55p
|
|
|
=========
|
=========
|
=========
|
Notes to the Financial Statements
1 Principal Activity
Fidelity European Trust PLC is an Investment Company incorporated
in England and Wales with a premium listing on the London
Stock Exchange. The Company’s registration number is 2638812, and
its registered office is Beech Gate, Millfield Lane, Lower Kingswood, Tadworth,
Surrey, KT20 6RP. The Company has been approved by HM Revenue
& Customs as an Investment Trust under Section 1158 of the
Corporation Tax Act 2010 and intends to conduct its affairs so as
to continue to be approved.
2 Publication of Non-statutory Accounts
The Financial Statements in this Half-Yearly Report have not been
audited by the Company's Independent Auditor and do not constitute
statutory accounts as defined in section 434 of the Companies Act
2006 ("the Act"). The financial information for the year ended
31 December 2023 is extracted from
the latest published Financial Statements of the Company. Those
Financial Statements were delivered to the Registrar of Companies
and included the Independent Auditor's Report which was unqualified
and did not contain a statement under either section 498(2) or
498(3) of the Act.
3 ACCOUNTING POLICIES
(i) Basis of Preparation
The Company prepares its Financial Statements on a going concern
basis and in accordance with UK Generally Accepted Accounting
Practice ("UK GAAP") and FRS 102: The Financial Reporting Standard
applicable in the UK and Republic of
Ireland, issued by the Financial Reporting Council. The
Financial Statements are also prepared in accordance with the
Statement of Recommended Practice: Financial Statements of
Investment Trust Companies and Venture Capital Trusts ("SORP")
issued by the Association of Investment Companies ("AIC") in
July 2022. FRS 104: Interim Financial
Reporting has also been applied in preparing this condensed set of
Financial Statements. The accounting policies followed are
consistent with those disclosed in the Company's Annual Report and
Financial Statements for the year ended 31
December 2023.
(ii) Going Concern
The Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for a
period of at least twelve months from the date of approval of these
Financial Statements. Accordingly, the Directors consider it
appropriate to adopt the going concern basis of accounting in
preparing these Financial Statements. This conclusion also takes
into account the Board’s assessment of the risks faced by the
Company as detailed in the Interim Management Report
above.
4 Income
|
Six months
ended
30.06.24
unaudited
£’000
|
Six months
ended
30.06.23
unaudited
£’000
|
Year
ended
31.12.23
audited
£’000
|
Investment income
|
|
|
|
Overseas dividends
|
33,375
|
28,415
|
37,484
|
Overseas scrip dividends
|
–
|
957
|
957
|
UK dividends
|
957
|
965
|
1,679
|
|
---------------
|
---------------
|
---------------
|
|
34,332
|
30,337
|
40,120
|
|
=========
|
=========
|
=========
|
Derivative income
|
|
|
|
Income recognised from futures contracts
|
1,659
|
1,797
|
2,392
|
Dividends received on long CFDs
|
3,536
|
3,339
|
3,570
|
Interest received on CFDs
|
180
|
61
|
333
|
|
---------------
|
---------------
|
---------------
|
|
5,375
|
5,197
|
6,295
|
|
=========
|
=========
|
=========
|
Investment and derivative income
|
39,707
|
35,534
|
46,415
|
|
=========
|
=========
|
=========
|
Other interest
|
|
|
|
Interest received on collateral, bank deposits and money market
funds
|
1,342
|
276
|
798
|
Interest received on tax reclaims
|
32
|
6
|
8
|
|
---------------
|
---------------
|
---------------
|
|
1,374
|
282
|
806
|
|
=========
|
=========
|
=========
|
Total income
|
41,081
|
35,816
|
47,221
|
|
=========
|
=========
|
=========
|
Special dividends of £nil have been recognised in capital during
the period (six months ended 30 June
2023 and year ended 31 December
2023: £710,000).
5 Investment Management Fees
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Six months ended 30 June 2024
(unaudited)
|
|
|
|
Investment management fees
|
1,437
|
4,311
|
5,748
|
|
---------------
|
---------------
|
---------------
|
Six months ended 30 June 2023
(unaudited)
|
|
|
|
Investment management fees
|
1,303
|
3,910
|
5,213
|
|
---------------
|
---------------
|
---------------
|
Year ended 31 December 2023 (audited)
|
|
|
|
Investment management fees
|
2,625
|
7,877
|
10,502
|
|
=========
|
=========
|
=========
|
FIL Investment Services (UK) Limited is the Company’s Alternative
Investment Fund Manager and has delegated portfolio management to
FIL Investments International (”FII“). Both companies are Fidelity
group companies.
