Fidelity European Values PLCFidelity European Values PLC Annual Report 2005 Page 1 Financial Summary...

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Fidelity EuropeanValues PLCAnnual Report

For the year ended 31 December 2005

ContentsObjective & Highlights 1

Financial Summary 2

Chairman’s Statement 3

Manager’s Review 5

Forty Largest Investments 7

Distribution of the Portfolio 9

Summary of Performance 11

Corporate Information 14

Board of Directors 14

Directors’ Report 16

Corporate Governance Statement 20

Directors’ Remuneration Report 24

Independent Auditors’ Report 26

Financial Statements 27

Notice of Meeting 42

Investing in Fidelity European Values PLC 44

Objective & Highlights

To achieve long-term capital growth from

the stockmarkets of continental Europe.

“The outlook for the European economy is improving. There have been signs that theregion’s high level of unemployment …… could be decreasing.”

Standardised performance (on a total return basis)

01/01/2001 01/01/2002 01/01/2003 01/01/2004 01/01/2005to to to to to

31/12/2001 31/12/2002 31/12/2003 31/12/2004 31/12/2005

NAV (debt at par) -16.2% -8.5% +38.2% +26.2%* +34.8%

Share price -2.7% -22.5% +43.3% +30.4% +46.0%

FTSE World Europe (ex UK) Index -20.4% -27.4% +29.0% +13.2% +23.4%

* restated - see note 20 on page 41(Sources: Fidelity and Datastream)(Past performance is not a guide to future returns)

Performance

NAV Total Return +34.8%

Share Price Total Return +46.0%

FTSE World Europe (ex UK) Index Total Return +23.4%

Equity Shareholders’ Funds as at 31 December 2005 £688.6m

Market Capitalisation as at 31 December 2005 £703.3m

Dividend per Share 2.50p

Capital Structure: Ordinary shares of 25p, 62,903,233 in issue

Robert Walther, Chairman

Fidelity European Values PLC Annual Report 2005 Page 1

Financial Summary

2005 2004 %restated3 change

Assets at 31 DecemberTotal assets employed1 £802.0m £576.2m +39.2

Shareholders’ funds £688.6m £512.7m +34.3

Borrowings as % of shareholders’ funds 16.5% 12.4%

Borrowings less cash as % of shareholders’ funds 16.0% 11.5%

Net asset value per share (NAV) 1,094.71p 815.04p +34.3

Results for the year to 31 December – see page 27

Capital return per ordinary share 280.32p 165.62p

Capital plus revenue return per ordinary share 283.14p 167.60p

Final dividend per ordinary share 2.50p 1.75p

Stockmarket Data at 31 DecemberFTSE World Europe (ex UK) Index 336.53 279.12 +20.6

Share price year end 1,118.00p 766.50p +45.9

high 1,118.00p 786.50p

low 765.00p 589.00p

(Premium)/discount year end (2.1)% 6.0%

high (2.4)% 1.2%

low 7.5% 10.3%

Returns (includes reinvested income) for the year to 31 December (%)

NAV +34.8 +26.2

Share price +46.0 +30.4

FTSE World Europe (ex UK) Index +23.4 +13.2

Total expense ratio2 1.55 1.58

1 total net assets plus fixed rate unsecured loans2 operating expenses before tax (excluding interest) based on average daily shareholders’ funds 3 restated - see note 20 on page 41(Sources: Fidelity and Datastream)(Past performance is not a guide to future returns)

Page 2 Fidelity European Values PLC Annual Report 2005

I have pleasure in presenting the annual report ofFidelity European Values PLC for the year ended31 December 2005.

PERFORMANCEContinental European equities delivered another yearof strong returns during 2005. Corporate earningsgrowth was healthy and a recovery in the level oftakeover activity helped drive the market higher,despite continued concerns over energy prices andlacklustre economic growth in the eurozone. Duringthe review period, the net asset value (“NAV”) pershare of the Company returned 34.8%, stronglyoutperforming the benchmark FTSE World Europe (exUK) Index, which returned 23.4%. The strong relativeoutperformance was primarily due to successful stockselection by the Manager, but also due to theportfolio’s gearing, which had a positive impact on thetotal return of the NAV. The shares ended the yeartrading at a premium of 2.1% to the underlying assetvalue per share. A detailed review of the performanceof the portfolio is provided in the Manager’s Review.Over the longer term, in the five years to 31 December2005 the NAV has increased 80.2% compared with abenchmark rise of 4.2%. Since launch these figures are1080.9% and 341.6% respectively. (All figures are on atotal return basis.)

