REG-Fidelity European Trust Plc: Annual Financial Report
18/03/2026 07:02
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
investmenttrusts@fil.com 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 Morse Marcel Stötzel
Portfolio Manager Portfolio Manager
17 March 2026 17 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 Impact Mitigation
* The Company and its assets may be impacted by geopolitical, economic and market related risks associated with pursuing an investment policy focused on continental Europe. In particular, the most recent escalation in the Middle East has injected fresh * The Company’s portfolio is made up mainly of listed securities. The Portfolio Managers success or failure to protect and increase the Company’s value against the market, economic and political background is core to the Company’s continued success. Their investment philosophy of stock-picking and investing in attractively valued companies should outperform the Benchmark Index over time.
volatility into oil markets, to which Europe is exposed given its dependence on imported energy and the inflationary implications. In addition to the oil prices, natural gas and a variety of soft commodities and supply limitations have fuelled global * The risk from the likely effects of unforeseen economic and market events is somewhat mitigated by the Company’s investment trust structure which means no forced sales need to take place to deal with any redemptions. Therefore, investments can be held over a longer time horizon.
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 * The Board reviews market, economic and political risks and legislative changes at each Board meeting. The Portfolio Managers provide an investment review at each meeting which includes a review of the economic and political environment, and any risks and challenges faced by the Company.
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 * The Board regularly reviews the impact of gearing and derivatives and has comfort that the portfolio is sufficiently diversified by sector and number of holdings.
investment appetite. * Risks to which the Company is exposed to in the market and currency risk category are included in Note 18 to the Financial Statements below together with summaries of the policies for managing these risks. It is the Company’s policy not to hedge the underlying currencies of the holdings in the portfolio but rather to take the currency risk into consideration when making investment decisions.
* 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 Impact Mitigation
* The risk of underperformance for a sustained period against the Benchmark Index or peer group. The achievement of the Company’s investment performance objective relative to the market requires the taking of risk, such as investment strategy, asset * The Portfolio Managers are responsible for actively monitoring the portfolio selected in accordance with the asset allocation parameters and seeks to ensure that individual stocks meet an acceptable risk/reward profile.
allocation and stock selection, and may lead to NAV and share price underperformance compared to the Benchmark Index and/or peer group companies. * The Board reviews Fidelity’s compliance with agreed investment restrictions; investment performance and risk; relative performance; the portfolio’s risk profile; and whether appropriate strategies are employed to mitigate any negative impact of substantial changes in the markets. The Board also regularly canvasses major shareholders for their views with respect to company matters.
* 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 * The Board has put in place policies and limits to control the Company’s use of derivatives and exposures. These are monitored daily by the Manager’s Compliance team and regular reports are provided to the Board. Further detail on derivative instruments risk is included in Note 18 to the Financial Statements below.
could lead to the Company and its objective becoming unattractive to investors. * The Board regularly considers the level of gearing and gearing risk. The Investment Policy sets the gearing limits within which the Manager must operate.
* 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 Impact Mitigation
* There is cybersecurity risk from cyberattacks or threats to the functioning of global markets and to the Manager’s own business model, including its and the Company’s outsourced suppliers. The external threat level has shifted with a number of UK * The risk is monitored by the Board with the help of the Manager’s global cybersecurity team and their extensive Strategic Cyber and Information Security programme and assurances from outsourced suppliers.
companies successfully targeted in recent months, and Artificial Intelligence (AI) has also increased the attack potential from nefarious actors. * The Manager has established a comprehensive framework of information security policies and standards which provide a structured approach to identify, prevent, and respond to information security threats. The framework ensures consistency in Fidelity’s security measures, enhances its ability to adapt to evolving/emerging threats, and compliance with changing regulatory requirements. The Company’s other service providers also have similar measures in place.
* 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/extortion attacks * Key performance indicators and metrics have been developed by the Manager to monitor the overall efficacy of cybersecurity processes and controls and to further enhance the Manager’s cybersecurity strategy and operational resilience.
(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 Impact Mitigation
* Changes in legislation, taxation or regulation, or other external influence that require changes to the investment trust structure of the Company are a significant risk for the Company. * The Board and Manager closely monitor regulatory, taxation and legislative changes, with developments impacting the Company summarised in the form of regular reporting to the Board.