FII charges investment management fees at an annual rate of 0.85%
of net assets up to £400 million and 0.65% of net assets in excess
of £400 million. Fees are payable monthly in arrears and are
calculated on a daily basis.
Investment management fees have been allocated 75% to capital
reserve in accordance with the Company‘s accounting
policies.
6 Finance Costs
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Six months ended 30 June 2024
(unaudited)
|
|
|
|
Interest paid on bank deposits
|
7
|
22
|
29
|
Interest paid on CFDs1
|
1,145
|
3,435
|
4,580
|
Costs recognised from futures contracts
|
336
|
1,006
|
1,342
|
|
---------------
|
---------------
|
---------------
|
|
1,488
|
4,463
|
5,951
|
|
=========
|
=========
|
=========
|
Six months ended 30 June 2023
(unaudited)
|
|
|
|
Interest paid on CFDs1
|
647
|
1,942
|
2,589
|
Costs recognised from futures contracts
|
261
|
782
|
1,043
|
|
---------------
|
---------------
|
---------------
|
|
908
|
2,724
|
3,632
|
|
=========
|
=========
|
=========
|
Year ended 31 December 2023 (audited)
|
|
|
|
Interest paid on CFDs1
|
1,601
|
4,803
|
6,404
|
Costs recognised from futures contracts
|
537
|
1,611
|
2,148
|
|
---------------
|
---------------
|
---------------
|
|
2,138
|
6,414
|
8,552
|
|
=========
|
=========
|
=========
|
1 The
interest paid on CFDs is higher in the current reporting period due
to an increase of long CFDs exposures and interest rates. As a
result, the Company has been exposed to higher interest
charges.
Finance costs have been allocated 75% to capital reserve in
accordance with the Company’s accounting policies.
7 Taxation on Return on Ordinary
Activities
|
Six months
ended
30.06.24
unaudited
£’000
|
Six months
ended
30.06.23
unaudited
£’000
|
Year
ended
31.12.23
audited
£’000
|
Overseas taxation
|
3,391
|
2,916
|
3,390
|
|
---------------
|
---------------
|
---------------
|
8 Return per Ordinary Share
|
Six months
ended
30.06.24
unaudited
|
Six months
ended
30.06.23
unaudited
|
Year
ended
31.12.23
audited
|
Revenue return per ordinary share
|
8.38p
|
7.38p
|
9.32p
|
Capital return per ordinary share
|
21.22p
|
29.91p
|
49.08p
|
|
---------------
|
---------------
|
---------------
|
Total return per ordinary share
|
29.60p
|
37.29p
|
58.40p
|
|
=========
|
=========
|
=========
|
The return per ordinary share is based on the net return on
ordinary activities after taxation for the period divided by the
weighted average number of ordinary shares held outside Treasury
during the period, as shown below:
|
£’000
|
£’000
|
£’000
|
Net revenue return on ordinary activities after taxation
|
34,244
|
30,182
|
38,101
|
Net revenue return on ordinary activities after taxation
|
86,756
|
122,249
|
200,591
|
|
---------------
|
---------------
|
---------------
|
Net total return on ordinary activities after
taxation
|
121,000
|
152,431
|
238,692
|
|
=========
|
=========
|
=========
|
|
Number
|
Number
|
Number
|
Weighted average number of ordinary shares held outside Treasury
during the period
|
408,730,523
|
408,730,523
|
408,730,523
|
|
=========
|
=========
|
=========
|
9 Dividends Paid to Shareholders
|
Six months
ended
30.06.24
unaudited
£’000
|
Six months
ended
30.06.23
unaudited
£’000
|
Year
ended
31.12.23
audited
£’000
|
Final dividend of 4.99 pence per ordinary share paid for the year
ended 31 December 2023
|
20,396
|
–
|
–
|
Interim dividend of 3.26 pence per ordinary share paid for the year
ended 31 December 2023
|
–
|
–
|
13,325
|
Final dividend of 4.62 pence per ordinary share paid for the year
ended 31 December 2022
|
–
|
18,883
|
18,883
|
|
---------------
|
---------------
|
---------------
|
|
20,396
|
18,883
|
32,208
|
|
=========
|
=========
|
=========
|
The Company has declared an interim dividend for the six month
period to 30 June 2024 of
3.60 pence per ordinary share (2023:
3.26 pence). The interim dividend
will be paid on 25 October 2024 to
shareholders on the register at close of business on 20 September 2024 (ex-dividend date 19 September 2024). The total cost of this
interim dividend, which has not been included as a liability in
these Financial Statements, is £14,714,000 (2023: £13,325,000).