GEARINGThe Board believes that gearing will continue to benefitshareholders in the long term and during the year to31 December 2005, gearing was increased twice. On20 June 2005 the Company entered into a facility for€40m at a fixed rate of 3.23% for a period of five years.The loan was drawn down in full on 22 June 2005 andwill be repayable on 22 June 2010. On 21 November2005 the Company entered into a further facility for€35m at a fixed rate of 3.54% for a period of threeyears. The loan was drawn down in full on 22 November2005 and will be repayable on 24 November 2008. Inboth cases the facilities are with Lloyds TSB Bank plcand are being invested in a manner consistent with theCompany’s investment objective.

The Company’s level of net gearing is now 14.1% andthe Board will ensure that in normal circumstances netgearing is below 20%. The Board is responsible for thelevel of gearing in the Company and continues toreview it on a regular basis. It is estimated that gearingenhanced the NAV by four per cent over the year.

DIVIDENDYour Board has decided to recommend a final dividendof 2.5 pence per share for the year ending31 December 2005 (2004: 1.75 pence). The dividendwill be payable on 22 May 2006 to shareholders on theregister at close of business on 24 March 2006 (ex-dividend date 22 March 2006). The Board believes

very strongly that total return (income and capital) isthe key performance indicator. We reiterate that wewill not therefore restrict the Manager even if this leadsto lower dividends in future.

DIRECTORATEMr David Simpson retires by rotation and, beingeligible, has offered himself for re-election. MrSimpson’s investment experience and Chairmanship ofthe Company’s Audit Committee have been extremelyvaluable. Mr Simon Fraser is subject to annual re-election under the Listing Rules due to his employmentrelationship with the Manager. This relationship with asenior member of the Company’s Manager whoassumes the responsibility of being a Director of theCompany is considered important. All of the otherDirectors are totally independent and this provides anappropriate balance.

The Board has considered the proposal for the re-election of both of these Directors and recommends toshareholders that they vote in favour of the proposals.

Due to my tenure on the Board exceeding nine years Iam subject to annual re-election and offer myself forsuch re-election. My fellow Directors have again met inmy absence for the purpose of considering my eligibilityfor re-election. They considered that my experience, myindependence of mind and the manner in which I havefilled the role of Chairman over the last four years hasbeen beneficial to the Company and they confirmedthat they wish me to continue as Chairman. They arerecommending that I be re-elected as a Director at theforthcoming Annual General Meeting.

CONTINUATION VOTE At the 2005 Annual General Meeting, shareholdersvoted in favour of the ordinary resolution that theCompany continue as an investment trust for a furthertwo years. The next continuation vote will take place atthe Annual General Meeting in 2007.


Chairman’s Statement

(Sources: Fidelity and Datastream)(Past performance is not a guide to future returns)

Performance over one year, five years and since launch to 31 December 2005 (on a total return basis)

NAV Share price FTSE World Europe (ex UK) Index

One year +34.8% +46.0% +23.4%

Five years +80.2% +106.2% +4.2%

Since launch (1991) +1080.9% +1099.1% +341.6%

DIRECTORS’ REMUNERATIONEach year the Board reviews Directors’ fees in the lightof increases in workload and the risks of being a non-executive director. Fees paid by companies in its peergroup and elsewhere in the industry are considered.The Board has agreed that the Chairman’s fee beincreased to £24,000 (2004: £22,000) with effect from1 January 2006. All other fees for Directors will remainthe same. This total is within the £150,000 maximumaggregate payable as laid down in the Company’sArticles of Association.

ANNUAL GENERAL MEETINGThe Annual General Meeting of the Company is due totake place on 19 May 2006 at midday at Fidelity’soffices at 25 Cannon Street. Full details of the meetingare given on pages 42 and 43 and I look forward tomeeting you then.

MANAGEMENT AGREEMENTThe management agreements between Fidelity andthe Fidelity branded investment trusts have beensubject to review recently. In recognition of thetendency by the industry to decrease notice periods insuch agreements, the Board has agreed to reduce thenotice period in place from twelve months to sixmonths. I am keen to emphasise that this in no wayreflects a change in relationship with or attitudetowards the Manager.

OUTLOOKThe outlook for the European economy is improving.There have been signs that the region’s high level ofunemployment, which has held back consumerspending, could be decreasing.