* 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. * The Manager monitors Section 1158 status to ensure any issues are escalated to the Board and addressed promptly.
* 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 * The Manager participates in industry discussions regarding regulatory changes impacting investment companies, and regulatory developments continue to be monitored and managed by Fidelity through active lobbying and negotiations as well as a robust change management process.
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 Impact Mitigation
* There is increased activity around mergers and acquisitions across the investment company marketplace and alternative investment offerings (including passive vehicles) which could influence the demand for the Company’s shares. In addition, cheaper * The Board, the Company’s Broker and the Manager closely monitor industry activity, the peer group and the share register.
capital and the search for technology scale is also likely to mean increased consolidation. * An annual review of strategy is undertaken by the Board to ensure that the Company continues to offer a relevant product to investors.
* 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 Impact Mitigation
* There is business process disruption risk from continued threats of cyberattacks, geopolitical events, outages, fire events and natural disasters, resulting in financial and/or reputational impact to the Company affecting the functioning of the business. * Fidelity has Business Continuity and Crisis Management Frameworks in place to deal with business disruption and assure operational resilience.
* The Company relies on a number of third-party service providers, principally the Registrar, Custodian and Depositary who may be subject to cybercrime. * All third-party service providers are subject to a risk-based programme of risk oversight and internal audits by the Manager and their own internal controls reports are received an annual basis and any concerns are investigated.
* The Board regularly reviews the services provided by third parties.
7. Operational Risks
Trend: Stable
Description and Impact Mitigation
* There is risk of financial losses or reputational damage from inadequate or failed internal processes, people and systems or from external parties and events. * Fidelity’s Operational Risk Management Framework is designed to pro-actively prevent, identify and manage operational risks inherent in most activities.
* Fidelity uses robust systems and procedures dedicated to its operational processes. Its risk management structure is designed according to the FCA’s three lines of defence model.
8. Discount Control Risk
Trend: Stable
Description and Impact Mitigation
* The price of the Company’s shares and its discount to NAV are factors which are not completely within the Company’s control. * The Board reviews the investment strategy, investment performance and the marketing approach, given the influence of all these factors on the discount.
* The Board has a discount 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 * The Company’s share price, NAV and discount volatility are monitored daily by the Manager and the Company’s Broker and considered by the Board on a regular basis. The demand for shares can be influenced through good performance and an active investor relations programme.
share repurchases at acceptable prices and within the parameters set by the Board. * The Board regularly reviews the Company’s share register, and the Chairman meets with large shareholders.
* 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. * Discretionary repurchases of ordinary shares are made within guidelines set by the Board.
9. Key Person Risk and Operational Support Risks
Trend: Stable
Description and Impact Mitigation
* The loss of the Portfolio Managers or other key individuals could lead to potential performance and/or operational issues. * The Company’s Portfolio Managers work closely together and have extensive experience in the same markets and companies and share a common investment approach and complementary investment experience and therefore if there was a loss of one of them, the remaining Portfolio Manager can provide continuity in managing the portfolio. The Portfolio Managers are also supported by an Investment Specialist and a team of Fidelity analysts.
* 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. * The Manager identifies key dependencies which are then addressed through succession plans, particularly for portfolio managers.
* 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
investmenttrusts@fil.com .
