PR Newswire
LONDON, United Kingdom, March 18
Fidelity European TRUST PLC
Final Results for the year ended 31 December 2025
Financial Highlights:
· The Board of Fidelity European Trust PLC (the «Company») recommends a final
dividend of 6.00 pence which together with the interim dividend payment of 3.90
pence per share (totalling 9.90 pence) represents an increase of 8.8% over the
total dividend of 9.10 pence paid in the prior year.
· During the year ended 31 December 2025, the Company reported a net asset
value (NAV) total return of +16.2% and a share price total return of +21.1%.
· The Company’s Benchmark, the FTSE World Europe ex UK Index, rose by 27.9%
over the same period.
· Positive contributors to performance included financial holdings and
gearing.
· The Portfolio Managers believe equities remain attractively valued relative
to US peers.
Contacts
For further information, please contact:
Smita Amin
Company Secretary
01737 836347
FIL Investments International
Chairman’s Statement
This is my first Annual Report for the Company, having joined the Board of
Directors in November 2024 and taken over as Chairman from Vivian Bazalgette at
the last AGM in May 2025. On behalf of the Board and our shareholders, I would
like to place on record our thanks to Vivian, who became Chairman following the
2016 AGM, for his strong leadership and invaluable contribution to the Company’s
strategy which has helped sustain its successful returns to shareholders over
the long-term.
2025 proved to be another busy year, not just on the world political stage and
in European financial markets, but also for your Company given the combination
with Henderson European Trust plc («HET»), which completed in late September.
The considerable benefits of the combination are set out below, but first I
would like to extend a very warm welcome to former HET shareholders, who I hope
will remain happy shareholders of this Company for many years to come.
While European stock market performance in 2024 was muted as a result of
geopolitical and macroeconomic concerns, 2025 saw strong returns despite some of
the previous year’s fears – notably, higher US trade tariffs – becoming reality.
In a more fractious global environment, Europe turned to self-help measures,
such as the European Central Bank (ECB) interest rate cuts and wide-ranging
fiscal stimulus in Germany, leading to an appreciation in the Euro and a
tailwind for more cyclically sensitive stocks. As discussed below and in the
Portfolio Managers’ Review that follows, the nature of the Company’s investment
philosophy is to seek companies based on four key criteria: attractive
valuations, disciplined use of capital; cash generation; and strong balance
sheets to ensure the ability to grow dividends. This means that periods
characterised by sharp, momentum-led or cyclical rallies, such as those
experienced in 2025, can act as a headwind for a portfolio that prioritises
sustainable cash generation and downside resilience.
Performance
For the year ended 31 December 2025, your Company delivered a net asset value
(«NAV») total return of 16.2% in sterling, which, while a good outcome in
absolute terms, was significantly behind the 27.9% total return from the
Benchmark Index, the FTSE World Europe ex UK Index in sterling terms. With the
discount to NAV having narrowed appreciably during the year, the share price
total return was higher, at 21.1%.
Sam and Marcel give a detailed picture of the contributors to and detractors
from performance in their Portfolio Managers’ Review below. In brief, however,
some of the factors underlying the underperformance against the Benchmark Index
include holding Danish pharmaceutical firm Novo Nordisk through a period of poor
news flow; being underweight in defence stocks, which they see as more than
pricing in increased European defence spending; and preferring France to more
highly favoured Germany, albeit with a skew towards global companies that are
less exposed to the French domestic economy. However, perhaps more important
than all of these has been investor enthusiasm for a narrow number of stocks
that do not necessarily share the combination of attractive starting valuations
and long-term capital and income growth potential that your Portfolio Managers
favour.
Over the longer-term, performance remains consistent, averaging 10-13% per annum
for both the NAV and share price total return over three, five and 10 years,
since Sam’s appointment in 2011 and since the Company’s launch in 1991. We have
also matched or outperformed the Benchmark Index return over 10 years, as well
as beating the average return of the AIC Europe peer group over three, five and
10 years (and in NAV terms over one year).
Combination with Henderson European Trust plc
Following the resignation of HET’s portfolio managers in January 2025 and
consultation with shareholders, the Board of HET (which itself was formed
through the merger of Henderson EuroTrust plc («HNE») and Henderson European
Focus Trust plc («HEFT») in 2024), undertook a comprehensive review of its
options and a competitive pitch process, leading to the recommendation in June
of a combination with Fidelity European Trust PLC («FEV»). Through combining the
two largest investment companies in the Association of Investment Companies’
(«AIC») Europe sector, the proposal sought to create a market-leading European
equity investment enjoying the benefits of scale and enhanced liquidity with
continuity of investment style, given both trusts’ focus on quality companies at
attractive valuations. HET shareholders were offered the choice of new FEV
shares or a cash exit of up to 33%, and it was pleasing to note that the cash
option was undersubscribed, with less than 30% electing to take the cash
element. The deal completed on 29 September 2025, resulting in the issuance of
111,902,155 shares in the Company.
The proposals for the combination were covered in detail in the Half Year Report
for the six months ended 30 June 2025, but now that it has taken place, it is
worth revisiting some of the benefits.
·Increased scale: Your company now has net assets of more than £2bn, placing it
in the top 10 by assets of all equity investment companies. While this may seem
to have limited relevance for individual shareholders, consolidation in the
wealth management market – historically a key source of demand for investment
trust shares – means investment companies now need significant scale to make it
on to centralised buy lists, given the large sums at work and the need to
maintain liquidity, which can be challenging for investors who account for a
significant proportion of a company’s share register. As one of the larger
companies in the FTSE 250 Index, we can also enjoy greater demand from index
-tracking funds.
·Lower management fees and ongoing charges: Fidelity agreed, with effect from
completion of the HET deal, a reduction in its tiered annual management fee to:
0.70% on net assets up to £400m, 0.65% on net assets from £400m to £1.4bn and
0.55% on net assets in excess of £1.4bn. This revised fee has resulted in a
blended annual management fee rate of 0.62% based on net assets as at 31
December 2025. The lower management fee, together with economies of scale
(meaning fixed costs are spread over a larger base), is feeding into a reduced
ongoing charges ratio («OCR»). For the year under review, the OCR was 0.73%
(2024: 0.76%) and reflecting the revised fee arrangement together with the
economies of scale the OCR going forward is 0.68%.
·Enhanced discount management policy: The Board proposed an enhancement to the
Company’s discount management policy with the aim of maintaining any share price
discount to NAV in mid-single digits (previously below 10%) in normal market
conditions. The steps taken to manage the discount are discussed in a separate
section below.
·Governance benefits: As part of the combination, we welcomed two new Directors
to the Board: Vicky Hastings, formerly chairman of HET and its predecessor HEFT,
and Rutger Koopmans, who was a director of HNE before joining the HET board. As
well as providing continuity for former HET (as well as HEFT and HNE)
shareholders, Vicky, with her strong investment management background, and
Rutger, a Dutch national with a wealth of experience as a financial
professional, are strong additions to the Company’s Board.
Dividends
Sustainable and growing dividends are a key feature your Portfolio Managers seek
when analysing potential holdings for your Company’s portfolio. The Board has a
policy whereby it seeks to deliver a progressive dividend in normal
circumstances, paid twice yearly in order to smooth dividend payments for the
reporting year. We understand that dividends are also important to our
shareholders, which is why your Company has increased its annual payout for the
past 14 years, placing it among the AIC’s `next generation of dividend heroes’
(investment companies with more than 10 but fewer than 20 consecutive years of
annual dividend growth).
In the year under review, the Company’s revenue return was 11.30 pence per
ordinary share (2024: 10.41 pence) and an interim dividend of 3.90 pence per
share was paid on 23 October 2025 (an increase of 8.3% on the 3.60 pence paid
for the same period in 2024). The Board is pleased to recommend a final dividend
of 6.00 pence for the year ended 31 December 2025 (2024: 5.50 pence), bringing
the total dividend for the year to 9.90 pence (2024: 9.10 pence), an increase of
8.8% and a 15th consecutive annual dividend increase.
Subject to approval by shareholders at the Annual General Meeting («AGM») on 12
May 2026, the final dividend will be paid on 19 May 2026 to shareholders on the
register at close of business on 27 March 2026 (ex-dividend date 26 March 2026).
Shareholders may choose to reinvest their dividends for additional shares in the
Company.
Discount Management and Treasury Shares
The success of the enhanced discount management policy (see Combination with HET
above) can be seen in the narrowing of the discount to NAV during the year, from
8.0% at the beginning of the year to 4.1% as at 31 December 2025. Having
previously sought to maintain the discount in single figures, the policy now is
to maintain a maximum discount in the mid-single digits in normal market
conditions. For the majority of 2025, even before the proposed combination with
HET, the discount to NAV was in mid or low single digits, with a low of 0.2% in
November, having seen a high of 9.9% at the start of the year.
During the year, a total of 9,286,723 shares were repurchased into Treasury
(2024: nil), equal to 2.2% of the shares in issue at the beginning of the year.
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 (which numbered 17,004,110 at the year end) are then
available to be reissued 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. As buying back shares at a discount to NAV is accretive, the
Board is seeking shareholder approval to renew this authority at the AGM on 12
May 2026.
Gearing
The Company continues to gear mainly through the use of derivative instruments,
primarily contracts for difference (CFDs). However, as part of the combination
with HET, the Company acquired a small amount of fixed gearing €35m at par value
in the form of two very long-term private loan notes at a particularly
attractive blended interest rate of only 1.57%. Having this element of
structural gearing provides the Company with a degree of diversification in its
counterparty risk, as well as potentially allowing Sam and Marcel to take a
longer-term view on some of their geared positions.
The Portfolio Managers have flexibility to gear within the parameters set by the
Board, the rationale being that over the longer-term carefully monitored levels
of gearing will enhance returns from a rising market. The ability to do this is
a key advantage of the investment company structure. As at 31 December 2025, the
Company’s gross gearing was 9.7% (2024: 11.3%), with net gearing also at 9.7%
(2024: 11.3%). In the reporting year, gearing was maintained within the limits
set by the Board and made a positive contribution to NAV performance, as can be
seen from the Attribution Analysis table in the Annual Report.
The Board monitors the level of gearing and the use of derivative instruments
carefully and has defined a risk control framework for this purpose which is
reviewed at each Board meeting. It should be emphasised that all gearing is
subject to the Portfolio Managers’ confidence in identifying attractive
investment opportunities, and to their remaining attractive.
Due diligence trip to Norway
Towards the end of the reporting year, the Board had the opportunity to visit
Oslo with your Portfolio Managers, and we were privileged to be invited to
observe a meeting with the senior management of DNB Bank, one of Norway’s
leading financial institutions. One of Fidelity’s great strengths is the depth
of its analyst team, with 38 analysts devoted to the European stock market. It
was fascinating to see one of the analyst team interacting with Sam, Marcel and
DNB, and gave us great confidence both in the calibre of the team and the
respect they command in the market.
Board of Directors
As mentioned above, I joined the Company’s Board in November 2024 and assumed
the role of Chairman on the retirement of Vivian Bazalgette at the AGM in May
2025. Also new to the Board are Vicky Hastings and Rutger Koopmans, who joined
as part of the combination with HET. Whilst Rutger has already served nine
years, having been a director of HNE from 2016 until it merged with HEFT to
become HET in 2024, the Board feels that it is important to extend his tenure to
give him a full year of representing HET (and HNE) shareholders and the
intention therefore is that Rutger will retire at the AGM in May 2027.
Paul Yates, Senior Independent Director, has served on your Company’s Board
since 2017, and will retire at the AGM on 12 May 2026. Paul has considerable
experience in investment management and investment trusts, both valuable assets
during his tenure and his contribution to the Board will be greatly missed. In
respect of skills that we will lose when Paul retires, Vicky’s appointment will
give us continuity in this regard with her strong background in investment
management.
Fleur Meijs, Chair of the Audit Committee, will have completed nine years on the
Board in September 2026 and will therefore not seek re-election at the AGM in
May 2027. A recruitment process to appoint her replacement will be conducted
later this year.
Following the AGM at which Paul retires, the Board will reduce to six Directors
and then become five following the 2027 AGM when Rutger and Fleur retire.
Annual General Meeting
The Company’s AGM will be held at 11.00 am on 12 May 2026 at 4 Cannon Street
EC4M 5AB and virtually via the online Lumi AGM meeting platform.
The AGM provides a great opportunity for shareholders to hear first-hand from
your Portfolio Managers and to meet the Company’s Directors, and of course, for
us to meet you. We hope to see as many of you as possible on the day. Full
details of the AGM are below.
Outlook
After a year of strong performance, with markets having risen significantly,
many investors in Europe are looking for further progress supported by potential
productivity gains, interest rate cuts, continued fiscal stimulus and a belief
that `the worst is over’ in relation to US trade tariffs. This has led to a
meaningful improvement in corporate earnings expectations from the flat outlook
anticipated for 2025. While the path ahead may not be linear in these uncertain
times, our team believe the portfolio is well positioned through its focus on
high-quality, cash-generative businesses with strong balance sheets.
Davina Walter
Chairman
17 March 2026
ANNUAL GENERAL MEETING – TUESDAY, 12 MAY 2026 AT 11.00 AM
The AGM of the Company will be held at 11.00 am on Tuesday, 12 May 2026 at 4
Cannon Street, London EC4M 5AB (nearest tube stations are St Paul’s or Mansion
House) and virtually via the online Lumi AGM meeting platform. Full details of
the meeting are given in the Notice of Meeting in the Annual Report.
For those shareholders who are unable to attend in person, we will live-stream
the formal business and presentations of the meeting online.
Sam Morse and Marcel Stötzel, the Portfolio Managers, will be making a
presentation to shareholders highlighting the achievements and challenges of the
year past and the prospects for the year to come. They and the Board will be
very happy to answer any questions that shareholders may have. Copies of their
presentation can be requested by email at [email protected] or in writing
to the Secretary at FIL Investments International, Beech Gate, Millfield Lane,
Lower Kingswood, Tadworth, Surrey KT20 6RP.