This amount is based on the number of ordinary shares held outside
Treasury at the date of this report.
10 Fair Value Hierarchy
The Company is required to disclose the fair value hierarchy that
classifies its financial instruments measured at fair value at one
of three levels, according to the relative reliability of the
inputs used to estimate the fair values.
Classification
|
Input
|
Level 1
|
Valued using quoted prices in active markets for identical
assets.
|
Level 2
|
Valued by reference to inputs other than quoted prices included in
level 1 that are observable (i.e. developed using market data) for
the asset or liability, either directly or indirectly.
|
Level 3
|
Valued by reference to valuation techniques using inputs that are
not based on observable market data.
|
Categorisation within the hierarchy has been determined on the
basis of the lowest level input that is significant to the fair
value measurement of the relevant asset. The table below sets out
the Company’s fair value hierarchy:
30 June 2024 (unaudited)
|
Level 1
£’000
|
Level 2
£’000
|
Level 3
£’000
|
Total
£’000
|
Financial assets at fair value through profit or
loss
|
|
|
|
|
Investments
|
1,626,177
|
–
|
–
|
1,626,177
|
Derivative instrument assets
|
531
|
4,817
|
–
|
5,348
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
1,626,708
|
4,817
|
–
|
1,631,525
|
|
=========
|
=========
|
=========
|
=========
|
Financial liabilities at fair value through profit or
loss
|
|
|
|
|
Derivative instrument liabilities
|
–
|
(2,615)
|
–
|
(2,615)
|
|
=========
|
=========
|
=========
|
=========
|
31 December 2023 (audited)
|
Level 1
£’000
|
Level 2
£’000
|
Level 3
£’000
|
Total
£’000
|
Financial assets at fair value through profit or
loss
|
|
|
|
|
Investments
|
1,518,875
|
–
|
–
|
1,518,875
|
Derivative instrument assets
|
–
|
886
|
–
|
886
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
1,518,875
|
886
|
–
|
1,519,761
|
|
=========
|
=========
|
=========
|
=========
|
Financial liabilities at fair value through profit or
loss
|
|
|
|
|
Derivative instrument liabilities
|
(348)
|
(3,173)
|
–
|
(3,521)
|
|
=========
|
=========
|
=========
|
=========
|
30 June 2023 (unaudited)
|
Level 1
£’000
|
Level 2
£’000
|
Level 3
£’000
|
Total
£’000
|
Financial assets at fair value through profit or
loss
|
|
|
|
|
Investments
|
1,459,305
|
–
|
–
|
1,459,305
|
Derivative instrument assets
|
1,120
|
2,799
|
–
|
3,919
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
1,460,425
|
2,799
|
–
|
1,463,224
|
|
=========
|
=========
|
=========
|
=========
|
Financial liabilities at fair value through profit or
loss
|
|
|
|
|
Derivative instrument liabilities
|
–
|
(1,681)
|
–
|
(1,681)
|
|
=========
|
=========
|
=========
|
=========
|
11 Share Capital
|
30 June 2024
unaudited
|
31 December 2023
audited
|
30 June 2023
unaudited
|
|
Number of
shares
|
£’000
|
Number of
shares
|
£’000
|
Number of
shares
|
£’000
|
Issued, allotted and fully paid
|
|
|
|
|
|
|
Ordinary shares of
2.5 pence each held
outside of Treasury
|
|
|
|
|
|
|
Beginning of the period
|
408,730,523
|
10,218
|
408,730,523
|
10,218
|
408,730,523
|
10,218
|
Ordinary shares repurchased into Treasury
|
–
|
–
|
–
|
–
|
–
|
–
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
End of the period
|
408,730,523
|
10,218
|
408,730,523
|
10,218
|
408,730,523
|
10,218
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
Ordinary shares of
2.5 pence each held
in Treasury1
|
|
|
|
|
|
|
Beginning of the period
|
7,717,387
|
193
|
7,717,387
|
193
|
7,717,387
|
193
|
Ordinary shares repurchased into Treasury
|
–
|
–
|
–
|
–
|
–
|
–
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
End of the period
|
7,717,387
|
193
|
7,717,387
|
193
|
7,717,387
|
193
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
Total share capital
|
|
10,411
|
|
10,411
|
|
10,411
|
|
|
=========
|
|
=========
|
|
=========
|
1 Ordinary
shares held in Treasury carry no rights to vote, to receive a
dividend or to participate in a winding up of the
Company.
