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Preliminary Announcement of Audited Results

For the year ended 31 December 2012

Chairman's Statement

I have pleasure in presenting the Annual Report of Fidelity European Values PLC for the year ended 31 December 2012.


European equities advanced in 2012 following a volatile 2011. After a difficult second quarter, in which anxieties were once again heightened by concerns over the sovereign debt crisis, markets turned a corner in July when European Central Bank ("ECB") President Mario Draghi stated that the ECB would do "whatever it takes" to save the Eurozone. Sentiment improved further after the ECB announced that it had agreed to an unlimited bond purchase programme to lower borrowing costs for some indebted Eurozone nations. Towards the end of the year, risk appetite increased on optimism that US lawmakers would reach an agreement on budget talks to avert the so-called fiscal cliff.

Against this backdrop, I am pleased to report that the net asset value ("NAV") per share of the Company returned 24.7% and outperformed its Benchmark, the FTSE World Europe (ex UK) Index, which returned 17.8%. Stock selection was the prime driver of performance. In particular, holdings in the financials, industrials and healthcare sectors performed well. However, there were some stock specific disappointments, especially in the energy sector, which held back returns. Overall, the focus remains on companies with solid balance sheets and growing dividends. Gearing which was held in a range of 5% - 15% during the year, also aided performance. A detailed review of the performance of the portfolio is provided in the Manager's Review in the Annual Report. (All figures are in sterling and are on a total return basis).


                                                    NAV       Share       FTSE 
                                                              price      World 

One year +24.7 +31.3 +17.8

Five years +8.6 +6.6 -5.1

Since launch (1991) +1,608.6 +1,453.8 +474.3

1 Data prior to the year ended 31 December 2011 is on a net of tax basis

Sources: Fidelity and Datastream as at 31 December 2012

Past performance is not a guide to future returns


The Board continues to adopt an active discount management policy and share buybacks have been made during the year. Whilst the primary purpose of our policy is to reduce share price volatility in relation to net asset value, buying in shares at a discount also results in an enhancement to NAV per share.

Your Board has sanctioned share buybacks over the course of 2012 amounting to 2.7% of the issued share capital of the Company, a much lower figure than the 11.6% repurchased in 2011. The great majority of the repurchases took place in the first half of the year whilst markets were weak. Further details may be found in the Directors' Report in the Annual Report.

I am pleased to report that the lower level of share price volatility relative to the NAV apparent in the second half of 2011 has continued into 2012. Furthermore, the level of discount has narrowed from 14.2% at the start of the year to 9.9% at the year end. This has given rise to a share price total return of 31.3% for 2012, ahead of the NAV total return of 24.7%.

Improved sentiment towards continental European equity markets has undoubtedly been a factor behind the narrowing of the discount. Re-establishing our historically good performance record against the Benchmark Index, under Sam Morse's management, has likewise been important.


The Board intends to continue with its practice of paying out earnings in full. The objective is one of long term capital growth and we will not seek to influence the Manager to determine the level of income of your Company's portfolio in any particular year.

The Board has decided to recommend a final dividend of 27.75 pence per share for the year ended 31 December 2012 (2011: 26.50 pence). This dividend will be payable on 24 May 2013 to shareholders on the register at close of business on 15 March 2013 (ex-dividend date 13 March 2013).

The proposed dividend increase for 2012 over 2011 is therefore 4.7%. Whilst we emphasise that the increase is a function of stock selection and cannot be extrapolated into the future, our Portfolio Manager, Sam Morse, continues to focus on companies which are able to grow their dividends as being one of the underlying factors in his stock selection. A further explanation of the investment process can be found in the Annual Report.


The Company gears through the use of long Contracts For Difference ("CFDs"). As at 31 December 2012, the level of gearing was 11.1% and the Board has been working within a range of 5% - 15%. Gearing made a positive contribution to performance during the year, as can be seen from the attribution analysis in the Annual Report.