Properly registered shareholders joining the AGM virtually will be able to vote
on the proposed resolutions. See Note 9 to the Notes to the Notice of Meeting in
the Annual Report for details on how to vote virtually. Investors viewing the
AGM online will be able to submit live written questions to the Board and the
Portfolio Managers and we will answer as many of these as possible at an
appropriate juncture during the meeting.
Further information and links to the Lumi platform may be found in Note 9 to the
Notes to the Notice of Meeting in the Annual Report. On the day of the AGM, in
order to join electronically and ask questions via the Lumi platform,
shareholders will need to connect to the website https://web.lumiagm.com.
Please note that investors on platforms, such as Fidelity Personal Investing,
Hargreaves Lansdown, Interactive Investor or AJ Bell Youinvest, will need to
request attendance at the AGM in accordance with the policies of your chosen
platform. They may request that you submit electronic votes in advance of the
meeting. If you are unable to obtain a unique IVC and PIN from your nominee or
platform, we will also welcome online participation as a guest. Once you have
accessed https://meetings.lumiconnect.com from your web browser on a tablet or
computer, you will need to enter the Lumi Meeting ID which is 100-968-191-255.
You should then select the `Guest Access’ option before entering your name and
who you are representing, if applicable. This will allow you to view the meeting
and ask questions, but you will not be able to vote.
Further information on how to vote across the most common investment platforms
is available at the following link: https://www.theaic.co.uk/how-to-vote-your
-shares
Portfolio Managers’ Review
Question
How has the Company performed over the year to 31 December 2025, both in
absolute terms and relative to its Benchmark Index?
Answer
The Company delivered a positive double-digit return in absolute terms in 2025,
but underperformed its Benchmark Index, the FTSE World Europe ex UK Index. Over
the year to 31 December 2025, the net asset value («NAV») rose 16.2%. Thanks to
a narrowing of the discount, the total return to shareholders was 21.1% but this
still lagged the Benchmark Index which climbed by 27.9% on a total return basis.
This outcome partly reflects the Company’s investment approach, which means it
can lag in strong, fast-moving `risk-on’ markets like we saw in 2025 following
Germany’s fiscal stimulus announcement. Periods characterised by sharp, momentum
-led or cyclical rallies, can act as a headwind for our portfolio that
prioritises sustainable cash generation and downside resilience.
Question
What were the principal drivers of performance in 2025, and to what extent was
this driven by stock selection versus geographic or sector allocation?
Answer
After sustained outflows for the asset class between 2022 and 2024, European
equity funds recorded renewed inflows in 2025, as investors diversified away
from a US market which had become highly concentrated on a number of expensive
technology stocks. A weaker US dollar further enhanced the appeal of non-US
assets.
The Company’s strategy is to be `benchmark-aware’, with relatively tight
controls around sector exposures. As a result, we usually expect performance to
be predominantly driven by stock selection rather than sector or geographic
allocation, with relative returns largely determined by company-specific
outcomes. In 2025, however, performance was influenced to some extent by the
prevailing market environment, which favoured cyclical and value-oriented stocks
following the announcement of fiscal stimulus in Germany. Unfortunately, the
relative contribution from stock selection was also negative and so did not
offset the stylistic headwinds. The Company’s gearing contributed positively to
absolute returns in a strong market (see the Attribution Analysis table in the
Annual Report).
European equity markets were characterised by sharp, value-led and cyclical
rallies, with areas such as defence, peripheral banks and German cyclicals
leading the market. The Company’s emphasis on quality businesses, sustainable
dividend growth and downside resilience meant that it was underweight in many of
these segments, and this acted as a drag on relative performance.
Limited exposure to defence stocks such as Rheinmetall detracted following
announcements of increased European defence spending. In addition, holdings
including health care company Novo Nordisk and chemicals producer Symrise,
detracted on company-specific developments, while software businesses SAP and
Dassault Systèmes came under pressure amid weaker software spending and
uncertainty around the competitive implications of AI adoption. Despite these
near-term headwinds, we believe the long-term fundamentals of most of these
companies remain intact and valuations are now attractive relative to their
prospects.
Stocks in the financials’ sector, including Bankinter, ABN AMRO Bank, KBC Group,
and Intesa Sanpaolo, were the top contributors to performance as they delivered
strong earnings and re-rated amid rising European bond yields and German fiscal
spending plans. However, not holding peripheral banks, including UniCredit,
Banco Santander and BBVA, proved costly as were our investments in private
equity holdings Partners Group Holding and 3i Group.
Below are the top five stock contributors and detractors to performance in the
Company’s reporting year.
Top 5 Stock Contributors (on a relative basis) %
Bankinter +1.3
ABN AMRO Bank +1.2
KBC Group +0.7
Intesa Sanpaolo +0.7
ASML +0.6
=========
Top 5 Stock Detractors (on a relative basis) %
Novo Nordisk -1.7
Symrise -1.3
Partners Group Holding -1.1
SAP -1.0
Dassault Systèmes -1.0
=========
Question
How was the combination with Henderson European Trust plc? What have been the
key benefits for shareholders of the enlarged Company, and how smoothly was the
integration of the portfolios and investment processes executed?
Answer
The combination with Henderson European Trust plc («HET»), which became
effective on 29 September 2025, followed a comprehensive and competitive review
process initiated after the resignation of HET’s co-portfolio managers earlier
in the year. Supported by its advisers, the HET Board undertook a formal request
-for-proposal process involving a wide range of potential managers and
consolidation partners. Fidelity’s proposal was ultimately selected as the
option best positioned to deliver long-term value for shareholders, reflecting
the strength of your Company’s investment capabilities and strategic
positioning.
Following the combination, Fidelity European Trust PLC has consolidated its
position as the largest European equity investment trust, with a market
capitalisation now exceeding £2 billion. We were delighted to have been chosen
after a competitive tender process, not least for out bottom-up investment
approach, ensuring continuity and stability for both existing and new
shareholders.
The enlarged scale of the Company delivers clear shareholder benefits. A new
tiered management fee structure and improved operating leverage have resulted in
a material reduction in the ongoing charges ratio. Fidelity also made a
significant contribution to the costs of the transaction, equivalent to a waiver
of twelve months of management fees on the assets rolling over from HET, which
is expected to fully offset the Company’s direct transaction costs. The Board
has also enhanced the Company’s discount management policy, with the aim of
maintaining the discount in mid-single digits in normal market conditions.
The integration of the portfolios and investment processes was executed smoothly
and in an orderly manner, with assets aligned to the Company’s established
investment framework and risk controls. The enlarged Company continues to
operate with its existing capital structure, including its approach to gearing
and loan notes, which remain subject to Board oversight and are described in the
Financial Statements. The aggregate exposure of the Company to equities,
including from borrowing and the use of derivatives, but excluding hedging, will
not exceed 130% of total net assets (a gearing level of 30%). As part of the
combination with HET, the Company now has unsecured borrowings of 1.53% Series A
senior notes 2047 and 1.66% Series B senior notes 2052 of €25m and €10m,
respectively.
Question
For new shareholders, could you outline your bottom-up stock selection approach,
and how this process contributed to performance over the past year?
Answer
We employ a bottom-up, fundamentally driven investment approach. The focus is on
identifying high-quality European companies with durable business models, strong
balance sheets and the ability to generate sustainable, and growing, cash flows
and dividends over time.
As active Portfolio Managers, we seek attractively valued companies that exhibit
good long-term structural growth prospects and can grow dividends sustainably
over the next three to five years. We look for four key characteristics:
positive fundamentals (exemplified by structural growth prospects, a proven
business model, and disciplined use of capital); the ability to generate cash; a
strong balance sheet; and a compelling valuation.
We invest cautiously, looking to manage the strategy’s downside risk and build a
balanced, fully invested portfolio that is benchmark aware. Turnover is low,
reflecting the long-term approach. Risk is managed through diversification and
disciplined position sizing.
This approach contributed to performance during the year through bank holdings
such as Bankinter, ABN AMRO Bank, KBC Group, and Intesa Sanpaolo, which
delivered strong earnings. French industrial group Legrand also performed well
as it saw accelerated growth in its datacentre business, ongoing strength in
underlying organic trends and positive contributions from recent acquisitions.
Question
European equities performed strongly in 2025, despite ongoing macroeconomic and
geopolitical uncertainty. How are you assessing the ability of the companies in
the portfolio to deliver sustainable earnings and dividend growth into 2026 and
beyond?
Answer
Although European equities delivered strong absolute and relative performance in
2025, we are conscious that this occurred alongside earnings downgrades,
valuation expansion and persistent macroeconomic and geopolitical uncertainty.
As we look into 2026 and beyond, our assessment of the ability of companies in
the portfolio to deliver sustainable earnings and dividend growth is firmly
rooted in bottom-up fundamentals rather than extrapolating recent market
strength. We focus on balance sheet resilience, cash flow durability, returns on
invested capital and the ability of companies to maintain or grow dividends
across the cycle. Indeed, at the time of writing, the escalation in the Middle
East suggests that a cautious approach will be prudent.
While not cheap in absolute terms, European equities still look attractive
relative to US equities. Valuations across nearly all sectors trade at a
discount to US peers, often beyond what differences in growth, margins or
returns can justify. This is also the case if we compare valuations on an equal
weighted basis to remove the skew to the Mag 7 (Mag 7 are the Magnificent Seven
major technology companies that have driven significant stock market growth over
the past decade. The seven companies are Apple, Microsoft, Amazon, Alphabet,
Meta, Nvidia and Tesla). The equal weight MSCI Europe Index forward price
-earnings ratio trades at a 21.5% discount to the US, compared to a 25.7%
discount on a market cap weighted basis. All European sectors, except
communication services, trade at a forward price-earnings discount to their US
counterparts on an equal weight basis. This creates an environment where
expectations are low, and companies do not need especially bullish assumptions
to deliver acceptable outcomes. In several sectors, including financials, health
care, utilities and parts of industrials, European companies generate earnings
and returns comparable to US peers, yet trade much cheaper, providing a
meaningful margin of safety.
Within the portfolio, we continue to emphasise companies with strong free cash
-flow generation and disciplined capital allocation, which supports sustainable
dividends even when earnings growth is uneven. This is evident in holdings such
as ASML, which can have cyclicality in its orders, but remains the world’s
leading supplier of photolithography equipment used in semiconductor
manufacturing. More broadly, the portfolio yield, in aggregate, is now close to
the market yield, which historically has been a favourable indicator of positive
long-term returns relative to the Benchmark Index, although it is no guarantee
in terms of absolute returns.
Question
Looking back over the year, were there any material developments or outcomes
that surprised you? If so, did these lead to changes in portfolio positioning or
investment theses?
Answer
Through 2025, several developments were more surprising than initially expected.
At a market level, the resilience of European equities stood out, particularly
given ongoing geopolitical tensions, renewed US-EU trade frictions and political
uncertainty across the region. Despite these headwinds, markets were supported
by a soft economic landing, easing inflation, ECB rate cuts and a meaningful
fiscal pivot towards defence and infrastructure spending. The recovery in
investor flows into European equity funds after several years of outflows was
also notable, reflecting diversification away from relatively expensive and
concentrated US equity exposure.
At the stock level, there were some unexpected outcomes that prompted
reassessment of individual investment theses. The extent of the setbacks at Novo
Nordisk, the leading global health care company, was one such example, with
disappointing late-stage trial results, pricing actions in the US, a profit
warning and a CEO change all occurring in quick succession. Given the failure of
the latest clinical trial for the next-generation weight loss drug, our
investment thesis – predicated on Novo’s continued market dominance – no longer
holds. As a result, we have exited the position.
Towards the end of the year, there was a brief slowdown in like-for-like sales
at Action, the discount retailer owned by 3i Group, which was a surprise after a
prolonged period of strong performance. However, the weakness was isolated to
one geographic area over a one-month period, and other segments continued to
report strong sales growth. As such, we are cautious to extrapolate this to a
broader trend and remain constructive on the company.
In other areas, companies such as Symrise, Sika and Dassault Systèmes, were
affected by cyclical weakness, cautious customer behaviour or softer guidance,
which weighed on share prices. These developments did not result in wholesale
changes to portfolio strategy, but they did lead to selective adjustments.
Where conviction in the long-term thesis weakened, positions were exited,
including LVMH Moët Hennessy following a change in dividend policy and some
management departures, as well as Sodexo and PUMA. Conversely, where near-term
disappointment appeared to overshadow intact long-term fundamentals, we
selectively added or maintained exposure, including in ASML, Dassault Systèmes
and Symrise. Overall, surprises during the year reinforced the importance of
disciplined stock selection and valuation awareness rather than prompting a
change in investment philosophy.
Question
The dividend has increased for fourteen consecutive years, putting the Company
on the AIC’s `next generation’ of dividend heroes. How do you look at dividends
versus growth when making an investment decision?
Answer
When making investment decisions, dividends are considered within the context of
a company’s overall cash-generation capability and financial strength, rather
than as a standalone objective. The portfolio focuses on identifying
attractively valued companies with strong long-term prospects for cash
generation and dividend growth, supported by resilient business models and
robust balance sheets. This reflects the belief that the ability to sustain and
grow dividends over time is closely linked to the durability and quality of
underlying earnings and cash flows.
The portfolio is constructed using a bottom-up approach, with investment
decisions driven by company-specific fundamentals rather than short-term
macroeconomic considerations. Growth opportunities are therefore assessed
alongside capital discipline and balance-sheet resilience. Companies such as
ASML illustrate this approach: despite having a low absolute dividend yield, the
dividend has grown for many years thanks to a strong business model given a
monopolistic position in Extreme Ultraviolet (EUV) lithography machines which
are critical for making the most advanced semiconductors.
The Company’s record of fourteen consecutive years of dividend growth is a
consequence of this disciplined focus on cash generation and financial strength,
rather than pursuing high yields at the expense of long-term growth. This
discipline has been a key contributor to our long-term record of income growth
and total return, with the AIC also ranking the Company 13th overall, and the
highest placed European strategy in its list of investment trusts that «would
have made an ISA Millionaire».