During the period, no ordinary shares were repurchased into
Treasury (year ended 31 December 2023
and six months ended 30 June 2023:
nil shares).
12 Net Asset Value per Ordinary Share
The calculation of the net asset value per ordinary share is based
on the total Shareholders’ funds divided by the number of ordinary
shares held outside of Treasury.
|
30.06.24
unaudited
|
31.12.23
audited
|
30.06.23
unaudited
|
Total shareholders’ funds
|
£1,688,083,000
|
£1,587,479,000
|
£1,514,543,000
|
Ordinary shares held outside of Treasury at the period
end
|
408,730,523
|
408,730,523
|
408,730,523
|
Net asset value per ordinary share
|
413.01p
|
388.39p
|
370.55p
|
|
=========
|
=========
|
=========
|
It is the Company’s policy that shares held in Treasury will only
be reissued at net asset value per ordinary share or at a premium
to net asset value per ordinary share and, therefore, shares held
in Treasury have no dilutive effect.
13 Capital Resources and Gearing
The Company does not have any externally imposed capital
requirements. The financial resources of the Company comprise its
share capital and reserves, as disclosed in the Balance Sheet
above, and any gearing, which is managed by the use of derivative
instruments. Financial resources are managed in accordance with the
Company’s investment policy and in pursuit of its investment
objective.
The Company’s gross gearing and net gearing at the end of the
period is shown below:
|
Gross gearing
Asset exposure
|
Net gearing
Asset exposure
|
|
£’000
|
%1
|
£’000
|
%1
|
30 June 2024 (unaudited)
|
|
|
|
|
Investments
|
1,626,177
|
96.3
|
1,626,177
|
96.3
|
Long CFDs
|
179,614
|
10.7
|
179,614
|
10.7
|
Long futures
|
69,923
|
4.1
|
69,923
|
4.1
|
|
---------------
|
---------------
|
---------------
|
---------------
|
Total long exposures
|
1,875,714
|
111.1
|
1,875,714
|
111.1
|
|
=========
|
=========
|
=========
|
=========
|
Short CFDs
|
12,990
|
0.8
|
(12,990)
|
(0.8)
|
|
=========
|
=========
|
=========
|
=========
|
Gross asset exposure/net market
exposure
|
1,888,704
|
111.9
|
1,862,724
|
110.3
|
Shareholders’ funds
|
1,688,083
|
|
1,688,083
|
|
|
=========
|
=========
|
=========
|
=========
|
Gearing2
|
|
11.9
|
|
10.3
|
|
|
=========
|
|
=========
|
31 December 2023 (audited)
|
|
|
|
|
Investments
|
1,518,875
|
95.6
|
1,518,875
|
95.6
|
Long CFDs
|
199,945
|
12.6
|
199,945
|
12.6
|
Long futures
|
64,492
|
4.1
|
64,492
|
4.1
|
|
---------------
|
---------------
|
---------------
|
---------------
|
Total long exposures
|
1,783,312
|
112.3
|
1,783,312
|
112.3
|
|
=========
|
=========
|
=========
|
=========
|
Short CFDs
|
12,736
|
0.8
|
(12,736)
|
(0.8)
|
|
---------------
|
---------------
|
---------------
|
---------------
|
Gross asset exposure/net market
exposure
|
1,796,048
|
113.1
|
1,770,576
|
111.5
|
Shareholders’ funds
|
1,587,479
|
|
1,587,479
|
|
|
=========
|
|
=========
|
|
Gearing2
|
|
13.1
|
|
11.5
|
|
|
=========
|
|
=========
|
1 Asset
exposure to the market expressed as a percentage of shareholders’
funds.
