Fidelity European Trust Plc - Half-year Report

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 Sector Country % Contributors (on a relative basis) 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 Sector Country % Detractors (on a relative basis) 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 Fair Exposure 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 49,769 2.9 49,769 Services Hermès International Personal Goods 47,208 2.8 47,208 Legrand (long CFD) Electronic & Electrical 45,366 2.7 (2,067) Equipment Partners Group Investment Banking & Brokerage 44,027 2.6 44,027 Services Sanofi Pharmaceuticals & Biotechnology 43,126 2.5 43,126 Long Exposures - shares unless otherwise stated Deutsche Börse Group Investment Banking & Brokerage 42,980 2.5 42,980 Services 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 1,805,791 107.0 1,628,636 futures2,3 ========= ========= ========= Long Futures EURO STOXX 50 Future September 69,923 4.1 531 20243 --------- --------------- --------------- ------ Total long exposures after long 1,875,714 111.1 1,629,167 futures3 ========= ========= ========= 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 59,173 derivative assets and liabilities) --------------- Shareholders' Funds (per Balance 1,688,083 Sheet below) ========= 1Asset Exposure is expressed as a percentage of Shareholders' Funds. 2Total long exposures before long futures comprises investments of £1,626,177,000 and long CFDs of £179,614,000. 3See Note 13 below. 4Gross 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. 5Portfolio 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 Six Year months months ended 31 ended 30 ended 30 December June 2024 June 2023 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 - 76,095 76,095 - 94,641 94,641 - 165,905 165,905 investments Gains on - 21,012 21,012 - 36,841 36,841 - 50,441 50,441 derivative instruments Income 4 41,081 - 41,081 35,816 - 35,816 47,221 - 47,221 Investment 5 (1,437) (4,311) (5,748) (1,303) (3,910) (5,213) (2,625) (7,877) (10,502) management fees Other (521) - (521) (507) - (507) (967) - (967) expenses Foreign - (1,577) (1,577) - (2,599) (2,599) - (1,464) (1,464) exchange losses --------- --------- --------- --------- --------- ----- ---- --------- --------- --------- ------ ------ ------ ------ ------ ----- - ------ ------ ------ Net return 39,123 91,219 130,342 34,006 124,973 158,979 43,629 207,005 250,634 on ordinary activities before finance costs and taxation Finance 6 (1,488) (4,463) (5,951) (908) (2,724) (3,632) (2,138) (6,414) (8,552) costs --------- --------- --------- --------- --------- ----- ---- --------- --------- --------- ------ ------ ------ ------ ------ ----- - ------ ------ ------ Net return 37,635 86,756 124,391 33,098 122,249 155,347 41,491 200,591 242,082 on ordinary activities before taxation Taxation on 7 (3,391) - (3,391) (2,916) - (2,916) (3,390) - (3,390) return on ordinary activities --------- --------- --------- --------- --------- ----- ---- --------- --------- --------- ------ ------ ------ ------ ------ ----- - ------ ------ ------ Net return 34,244 86,756 121,000 30,182 122,249 152,431 38,101 200,591 238,692 on ordinary activities after taxation for the period Return per 8 8.38p 21.22p 29.60p 7.38p 29.91p 37.29p 9.32p 49.08p 58.40p ordinary share ========= ========= ========= ========= ========= ========= ========= ========= ========= 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 10,411 58,615 5,414 1,472,587 40,452 1,587,479 shareholders' funds at 31 December 2023 Net return on - - - 86,756 34,244 121,000 ordinary activities after taxation for the period Dividend paid 9 - - - - (20,396) (20,396) to shareholders --------- --------- ---------- --------- --------- ------------ ------ ------ ----- ------ ------ --- Total 10,411 58,615 5,414 1,559,343 54,300 1,688,083 shareholders' funds at 30 June 2024 ========= ========= ========= ========= ========= ========= Six months ended 30 June 2023 (unaudited) Total 10,411 58,615 5,414 1,271,996 34,559 1,380,995 shareholders' funds at 31 December 2022 Net return on - - - 122,249 30,182 152,431 ordinary activities after taxation for the period Dividend paid 9 - - - - (18,883) (18,883) to shareholders --------- --------- ---------- --------- --------- ------------ ------ ------ ----- ------ ------ --- Total 10,411 58,615 5,414 1,394,245 45,858 1,514,543 shareholders' funds at 30 June 2023 ========= ========= ========= ========= ========= ========= Year ended 31 December 2023 (audited) Total 10,411 58,615 5,414 1,271,996 34,559 1,380,995 shareholders' funds at 31 December 2022 Net return on - - - 200,591 38,101 238,692 ordinary activities after taxation for the year Dividends 9 - - - - (32,208) (32,208) paid to shareholders --------- --------- --------- ---------- --------- --------- ------------ ------ ------ ------ ----- ------ ------ --- Total 10,411 58,615 5,414 1,472,587 40,452 1,587,479 shareholders' funds at 31 December 2023 ========= ========= ========= ========= ========= ========= ========= 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 4,545 8,384 5,869 clearing houses and brokers 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 5,414 5,414 5,414 reserve 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 12 413.01p 388.39p 370.55p ordinary share ========= ========= ========= 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 