It is pleasing to note that the move to using CFDs as a means of gearing the portfolio, introduced in 2011 in place of traditional bank loans, has been positive. Operationally it has worked smoothly and it has been significantly cheaper for the Company, with finance costs reducing from £2,617,000 in 2011 to just £326,000 in 2012; and this in spite of gearing levels actually on average being higher in 2012.


Investment performance was strong during the year and a performance fee is payable, all cumulative past underperformance against the Benchmark Index having been made good. The base fee paid and payable to the Manager is charged fully against revenue. The performance fee is charged against capital. Further details are included in the Directors' Report in the Annual Report.


Simon Duckworth will step down from the Board at the conclusion of the business of the Annual General Meeting on 16 May 2013. Simon has served on the Board for just over 10 years and on behalf of the Board I would like to take this opportunity to thank him for his invaluable contribution to the Company. We wish him well in his future endeavours. In preparation for this, I am delighted to confirm that Marion Sears was appointed a non-executive Director of the Company on 17 January 2013 following a search using an external agency. Marion has extensive commercial and investment experience and is currently the Senior Independent non-executive Director of Dunelm Group plc, and a non-executive Director of Octopus AIM VCT plc and Persimmon plc. Further details are included in her biography in the Annual Report.

In accordance with the UK Corporate Governance Code for Directors of FTSE 350 companies the entire Board is subject to annual election and re-election. The Directors' biographies can be found in the Annual Report. The Directors have a wide range of appropriate skills and experience to make up a balanced board for your Company. With the exception of Simon Fraser, in the opinion of the Board, all other Directors are independent.

Simon Fraser, due to his previous employment relationship with the Manager and his directorship of another investment trust managed by Fidelity, namely Fidelity Japanese Values PLC, is deemed non-independent by the UK Corporate Governance Code. The Board is convinced that Simon Fraser's experience serves the Company well; and the Directors support unanimously his continued position as a Director of the Company.

In line with good corporate governance, the Board had an independent, externally facilitated assessment of its performance during 2012. The evaluation reported that the performance and contribution of the Board was effective and all Directors were committed to their roles. There were no areas of concern reported.

The Board has considered the proposals for the election and re-election of all of the Directors and recommends to shareholders that they vote in favour of the proposals.


In accordance with the Articles of Association of the Company, an ordinary resolution that the Company continue as an investment trust for a further two years was passed at the 2011 Annual General Meeting. A further continuation vote will take place at this year's Annual General Meeting. The Company's performance record has been excellent since launch with a NAV increase of 1,608.6% compared to an increase in the Benchmark Index of 474.3% (on a total return basis). During the past 12 months the Company's NAV has outperformed the Index by 6.9% on a total return basis and is also ahead of the Index over 3, 5 and 10 years. Therefore your Board recommends that shareholders vote in favour of the continuation vote. A further continuation vote will take place at the Annual General Meeting in 2015.


The Annual General Meeting of the Company will be held at Fidelity's offices at 25 Cannon Street, London EC4M 5TA (St Paul's or Mansion House tube stations) on Thursday 16 May 2013 at midday. Full details of the meeting are given in the Annual Report and I look forward to talking with as many shareholders as possible on this occasion.


Investors who stayed the course in continental European equities have been rewarded with an excellent year. Indeed, Europe was one of the strongest areas for equity investment in 2012.

There are a large number of high quality companies quoted on continental European bourses, many also with extensive businesses in Asia and around the world. Value will `out'; such stocks had become overly depressed by the waves of poor sentiment surrounding the political situation in Europe, low economic growth and budget deficits which have to be financed, high unemployment especially in Southern Europe and of course the Euro.

Whilst equities have regained poise, the outlook for earnings and dividend growth is generally muted and one cannot pretend that the underlying political and economic situation in Europe has improved dramatically. It does seem likely that at some point in 2013 some of the worries will once again come to the fore; and it follows that we may well see setbacks and volatility ahead. Our response is to continue to focus on finding and investing in strong companies which offer fundamental value and the prospect of making decent returns from current valuation levels. We are fortunate to have a wide choice of investment opportunities across the region.