Question
How would you describe the outlook for continental Europe and does this
correlate with your thoughts on the individual companies you invest in?
Answer
European equity markets have demonstrated resilience, supported by accommodative
monetary policy, attractive relative valuations and a gradual improvement in
investor sentiment. Looking ahead, Europe has the potential to close its
productivity gap with the US by focusing on technology and innovation and by
simplifying business regulations, as outlined in the Draghi report, although
progress towards greater European integration is expected to be slow.
Investor expectations for earnings growth have increased, with markets
anticipating an improvement driven by interest rate reductions, fiscal stimulus
– particularly in Germany – and a belief that the worst of the tariff-related
uncertainty is over. However, there is still tariff uncertainty, inflation
remains stubborn and rising long-term bond yields may offset some of the
benefits of fiscal stimulus. Expectations are high so markets appear vulnerable
to disappointment from policy slippage or renewed geopolitical instability. As a
result, we remain cautious on the broader market outlook.
This macro view does not directly correlate with our assessment of individual
companies. European companies are not simple proxies for the domestic economy,
with roughly two-thirds of revenues generated outside the region. This global
footprint has long been supportive, and any improvement in domestic European
conditions could provide an additional source of upside. Our investment
philosophy remains unchanged and is anchored in stock selection, a long-term
perspective and capital preservation. The portfolio is balanced across sectors,
with positioning driven by bottom-up opportunities rather than macro
developments.
We continue to focus on attractively valued companies with good long-term
prospects for cash generation and dividend growth. Defensive quality is not
expensive on a relative basis, and the portfolio yield is close to the market
yield. Higher rates and extreme factor rotations have weighed on many of the
high-quality, stable-growing businesses we favour, bringing valuations closer to
the market and creating opportunities. We have also made a measured increase in
exposure to domestic European revenue streams, reflecting improved structural
momentum around fiscal investment, integration and competitiveness reform, while
remaining consistent with our bottom-up framework and valuation discipline.
Question
What is the advantage of investing in Fidelity European Trust PLC?
Answer
The Company’s investment discipline provides resilience, in absolute terms,
across different market environments. While this disciplined positioning, which
is focused on sustainable dividend growth, can result in periods of relative
underperformance when markets are more exuberant, it is designed to deliver more
consistent long-term outcomes. The Company’s aim is to outperform its Benchmark
Index by one to two percent per annum post fees over the long-term. This is
supported by the breadth and depth of Fidelity’s research platform, which
provides a consistent pipeline of high-quality investment ideas and enables the
construction of a fully diversified portfolio across the market cycle. In
addition, the Portfolio Managers bring deep experience, and Fidelity’s private
ownership allows the firm to take a long-term view in maintaining organisational
stability and supporting shareholders’ investment objectives.
Question
Looking ahead to 2026 and beyond, which sectors, themes or regions within Europe
are you most optimistic about, and where do you see the greatest potential for
long-term outperformance?
Answer
Looking ahead to 2026 and beyond, our optimism is selective rather than thematic
or region wide. The greatest potential for long-term outperformance lies in
areas where Europe’s valuation discount appears most disconnected from current
fundamentals and where confidence can continue to rebuild without requiring a
strong macro uplift.
Financials are a clear example. European banks are fundamentally stronger than
at any point since the Global Financial Crisis, with significantly higher
capital ratios, de-risked balance sheets, improved cost efficiency and
structurally higher net interest income. Returns on tangible equity are now
broadly in line with the wider market, and in some cases, comparable with US
peers, yet valuations continue to reflect historical distrust. As confidence in
the sustainability of these returns grows, financials offer meaningful upside
through dividend, buybacks and potential valuation normalisation.
More broadly, we see opportunity in high-quality European companies with strong
global franchises, pricing power and resilient cash flows, particularly where
short-term cyclical weakness or sentiment has created attractive entry points.
This includes selective industrials, software and health care names, where long
-term structural drivers remain intact, but valuations have adjusted. The
potential for Europe to gradually close its productivity gap with the US through
technology, innovation and regulatory simplification, as outlined in the Draghi
report, also supports selective exposure to companies enabling efficiency and
digitalisation, even if progress is slow.
At the same time, we remain cautious on areas where valuations already discount
optimistic assumptions around fiscal stimulus, rate cuts or easing trade
tensions. Overall, we do not rely on a broad European re-rating to generate
returns. Instead, we believe long-term outperformance will come from disciplined
stock selection, exploiting valuation gaps created by entrenched pessimism and
focusing on companies with durable business models, strong balance sheets and
the ability to compound cash flows and dividends over time.
Sam MorseMarcel Stötzel
Portfolio Manager Portfolio Manager
17 March 202617 March 2026
Strategic Report
RISK FRAMEWORK
Principal Risks and Uncertainties and Risk Management
As required by provisions 28 and 29 of the 2024 UK Corporate Governance Code
(«UK Code»), the Board has a robust ongoing process for identifying, evaluating
and managing the principal risks and uncertainties faced by the Company,
including those that could threaten its business model, future performance,
solvency or liquidity. The Board will implement the new requirement under
provision 29 of the 2024 UK Code for reporting periods from 1 January 2026, of a
Board declaration on the effectiveness of material risk management and internal
controls in the Company’s next reporting year.
The Board, with the assistance of the Alternative Investment Fund Manager (FIL
Investment Services (UK) Limited/the «Manager»), 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 that the Company faces.
Emerging Risks
The Audit Committee continues to identify emerging risks that may arise from
existing risks or new situations and take any action necessary to mitigate their
potential impact. The risks identified are placed on the Company’s risk matrix
and graded appropriately. This process, together with the policies and
procedures for the mitigation of existing and emerging risks, is updated and
reviewed regularly in the form of comprehensive reports by the Audit Committee.
The Board determines the nature and extent of any risks it is willing to take in
order to achieve the Company’s strategic objectives.
Globally, climate change (large scale shift in the planet’s weather patterns and
average temperatures) effects are already being experienced in the form of
changing weather patterns. Extreme weather events can potentially impact the
operations of investee and potential investee companies, their supply chains and
their customers. Climate change continues to be a key principal as well as an
emerging risk. The Board notes that the Manager includes 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 to investment
valuations and potentially shareholder returns.
The Board, together with the Manager, is 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. AI can provide asset managers powerful tools,
such as enhancing data analysis risk management, trading strategies, operational
efficiency and client servicing, all of which can lead to better investment
outcomes and more efficient operations. However, with these advances in
computing power, there are risks from its increasing use and manipulation with
the potential to harm, including a heightened threat to cybersecurity.
Other emerging risks may continue to evolve from unforeseen geopolitical and
economic events. There are currently a number of geopolitical factors that could
mean greater stock market risks and heightened macro-economic changes such as
inflation, interest rates, currency fluctuations, energy costs and an increased
regulatory environment.
Emerging Risks – Manager’s Role
The Manager also has responsibility for risk management for the Company. It
works with the Board to identify and manage the principal and emerging risks and
uncertainties and to ensure that the Board can continue to meet its UK corporate
governance obligations.
Annual Review of the Risk Register
The Company has a full risk register which includes less material risks which
the Board reviews at least annually.
The Board considers the risks listed below as the principal risks and
uncertainties faced by the Company.
1. Economic,
Geopolitical and
Market Risks
Trend: Increased
Description and Mitigation
Impact
· The Company · The Company’s portfolio is made up mainly of listed
and its assets securities. The Portfolio Managers success or failure to
may be impacted protect and increase the Company’s value against the market,
by geopolitical, economic and political background is core to the Company’s
economic and continued success. Their investment philosophy of stock
market related -picking and investing in attractively valued companies
risks associated should outperform the Benchmark Index over time.
with pursuing an · The risk from the likely effects of unforeseen economic
investment and market events is somewhat mitigated by the Company’s
policy focused investment trust structure which means no forced sales need
on continental to take place to deal with any redemptions. Therefore,
Europe. In investments can be held over a longer time horizon.
particular, the · The Board reviews market, economic and political risks
most recent and legislative changes at each Board meeting. The Portfolio
escalation in Managers provide an investment review at each meeting which
the Middle East includes a review of the economic and political environment,
has injected and any risks and challenges faced by the Company.
fresh volatility · The Board regularly reviews the impact of gearing and
into oil derivatives and has comfort that the portfolio is
markets, to sufficiently diversified by sector and number of holdings.
which Europe is · Risks to which the Company is exposed to in the market
exposed given and currency risk category are included in Note 18 to the
its dependence Financial Statements below together with summaries of the
on imported policies for managing these risks. It is the Company’s
energy and the policy not to hedge the underlying currencies of the
inflationary holdings in the portfolio but rather to take the currency
implications. In risk into consideration when making investment decisions.
addition to the
oil prices,
natural gas and
a variety of
soft commodities
and supply
limitations have
fuelled global
inflation and
economic
instability,
specifically
within Western
nations. The war
in Ukraine and
the potential
for Russian
aggression
(hybrid and
kinetic) against
European NATO
members remains
in focus. Global
trade and tariff
wars continue,
with ongoing
tensions between
the US and EU
and China and
the EU. Finally,
local European
sovereigns can
be subject to
sudden political
upheaval. The
geopolitical
risk and
economic
instability,
including the
macroeconomic
uncertainty
continues to
impact Western
investment
appetite.
· Heightened
tensions between
the U.S. and
global trading
partners,
particularly
China, continue
to impact
markets. The
US/China
relationship is
also impacted by
the dynamic of
the balance
between national
security and
economic
interests and
could lead to
higher
volatility,
sanctions for
broader markets,
technology and
oil in
particular, as
well as risk of
changes in
foreign policies
across the
globe.
· China’s
outlook for
`controlled
stabilisation’
remains intact,
supported by
targeted policy
measures.
China’s growth
stabilisation is
more credible
post-deal (i.e.
the government’s
commitment to
implementing
strategic
economic
measures to
achieve steady
growth and
economic
resilience), and
the agreement
with the U.S.
reduces pressure
on China to
deliver new
fiscal easing.
Exports and
industrial
activities
continue to
outperform
despite the
slower than
expected
recovery in
domestic demand.
2. Investment
Performance Risk
(including
Gearing Risk)
Trend: Increased
Description and Mitigation
Impact
· The risk of · The Portfolio Managers are responsible for actively
underperformance monitoring the portfolio selected in accordance with the
for a sustained asset allocation parameters and seeks to ensure that
period against individual stocks meet an acceptable risk/reward profile.
the Benchmark · The Board reviews Fidelity’s compliance with agreed
Index or peer investment restrictions; investment performance and risk;
group. The relative performance; the portfolio’s risk profile; and
achievement of whether appropriate strategies are employed to mitigate any
the Company’s negative impact of substantial changes in the markets. The
investment Board also regularly canvasses major shareholders for their
performance views with respect to company matters.
objective · The Board has put in place policies and limits to
relative to the control the Company’s use of derivatives and exposures.
market requires These are monitored daily by the Manager’s Compliance team
the taking of and regular reports are provided to the Board. Further
risk, such as detail on derivative instruments risk is included in Note 18
investment to the Financial Statements below.
strategy, asset · The Board regularly considers the level of gearing and
allocation and gearing risk. The Investment Policy sets the gearing limits
stock selection, within which the Manager must operate.
and may lead to
NAV and share
price
underperformance
compared to the
Benchmark Index
and/or peer
group companies.
· The Board
relies on the
Portfolio
Managers skills
and judgement to
make investment
decisions based
on research and
analysis of
individual
stocks and
sectors and
there is a risk
of volatility of
performance in
the short-term.
Continued
underperformance
could lead to
the Company and
its objective
becoming
unattractive to
investors.
· Derivative
instruments are
used to enhance
investment
returns. The
principal risk
is that the
Portfolio
Managers fails
to use gearing
effectively,
resulting in a
failure to
outperform in a
rising market or
to underperform
in a falling
market. The
Company gears
using
derivatives and
bank loans.
3. Cybercrime
and Information
Security Risks
Trend: Increased
Description and Mitigation
Impact
· There is · The risk is monitored by the Board with the help of the
cybersecurity Manager’s global cybersecurity team and their extensive
risk from Strategic Cyber and Information Security programme and
cyberattacks or assurances from outsourced suppliers.
threats to the · The Manager has established a comprehensive framework of
functioning of information security policies and standards which provide a
global markets structured approach to identify, prevent, and respond to
and to the information security threats. The framework ensures
Manager’s own consistency in Fidelity’s security measures, enhances its
business model, ability to adapt to evolving/emerging threats, and
including its compliance with changing regulatory requirements. The
and the Company’s other service providers also have similar measures
Company’s in place.
outsourced · Key performance indicators and metrics have been
suppliers. The developed by the Manager to monitor the overall efficacy of
external threat cybersecurity processes and controls and to further enhance
level has the Manager’s cybersecurity strategy and operational
shifted with a resilience.
number of UK
companies
successfully
targeted in
recent months,
and Artificial
Intelligence
(AI) has also
increased the
attack potential
from nefarious
actors.
· There is
risk of
cybercrime such
as phishing,
remote access
threats,
extortion, and
denial-of
-service attacks
from highly
organised
criminal
networks and
sophisticated
ransomware
operators,
including
threats such as
service
disruption/extort
ion attacks
(DDoS,
ransomware),
financial theft
and data
breaches,
regulatory non
-compliance,
reputational
damage/loss of
customer trust.
The threat
environment
continues to
evolve rapidly,
including the
heightened
potential threat
from nation
state backed
threat actors
due to
geopolitical
tensions.
Ransomware
continues to
increase
globally and is
also becoming a
supply chain
risk.
4. Changes in
Legislation,
Taxation or
Regulation
Trend: Stable
Description and Mitigation
Impact
· Changes in · The Board and Manager closely monitor regulatory,
legislation, taxation and legislative changes, with developments
taxation or impacting the Company summarised in the form of regular
regulation, or reporting to the Board.
other external · The Manager monitors Section 1158 status to ensure any
influence that issues are escalated to the Board and addressed promptly.
require changes · The Manager participates in industry discussions
to the regarding regulatory changes impacting investment companies,
investment trust and regulatory developments continue to be monitored and
structure of the managed by Fidelity through active lobbying and negotiations
Company are a as well as a robust change management process.
significant risk
for the Company.
