Half-year Report
05/08/2024 07:00
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 futures 2,3 1,805,791 107.0 1,628,636
========= ========= =========
Long Futures
EURO STOXX 50 Future September 2024 3 69,923 4.1 531
--------------- --------------- ---------------
Total long exposures after long futures 3 1,875,714 111.1 1,629,167
========= ========= =========
Short Exposures
Short CFDs (1 Holding) 12,990 0.8 (257)
--------------- --------------- ---------------
Gross Asset Exposure 3,4 1,888,704 111.9
========= =========
Portfolio Fair Value 5 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 Six months ended 30 June 2023 Year ended 31 December 2023
unaudited unaudited audited
Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’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 Share Capital Capital Revenue Total
capital premium redemption reserve reserve shareholder’
£’000 account reserve £’000 £’000 fund
£’000 £’000 £’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 31 December 30 June
2024 2023 2023
unaudited audited unaudited
£’000 £’000 £’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 Six months Year
ended ended ended
30.06.24 30.06.23 31.12.23
unaudited unaudited audited
£’000 £’000 £’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 Capital Total
£’000 £’000 £’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 Capital Total
£’000 £’000 £’000
Six months ended 30 June 2024 (unaudited)
Interest paid on bank deposits 7 22 29
Interest paid on CFDs 1 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 CFDs 1 647 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 CFDs 1 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 Six months Year
ended ended ended
30.06.24 30.06.23 31.12.23
unaudited unaudited audited
£’000 £’000 £’000
Overseas taxation 3,391 2,916 3,390
--------------- --------------- ---------------
8 Return per Ordinary Share
Six months Six months Year
ended ended ended
30.06.24 30.06.23 31.12.23
unaudited unaudited 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 Six months Year
ended ended ended
30.06.24 30.06.23 31.12.23
unaudited unaudited audited
£’000 £’000 £’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 Level 2 Level 3 Total
£’000 £’000 £’000 £’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 Level 2 Level 3 Total
£’000 £’000 £’000 £’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 Level 2 Level 3 Total
£’000 £’000 £’000 £’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 31 December 2023 30 June 2023
unaudited audited unaudited
Number of £’000 Number of £’000 Number of £’000
shares shares shares
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 Treasury 1
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 31.12.23 30.06.23
unaudited audited 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 Net gearing
Asset exposure 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
========= ========= ========= =========
Gearing 2 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
========= =========
Gearing 2 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 Net gearing
Asset exposure 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
========= ========= ========= =========
Gearing 2 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.
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