The European Central Bank (“ECB”) has raised interestrates twice since December, the first rises in five years.However, these rises are from low nominal levels andECB policy remains “accommodative”. Corporateprofits growth has been revised upwards, whichprovides a positive backdrop for the equity market.

We continue to believe that stock selection based onin-depth company analysis will continue to be the keyin outperforming the Index over the coming year.

This trust has had two investment managers since itstarted in 1991, both of whom have performedextraordinarily well. Both have taken strong views onstock selection and the Board has always encouragedthis approach. The Board recognises that thisinvestment style has given, and will continue to give,significant deviation of performance from that of theIndex. I felt it important making this clear to investors,since we are all aware that investments can go down aswell as up.

Robert WaltherChairman6 March 2006


Chairman’s Statement

PERFORMANCE REVIEWAs shown in the Financial Summary on page 2, theNAV of Fidelity European Values PLC returned 34.8%in the year to 31 December 2005, outperforming theFTSE World Europe (ex UK) Index, which returned23.4%. (All performance figures are quoted on a totalreturn basis and in sterling.)

MARKET BACKGROUNDEuropean equities delivered strong returns during2005. Healthy earnings growth and robust levels oftakeover activity helped drive the market higher,despite continued concerns over energy prices andlacklustre economic growth in the eurozone.

The European Central Bank (“ECB”) changed interestrates for the first time since 2003, by a rise of onequarter of a percentage point to 2.25%. Aftermaintaining rates at historically low levels for anextended period, the ECB justified the rate rise asnecessary to promote price stability, although therewere concerns that the monetary tightening wouldharm a fragile recovery.

The French and Dutch ‘No’ votes to the EuropeanConstitution referendum had little impact on Europeanequity markets. However, the votes weighed on theeuro. Following four years of euro strength, thecurrency weakened relative to the US dollar, falling13.4% from $1.36 to $1.18.

PORTFOLIO REVIEWThe outperformance of the portfolio versus the marketwas due to successful stock selection and sectorallocation. In particular, stock selection within the oil &gas sector proved rewarding, with a strong

contribution from the refining-related companiesincluding OMV, ERG, PKN and MOL. Other areas ofthe market that helped deliver solid returns werestocks in the electricity and media & entertainmentsectors. The portfolio’s performance also gained from alow exposure to telecommunication services stocks asthe sector was the worst performing during the yeardue to ongoing concerns over revenue growth in theindustry. At country level, stock selection was alsoimportant, with individual holdings in the coreEuropean markets contributing to returns, notablyAustrian, Italian and French companies.

Finally, in the context of a rising market, the portfolio’sfixed gearing enhanced the total return of the NAV.

PORTFOLIO STRUCTUREThe general structure of the portfolio remainsunchanged, with a focus on medium-sized and smallercompanies combined with a bottom-up, value-drivenstock selection approach. However, the Managerincreased the weighting in larger-sized companiesduring the year as valuations of some large caps havebecome attractive.

The portfolio continues to have a substantial weightingin resources and domestic economy stocks, reflectedby positions in oil & gas, construction, real estate andtransport. During the year, the Manager increased theportfolio’s exposure to a number of growth-orientedsectors where their valuations were reasonable.Consequently the portfolio’s exposure topharmaceutical and software stocks rose. The portfoliocontinued to have a low exposure to financials and theweighting in telecommunication stocks, which hasbeen reduced since 2003, was reduced further.


Manager’s Review

Fidelity Investments InternationalThe Company is managed by Fidelity Investments International(which is authorised and regulated by the Financial ServicesAuthority). Fidelity Investments International is part of theFidelity International Limited group which, as at 31 December2005, had total assets under management exceeding £144 billion.

Tim McCarron (age 43)is a portfolio manager with Fidelity Investment ServicesLimited based in London. He has been with Fidelity since1993, when he joined as a research analyst. He spent a year inFidelity’s Boston office as a research analyst, before returningto the UK in 1995. In addition to Fidelity European Values PLC,he manages the Fidelity European Fund and a number ofinstitutional portfolios.

In terms of country positioning, the weighting hasbecome much more balanced between the smallerEuropean countries and core Europe. Indeed, the coreEuropean weighting has moved to an overweightexposure, based on the Manager’s view that manyindividual stocks offer more value than in previous years.As a result, the Manager has substantially reduced theportfolio’s holdings in peripheral European marketsbased on the view that these markets offered less valuethan they did in the previous years.