· A breach of
Section 1158 of
the Corporation
Tax Act 2010
could lead to a
loss of
investment trust
status resulting
in the Company
being subject to
tax on capital
gains.
· There have
been increased
concerns about
investment cost
disclosures and
their impact on
the industry.
There is a risk
that the FCA’s
Consumer
Composite
Investment (CCI)
regime may make
investment
companies more
complex for
consumers and
other investors
to understand
and increase the
regulatory
burden imposed
on the sector if
it proceeds with
some of the
proposals as
drafted.
5. Competition
Risks and
Marketplace
Threats
Impacting
Business Growth
Trend: Stable
Description and Mitigation
Impact
· There is · The Board, the Company’s Broker and the Manager
increased closely monitor industry activity, the peer group and the
activity around share register.
mergers and · An annual review of strategy is undertaken by the
acquisitions Board to ensure that the Company continues to offer a
across the relevant product to investors.
investment
company
marketplace and
alternative
investment
offerings
(including
passive
vehicles) which
could influence
the demand for
the Company’s
shares. In
addition,
cheaper capital
and the search
for technology
scale is also
likely to mean
increased
consolidation.
· There is a
risk of costly
shareholder
activism in the
investment
company sector,
pursuing goals
that may not be
in the interests
of most
shareholders.
6. Business
Continuity and
Crisis
Management
Trend: Stable
Description and Mitigation
Impact
· There is · Fidelity has Business Continuity and Crisis Management
business process Frameworks in place to deal with business disruption and
disruption risk assure operational resilience.
from continued · All third-party service providers are subject to a risk
threats of -based programme of risk oversight and internal audits by
cyberattacks, the Manager and their own internal controls reports are
geopolitical received an annual basis and any concerns are investigated.
events, outages, · The Board regularly reviews the services provided by
fire events and third parties.
natural
disasters,
resulting in
financial and/or
reputational
impact to the
Company
affecting the
functioning of
the business.
· The Company
relies on a
number of third
-party service
providers,
principally the
Registrar,
Custodian and
Depositary who
may be subject
to cybercrime.
7. Operational
Risks
Trend: Stable
Description and Mitigation
Impact
· There is · Fidelity’s Operational Risk Management Framework is
risk of designed to pro-actively prevent, identify and manage
financial losses operational risks inherent in most activities.
or reputational · Fidelity uses robust systems and procedures dedicated to
damage from its operational processes. Its risk management structure is
inadequate or designed according to the FCA’s three lines of defence
failed internal model.
processes,
people and
systems or from
external parties
and events.
8. Discount
Control Risk
Trend: Stable
Description and Mitigation
Impact
· The price · The Board reviews the investment strategy, investment
of the Company’s performance and the marketing approach, given the influence
shares and its of all these factors on the discount.
discount to NAV · The Company’s share price, NAV and discount volatility
are factors are monitored daily by the Manager and the Company’s Broker
which are not and considered by the Board on a regular basis. The demand
completely for shares can be influenced through good performance and an
within the active investor relations programme.
Company’s · The Board regularly reviews the Company’s share
control. register, and the Chairman meets with large shareholders.
· The Board · Discretionary repurchases of ordinary shares are made
has a discount within guidelines set by the Board.
management
policy which was
updated in the
reporting year
in order to
maintain the
discount to NAV
in mid-single
digits in normal
market
conditions. Some
short-term
influence over
the discount may
be exercised by
carrying out
share
repurchases at
acceptable
prices and
within the
parameters set
by the Board.
· In
considering the
risk that the
discount to NAV
poses to
shareholder
value and
returns, both
the absolute
level of the
discount and the
amount relative
to the Company’s
peer group and
the wider market
are considered.
9. Key Person
Risk and
Operational
Support Risks
Trend: Stable
Description and Mitigation
Impact
· The loss of · The Company’s Portfolio Managers work closely together
the Portfolio and have extensive experience in the same markets and
Managers or companies and share a common investment approach and
other key complementary investment experience and therefore if there
individuals was a loss of one of them, the remaining Portfolio Manager
could lead to can provide continuity in managing the portfolio. The
potential Portfolio Managers are also supported by an Investment
performance Specialist and a team of Fidelity analysts.
and/or · The Manager identifies key dependencies which are then
operational addressed through succession plans, particularly for
issues. portfolio managers.
· The
Portfolio
Managers have a
differentiated
style in
relation to
their peers.
This style is
intrinsically
linked with the
Company’s
investment
philosophy and
strategy, and
therefore, the
Company has a
key person
dependency on
them.
· There is
also a risk that
the Manager has
inadequate
succession plans
for other key
operational
individuals.
Continuation Vote
A continuation vote takes place every two years. The last continuation vote was
at the AGM held on 8 May 2025, and 93.85% of shareholders voted in favour of the
continuation of the Company. The next continuation vote will take place at the
AGM in 2027.
Viability Statement
In accordance with provision 31 of the 2024 UK Corporate Governance Code, the
Directors have assessed the prospects of the Company over a longer period than
the twelve month period required by the «Going Concern» basis. The Company is an
investment trust with the objective of achieving long-term growth in both
capital and income. The Board considers that five years is an appropriate
investment horizon to assess the viability of the Company, although the life of
the Company is not intended to be limited to this or any other period.
In making an assessment on the viability of the Company, the Board has
considered the following:
·The ongoing relevance of the investment objective in prevailing market
conditions;
·The Company’s level of gearing;
·The Company’s NAV and share price performance compared to its Benchmark Index;
·The principal and emerging risks and uncertainties facing the Company and their
potential impact, as set out above;
·The likely future demand for the Company’s shares;
·The Company’s share price discount to the NAV and the Board’s discount
management policy;
·The liquidity of the Company’s portfolio;
·The level of income generated by the Company; and
·Future income and expenditure forecasts.
The Company’s performance for the five year reporting period to 31 December 2025
was a NAV total return of 63.3% and an ordinary share price total return of
63.5% compared to the Benchmark Index total return of 66.5%.
The Board regularly reviews the investment policy to consider whether it remains
appropriate.
The Board has concluded that there is a reasonable expectation that the Company
will be able to continue in operation and meet its liabilities as they fall due
over the next five years based on the following additional considerations:
·The Investment Manager’s compliance with the Company’s investment objective and
policy, its investment strategy and asset allocation;
·The portfolio mainly comprises readily realisable securities which can be sold
to meet funding requirements if necessary;
·The Board’s discount management policy; and
·The ongoing processes for monitoring operating costs and income which are
considered to be reasonable in comparison to the Company’s total assets.
In preparing the Financial Statements, the Directors have considered the
continued impact of climate change and potential emerging risks from the use of
artificial intelligence as detailed above. The Board has also considered the
impact of regulatory changes, unforeseen market events, geopolitical concerns
and the ongoing global implications of the war in Ukraine, and more recently the
war in the Middle East, and how this may affect the Company.
In addition, the Directors’ assessment of the Company’s ability to operate in
the foreseeable future is included in the Going Concern Statement 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, including the loan notes, are
satisfied that the Company is financially sound and has adequate resources to
meet all of its liabilities and ongoing expenses and continue in operational
existence for the foreseeable future. The Board has, therefore, concluded that
the Company has adequate resources to continue to adopt the going concern basis
for the period to 31 March 2027 which is at least twelve months from the date of
approval of the Financial Statements. This conclusion also takes into account
the Board’s assessment of the ongoing risks from significant geopolitical and
market events and regulatory changes that could impact the Company’s
performance, prospects and operations.
Accordingly, the Financial Statements of the Company have been prepared on a
going concern basis.
The prospects of the Company over a period longer than twelve months can be
found in the Viability Statement above.
PROMOTING THE SUCCESS OF THE COMPANY
Under Section 172(1) of the Companies Act 2006, the Directors of a company must
act in a way they consider, in good faith, would be most likely to promote the
success of the Company for the benefit of its members as a whole, and in doing
so have regard (amongst other matters) to the likely consequences of any
decision in the long-term; the need to foster relationships with the Company’s
suppliers, customers and others; the impact of the Company’s operations on the
community and the environment; the desirability of the Company maintaining a
reputation for high standards of business conduct; and the need to act fairly as
between members of the Company.
As an externally managed investment company, the Company has no employees or
physical assets, and a number of the Company’s functions are outsourced to third
parties. The key outsourced function is the provision of investment management
services by the Manager, but other professional service providers support the
Company by providing administration, custodial, banking, accounting and audit
services. The Board considers the Company’s key stakeholders to be the existing
and potential shareholders, the externally appointed Manager (FIL Investment
Services (UK) Limited) and other third-party professional service providers. The
Board considers that the interest of these stakeholders is aligned with the
Company’s objective of delivering long-term capital growth to investors, in line
with the Company’s stated objective and strategy, while providing the highest
standards of legal, regulatory and commercial conduct.
The Board, with the Portfolio Managers, sets the overall investment strategy and
reviews this at an annual strategy day which is separate from the regular cycle
of board meetings. In order to ensure good governance of the Company, the Board
has set various limits on the investments in the portfolio, whether in the
maximum size of individual holdings, the use of derivatives and bank loans, the
level of gearing and others. These limits and guidelines are regularly monitored
and reviewed and are set out in the Annual Report.
The Board receives regular reports from the Company’s Broker which covers market
activity, how the Company compares with peers in the AIC Europe and European
Smaller Companies sectors on performance, discount and share repurchase
activity, an analysis of the Company’s share register and market trends.
The Board places great importance on communication with shareholders. The Annual
General Meeting («AGM») provides the key forum for the Board and the Portfolio
Managers to present to the shareholders on the Company’s performance and future
plans and the Board encourages all shareholders to attend in person or virtually
and raise any questions or concerns. The Chairman and other Board members are
available to meet shareholders as appropriate. Shareholders may also communicate
with Board members at any time by writing to them at the Company’s registered
office at FIL Investments International, Beech Gate, Millfield Lane, Tadworth,
Surrey KT20 6RP or via the Company Secretary at the same address or by email at
[email protected].
The Portfolio Managers meet with major shareholders, potential investors, stock
market analysts, journalists and other commentators throughout the year. These
communication opportunities help inform the Board in considering how best to
promote the success of the company over the long-term.
The Board seeks to engage with the Manager and other service providers and
advisers in a constructive and collaborative way, promoting a culture of strong
governance, while encouraging open and constructive debate, in order to ensure
appropriate and regular challenge and evaluation. This aims to enhance service
levels and strengthen relationships with service providers, with a view to
ensuring shareholders’ interests are best served, by maintaining the highest
standards of commercial conduct while keeping cost levels competitive.
Whilst the Company’s direct operations are limited, the Board recognises the
importance of considering the impact of the Company’s investment strategy on the
wider community and environment and considers the Manager’s Environmental,
Social and Governance (ESG) approach.
In addition to ensuring that the Company’s investment objective was being
pursued, key decisions and actions taken by the Board during the reporting year,
and up to the date of this report, have included:
·As part of the Board’s succession plan, appointing Davina Walter as Chairman of
the Board to replace Vivian Bazalgette as Chairman of the Board when he stepped
down at the conclusion of the AGM on 8 May 2025;
·Holding multiple ad hoc Board meetings between March and September 2025 in the
lead up to combining assets with Henderson European Trust plc («HET»);
·The decision to combine assets with those of HET on 29 September 2025 (see
further details in the Chairman’s Statement above and also in the Notes to the
Financial Statements below). As part of the combination, appointing Vicky
Hastings and Rutger Koopmans to the Company’s Board.
·Following the combination of assets with HET, agreeing a lower management fee
with the Manager with effect from 29 September 2025. This is made up of: 0.70
per cent of net assets up to and including £400 million; 0.65 per cent of net
assets in excess of £400 million and up to £1.4 billion; and 0.55 per cent of
net assets in excess of £1.4 billion.
·The decision to pay an interim dividend of 3.90 pence per ordinary share and a
final dividend of 6.00 pence per ordinary share (a total of 9.90 pence per
ordinary share), to maintain the Board’s policy to pay progressive dividends in
normal circumstances. Subject to shareholder approval, the Company will have
paid an increased dividend for 15 years in a row;
·Authorising the repurchase of 9,286,723 shares into Treasury in the reporting
year as part of the Board’s discount management policy. Since the year ended 31
December 2025 and up to the latest practicable date of this report, a further
2,219,500 shares have been repurchased into Treasury;
·Meetings with some of the Company’s key shareholders during the reporting year;
and
·The decision once again to hold a hybrid AGM in 2026 in order to make the AGM
more accessible to those shareholders who are unable to or prefer not to attend
in person.
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and Financial
Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial period. Under that law, the Directors have elected to prepare the
Financial Statements in accordance with UK Generally Accepted Accounting
Practice (UK Accounting Standards and applicable law), including Financial
Reporting Standard FRS 102: The Financial Reporting Standard applicable in the
UK and Republic of Ireland («FRS 102»). Under company law, the Directors must
not approve the Financial Statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Company and of the profit or
loss for the reporting period.
In preparing these Financial Statements, the Directors are required to:
·Select suitable accounting policies in accordance with Section 10 of FRS 102
and then apply them consistently;
·Make judgements and accounting estimates that are reasonable and prudent;
·Present information, including accounting policies, in a fair and balanced
manner that provides relevant, reliable, comparable and understandable
information;
·State whether applicable UK Accounting Standards, including FRS 102, have been
followed, subject to any material departures disclosed and explained in the
Financial Statements; and
·Prepare the Financial Statements on a going concern basis, unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company’s transactions and disclose with
reasonable accuracy, at any time, the financial position of the Company and
enable them to ensure that the Company and the Financial Statements comply with
the Companies Act 2006. They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, a Directors’ Report, a Corporate Governance
Statement and a Directors’ Remuneration Report which comply with that law and
those regulations.
The Directors have delegated the responsibility for the maintenance and
integrity of the corporate and financial information included on the Company’s
pages of the Manager’s website at www.fidelity.co.uk/europe to the Manager.