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 ended 31 December 2025 Year ended 31 December 2024
Notes Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000
Gains/(losses) on investments 10 – 207,231 207,231 – (47,301) (47,301)
Gains on derivative instruments 11 – 27,618 27,618 – 35,423 35,423
Income 3 57,618 – 57,618 53,670 – 53,670
Investment management fees 4 (2,418) (7,253) (9,671) (2,878) (8,634) (11,512)
Other expenses 5 (1,079) – (1,079) (1,063) – (1,063)
Foreign exchange gains/(losses) – 1,889 1,889 – (2,956) (2,956)
--------------- --------------- --------------- --------------- --------------- ---------------
Net return/(loss) on ordinary activities before finance costs and taxation 54,121 229,485 283,606 49,729 (23,468) 26,261
Finance costs 6 (1,771) (5,314) (7,085) (2,770) (8,309) (11,079)
--------------- --------------- --------------- --------------- --------------- ---------------
Net return/(loss) on ordinary activities before taxation 52,350 224,171 276,521 46,959 (31,777) 15,182
Taxation on return/(loss) on ordinary activities 7 (3,165) – (3,165) (4,422) – (4,422)
--------------- --------------- --------------- --------------- --------------- ---------------
Net return/(loss) on ordinary activities after taxation for the year 49,185 224,171 273,356 42,537 (31,777) 10,760
========= ========= ========= ========= ========= =========
Return/(loss) per ordinary share 8 11.30p 51.50p 62.80p 10.41p (7.78p) 2.63p
========= ========= ========= ========= ========= =========
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 capital £’000 Share premium account £’000 Capital redemption reserve £’000 Capital reserve £’000 Revenue reserve £’000 Total shareholders ’ funds £’000
Total shareholders’ funds at 31 December 2024 10,411 58,615 5,414 1,440,810 47,879 1,563,129
Net return on ordinary – – – 224,171 49,185 273,356
activities after taxation for the year
New ordinary shares issued in respect of the transaction with HET 16 2,798 458,644 – – – 461,442
Expenses in respect of the transaction with HET – – – (406) – (406)
Repurchase of ordinary shares into Treasury 15 – – – (38,097) – (38,097)
Dividends paid to shareholders 9 – – – – (38,194) (38,194)
--------------- --------------- --------------- --------------- --------------- ---------------
Total shareholders’ funds at 31 December 2025 13,209 517,259 5,414 1,626,478 58,870 2,221,230
========= ========= ========= ========= ========= =========
Total shareholders’ funds at 31 December 2023 10,411 58,615 5,414 1,472,587 40,452 1,587,479
Net (loss)/return on ordinary activities after taxation for the year – – – (31,777) 42,537 10,760
Dividends paid to shareholders 9 – – – – (35,110) (35,110)
--------------- --------------- --------------- --------------- --------------- ---------------
Total shareholders’ funds at 31 December 2024 10,411 58,615 5,414 1,440,810 47,879 1,563,129
========= ========= ========= ========= ========= =========
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 £’000 31 December 2024 £’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 clearing houses and brokers 2,814 10,078
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 reserve 16 5,414 5,414
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 ordinary share 17 434.39p 382.44p
========= =========
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
1 PRINCIPAL 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.
2 ACCOUNTING 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.
3 INCOME
Year ended 31 December 2025 £’000 Year ended 31 December 2024 £’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 contracts 1,842 2,468
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, bank deposits and money market funds 993 2,323
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).
4 INVESTMENT MANAGEMENT FEES
Year ended 31 December 2025 Year ended 31 December 2024
Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000
Investment management fees 3,052 9,156 12,208 2,878 8,634 11,512
Fee waived in respect of the transaction with HET (634) (1,903) (2,537) – – –
--------------- --------------- --------------- --------------- --------------- ---------------
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.
5 OTHER EXPENSES
Year ended 31 December 2025 £’000 Year ended 31 December 2024 £’000
AIC fees 25 24
Custody fees 100 90
Depositary fees 54 63
Directors’ fees 1 219 186
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 Auditor for the audit of the Financial Statements 72 50
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 .
6 FINANCE COSTS
Year ended 31 December 2025 Year ended 31 December 2024
Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000
Interest paid on collateral, unsecured loan notes and overdrafts 79 236 315 15 43 58
Interest paid on CFDs 1,318 3,956 5,274 2,122 6,367 8,489
Costs recognised from futures contracts 374 1,122 1,496 633 1,899 2,532
--------------- --------------- --------------- --------------- --------------- ---------------
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).
7 TAXATION ON RETURN/(LOSS) ON
ORDINARY ACTIVITIES
Year ended 31 December 2025 Year ended 31 December 2024
Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000
a) Analysis of the taxation charge for the year
Overseas taxation 3,165 – 3,165 4,422 – 4,422
--------------- --------------- --------------- --------------- --------------- ---------------
Taxation charge for the year (see Note 7b) 3,165 – 3,165 4,422 – 4,422
========= ========= ========= ========= ========= =========
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 ended 31 December 2025 Year ended 31 December 2024
Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000
Net return/(loss) on ordinary activities before taxation 52,350 224,171 276,521 46,959 (31,777) 15,182
--------------- --------------- --------------- --------------- --------------- ---------------
Net return/(loss) on ordinary activities before taxation multiplied by the standard rate of UK corporation tax of 25% (2024: 25%) 13,088 56,043 69,131 11,740 (7,944) 3,796
Effects of:
Capital (gains)/losses not taxable 1 – (59,185) (59,185) – 3,709 3,709
Income not taxable (13,081) – (13,081) (11,131) – (11,131)
Expenses not deductible – 1,329 1,329 – 2,077 2,077
Excess management expenses (7) 1,813 1,806 (609) 2,158 1,549
Overseas taxation 3,165 – 3,165 4,422 – 4,422
--------------- --------------- --------------- --------------- --------------- ---------------