2 Gearing
is the amount by which the gross asset exposure/net market exposure
exceeds shareholders' funds expressed as a percentage of
shareholders’ funds.
|
Gross gearing
Asset exposure
|
Net gearing
Asset exposure
|
30 June 2023 (unaudited)
|
£’000
|
%1
|
£’000
|
%1
|
Investments
|
1,459,305
|
96.4
|
1,459,305
|
96.4
|
Long CFDs
|
177,871
|
11.7
|
177,871
|
11.7
|
Long futures
|
60,659
|
4.0
|
60,659
|
4.0
|
|
---------------
|
---------------
|
---------------
|
---------------
|
Total long exposures
|
1,697,835
|
112.1
|
1,697,835
|
112.1
|
|
=========
|
=========
|
=========
|
=========
|
Short CFDs
|
18,101
|
1.2
|
(18,101)
|
(1.2)
|
Gross asset exposure/net market
exposure
|
1,715,936
|
113.3
|
1,679,734
|
110.9
|
Shareholders’ funds
|
1,514,543
|
|
1,514,543
|
|
|
=========
|
=========
|
=========
|
=========
|
Gearing2
|
|
13.3
|
|
10.9
|
|
|
=========
|
|
=========
|
1 Asset
exposure to the market expressed as a percentage of shareholders’
funds.
2 Gearing
is the amount by which the gross asset exposure/net market exposure
exceeds shareholders’ funds expressed as a percentage of
shareholders’ funds.
14 Transactions with the Manager and Related
Parties
FIL Investment Services (UK) Limited is the Company’s Alternative
Investment Fund Manager and has delegated portfolio management and
the role of company secretary to FIL Investments International
(“FII”), the Investment Manager. Both companies are Fidelity group
companies. Details of the fee arrangements are given in Note 5
above.
During the period, fees for portfolio management services of
£5,748,000 (six months ended 30 June
2023: £5,213,000 and year ended 31
December 2023: £10,502,000) were payable to FII. At the
Balance Sheet date, fees for portfolio management services of
£970,000 (31 December 2023: £925,000
and 30 June 2023: £866,000) were
accrued and included in other creditors. FII also provides the
Company with marketing services. The total amount payable for these
services during the period was £116,000 (six months ended
30 June 2023: £160,000 and year ended
31 December 2023: £260,000). At the
Balance Sheet date, marketing services of £55,000 were accrued and
included in other creditors (31 December
2023: £14,000 and 30 June
2023: £nil).
As at 30 June 2024, the Board
consisted of five non-executive Directors (shown in the Directory
in the Half-Yearly Report), all of whom are considered to be
independent by the Board. None of the Directors have a service
contract with the Company. The Chairman receives an annual fee of
£48,000, the Audit Committee Chair an annual fee of £37,250, the
Senior Independent Director an annual fee of £33,500 and each other
Director an annual fee of £31,000. The following members of the
Board hold ordinary shares in the Company: Vivian Bazalgette 30,000 shares, Fleur Meijs 28,970 shares, Milyae Park 10,000
shares, Sir Ivan Rogers 4,569 shares
and Paul Yates 32,000
shares.
The financial information contained in this Half-Yearly Results
Announcement does not constitute statutory accounts as defined in
section 435 of the Companies Act 2006. The financial information
for the six months ended 30 June 2024
and 30 June 2023 has not been audited
or reviewed by the Company’s Independent Auditor.
The information for the year ended 31
December 2023 has been extracted from the latest published
audited financial statements, which have been filed with the
Registrar of Companies, unless otherwise stated. The report of the
Auditor on those financial statements contained no qualification or
statement under sections 498(2) or (3) of the Companies Act
2006.
Neither the contents of the Company's website nor the contents of
any website accessible from hyperlinks on the Company's website (or
any other website) is incorporated into, or forms part of, this
announcement.
A copy of the Half-Yearly Report will shortly be submitted to the
National Storage Mechanism and will be available for inspection at
www.morningstar.co.uk/uk/NSM
The Half-Yearly Report will also be available on the Company's
website at
www.fidelity.co.uk/europe
where up to date information on the Company, including daily NAV
and share prices, factsheets and other information can also be
found.