Six Year months months ended ended ended 31.12.23 30.06.24 30.06.23 audited unaudited unaudited £'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 1,659 1,797 2,392 contracts 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, 1,342 276 798 bank deposits and money market funds 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 1,437 4,311 5,748 management fees --------------- --------------- --------------- Six months ended 30 June 2023 (unaudited) Investment 1,303 3,910 5,213 management fees --------------- --------------- --------------- Year ended 31 December 2023 (audited) Investment 2,625 7,877 10,502 management fees ========= ========= ========= 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 7 22 29 bank deposits Interest paid on 1,145 3,435 4,580 CFDs1 Costs recognised 336 1,006 1,342 from futures contracts --------------- --------------- --------------- 1,488 4,463 5,951 ========= ========= ========= Six months ended 30 June 2023 (unaudited) Interest paid on 647 1,942 2,589 CFDs1 Costs recognised 261 782 1,043 from futures contracts --------------- --------------- --------------- 908 2,724 3,632 ========= ========= ========= Year ended 31 December 2023 (audited) Interest paid on 1,601 4,803 6,404 CFDs1 Costs recognised 537 1,611 2,148 from futures contracts --------------- --------------- --------------- 2,138 6,414 8,552 ========= ========= ========= 1The 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 8.38p 7.38p 9.32p per ordinary share Capital return 21.22p 29.91p 49.08p per ordinary share --------------- --------------- --------------- Total return per 29.60p 37.29p 58.40p ordinary share ========= ========= ========= 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 34,244 30,182 38,101 ordinary activities after taxation Net revenue return on 86,756 122,249 200,591 ordinary activities after taxation --------- --------------- --------------- ------ Net total return on ordinary 121,000 152,431 238,692 activities after taxation ========= ========= ========= Number Number Number Weighted average number of ordinary 408,730,523 408,730,523 408,730,523 shares held outside Treasury during the period ========= ========= ========= 9 Dividends Paid to Shareholders Six Six Year months months ended ended ended 31.12.23 30.06.24 30.06.23 audited unaudited unaudited £'000 £'000 £'000 Final dividend of 4.99 pence per ordinary 20,396 - - share paid for the year ended 31 December 2023 Interim dividend of 3.26 pence per ordinary - - 13,325 share paid for the year ended 31 December 2023 Final dividend of 4.62 pence per ordinary - 18,883 18,883 share paid for the year ended 31 December 2022 --------- --------- --------- ------ ------ ------ 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 - (2,615) - (2,615) liabilities ========= ========= ========= ========= 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 (348) (3,173) - (3,521) liabilities ========= ========= ========= ========= 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 - (1,681) - (1,681) liabilities ========= ========= ========= ========= 11 Share Capital 30 June 31 December 30 June 2024 2023 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 408,730,523 10,218 408,730,523 10,218 408,730,523 10,218 of the period Ordinary - - - - - - shares repurchased into Treasury ----------- --------- ----------- --------- ----------- ------ --- ---- ------ ---- ------ ---- ------ End of the 408,730,523 10,218 408,730,523 10,218 408,730,523 10,218 period ========= ========= ========= ========= ========= ========= Ordinary shares of 2.5 pence each held in Treasury1 Beginning 7,717,387 193 7,717,387 193 7,717,387 193 of the period Ordinary - - - - - - shares repurchased into Treasury ----------- --------- ----------- --------- ----------- ------ --- ---- ------ ---- ------ ---- ------ End of the 7,717,387 193 7,717,387 193 7,717,387 193 period ========= ========= ========= ========= ========= ========= Total share 10,411 10,411 10,411 capital ========= ========= ========= 1Ordinary 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 408,730,523 408,730,523 408,730,523 of Treasury at the period end Net asset value per ordinary 413.01p 388.39p 370.55p share ========= ========= ========= 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 Net gearing 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 1,888,704 111.9 1,862,724 110.3 exposure/net market exposure 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 1,796,048 113.1 1,770,576 111.5 exposure/net market exposure Shareholders' funds 1,587,479 1,587,479 ========= ========= Gearing2 13.1 11.5 ========= ========= 1Asset exposure to the market expressed as a percentage of shareholders' funds. 2Gearing is the amount by which the gross asset exposure/net market exposure exceeds shareholders' funds expressed as a percentage of shareholders' funds. Gross Net gearing gearing Asset exposure Asset exposure 30 June 2023 £'000 %1 £'000 %1 (unaudited) 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 1,715,936 113.3 1,679,734 110.9 exposure/net market exposure Shareholders' funds 1,514,543 1,514,543 ========= ========= ========= ========= Gearing2 13.3 10.9 ========= ========= 1Asset exposure to the market expressed as a percentage of shareholders' funds. 2Gearing 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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