Total taxation charge for the year (see Note 7a) 3,165 – 3,165 4,422 – 4,422
========= ========= ========= ========= ========= =========
1 The 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.
8 RETURN/(LOSS) PER ORDINARY SHARE
Year ended 31 December 2025 Year ended 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 revenue return on ordinary activities after taxation 49,185 42,537
Net capital return/(loss) on ordinary activities after taxation 224,171 (31,777)
--------------- ---------------
Total return on ordinary activities after taxation 273,356 10,760
========= =========
Number Number
Weighted average number of ordinary shares held outside of Treasury 435,250,229 408,730,523
========= =========
9 DIVIDENDS PAID TO SHAREHOLDERS
Year ended 31 December 2025 £’000 Year ended 31 December 2024 £’000
Dividends paid
Interim dividend of 3.90 pence per ordinary share paid for the year ended 31 December 2025 15,714 –
Final dividend of 5.50 pence per ordinary share paid for the year ended 31 December 2024 22,480 –
Interim dividend of 3.60 pence per ordinary share paid for the year ended 31 December 2024 – 14,714
Final dividend of 4.99 pence per ordinary share paid for the year ended 31 December 2023 – 20,396
--------------- ---------------
38,194 35,110
========= =========
Dividends proposed
Final dividend of 6.00 pence per ordinary share proposed for the year ended 31 December 2025 30,548 –
Final dividend of 5.50 pence per ordinary share proposed for the year ended 31 December 2024 – 22,480
--------------- ---------------
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).
10 INVESTMENTS
31 December 2025 £’000 31 December 2024 £’000
Investments held at fair value 2,189,231 1,487,772
========= =========
Opening book cost 1,005,206 943,460
Opening investment holding gains 482,566 575,415
--------------- ---------------
Opening fair value 1,487,772 1,518,875
========= =========
Movements in the year
Purchases at cost 761,976 185,382
Assets acquired in respect of the transaction with HET 1 478,394 –
Costs in respect to the transaction with HET 1 892 –
Sales – proceeds (747,034) (169,184)
Gains/(losses) on investments 207,231 (47,301)
--------------- ---------------
Closing fair value 2,189,231 1,487,772
========= =========
Closing book cost 1,607,792 1,005,206
Closing investment holding gains 581,439 482,566
--------------- ---------------
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 31 December 2025 £’000 Year ended 31 December 2024 £’000
Purchases transaction costs 1,388 488
Sales transaction costs 176 70
--------------- ---------------
1,564 558
========= =========
11 DERIVATIVE INSTRUMENTS
Year ended 31 December 2025 £’000 Year ended 31 December 2024 £’000
Gains on derivative instruments
Gains on long CFD positions closed 20,597 41,187
Losses on short CFD positions closed (6,325) (8,418)
Gains on futures contracts closed 5,217 5,815
Movement in investment holding gains/(losses) on long CFDs 6,603 (2,246)
Movement in investment holding losses on short CFDs – (142)
Movement in investment holding gains/(losses) on futures 1,526 (773)
--------------- ---------------
27,618 35,423
========= =========
31 December 2025 Fair value £’000 31 December 2024 Fair value £’000
Derivative instruments recognised on the Balance Sheet
Derivative instrument assets 2,333 –
Derivative instrument liabilities – (5,796)
--------------- ---------------
2,333 (5,796)
========= =========
31 December 2025 31 December 2024
Fair value £’000 Asset exposure £’000 Fair value £’000 Asset exposure £’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