Visitors to the website need to be aware that legislation in the UK governing
the preparation and dissemination of the Financial Statements may differ from
legislation in their own jurisdictions.
The Directors confirm that to the best of their knowledge:
·The Financial Statements, prepared in accordance with UK Generally Accepted
Accounting Practice, including FRS 102, give a true and fair view of the assets,
liabilities, financial position and profit of the Company;
·The Annual Report, including the Strategic Report, includes a fair review of
the development and performance of the business and the position of the Company,
together with a description of the principal risks and uncertainties it faces;
and
·The Annual Report and Financial Statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for
shareholders to assess the Company’s performance, business model and strategy.
The Statement of Directors’ Responsibilities was approved by the Board on 17
March 2026 and signed on its behalf by:
Davina Walter
Chairman
INCOME STATEMENT
for the year ended 31 December 2025
Year Year
ended 31 ended 31
December December
2025 2024
Notes Revenue Capital Total Revenue Capital
Total
£’000 £’000 £’000 £’000 £’000
£’000
Gains/(losse 10 – 207,231 207,231 – (47,301)
(47,301)
s) on
investments
Gains on 11 – 27,618 27,618 – 35,423
35,423
derivative
instruments
Income 3 57,618 – 57,618 53,670 –
53,670
Investment 4 (2,418) (7,253) (9,671) (2,878) (8,634)
(11,512)
management
fees
Other 5 (1,079) – (1,079) (1,063) –
(1,063)
expenses
Foreign – 1,889 1,889 – (2,956)
(2,956)
exchange
gains/(losse
s)
——— ——— ——— ——— ——— —-
—–
—— —— —— —— —— —-
—
Net 54,121 229,485 283,606 49,729 (23,468)
26,261
return/(loss
)
on ordinary
activities
before
finance
costs and
taxation
Finance 6 (1,771) (5,314) (7,085) (2,770) (8,309)
(11,079)
costs
——— ——— ——— ——— ——— —-
—–
—— —— —— —— —— —-
—
Net 52,350 224,171 276,521 46,959 (31,777)
15,182
return/(loss
)
on ordinary
activities
before
taxation
Taxation on 7 (3,165) – (3,165) (4,422) –
(4,422)
return/(loss
) on
ordinary
activities
——— ——— ——— ——— ——— —-
—–
—— —— —— —— —— —-
—
Net 49,185 224,171 273,356 42,537 (31,777)
10,760
return/(loss
)
on ordinary
activities
after
taxation
for the
year
========= ========= ========= ========= =========
=========
Return/(loss 8 11.30p 51.50p 62.80p 10.41p (7.78p)
2.63p
) per
ordinary
share
========= ========= ========= ========= =========
=========
The Company does not have any other comprehensive income. Accordingly, the net
return/(loss) on ordinary activities after taxation for the year is also the
total comprehensive income for the year 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.
On 26 September 2025, the Company combined assets with Henderson European Trust
plc («HET»), following a scheme of reconstruction. No other operations were
acquired or discontinued during the year.
The Notes below form an integral part of these Financial Statements.
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2025
Notes Share Share Capital Capital Revenue
Total
capital premium redemption reserve reserve
shareholders’
£’000 account reserve £’000 £’000
funds
£’000 £’000
£’000
Total 10,411 58,615 5,414 1,440,810 47,879
1,563,129
shareholders’
funds at 31
December 2024
Net return on – – – 224,171 49,185
273,356
ordinary
activities
after
taxation for
the
year
New ordinary 16 2,798 458,644 – – –
461,442
shares issued
in
respect of
the
transaction
with
HET
Expenses in – – – (406) –
(406)
respect of
the
transaction
with
HET
Repurchase of 15 – – – (38,097) –
(38,097)
ordinary
shares
into
Treasury
Dividends 9 – – – – (38,194)
(38,194)
paid to
shareholders
——— ——— ———- ——— ——— —
———–
—— —— —– —— —— —
Total 13,209 517,259 5,414 1,626,478 58,870
2,221,230
shareholders’
funds at 31
December 2025
========= ========= ========= ========= =========
=========
Total 10,411 58,615 5,414 1,472,587 40,452
1,587,479
shareholders’
funds at 31
December 2023
Net – – – (31,777) 42,537
10,760
(loss)/return
on ordinary
activities
after
taxation for
the
year
Dividends 9 – – – – (35,110)
(35,110)
paid to
shareholders
——— ——— ———- ——— ——— —
———–
—— —— —– —— —— —
Total 10,411 58,615 5,414 1,440,810 47,879
1,563,129
shareholders’
funds at 31
December 2024
========= ========= ========= ========= =========
=========
The Notes below form an integral part of these Financial Statements.
BALANCE SHEET
as at 31 December 2025
Company number 2638812
Notes 31 December 2025 31 December 2024
£’000 £’000
Fixed assets
Investments 10 2,189,231 1,487,772
========= =========
Current assets
Derivative instruments 11 2,333 –
Debtors 12 11,316 9,506
Amounts held at futures 2,814 10,078
clearing houses and
brokers
Cash and cash equivalents 47,710 63,042
————— —————
64,173 82,626
========= =========
Current liabilities
Derivative instruments 11 – (5,796)
Other creditors 13 (1,613) (1,473)
————— —————
(1,613) (7,269)
========= =========
Net current assets 62,560 75,357
Non current liabilities
Loan notes (unsecured) 14 (30,561) –
————— —————
(30,561) –
========= =========
Net assets 2,221,230 1,563,129
Capital and reserves
Share capital 15 13,209 10,411
Share premium account 16 517,259 58,615
Capital redemption 16 5,414 5,414
reserve
Capital reserve 16 1,626,478 1,440,810
Revenue reserve 16 58,870 47,879
————— —————
Total shareholders’ funds 2,221,230 1,563,129
========= =========
Net asset value per 17 434.39p 382.44p
ordinary share
========= =========
The Financial Statements above and below were approved by the Board of Directors
on 17 March 2026 and were signed on its behalf by:
Davina Walter
Chairman
The Notes below form an integral part of these Financial Statements.
NOTES TO THE FINANCIAL STATEMENTS
1PRINCIPAL ACTIVITY
Fidelity European Trust PLC is an Investment Company incorporated in England and
Wales that is listed 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.
2ACCOUNTING POLICIES
The Company has prepared its Financial Statements in accordance with UK
Generally Accepted Accounting Practice («UK GAAP»), including FRS 102 «The
Financial Reporting Standard applicable in the UK and Republic of Ireland»,
issued by the Financial Reporting Council («FRC»). The Financial Statements have
also been 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.
The Company is exempt from presenting a Cash Flow Statement as a Statement of
Changes in Equity is presented and substantially all of the Company’s
investments are highly liquid and are carried at market value.
(a) Basis of accounting
The Financial Statements have been prepared on a going concern basis and under
the historical cost convention, except for the measurement at fair value of
investments and derivative instruments. The Directors have a reasonable
expectation that the Company has adequate resources to continue in operational
existence up to 31 March 2027 which is at least twelve months from the date of
approval of these Financial Statements. In making their assessment the Directors
have reviewed income and expense projections and the loan agreement, reviewed
the liquidity of the investment portfolio, stress testing performed and
considered the Company’s ability to meet liabilities as they fall due. This
conclusion also takes into account the Director’s assessment of the risks faced
by the Company as detailed in the Going Concern Statement above.
In preparing these Financial Statements the Directors have considered the impact
of climate change risk as an emerging and a principal risk as set out above, and
have concluded that there was no further impact of climate change to be taken
into account as the investments are valued based on market pricing. In line with
FRS 102, investments are valued at fair value, which for the Company are quoted
bid prices for investments in active markets at the balance sheet date and
therefore reflect the market participants view of climate change risk on the
investments held by the Company.
The Company’s Going Concern Statement above takes account of all events and
conditions up to 31 March 2027 which is at least twelve months from the date of
approval of these Financial Statements.
Issue of Ordinary Shares in respect of the transaction with Henderson European
Trust plc («HET»)
On 29 September 2025, the Company issued new ordinary shares which were provided
to shareholders of HET, in connection with the combination of the assets of the
Company with the assets of HET.
The Directors have considered the substance of the assets and activities of HET
in determining whether the acquisition represents the acquisition of a business.
In this case, the acquisition is not considered to be an acquisition of a
business, and therefore, has not been treated as a business combination. Rather,
the cost to acquire the assets and liabilities of HET has been allocated between
the acquired identifiable assets and liabilities based on their relative fair
values on the acquisition date without attributing any amount to goodwill or to
deferred taxes. Net assets transferred comprised investments, cash, loans,
payables and HET contribution to the transaction. A total of £462,717,000 of
assets were acquired as a result of the transaction with HET. This comprised:
investments of £478,394,000, cash of £13,631,000, loan notes of -£30,522,000,
payables of -£74,000 and a HET contribution to the transaction of £1,288,000.
Transaction costs of £892,000 in relation to the combination of HET have been
recognised in the Income Statement in Note 10. Costs of £406,000 in relation to
issuing new shares have been recognised in the Statement of Changes in Equity.
Fidelity has agreed to make a material contribution by means of a waiver of the
management fees that would otherwise be payable, under the AIFM Agreement and
the Investment Management Agreement, in respect of the net assets transferred by
HET to the Company following the combination of assets for the 12 month period
immediately following the effective date. Fidelity’s total contribution was
£2,537,000 allocated £634,000 against Revenue and £1,903,000 against Capital.
Since 26 September 2025, the base investment management fee has been charged at
an annual rate of 0.70% (previously 0.85%) on the first £400 million of net
assets, 0.65% (previously 0.65%) on net assets above £400 million and up to £1.4
billion, and 0.55% on net assets in excess of £1.4 billion. Fees are payable
monthly in arrears and are calculated on a daily basis.
b) Significant accounting estimates and judgements
The Directors make judgements and estimates concerning the future. Estimates and
judgements are continually evaluated and are based on historical experience and
other factors, such as expectations of future events, and are believed to be
reasonable under the circumstances. Actual results may differ from these
estimates. The Company’s Financial Statements contain no key sources of
estimation or uncertainty.
c) Segmental reporting
The Company is engaged in a single segment business and, therefore, no segmental
reporting is provided.
d) Presentation of the Income Statement
In order to better reflect the activities of an investment company and in
accordance with guidance issued by the AIC, supplementary information which
analyses the Income Statement between items of a revenue and capital nature has
been prepared alongside the Income Statement. The net revenue return/(loss)
after taxation for the year is the measure the Directors believe appropriate in
assessing the Company’s compliance with certain requirements set out in Section
1159 of the Corporation Tax Act 2010.
e) Income
Income from equity investments is accounted for on the date on which the right
to receive the payment is established, normally the ex-dividend date. Overseas
dividends are accounted for gross of any tax deducted at source. Amounts are
credited to the revenue column of the Income Statement. Where the Company has
elected to receive its dividends in the form of additional shares rather than
cash, the amount of the cash dividend foregone is recognised in the revenue
column of the Income Statement. Any excess in the value of the shares received
over the amount of the cash dividend is recognised in the capital column of the
Income Statement. Special dividends are treated as a revenue receipt or a
capital receipt depending on the facts and circumstances of each particular
case.
Derivative instrument income received from dividends on long contracts for
difference («CFDs») is accounted for on the date on which the right to receive
the payment is established, normally the ex-dividend date. The amount net of tax
is credited to the revenue column of the Income Statement.
Interest received on CFDs, bank deposits, collateral and money market funds is
accounted for on an accruals basis and credited to the revenue column of the
Income Statement. Interest received on CFDs represent the finance costs
calculated by reference to the notional value of the CFDs.
f) Investment management fees and other expenses
Investment management fees and other expenses are accounted for on an accruals
basis and are charged as follows:
·The investment management fee is allocated 25% to revenue and 75% to capital in
line with the Board’s expected long-term split of revenue and capital return
from the Company’s portfolio of investments; and
·All other expenses are allocated in full to revenue with the exception of those
directly attributable to share issues or other capital events.
g) Functional currency and foreign exchange
The functional and reporting currency of the Company is UK sterling, which is
the currency of the primary economic environment in which the Company operates.
Transactions denominated in foreign currencies are reported in UK sterling at
the rate of exchange ruling at the date of the transaction. Assets and
liabilities in foreign currencies are translated at the rates of exchange ruling
at the Balance Sheet date. Foreign exchange gains and losses arising on
translation are recognised in the Income Statement as a revenue or a capital
item depending on the nature of the underlying item to which they relate.
h) Finance costs
Finance costs comprises interest on the unsecured loans notes, overdrafts and
finance costs paid on CFDs, which are accounted for on an accruals basis.
Finance costs are allocated 25% to revenue and 75% to capital in line with the
Board’s expected long-term split of revenue and capital from the Company’s
portfolio of investments.
i) Taxation
The taxation charge represents the sum of current taxation and deferred
taxation.
Current taxation is taxation suffered at source on overseas income less amounts
recoverable under taxation treaties. Taxation is charged or credited to the
revenue column of the Income Statement, except where it relates to items of a
capital nature, in which case it is charged or credited to the capital column of
the Income Statement. Where expenses are allocated between revenue and capital
any tax relief in respect of the expenses is allocated between revenue and
capital returns on the marginal basis using the Company’s effective rate of
corporation tax for the accounting period. The Company is an approved Investment
Trust under Section 1158 of the Corporation Tax Act 2010 and is not liable for
UK taxation on capital gains.
Deferred taxation is the taxation expected to be payable or recoverable on
timing differences between the treatment of certain items for accounting
purposes and their treatment for the purposes of computing taxable profits.