OUTLOOKThe macroeconomic outlook for the European economyhas recently begun to show signs of improvement.Companies are restructuring and cutting costs,improving their return on equity. In addition, manycompanies have de-leveraged over the past few yearsand so now have strong balance sheets and aregenerating strong cashflows. This provides a very goodenvironment for a stock-picking driven approach and wecontinue to believe that stock selection, based on in-depth company analysis, will continue to be crucial inoutperforming the benchmark index over the comingyear.

Fidelity Investments International6 March 2006


Manager’s Review

-6 -5 -4 -3 -2 -1 0 1 2 3 4

Peripheraleurozone

Western EuropeNon-eurozone

Core eurozone

Eastern Europe& Other

Relative % weighting to FTSE World Europe (ex UK) Index

(Sources: Fidelity and Datastream)


Forty Largest Investments as at 31 December 2005

NovartisSwiss manufacturer of pharmaceutical and nutrition products 43,578 5.4

ING GroepDutch provider of financial services 36,869 4.6

BNP ParibasFrench bank 33,576 4.2

Sanofi-AventisFrench pharmaceutical company 31,557 3.9

AllianzGerman insurance and financial services company 27,885 3.5

Roche HoldingsSwiss developer and manufacturer of pharmaceutical and chemical products 27,650 3.4

SAPGerman software company 26,369 3.3

AXAFrench insurance company 21,864 2.7

TotalFrench integrated oil company 19,949 2.5

BayerGerman pharmaceutical and chemical company 17,440 2.2

Top 10 Holdings (2004: 23.1%) 286,737 35.7

Societe Generale de ParisFrench bank 17,207 2.1

VNUDutch publisher and information provider 17,122 2.1

European Aeronautic Defence & SpacePan European manufacturer of aerospace and military equipment 17,050 2.1

EniItalian integrated oil company 16,852 2.1

OMVAustrian integrated oil company 13,755 1.7

SynthesSwiss developer and manufacturer of orthopaedic trauma surgery products 13,627 1.7

EiffageFrench construction company 13,243 1.7

E.ONGerman generator and distributor of electricity and gas 12,727 1.6

BASFGerman chemical company 12,686 1.6

Allied Irish BanksIrish bank 11,683 1.5

Top 20 Holdings (2004: 38.5%) 432,689 53.9

Market ValueHolding £’000 %1

Fidelity European Values PLC Annual Report 2005

Forty Largest Investments as at 31 December 2005

AltadisSpanish tobacco company 10,430 1.3

DNBNorwegian bank 10,351 1.3

Statoil ASANorwegian integrated oil company 9,363 1.2

Magyar Olaj-Es GazipariHungarian integrated oil and gas company 9,194 1.1

Reed ElsevierDutch publisher and information provider 9,080 1.1

Polski Koncern NaftowyPolish oil company 8,637 1.1

GambroSwedish medical technology and healthcare company 8,164 1.0

Gaz de FranceFrench gas company 8,103 1.0

Norsk HydroNorwegian industrial company 7,905 1.0

Banco Espanol de CreditoSpanish bank 7,316 0.9

MediobancaItalian bank and financial holding company 7,297 0.9

SES GlobalLuxembourg company offering global satellite broadband communication services 7,134 0.9