========= ========= ========= =========
12 DEBTORS
31 December 2025 £’000 31 December 2024 £’000
Accrued income 1,930 618
Taxation recoverable 9,014 8,807
Other debtors and prepayments 372 81
--------------- ---------------
11,316 9,506
========= =========
13 OTHER CREDITORS
31 December 2025 £’000 31 December 2024 £’000
Creditors and accruals 1,613 1,473
========= =========
14 LOAN NOTES (UNSECURED)
31 December 2025 £’000 31 December 2024 £’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.
15 SHARE CAPITAL
31 December 2025 31 December 2024
Number of shares Nominal value £’000 Number of shares Nominal value £’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 Treasury (9,286,723) (232) – –
New ordinary shares issued in respect of the transaction with HET 111,902,155 2,798 – –
--------------- --------------- --------------- ---------------
End of the year 511,345,955 12,784 408,730,523 10,218
========= ========= ========= =========
Ordinary shares of 2.5 pence each held in Treasury 1
Beginning of the year 7,717,387 193 7,717,387 193
Ordinary shares repurchased into Treasury 9,286,723 232 – –
End of the year 17,004,110 425 7,717,387 193
--------------- --------------- --------------- ---------------
Total share capital 13,209 10,411
========= =========
1 Ordinary shares held in Treasury carry no rights to
vote, to receive a dividend or to participate in a winding up of the Company.
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.
16 CAPITAL AND RESERVES
Share capital £’000 Share premium account £’000 Capital redemption reserve £’000 Capital reserve £’000 Revenue reserve £’000 Total shareholders ’ funds £’000
At 1 January 2025 10,411 58,615 5,414 1,440,810 47,879 1,563,129
Gains on investments (see Note 10) – – – 207,231 – 207,231
Gains on derivative instruments (see Note 11) – – – 27,618 – 27,618
Foreign exchange gains – – – 1,889 – 1,889
Investment management fees (see Note 4) – – – (7,253) – (7,253)
Finance costs (see Note 6) – – – (5,314) – (5,314)
New ordinary shares issued in respect of the transaction with HET 2,798 458,644 – – – 461,442
Expenses in respect of the transaction with HET 1 – – – (406) – (406)
Repurchase of ordinary shares (see Note 15) – – – (38,097) – (38,097)
Revenue returns after taxation for the year – – – – 49,185 49,185
Dividends paid to shareholders (see Note 9) – – – – (38,194) (38,194)
--------------- --------------- --------------- --------------- --------------- ---------------
At 31 December 2025 13,209 517,259 5,414 1,626,478 58,870 2,221,230
========= ========= ========= ========= ========= =========
1 See Accounting Policy 2 (a) above for further details.
Share capital £’000 Share premium account £’000 Capital redemption reserve £’000 Capital reserve £’000 Revenue reserve £’000 Total shareholders ’ funds £’000
At 1 January 2024 10,411 58,615 5,414 1,472,587 40,452 1,587,479
Losses on investments (see Note 10) – – – (47,301) – (47,301)
Gains on derivative instruments (see Note 11) – – – 35,423 – 35,423
Foreign exchange losses – – – (2,956) – (2,956)
Investment management fees (see Note 4) – – – (8,634) – (8,634)
Finance costs (see Note 6) – – – (8,309) – (8,309)
Revenue return on ordinary activities after taxation for the year – – – – 42,537 42,537
Dividends paid to shareholders (see Note 9) – – – – (35,110) (35,110)
--------------- --------------- --------------- --------------- --------------- ---------------
At 31 December 2024 10,411 58,615 5,414 1,440,810 47,879 1,563,129
========= ========= ========= ========= ========= =========
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.
17 NET ASSET VALUE PER ORDINARY
SHARE
The calculation of the net asset value per ordinary share is based on the
total shareholders’ funds divided by the number of ordinary shares held
outside of Treasury.
31 December 2025 31 December 2024
Total shareholders’ funds £2,221,230,000 £1,563,129,000
Ordinary shares held outside of Treasury at year end 511,345,955 408,730,523
--------------- ---------------
Net asset value per ordinary share 434.39p 382.44p
========= =========
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.