Deferred taxation is based on tax rates that have been enacted or substantively
enacted when the taxation is expected to be payable or recoverable. Deferred tax
assets are only recognised if it is considered more likely than not that there
will be sufficient future taxable profits to utilise them.
j) Dividend paid
Dividends payable to equity shareholders are recognised when the Company’s
obligation to make payment is established.
k) Investments
The Company’s business is investing in financial instruments with a view to
profiting from their total return in the form of income and capital growth. This
portfolio of investments is managed and its performance evaluated on a fair
value basis, in accordance with a documented investment strategy, and
information about the portfolio is provided on that basis to the Company’s Board
of Directors. Investments are measured at fair value with changes in fair value
recognised in profit or loss, in accordance with the provisions of both Section
11 and Section 12 of FRS 102. The fair value of investments is initially taken
to be their cost and is subsequently measured as follows:
·Listed investments are valued at bid prices, or last market prices, depending
on the convention of the exchange on which they are listed.
In accordance with the AIC SORP, the Company includes transaction costs,
incidental to the purchase or sale of investments, within gains/(losses) on
investments in the capital column of the Income Statement and has disclosed
these costs in Note 10 below.
l) Derivative instruments
When appropriate, permitted transactions in derivative instruments are used.
Derivative transactions into which the Company may enter include long and short
CFDs and futures. Derivatives are classified as other financial instruments and
are initially accounted and measured at fair value on the date the derivative
contract is entered into and subsequently measured at fair value as follows:
·Long and short CFDs – the difference between the strike price and the value of
the underlying shares in the contract; and
·Futures – the difference between the contract price and the quoted trade price.
Where transactions are used to protect or enhance income, if the circumstances
support this, the income and expenses derived are included in net income in the
revenue column of the Income Statement. Where such transactions are used to
protect or enhance capital, if the circumstances support this, the income and
expenses derived are included in gains/(losses) on derivative instruments in the
capital column of the Income Statement. Any positions on such transactions open
at the year end are reflected on the Balance Sheet at their fair value within
current assets or current liabilities.
m) Debtors
Debtors include accrued income, taxation recoverable and other debtors and
prepayments incurred in the ordinary course of business. If collection is
expected in one year or less (or in the normal operating cycle of the business,
if longer) they are classified as current assets. If not, they are presented as
non-current assets. They are recognised initially at fair value and, where
applicable, subsequently measured at amortised cost using the effective interest
rate method.
n) Amounts held at futures clearing houses and brokers
These are amounts held in segregated accounts on behalf of brokers as collateral
against open derivative contracts. These are carried at amortised cost.
o) Cash and cash equivalents
Cash and cash equivalents may comprise cash at bank and money market funds which
are short-term, highly liquid and are readily convertible to a known amount of
cash. These are subject to an insignificant risk of changes in value.
p) Loan notes (unsecured)
Loan notes are initially included in the Financial Statements at cost, being the
fair value of the consideration received net of any issue costs relating to the
borrowing. After initial recognition, the loans are measured at amortised cost
using the effective interest rate method. The amortised cost is calculated by
taking into account any issue costs and any discount or premium on settlement.
q) Other creditors
Other creditors include amounts payable on investment management fees and other
creditors and expenses accrued in the ordinary course of business. If payment is
due within one year or less (or in the normal operating cycle of the business,
if longer), they are classified as current liabilities. If not, they are
presented as non-current liabilities. They are recognised initially at fair
value and, where applicable, subsequently measured at amortised cost using the
effective interest rate method.
r) Capital reserve
The following are accounted for in the capital reserve:
·Gains and losses on the disposal of investments and derivative instruments;
·Changes in the fair value of investments and derivative instruments held at the
year end;
·Foreign exchange gains and losses of a capital nature;
·75% of investment management fees and finance costs;
·Dividends receivable which are capital in nature; and
·Cost of repurchasing shares.
Technical guidance issued by the Institute of Chartered Accountants in England
and Wales in TECH 02/17BL, guidance on the determination of realised profits and
losses in the context of distributions under the Companies Act 2006, states that
changes in the fair value of investments which are readily convertible to cash,
without accepting adverse terms at the Balance Sheet date, can be treated as
realised. Capital reserves realised and unrealised are shown in aggregate as
capital reserve in the Statement of Changes in Equity and the Balance Sheet. At
the Balance Sheet date, the portfolio of the Company consisted of investments
listed on a recognised stock exchange and derivative instruments contracted with
counterparties having an adequate credit rating, and the portfolio was
considered to be readily convertible to cash.
3INCOME
Year ended Year ended
31 December 2025 31 December 2024
£’000 £’000
Investment income
Overseas dividends 50,142 42,870
UK dividends 2,182 1,654
Interest on securities 230 –
————— —————
52,554 44,524
========= =========
Derivative income
Income recognised from futures 1,842 2,468
contracts
Dividends received on long CFDs 2,229 3,972
Interest received on CFDs – 329
————— —————
4,071 6,769
————— —————
Investment and derivative income 56,625 51,293
========= =========
Other income
Interest received on collateral, 993 2,323
bank deposits and money market
funds
Interest received on tax reclaims – 54
————— —————
993 2,377
========= =========
Total income 57,618 53,670
========= =========
No special dividends have been recognised in capital during the year (2024:
£1,271,000).
4INVESTMENT MANAGEMENT FEES
Year Year
ended 31 ended 31
December December
2025 2024
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Investment 3,052 9,156 12,208 2,878 8,634 11,512
management
fees
Fee waived (634) (1,903) (2,537) – – –
in respect
of
the
transaction
with HET
——— ——— ——— ——— ——— ———
—— —— —— —— —— ——
Total 2,418 7,253 9,671 2,878 8,634 11,512
========= ========= ========= ========= ========= =========
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.
Fidelity has agreed to make a material contribution by means of a waiver of the
management fees that would otherwise be payable, under the AIFM Agreement and
the Investment Management Agreement, in respect of the net assets transferred by
HET to the Company following the combination of assets for the 12 month period
immediately following the effective date.
Since 26 September 2025, the base investment management fee has been charged at
an annual rate of 0.70% (previously 0.85%) on the first £400 million of net
assets, 0.65% (previously 0.65%) on net assets above £400 million and up to £1.4
billion, and 0.55% on net assets in excess of £1.4 billion. 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.
5OTHER EXPENSES
Year Year ended
ended
31 December 2024
31
December £’000
2025
£’000
AIC fees 25 24
Custody fees 100 90
Depositary fees 54 63
Directors’ fees1 219 186
Legal and professional fees 79 120
Marketing expenses 214 221
Printing and publication expenses 182 191
Registrars’ fees 104 91
Fees payable to the Company’s Independent 72 50
Auditor for the audit of the Financial
Statements
Other expenses 30 27
——— —————
——
1,079 1,063
========= =========
1 Details of the breakdown of Directors’ fees are disclosed in the Directors’
Remuneration Report in the Annual Report.
6FINANCE COSTS
Year Year
ended 31 ended 31
December December
2025 2024
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Interest paid 79 236 315 15 43 58
on collateral,
unsecured loan
notes and
overdrafts
Interest paid 1,318 3,956 5,274 2,122 6,367 8,489
on CFDs
Costs 374 1,122 1,496 633 1,899 2,532
recognised
from futures
contracts
——— ——— ——— ——— ——— ———
—— —— —— —— —— ——
1,771 5,314 7,085 2,770 8,309 11,079
========= ========= ========= ========= ========= =========
Finance costs have been allocated 75% to capital reserve in accordance with the
Company’s accounting policies. At the year end, interest payable on the
unsecured loan notes amounted to £200,000 (2024: £nil).
7TAXATION ON RETURN/(LOSS) ON ORDINARY ACTIVITIES
Year Year
ended 31 ended 31
December December
2025 2024
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
a) Analysis
of the
taxation
charge for
the
year
Overseas 3,165 – 3,165 4,422 – 4,422
taxation
——— ——— ——— ——— ——— ———
—— —— —— —— —— ——
Taxation 3,165 – 3,165 4,422 – 4,422
charge for
the
year (see
Note 7b)
========= ========= ========= ========= ========= =========
b)Factors affecting the taxation charge for the year
The taxation charge for the year is lower than the standard rate of UK
corporation tax for an investment trust company of 25% (2024: 25%). A
reconciliation of the standard rate of UK corporation tax to the taxation charge
for the year is shown below:
Year Year
ended 31 ended 31
December December
2025 2024
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Net 52,350 224,171 276,521 46,959 (31,777) 15,182
return/(loss
) on
ordinary
activities
before
taxation
——— ——— ——— ——— ——— ———
—— —— —— —— —— ——
Net 13,088 56,043 69,131 11,740 (7,944) 3,796
return/(loss
) on
ordinary
activities
before
taxation
multiplied
by the
standard
rate of UK
corporation
tax of 25%
(2024: 25%)
Effects of:
Capital – (59,185) (59,185) – 3,709 3,709
(gains)/loss
es not
taxable1
Income not (13,081) – (13,081) (11,131) – (11,131)
taxable
Expenses – 1,329 1,329 – 2,077 2,077
not
deductible
Excess (7) 1,813 1,806 (609) 2,158 1,549
management
expenses
Overseas 3,165 – 3,165 4,422 – 4,422
taxation
——— ——— ——— ——— ——— ———
—— —— —— —— —— ——
Total 3,165 – 3,165 4,422 – 4,422
taxation
charge for
the year
(see Note
7a)
========= ========= ========= ========= ========= =========
1The Company is exempt from UK taxation on capital gains as it meets the HM
Revenue & Customs criteria for an investment company set out in Section 1159 of
the Corporation Tax Act 2010.
c)Deferred taxation
A deferred tax asset of £20,482,000 (2024: £18,676,000), in respect of excess
expenses of £76,426,000 (2024: £69,202,000) and excess loan interest of
£5,505,000 (2024: £5,505,000), has not been recognised as it is unlikely that
there will be sufficient future taxable profits to utilise these expenses.
8RETURN/(LOSS) PER ORDINARY SHARE
Year ended Year ended
31 December 2025 31 December 2024
Revenue return per ordinary share 11.30p 10.41p
Capital return/(loss) per ordinary share 51.50p (7.78p)
————— —————
Total return per ordinary share 62.80p 2.63p
========= =========
The return/(loss) per ordinary share is based on the net return/(loss) on
ordinary activities after taxation for the year divided by the weighted average
number of ordinary shares held outside of Treasury during the year, as shown
below:
£’000 £’000
Net 49,185 42,537
revenue
return on
ordinary
activities
after
taxation
Net 224,171 (31,777)
capital
return/(los
s) on
ordinary
activities
after
taxation
——— ———
—— ——
Total 273,356 10,760
return on
ordinary
activities
after
taxation
========= =========
Number Number
Weighted average number of 435,250,229 408,730,523
ordinary shares held outside
of Treasury
========= =========
9DIVIDENDS PAID TO SHAREHOLDERS
Year Year ended
ended
31 December 2024
31
December £’000
2025
£’000
Dividends paid
Interim dividend of 3.90 pence per ordinary 15,714 –
share paid for the year ended 31 December 2025
Final dividend of 5.50 pence per ordinary 22,480 –
share paid for the year ended 31 December 2024
Interim dividend of 3.60 pence per ordinary – 14,714
share paid for the year ended 31 December 2024
Final dividend of 4.99 pence per ordinary – 20,396
share paid for the year ended 31 December 2023
——— —————
——
38,194 35,110
========= =========
Dividends proposed
Final dividend of 6.00 pence per ordinary 30,548 –
share proposed for the year ended 31 December
2025
Final dividend of 5.50 pence per ordinary – 22,480
share proposed for the year ended 31 December
2024
——— —————
——
Total dividend proposed 30,548 22,480
========= =========
The Directors have proposed the payment of a final dividend for the year ended
31 December 2025 of 6.00 pence per ordinary share which is subject to approval
by shareholders at the Annual General Meeting on 12 May 2026 and has not been
included as a liability in these Financial Statements. The dividend will be paid
on 19 May 2026 to shareholders on the register at the close of business on 27
March 2026 (ex-dividend date 26 March 2026).
10INVESTMENTS
31 December 2025 31 December 2024
£’000 £’000
Investments held at fair 2,189,231 1,487,772
value
========= =========
Opening book cost 1,005,206 943,460
Opening investment holding 482,566 575,415
gains
————— —————
Opening fair value 1,487,772 1,518,875
========= =========
Movements in the year
Purchases at cost 761,976 185,382
Assets acquired in respect 478,394 –
of the transaction with
HET1
Costs in respect to the 892 –
transaction with HET1
Sales – proceeds (747,034) (169,184)
Gains/(losses) on 207,231 (47,301)
investments
————— —————
Closing fair value 2,189,231 1,487,772
========= =========
Closing book cost 1,607,792 1,005,206
Closing investment holding 581,439 482,566
gains
————— —————
Closing fair value 2,189,231 1,487,772
========= =========
1 See Accounting Policy 2 (a) above for further details.
The Company received £747,034,000 (2024: £169,184,000) from investments sold in
the year. The book cost of these investments when they were purchased was
£637,784,000 (2024: £123,636,000). These investments have been revalued over
time and until they were sold any unrealised gains/losses were included in the
fair value of the investments.