Humphrey van der Klugt Chairman 26 February 2013


Susan Platts-Martin - Head of Investment Trusts, FIL Investments International - 01737 836916

Keren Holland - Corporate Communications, FIL Investments International - 0207 074 5262

Christopher Pirnie - Head of UK Company Secretariat, FIL Investment International - 01737 837929

    Income Statement for the year ended 31 December 2012
                                       2012                             2011    

revenue capital total revenue capital total

£'000 £'000 £'000 £'000 £'000 £'000

Gains/(losses) on - 93,403 93,403 - (94,320) (94,320) investments

designated at fair

value through profit

or loss


Gains on derivative - 19,630 19,630 - 3,201 3,201 instruments held at

fair value through

profit or loss


Income* 18,518 - 18,518 22,831 - 22,831

Investment (4,929) (2,243) (7,172) (5,127) - (5,127) management and

performance fees


Other expenses (629) - (629) (710) -


Exchange losses on (76) (153) (229) (73) (2,639) (2,712) other net assets


Exchange gains on - - - - 1,394 1,394 loans


---------- ---------- ---------- ---------- ---------- -- --------

Net return/(loss) 12,884 110,637 123,521 16,921 (92,364) (75,443) before finance costs

and taxation


Finance costs (326) - (326) (2,617) - (2,617)


---------- ---------- ---------- ---------- ---------- -- --------

Net return/(loss) on 12,558 110,637 123,195 14,304 (92,364) (78,060) ordinary activities

before taxation


Taxation on return/ (503) - (503) (1,511) 50 (1,461) (loss) on ordinary



---------- ---------- ---------- ---------- ---------- -- --------

Net return/(loss) on 12,055 110,637 122,692 12,793 (92,314) (79,521) ordinary activities

after taxation for

the year


========== ========== ========== ========== ========== ==========

Return/(loss) per 27.78p 254.97p 282.75p 26.94p (194.42p) (167.48p) ordinary share


========== ========== ========== ========== ========== ==========

2012 2011

£'000 £'000


Income from investments designated at fair value

through profit or loss

Overseas dividends 15,301 20,518

Overseas scrip dividends 1,435 1,987

UK dividends 570 244

---------- --------- -

17,306 22,749

Income from derivative instruments held at fair value

through profit or loss

Dividends on long CFDs 1,162 -

---------- --------- -

18,468 22,749

Other income

Deposit interest 50 46

Income from Fidelity Institutional Liquidity Fund plc - 36

---------- --------- -

Total income 18,518 22,831

========== ==========

** Relates to overseas taxation only

A Statement of Total Recognised Gains and Losses has not been prepared as there are no gains and losses other than those reported in this Income Statement.

The total column of the Income Statement is the profit and loss account of the Company.

All revenue and capital items in the above statement derive from continuing operations.

No operations were acquired or discontinued in the year.

Reconciliation of Movements in Shareholders' Funds for the year ended 31 December 2012

share share capital capital revenue total

capital premium redemption reserve reserve equity

£'000 account reserve £'000 £'000 £'000

                                            £'000       £'000                 

Opening shareholders' 12,362 58,615 3,463 572,985 13,117 660,542 funds: 1 January 2011


Net (loss)/return on - - - (92,314) 12,793 (79,521) ordinary activities after

taxation for the year


Repurchase of ordinary (1,289) - 1,289 (55,664) - (55,664) shares


Dividend paid to - - - - (7,740) (7,740) shareholders


---------- ---------- ---------- ---------- ------ ---- ----------


Closing shareholders' funds: 11,073 58,615 4,752 425,007 18,170 517,617 31 December 2011