18 FINANCIAL 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 £’000 31 December 2024 £’000
Exposure to financial instruments that bear interest
Long CFDs – exposure less fair value 198,281 201,334
Unsecured loan notes 30,561 –
--------------- ---------------
228,842 201,334
========= =========
Exposure to financial instruments that earn interest
Amounts held at futures clearing houses and brokers 2,814 10,078
Cash and cash equivalents 47,710 63,042
--------------- ---------------
50,524 73,120
========= =========
Net exposure to financial instruments that bear interest 178,318 128,214
========= =========
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 held at fair value £’000 Long exposure to derivative instruments £’000 Debtors 1 £’000 Cash and cash equivalents 2 £’000 Total £’000
Euro 1,392,580 196,947 5,975 47,067 1,642,569
Swiss franc 483,482 – 4,103 – 487,585
Danish krone 66,619 – 316 60 66,995
Swedish krona 117,415 – – – 117,415
US dollar – 50,301 – – 50,301
Norwegian krone 37,683 – – – 37,683
UK sterling 91,452 – 3,736 583 95,771
--------------- --------------- --------------- --------------- ---------------
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 held at fair value £’000 Long exposure to derivative instruments £’000 Debtors 1 £’000 Cash and cash equivalents 2 £’000 Total £’000
Euro 917,732 213,759 4,309 63,042 1,198,842
Swiss franc 295,505 – 3,752 – 299,257
Danish krone 85,263 – 341 – 85,604
Swedish krona 92,286 – – – 92,286
US dollar – 37,643 – – 37,643
Norwegian krone 25,629 – – – 25,629
UK sterling 71,357 – 11,182 – 82,539
--------------- --------------- --------------- --------------- ---------------
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 loan notes £’000 Other creditors £’000 Total £’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 loan notes £’000 Other creditors £’000 Total £’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 one year £’000 More than one year £’000 Total £’000
Creditors and accruals 1,613 – 1,613
1.53% unsecured loan notes 2047 (Euro) 1 334 21,829 22,163
1.66% unsecured loan notes 2052 (Euro) 1 145 8,732 8,877
--------------- --------------- ---------------
2,092 30,561 32,653
========= ========= =========
1 Acquired by the Company, as part of the combination
with HET on 26 September 2025.
31 December 2024
Within one year £’000 More than one year £’000 Total £’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 December 2025 31 December 2024
Collateral received £’000 Collateral pledged £’000 Collateral received £’000 Collateral pledged £’000
J.P. Morgan Securities plc 1,600 – – 5,025
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 £’000 31 December 2024 £’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 £’000 31 December 2024 £’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 £’000 At amortised cost £’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 value through profit or loss Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’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 value through profit or loss Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’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 liabilities (1,121) (4,675) – (5,796)
========= ========= ========= =========
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.
19 CAPITAL RESOURCES AND GEARING
The Company does not have any externally imposed capital requirements. The
financial resources of the Company comprise its share capital and reserves, as
disclosed in the Balance Sheet above, and any gearing, which is managed by the
use of derivative instruments. Financial resources are managed in accordance
with the Company’s investment policy and in pursuit of its investment
objective, 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 exposure £’000 % 1 Asset exposure £’000 % 1
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 exposure/net market exposure 2,436,479 109.7 2,436,479 109.7
========= ========= ========= =========
Shareholders’ funds 2,221,230 2,221,230
========= =========
Gearing 2 9.7 9.7
========= =========
1 Asset exposure to the market expressed as a percentage
of shareholders’ funds.
2 Gearing 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 exposure £’000 % 1 Asset exposure £’000 % 1
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 exposure/net market exposure 1,739,174 111.3 1,739,174 111.3
========= ========= ========= =========
Shareholders’ funds 1,563,129 1,563,129
========= =========
Gearing 2 11.3 11.3
========= =========
1 Asset exposure to the market expressed as a percentage
of shareholders’ funds.
2 Gearing is the amount by which gross asset exposure/net
market exposure exceeds shareholders’ funds expressed as a percentage of
shareholders’ funds.
20 TRANSACTIONS 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 £’000 31 December 2024 £’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 £’000 31 December 2024 £’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 (£’000) 12,208 11,512
Other expenses (£’000) 1,079 1,063
Ongoing charges (£’000) 13,287 12,575
Fee waivers in respect of the transaction with HET (£’000) (2,537) –
Ongoing charges ratio 0.73% 0.76%
Ongoing charges ratio including fee waivers 0.59% 0.76%
========= =========
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 value per ordinary share Ordinary share price
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 value per ordinary share Ordinary share price
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
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