Investment transaction costs
Transaction costs incurred in the acquisition and disposal of investments, which
are included in the gains/(losses) on investments above, were as follows:
Year ended Year ended
31 December 2025 31 December 2024
£’000 £’000
Purchases transaction costs 1,388 488
Sales transaction costs 176 70
————— —————
1,564 558
========= =========
11DERIVATIVE INSTRUMENTS
Year Year
ended ended
31 31
December December
2025 2024
£’000 £’000
Gains on derivative instruments
Gains on long CFD positions closed 20,597 41,187
Losses on short CFD positions (6,325) (8,418)
closed
Gains on futures contracts closed 5,217 5,815
Movement in investment holding 6,603 (2,246)
gains/(losses) on long CFDs
Movement in investment holding – (142)
losses on short CFDs
Movement in investment holding 1,526 (773)
gains/(losses) on futures
——— ———
—— ——
27,618 35,423
========= =========
31 31
December December
2025 2024
Fair Fair
value value
£’000 £’000
Derivative instruments recognised
on the Balance Sheet
Derivative instrument assets 2,333 –
Derivative instrument liabilities – (5,796)
——— ———
—— ——
2,333 (5,796)
========= =========
31 31
December December
2025 2024
Fair Asset Fair Asset
value value
exposure exposure
£’000 £’000
£’000 £’000
At the year end the Company held
the following derivative
instruments
Long CFDs 1,928 200,209 (4,675) 196,659
Long futures 405 47,039 (1,121) 54,743
——— ——— ——— ———
—— —— —— ——
2,333 247,248 (5,796) 251,402
========= ========= ========= =========
12DEBTORS
31 December 2025 31 December 2024
£’000 £’000
Accrued income 1,930 618
Taxation recoverable 9,014 8,807
Other debtors and prepayments 372 81
————— —————
11,316 9,506
========= =========
13OTHER CREDITORS
31 December 2025 31 December 2024
£’000 £’000
Creditors and accruals 1,613 1,473
========= =========
14LOAN NOTES (UNSECURED)
31 December 2025 31 December 2024
£’000 £’000
1.53% unsecured loan notes 2047 (Euro) 21,829 –
1.66% unsecured loan notes 2052 (Euro) 8,732 –
————— —————
30,561 –
========= =========
The Euro 25,000,000 1.53% unsecured loan notes 2047 were issued by HET on 31
January 2022 and are redeemable at par on 31 January 2047. They are shown on the
balance sheet on the effective interest basis. HET issued the unsecured loan
notes net of issuance costs totalling £124,000.
The Euro 10,000,000 1.66% unsecured loan notes 2052 were issued by HET on 31
January 2022 and are redeemable at par on 31 January 2052. They are shown on the
balance sheet on the effective interest basis. HET issued the unsecured loan
notes net of issuance costs totalling £50,000.
The issue costs for both series of loan notes are amortised over their
respective terms. See Note 18 for more details on the estimate of the fair value
of the unsecured loan notes.
15SHARE CAPITAL
31 December 31 December
2025 2024
Number of Nominal Number of Nominal
shares value shares value
£’000 £’000
Issued, allotted and fully paid
Ordinary shares of 2.5 pence
each held outside of Treasury
Beginning of the year 408,730,523 10,218 408,730,523 10,218
Ordinary shares repurchased into (9,286,723) (232) – –
Treasury
New ordinary shares issued in 111,902,155 2,798 – –
respect of the transaction with
HET
———– ——— ———– ———
—- —— —- ——
End of the year 511,345,955 12,784 408,730,523 10,218
========= ========= ========= =========
Ordinary shares of 2.5 pence
each held in Treasury1
Beginning of the year 7,717,387 193 7,717,387 193
Ordinary shares repurchased into 9,286,723 232 – –
Treasury
End of the year 17,004,110 425 7,717,387 193
———– ——— ———– ———
—- —— —- ——
Total share capital 13,209 10,411
========= =========
1Ordinary shares held in Treasury carry no rights to vote, to receive a dividend
or to participate in a winding up of the Company.
On 26 September 2025, the Company acquired £462.7 million of net assets from
HET, in consideration for the issue of 111,902,155 new shares to HET
shareholders as part of the combination of assets.
During the year, the Company repurchased 9,286,723 (2024: nil) ordinary shares
and held them in Treasury. The cost of repurchasing these shares of £38,097,000
(2024: £nil) was charged to the Capital Reserve.
16CAPITAL AND RESERVES
Share Share Capital Capital Revenue Total
capital premium redemption reserve reserve
shareholders’
£’000 account reserve £’000 £’000 funds
£’000 £’000 £’000
At 1 January 10,411 58,615 5,414 1,440,810 47,879 1,563,129
2025
Gains on – – – 207,231 – 207,231
investments
(see Note
10)
Gains on – – – 27,618 – 27,618
derivative
instruments
(see Note
11)
Foreign – – – 1,889 – 1,889
exchange
gains
Investment – – – (7,253) – (7,253)
management
fees
(see
Note 4)
Finance – – – (5,314) – (5,314)
costs
(see Note 6)
New ordinary 2,798 458,644 – – – 461,442
shares
issued
in
respect of
the
transaction
with
HET
Expenses in – – – (406) – (406)
respect of
the
transaction
with HET1
Repurchase – – – (38,097) – (38,097)
of
ordinary
shares
(see Note
15)
Revenue – – – – 49,185 49,185
returns
after
taxation
for the year
Dividends – – – – (38,194) (38,194)
paid
to
shareholders
(see Note 9)
——— ——— ———- ——— ——— ———-
—
—— —— —– —— —— —
At 31 13,209 517,259 5,414 1,626,478 58,870 2,221,230
December
2025
========= ========= ========= ========= ========= =========
1 See Accounting Policy 2 (a) above for further details.
Share Share Capital Capital Revenue Total
capital premium redemption reserve reserve
shareholders’
£’000 account reserve £’000 £’000 funds
£’000 £’000 £’000
At 1 January 10,411 58,615 5,414 1,472,587 40,452 1,587,479
2024
Losses on – – – (47,301) – (47,301)
investments
(see Note
10)
Gains on – – – 35,423 – 35,423
derivative
instruments
(see Note
11)
Foreign – – – (2,956) – (2,956)
exchange
losses
Investment – – – (8,634) – (8,634)
management
fees
(see
Note 4)
Finance – – – (8,309) – (8,309)
costs
(see Note 6)
Revenue – – – – 42,537 42,537
return
on ordinary
activities
after
taxation
for
the year
Dividends – – – – (35,110) (35,110)
paid
to
shareholders
(see Note 9)
——— ——— ———- ——— ——— ———-
—
—— —— —– —— —— —
At 31 10,411 58,615 5,414 1,440,810 47,879 1,563,129
December
2024
========= ========= ========= ========= ========= =========
The capital reserve balance at 31 December 2025 includes investment holding
gains of £581,439,000 (2024: gains of £482,566,000) as detailed in Note 10. See
Note 2 (r) for further details. The revenue and capital reserves are
distributable by way of dividends.
17NET 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.
31 December 2025 31 December 2024
Total shareholders’ funds £2,221,230,000 £1,563,129,000
Ordinary shares held 511,345,955 408,730,523
outside of Treasury at
year end
————— —————
Net asset value per 434.39p 382.44p
ordinary 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.
18FINANCIAL INSTRUMENTS
Management of risk
The Company’s investing activities in pursuit of its investment objective
involve certain inherent risks. The Board confirms that there is an ongoing
process for identifying, evaluating and managing the risks faced by the Company.
The Board with the assistance of the Manager, has developed a risk matrix which,
as part of the internal control process, identifies the risks that the Company
faces. Risks are identified and graded in this process, together with steps
taken in mitigation, and are updated and reviewed on an ongoing basis. These
risks and how they are identified, evaluated and managed are shown in the
Strategic Report above.
This note refers to the identification, measurement and management of risks
potentially affecting the value of financial instruments. The Company’s
financial instruments may comprise:
·Equity shares held in accordance with the Company’s investment objective and
policies;
·Derivative instruments which comprise CFDs and futures on equity indices;
·Cash, liquid resources and short-term debtors and creditors that arise from its
operations; and
·Bank borrowings
The risks identified arising from the Company’s financial instruments are market
price risk (which comprises interest rate risk, foreign currency risk and other
price risk), liquidity risk, counterparty risk, credit risk and derivative
instrument risk. The Board reviews and agrees policies for managing each of
these risks, which are summarised below. These policies are consistent with
those followed last year.
Market price risk
Interest rate risk
The Company finances its operations through its share capital and reserves. In
addition, the Company has gearing through the use of derivative instruments and
on unsecured fixed rate loan facilities of Euro 25m expiring on 31 January 2047
and Euro 10m expiring on 31 January 2052. The level of gearing is reviewed by
the Board and the Lead Portfolio Manager.
Interest rate risk exposure
The values of the Company’s financial instruments that are exposed to movements
in interest rates are shown below:
31 December 2025 31 December 2024
£’000 £’000
Exposure to financial
instruments that bear
interest
Long CFDs – exposure less 198,281 201,334
fair value
Unsecured loan notes 30,561 –
————— —————
228,842 201,334
========= =========
Exposure to financial
instruments that earn
interest
Amounts held at futures 2,814 10,078
clearing houses and brokers
Cash and cash equivalents 47,710 63,042
————— —————
50,524 73,120
========= =========
Net exposure to financial 178,318 128,214
instruments that bear
interest
========= =========
Foreign currency risk
The Company’s net return/(loss) on ordinary activities after taxation for the
year and its net assets can be affected by foreign exchange rate movements
because the Company has income, assets and liabilities which are denominated in
currencies other than the Company’s functional currency which is UK sterling.
The Company can also be subject to short-term exposure from exchange rate
movements, for example, between the date when an investment is purchased or sold
and the date when settlement of the transaction occurs.
Three principal areas have been identified where foreign currency risk could
impact the Company:
·Movements in exchange rates affecting the value of investments and derivative
instruments;
·Movements in exchange rates affecting short-term timing differences; and
·Movements in exchange rates affecting income received.
Currency exposure of financial assets
The currency profile of the Company’s financial assets is shown below:
31 December
2025
Currency Investments Long Debtors1 Cash and Total
held at exposure £’000 cash £’000
fair value to equivalents2
derivative
£’000 £’000
instruments
£’000
Euro 1,392,580 196,947 5,975 47,067 1,642,569
Swiss 483,482 – 4,103 – 487,585
franc
Danish 66,619 – 316 60 66,995
krone
Swedish 117,415 – – – 117,415
krona
US dollar – 50,301 – – 50,301
Norwegian 37,683 – – – 37,683
krone
UK 91,452 – 3,736 583 95,771
sterling
———– ———– ——— ———— —————
—- —- —— —
2,189,231 247,248 14,130 47,710 2,498,319
========= ========= ========= ========= =========
1 Debtors include amounts held at futures clearing houses and brokers.
2 Cash and cash equivalent are made up of £4,660,000 cash at bank and
£43,050,000 held in Fidelity Institutional Liquidity Fund.
31 December
2024
Currency Investments Long Debtors1 Cash and Total
held at exposure £’000 cash £’000
fair value to equivalents2
derivative
£’000 £’000
instruments
£’000
Euro 917,732 213,759 4,309 63,042 1,198,842
Swiss 295,505 – 3,752 – 299,257
franc
Danish 85,263 – 341 – 85,604
krone
Swedish 92,286 – – – 92,286
krona
US dollar – 37,643 – – 37,643
Norwegian 25,629 – – – 25,629
krone
UK 71,357 – 11,182 – 82,539
sterling
———– ———– ——— ———— —————
—- —- —— —
1,487,772 251,402 19,584 63,042 1,821,800
========= ========= ========= ========= =========
1 Debtors include amounts held at futures clearing houses and brokers.
2 Cash and cash equivalent are made up of £3,460,000 cash at bank and
£59,582,000 held in Fidelity Institutional Liquidity Fund.
Currency exposure of financial liabilities
The currency profile of the Company’s financial liabilities is shown below:
31 December 2025
Currency Unsecured Other Total
loan notes creditors £’000
£’000 £’000
Euro 30,561 107 30,668
US dollar – 87 87
UK sterling – 1,419 1,419
————— ————— —————
30,561 1,613 32,174
========= ========= =========
31 December 2024
Currency Unsecured Other Total
loan notes creditors £’000
£’000 £’000
Euro – 200 200
US dollar – 78 78
UK sterling – 1,195 1,195
————— ————— —————
– 1,473 1,473
========= ========= =========
Other price risk
Other price risk arises mainly from uncertainty about future prices of financial
instruments used in the Company’s business. It represents the potential loss the
Company might suffer through holding market positions in the face of price
movements. The Board meets quarterly to consider the asset allocation of the
portfolio and the risk associated with particular industry sectors within the
parameters of the investment objective. The Portfolio Managers are responsible
for actively monitoring the existing portfolio selected in accordance with the
overall asset allocation parameters described above and seek to ensure that
individual stocks also meet an acceptable risk/reward profile.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulties in
meeting obligations associated with financial liabilities. The Company’s assets
mainly comprise readily realisable securities and derivative instruments which
can be sold easily to meet funding commitments if necessary. Short-term
flexibility is achieved by the use of a bank overdraft, if required. The Company
has the current borrowing of Euro 25m expiring 31 January 2047 and Euro 10m
expiring 31 January 2052.
Liquidity risk exposure
At 31 December 2025, contractual maturities of the financial liabilities at the
year end, based on the earliest date on which payment can be required are as
follows:
31 December 2025
Within More than Total
one year one year £’000
£’000 £’000
Creditors and 1,613 – 1,613
accruals
1.53% unsecured 334 21,829 22,163
loan notes 2047
(Euro)1
1.66% unsecured 145 8,732 8,877
loan notes 2052
(Euro)1
————— ————— —————
2,092 30,561 32,653
========= ========= =========
1Acquired by the Company, as part of the combination with HET on 26 September
2025.
31 December 2024
Within More than Total
one year one year £’000
£’000 £’000
Derivative instruments 5,796 – 5,796
Creditors and accruals 1,473 – 1,473
————— ————— —————
7,269 – 7,269
========= ========= =========
Counterparty risk
Certain derivative instruments in which the Company invests are not traded on an
exchange but instead will be traded between counterparties based on contractual
relationships, under the terms outlined in the International Swaps and
Derivatives Association’s («ISDA») market standard derivative legal
documentation. These are known as Over The Counter («OTC») trades. As a result,
the Company is subject to the risk that a counterparty may not perform its
obligations under the related contract. In accordance with the risk management
process which the Manager employs, this risk is minimised by only entering into
transactions with counterparties which are believed to have an adequate credit
rating at the time the transaction is entered into, by ensuring that formal
legal agreements covering the terms of the contract are entered into in advance,
and through adopting a counterparty risk framework which measures, monitors and
manages counterparty risk by the use of internal and external credit agency
ratings and by evaluating derivative instrument credit risk exposure
31 31 December 2024
December
2025
Collateral Collateral Collateral Collateral
received pledged received pledged
£’000 £’000 £’000 £’000
J.P. Morgan 1,600 – – 5,025
Securities
plc
UBS AG – 2,814 50 5,053
———- ————— ————— —————
—–
1,600 2,814 50 10,078
========= ========= ========= =========
Credit risk
Financial instruments may be adversely affected if any of the institutions with
which money is deposited suffer insolvency or other financial difficulties. All
transactions are carried out with brokers that have been approved by the Manager
and are settled on a delivery versus payment basis. Limits are set on the amount
that may be due from any one broker and are kept under review by the Manager.