Alfa LavalSwedish engineering company 7,085 0.9

AstraZenecaAnglo-Swedish pharmaceutical company 7,065 0.9

Koninklijke DSMDutch specialist chemical company 6,440 0.8

Pirelli Real EstateItalian real estate company 6,359 0.8

Brisa Auto Estradas de PortugalPortuguese motorway operator 6,191 0.8

Rodamco EuropeDutch investment company investing in real estate 6,162 0.8

ERGItalian oil company 6,036 0.8

SuedzuckerGerman manufacturer of sugar and related products 5,963 0.7

Top 40 Holdings (2004: 59.8%) 586,964 73.2

Other Holdings (83) (2004: 39.8%) 213,670 26.6

800,634 99.8

Cash & other net current assets (2004: 0.4%) 1,375 0.2

802,009 100.0

1 % total assets less liabilities, excluding loan liabilities

Market ValueHolding £’000 %1


Distribution of the Portfolio1at 31 December 2005

Financials

Banks 6.4 0.2 – – 0.9 – 1.3 0.9 1.5 – 0.7 11.9 22.0 17.8

Insurance 2.8 3.5 4.6 – – – – – – – – 10.9 7.6 4.3

Real Estate 0.5 – 1.4 – 0.8 0.1 – – – – 0.4 3.2 0.6 4.1

Investment Companies – – – 0.2 – 0.7 – – – – 0.6 1.5 0.6 –

Speciality & Other Finance – 0.2 – – 0.9 – – – – – – 1.1 1.0 0.7

Life Assurance – – – – – – – – – – – – 1.1 1.4

9.7 3.9 6.0 0.2 2.6 0.8 1.3 0.9 1.5 – 1.7 28.6 32.9 28.3

Non-Cyclical Consumer Goods

Pharmaceuticals & Biotechnology 4.0 0.7 – 9.1 – 0.9 – – – – 0.7 15.4 7.7 4.0

Health – – – 1.7 – 1.0 – – – – – 2.7 0.9 5.2

Food Producers & Processors – 0.7 0.5 0.4 – – – – – – – 1.6 4.3 0.2

Tobacco – – – – – – – 1.3 – – – 1.3 0.3 1.9

Beverages – – – – – – – – 0.4 – – 0.4 0.8 0.8

Personal Care & Household Products – – 0.4 – – – – – – – – 0.4 0.9 0.7

4.0 1.4 0.9 11.2 – 1.9 – 1.3 0.4 – 0.7 21.8 14.9 12.8

Resources

Oil & Gas 2.5 – 0.5 – 3.2 – 2.2 – – 1.7 3.3 13.4 7.0 12.7

2.5 – 0.5 – 3.2 – 2.2 – – 1.7 3.3 13.4 7.0 12.7

Basic Industries

Chemicals 0.5 4.5 0.8 – – – 0.5 – – – – 6.3 3.5 2.7

Construction & Building Materials 2.2 0.5 – – – 0.6 – – – – 0.2 3.5 2.9 5.3

Steel & Other Metals – – – – – – – 0.3 – – – 0.3 0.5 –

Forestry & Paper – – – – – – – – – – – – 0.5 0.8

2.7 5.0 0.8 – – 0.6 0.5 0.3 – – 0.2 10.1 7.4 8.8

Cyclical Services

Media & Entertainment 0.5 – 3.2 – – 0.2 – – – – 1.3 5.2 2.6 5.5

Transport – – – – 0.3 0.1 0.4 0.2 0.6 – 0.8 2.4 1.4 3.3

Support Services – 0.7 0.5 – – – – – – – – 1.2 1.3 0.8

Leisure & Hotels 0.7 – – – – – – – – – – 0.7 0.6 2.2

General Retailers – – – – – – – – – – – – 0.8 0.5

1.2 0.7 3.7 – 0.3 0.3 0.4 0.2 0.6 – 2.1 9.5 6.7 12.3

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Distribution of the Portfolio1at 31 December 2005

General Industrials

Aerospace & Defence 0.9 0.1 2.1 – – – – – – – 0.5 3.6 0.5 3.6

Engineering & Machinery 0.5 0.1 – – – 1.3 – – – – 0.1 2.0 1.8 2.1

Diversified Industrials 0.5 – – – – – – – – – – 0.5 0.3 0.9

Electronic & Electrical Equipment 0.5 – – – – – – – – – – 0.5 3.6 0.4

2.4 0.2 2.1 – – 1.3 – – – – 0.6 6.6 6.2 7.0

Utilities

Utilities 1.0 1.6 – – – – – 0.2 – – – 2.8 3.7 0.9

Electricity – – – – – – – 0.6 – 0.7 – 1.3 2.8 2.6

1.0 1.6 – – – – – 0.8 – 0.7 – 4.1 6.5 3.5

Information Technology

Software & Computer Services – 3.3 0.3 – – – – – – – – 3.6 1.3 1.4

Information Technology Hardware – – 0.2 – – – – – – – – 0.2 3.7 –

– 3.3 0.5 – – – – – – – – 3.8 5.0 1.4

Non-Cyclical Services

Telecommunication Services – – – – – – – – – – 1.4 1.4 7.0 9.0

Food & Drug Retailers – – – – – – – – – – – – 1.2 0.1

– – – – – – – – – – 1.4 1.4 8.2 9.1

Cyclical Consumer Goods

Automobiles & Parts 0.4 – – – – – – – – – – 0.4 3.1 1.6

Household Goods & Textiles – – – – – – – – – – 0.1 0.1 2.1 2.1

0.4 – – – – – – – – – 0.1 0.5 5.2 3.7

Total Equities 2005 23.9 16.1 14.5 11.4 6.1 4.9 4.4 3.5 2.5 2.4 10.1 99.8 100.0 99.6