Net return on ordinary - - - 110,637 12,055 122,692 activities after taxation

for the year


Repurchase of ordinary (292) - 292 (12,457) - (12,457) shares


Dividend paid to - - - - (11,578) (11,578) shareholders


---------- ---------- ---------- ---------- ------ ---- ----------


Closing shareholders' funds: 10,781 58,615 5,044 523,187 18,647 616,274 31 December 2012


========== ========== ========== ========== ========== ==========


Balance Sheet as at 31 December 2012

Company number 2638812

2012 2011

£'000 £'000

Fixed assets

Investments designated at fair value through 583,938 504,409 profit or loss

---------- -------- --


Current assets

Derivative assets held at fair value through 16,448 4,423 profit or loss

Debtors 1,940 887

Fidelity Institutional Liquidity Fund plc 30 31

Cash at bank 20,450 12,371

---------- -------- --


38,868 17,712

---------- -------- --


Creditors - amounts falling due within one


Derivative liabilities held at fair value (2,747) (1,314) through profit or loss

Other creditors (3,785) (3,190)

---------- -------- --


(6,532) (4,504)

---------- -------- --


Net current assets 32,336 13,208

---------- -------- --


Total net assets 616,274 517,617

========== ==========


Capital and reserves

Share capital 10,781 11,073

Share premium account 58,615 58,615

Capital redemption reserve 5,044 4,752

Capital reserve 523,187 425,007

Revenue reserve 18,647 18,170

---------- -------- --


Total equity shareholders' funds 616,274 517,617

========== ==========


Net asset value per ordinary share 1,428.97p 1,168.57p

========== ==========

    Cash Flow Statement for the year ended 31 December 2012

2012 2011

£'000 £'000

Operating activities

Investment income received 13,165 16,783

Income received on long CFDs 1,162 -

Deposit interest received 53 78

Investment management fee paid (4,721) (5,384)

Directors' fees paid (161) (107)

Other cash payments (675) (494)

---------- -------- --

Net cash inflow from operating activities 8,823 10,876

---------- -------- --

Finance costs

Interest paid on long CFDs and bank loans (335) (2,606)

---------- -------- --

Net cash outflow from finance costs (335) (2,606)

---------- -------- --

Overseas taxation recovered 1,106 2,608

---------- -------- --

Financial investments

Purchase of investments (129,219) (278,237)

Disposal of investments 144,451 372,990

---------- -------- --

Net cash inflow from financial investments 15,232 94,753

---------- -------- --

Derivative activities

Proceeds of long CFD positions closed 9,038 92

---------- -------- --

Net cash inflow from derivative activities 9,038 92

---------- -------- --

Dividend paid to shareholders (11,578) (7,740)

---------- -------- --

Net cash inflow before use of liquid 22,286 97,983 resources and financing

---------- -------- --

Cash flow from management of liquid resources

Fidelity Institutional Liquidity Fund plc 1 21,502

---------- -------- --

Net cash inflow from management of liquid 1 21,502 resources

---------- -------- --

Net cash inflow before financing 22,287 119,485

---------- -------- --


Repurchase of ordinary shares (14,055) (54,354)

Loans repaid - (54,418)

---------- -------- --

Net cash outflow from financing (14,055) (108,772)

---------- -------- --

Increase in cash 8,232 10,713

========== ==========

The above statements have been prepared on the basis of the accounting policies as set out in the annual financial statements to 31 December 2012. This preliminary statement, which has been agreed with the Auditor, was approved by the Board on 26 February 2013 and agreed by the Auditor on 27 February 2013. It is not the Company's statutory financial statements. The statutory financial statements for the financial year ended 31 December 2011 have been delivered to the Registrar of Companies. The statutory financial statements for the financial year ended 31 December 2012 have been approved and audited but have not yet been filed. The statutory financial statements for the financial years ended 31 December 2011 and 31 December 2012 received unqualified audit reports, did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying the report and did not contain statements under section 498(2) and (3) of the Companies Act 2006. The annual report and financial statements will be posted to shareholders as soon as is practicable and in any event no later than 13 April 2013.


-0- Feb/27/2013 17:03 GMT

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