Exposure to credit risk arises on unsettled security transactions and derivative
instrument contracts and cash at bank.
Derivative instrument risk
The risks and risk management processes which result from the use of derivative
instruments, are set out in a documented Risk Management Process Document.
Derivative instruments are used by the Manager for the following purposes:
·to gain unfunded long exposure to equity markets, sectors or single stocks.
Unfunded exposure is exposure gained without an initial flow of capital; and
·to position short exposures in the Company’s portfolio. These uncovered
exposures benefit from falls in the prices of shares which the Portfolio
Managers believe to be overvalued. These positions, therefore, distinguish
themselves from other short exposures held for hedging purposes since they are
expected to add risk to the portfolio.
RISK SENSITIVITY ANALYSIS
Interest rate risk sensitivity analysis
Based on the financial instruments held and interest rates at 31 December 2025,
an increase of 1.00% in interest rates throughout the year, with all other
variables held constant, would have decreased the net return on ordinary
activities after taxation for the year and decreased the net assets of the
Company by £1,478,000 (2024: increased the net loss and increase the net assets
by £1,282,000). A decrease of 1.00% in interest rates throughout the year would
have had an equal but opposite effect.
Foreign currency risk sensitivity analysis
Based on the financial instruments held and currency exchange rates at the
Balance Sheet date, a 10% strengthening of the UK sterling exchange rate against
foreign currencies, with all other variables held constant, would have decreased
the Company’s net return on ordinary activities after taxation for the year and
decreased the Company’s net assets (2024: decreased the net loss and decreased
the net assets) by the following amounts:
Currency 31 December 2025 31 December 2024
£’000 £’000
Euro 146,536 108,967
Swiss franc 44,326 27,205
Swedish krona 10,674 8,390
Danish krone 6,090 7,782
US dollar 4,565 3,415
Norwegian krone 3,426 2,330
————— —————
215,617 158,089
========= =========
Based on the financial instruments held and currency exchange rates at the
Balance Sheet date, a 10% weakening of the UK sterling exchange rate against
foreign currencies, with all other variables held constant, would have increased
the Company’s net return on ordinary activities after taxation for the year and
increased the Company’s net assets (2024: increased the net loss and increased
the net assets) by the following amounts:
Currency 31 December 2025 31 December 2024
£’000 £’000
Euro 179,100 133,182
Swiss franc 54,176 33,251
Swedish krona 13,046 10,254
Danish krone 7,444 9,512
US dollar 5,579 4,174
Norwegian krone 4,187 2,848
————— —————
263,532 193,221
========= =========
Other price risk – exposure to investments sensitivity analysis
Based on the investments held and share prices at 31 December 2025, an increase
of 10% in share prices, with all other variables held constant, would have
increased the Company’s net return on ordinary activities after taxation for the
year and increased the net assets of the Company by £218,923,000 (2024:
increased the net loss and increased the net assets by £148,777,000). A decrease
of 10% in share prices would have had an equal and opposite effect.
Other price risk – net exposure to derivative instruments sensitivity analysis
Based on the derivative instruments held and share prices at 31 December 2025,
an increase of 10% in the share prices underlying the derivative instruments,
with all other variables held constant, would have increased the Company’s net
return on ordinary activities after taxation for the year and increased the net
assets of the Company by £24,725,000 (2024: increased the net loss and increased
the net assets by £25,140,000). A decrease of 10% in share prices of the
investments underlying the derivative instruments would have had an equal and
opposite effect.
Fair Value of Financial Assets and Liabilities
Financial assets and liabilities are stated in the Balance Sheet at values which
are not materially different to their fair values. As explained in Notes 2 (k)
and (l), investments and derivative instruments are shown at fair value. In the
case of cash and cash equivalents, book value approximates to fair value due to
the short maturity of the instruments. The exception are the Euro unsecured bank
loans, their fair value having been calculated by discounting future cash flows
at current Euro interest rates.
31 December 2025
At fair value At amortised cost
£’000 £’000
1.53% unsecured loan notes 2047 (Euro) 21,433 21,829
1.66% unsecured loan notes 2052 (Euro) 8,481 8,732
————— —————
Total 29,914 30,561
========= =========
The unsecured loan notes were acquired as a result of the transaction with HET.
In order to comply with fair value accounting disclosures only, the fair value
of the unsecured loan notes has been estimated to be £29,914,000 (2024: £nil)
and is categorised as Level 3 in the fair value hierarchy as described below.
However, for the purpose of the daily NAV announcements, the unsecured loan
notes are valued at par in the NAV because they are not traded and the Directors
expect them to be held to maturity and, accordingly, the directors have assessed
that this is the most appropriate value to be applied for this purpose.
The estimate of the fair value of each unsecured loan note is calculated by
aggregating the discounted value of future cash flows, being the contractual
interest payments and the repayment of capital at maturity as each note falls
due. The discount rate used for each note is based on the yield of the reference
instrument that was used in the pricing of each loan note plus the same credit
spread applied at the issue. The net assets including the unsecured loan notes
at fair value would have been £2,221,877,000 at 31 December 2025 (compared to
£2,221,230,000 with the unsecured loan notes at par value), equivalent to a net
asset value per ordinary share of 434.52p (compared to 434.39p with loan notes
at par value).
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 valuation techniques used by the Company are explained in
Notes 2 (k) and (l). The table below sets out the Company’s fair value
hierarchy.
31
December
2025
Financial assets at fair Level 1 Level 2 Level 3 Total
value through profit or loss
£’000 £’000 £’000 £’000
Investments 2,189,231 – – 2,189,231
Derivative instrument assets 405 1,928 – 2,333
——— ——— ——— ———
—— —— —— ——
2,189,636 1,928 – 2,191,564
========= ========= ========= =========
Financial liabilities at fair
value through profit or loss
Derivative instrument – – – –
liabilities
========= ========= ========= =========
31
December
2024
Financial assets at fair Level 1 Level 2 Level 3 Total
value through profit or loss
£’000 £’000 £’000 £’000
Investments 1,487,772 – – 1,487,772
Derivative instrument assets – – – –
——— ——— ——— ———
—— —— —— ——
1,487,772 – – 1,487,772
========= ========= ========= =========
Financial liabilities at fair
value through profit or loss
Derivative instrument (1,121) (4,675) – (5,796)
liabilities
========= ========= ========= =========
In the event that the Company decided to pay back the loan notes earlier than
the maturity date, the loan note agreements include certain clauses that may
require additional payments to be made. These clauses are primarily to protect
the lender from any losses suffered from early repayment. Such `make-whole
amounts’ are based on any excess of the discounted value of the remaining
scheduled payments over the life of the unsecured loan notes above the value of
the principal. The make-whole amount cannot be less than zero. The directors
have assessed that the likelihood of early repayment is considered to be highly
unlikely to occur.
19CAPITAL 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,
both of which are detailed in the Strategic Report in the Annual Report. The
principal risks and their management are disclosed in the Strategic Report above
and in Note 18.
The Company’s gross gearing and net gearing at the year end is set out below:
31 December 2025
Gross gearing Net gearing
Asset %1 Asset %1
exposure exposure
£’000 £’000
Investments 2,189,231 98.6 2,189,231 98.6
Long CFDs 200,209 9.0 200,209 9.0
Long futures 47,039 2.1 47,039 2.1
Total long exposures 2,436,479 109.7 2,436,479 109.7
Gross asset 2,436,479 109.7 2,436,479 109.7
exposure/net market
exposure
========= ========= ========= =========
Shareholders’ funds 2,221,230 2,221,230
========= =========
Gearing2 9.7 9.7
========= =========
1Asset exposure to the market expressed as a percentage of shareholders’ funds.
2Gearing is the amount by which gross asset exposure/net market exposure exceeds
shareholders’ funds expressed as a percentage of shareholders’ funds.
31 December 2024
Gross gearing Net gearing
Asset %1 Asset %1
exposure exposure
£’000 £’000
Investments 1,487,772 95.2 1,487,772 95.2
Long CFDs 196,659 12.6 196,659 12.6
Long futures 54,743 3.5 54,743 3.5
Total long exposures 1,739,174 111.3 1,739,174 111.3
Gross asset 1,739,174 111.3 1,739,174 111.3
exposure/net market
exposure
========= ========= ========= =========
Shareholders’ funds 1,563,129 1,563,129
========= =========
Gearing2 11.3 11.3
========= =========
1Asset exposure to the market expressed as a percentage of shareholders’ funds.
2Gearing is the amount by which gross asset exposure/net market exposure exceeds
shareholders’ funds expressed as a percentage of shareholders’ funds.
20TRANSACTIONS WITH THE MANAGERS 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»). Both companies are Fidelity
group companies.
Details of the current fee arrangements are given in the Directors’ Report in
the Annual Report. During the year, the following expenses were payable to FII:
31 December 2025 31 December 2024
£’000 £’000
Management fees 12,208 11,512
Marketing services 214 221
========= =========
At the Balance Sheet date, the following balances payable to FII were accrued
and included in other creditors:
31 December 2025 31 December 2024
£’000 £’000
Management fees 1,237 972
Marketing services – 53
========= =========
As at 31 December 2025, the Board consisted of seven non-executive Directors,
all of whom are considered to be independent by the Board. None of the Directors
have a service contract with the Company.
Disclosures of the Directors’ interests in the ordinary shares of the Company
and Directors’ fees and taxable expenses relating to reasonable travel expenses
paid to the Directors are given in the Directors’ Remuneration Report in the
Annual Report. In addition to the fees and taxable expenses disclosed in the
Directors’ Remuneration Report, £21,000 (2024: £20,000) of Employers’ National
Insurance Contributions was also paid by the Company. As at 31 December 2025,
Directors’ fees of £25,000 (2024: £22,000) were accrued and payable.
ALTERNATIVE PERFORMANCE MEASURES
The Company uses the following as Alternative Performance Measures and these are
all defined in the Glossary of Terms in the Annual Report.
Discount/Premium
Details of the Company’s discount are on the Financial Highlights page in the
Annual Report.
Gearing
See Note 19 above for details of the Company’s gearing (both gross and net).
Net Asset Value («NAV») per Ordinary Share
See the Balance Sheet and Note 17 above for further details.
Ongoing Charges Ratio
The ongoing charges ratio has been calculated in accordance with guidance issued
by the AIC as the total of management fees and other expenses expressed as a
percentage of the average net assets throughout the year.
31 December 2025 31 December 2024
Investment management fees 12,208 11,512
(£’000)
Other expenses (£’000) 1,079 1,063
Ongoing charges (£’000) 13,287 12,575
Fee waivers in respect of the (2,537) –
transaction with HET (£’000)
Ongoing charges ratio 0.73% 0.76%
Ongoing charges ratio 0.59% 0.76%
including fee waivers
========= =========
Revenue, Capital and Total Returns per Share
See the Income Statement and Note 8 above for further details.
Total Return Performance
The NAV per ordinary share total return performance includes reinvestment of the
dividend in the NAV of the Company on the ex-dividend date. The ordinary share
price total return performance includes the reinvestment of the net dividend in
the month that the share price goes ex-dividend.
The tables below provide information relating to the NAV per ordinary share and
the ordinary share price of the Company, the impact of the dividend
reinvestments and the total returns for the years ended 31 December 2025 and 31
December 2024.
2025 Net asset Ordinary
value per share
ordinary price
share
31 December 2024 382.44p 352.00p
31 December 2025 434.39p 416.50p
Change in year +13.6% +18.3%
Impact of dividend reinvestments +2.6% +2.8%
Total return for the year +16.2% +21.1%
========= =========
2024 Net asset Ordinary
value per share
ordinary price
share
31 December 2023 383.39p 360.00p
31 December 2024 382.44p 352.00p
Change in year -1.5% -2.2%
Impact of dividend reinvestments +2.0% +2.1%
Total return for the year +0.5% -0.1%
========= =========
The Annual Financial Report Announcement is not the Company’s statutory
accounts. The above results for the year ended 31 December 2025 are an abridged
version of the Company’s full Annual Report and Financial Statements, which have
been approved and audited with an unqualified report. The 2024 and 2025
statutory accounts received unqualified reports from the Company’s Auditor and
did not include any reference to matters to which the Auditor drew attention by
way of emphasis without qualifying the reports and did not contain a statement
under s.498 of the Companies Act 2006. The financial information for 2024 is
derived from the statutory accounts for 2024 which have been delivered to the
Registrar of Companies. The 2025 Financial Statements will be filed with the
Registrar of Companies in due course.
A copy of the Annual Report will shortly be submitted to the National Storage
Mechanism and will be available for inspection at: www.morningstar.co.uk/uk/NSM
The Annual Report will be posted to shareholders later this month and additional
copies will be available from the registered office of the Company and on the
Company’s website: 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.
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.
ENDS
This information was brought to you by Cision http://news.cision.com
https://news.cision.com/fidelity-european-trust-plc/r/annual-financial-report,c4322655
Comparto con muchos la visión de que la universidad, salgo contadas excepciones va muy por detrás del mundo real, con una actitud muy reactiva.
Hace años que salà de ella, aunque continúo ligado, intentando terminar otros estudios que hace tiempo comence (soy un ferviente entusiasta de estar continuamente formándome… aunque solamente sea como intención, y el estar matriculado en alguna asignatura de una 2ª carrera me ayuda en ocasiones a autoexigirme un plus adicional).
Lo penoso es que solamente mantengo relación, muy de vez en cuando, con 2 profesores. Los únicos de los que guardo un buen recuerdo. Y casualidad esta que no son profesionales de la docencia, sino profesionales de la industria privada que están en la docencia por convicción e ilusión personal. Cuánto tiene que aprender la universidad de muchas escuelas de negocios…