Cash & other net current assets 0.2 0.4

Total – 2005 23.9 16.1 14.5 11.4 6.1 4.9 4.4 3.5 2.5 2.4 10.1 100.0 100.0 100.0

Index – 2005 22.3 16.2 8.2 15.1 9.9 5.6 1.5 9.1 0.8 1.7 9.6 100.0

Total Equities – 2004 25.8 9.8 8.4 7.1 8.8 4.7 3.9 2.8 2.8 3.6 21.9 100.0

1 % total assets less liabilities, excluding loan liabilities2 FTSE World Europe (ex UK) Index

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Summary of Performance

Historical Record 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995as at 31 December

Total assets employed (£m)1 802 576 471 355 379 419 352 266 220 167 137

Shareholders’ funds (£m)1 689 513 407 297 324 359 292 215 181 141 113

NAV per share undiluted (p)1 1,094.71 815.04 647.43 469.73 514.94 615.40 505.73 371.78 315.81 246.58 216.32

NAV per share diluted (p) n/a n/a n/a n/a n/a 576.97 471.71 343.39 285.45 224.26 197.19

Share price (p) 1,118.00 766.50 589.00 412.00 533.00 548.50 449.00 334.00 277.50 220.00 193.00

Warrant price (p) n/a n/a n/a n/a n/a 444.00 348.00 230.50 177.50 121.00 102.00

(Premium)/discount to NAV (%)1 (2.1) 6.0 9.0 12.3 (3.5) 4.9 4.8 2.7 2.8 1.9 2.1

Revenue return per ordinary share (p) 2.82 1.98 1.93 1.69 4.01 1.07 1.01 1.27 0.83 1.26 1.46

Fully-diluted return per ordinary share (p) n/a n/a n/a n/a n/a 1.00 0.94 1.16 0.75 1.07 1.23

Dividend per ordinary share (p) 2.50 1.75 1.502 1.20 2.00 0.60 0.60 0.60 0.60 0.60 0.60

Cost of running trust3 (%) 1.55 1.58 1.63 1.51 1.47 1.61 1.74 1.57 1.63 1.65 1.67

Actual gearing ratioloan stock (%) n/a n/a n/a n/a n/a 13.3 19.5 22.3 20.5 17.0 17.7

Actual gearing ratioborrowings (%)1 16.0 11.5 15.3 17.0 13.6 n/a n/a n/a n/a n/a n/a

NAV – performance (%)1,4 +34.8 +26.2 +38.2 -8.5 -16.2 +21.8 +36.3 +17.9 +28.4 +14.3 +25.2

Share price performance (%) +46.0 +30.4 +43.3 -22.5 -2.7 +22.3 +34.7 +20.6 +26.4 +14.3 +26.8

Index performance (%) +23.4 +13.2 +29.0 -27.4 -20.4 +1.4 +19.5 +31.1 +29.6 +8.5 +22.6

1 2004 year end restated – see note 20 on page 412 interim dividend only paid in respect of the year to 31 December 2003. No final dividend was paid3 operating expenses before tax (excluding interest) as a percentage of average daily shareholders’ funds4 2000 and prior years are undiluted performance(Sources: Fidelity and Datastream)(Past performance is not a guide to future returns)

The Company was launched on 5 November 1991 withone warrant attached to every five shares. The originalsubscription price for each share was £1. In 2007 andevery two years thereafter, shareholders will have theright to approve, or otherwise, the continued existenceof the Company.

The Company is a member of The Association ofInvestment Trust Companies (“AITC”) from whomgeneral information on investment trusts can beobtained by telephoning 020 7282 5555 (email address:[email protected]).

PRICE INFORMATIONThe mid-market price of the ordinary shares is publisheddaily in the Financial Times under the heading“Investment Trusts”. The ordinary share price is alsopublished in The Times, The Daily Telegraph and TheIndependent. You can also obtain current priceinformation by phoning FT Cityline on 0906 843 2287.

The Reuters code for Fidelity European Values PLC isFEV.L.

NAV INFORMATIONThe net asset value of the Company is calculated on adaily basis and released to the London Stock Exchange.

CAPITAL GAINS TAXYour Directors have been advised that, for thepurposes of calculating an investor’s possible liabilityto capital gains tax, the base cost of ordinary sharesand warrants, acquired at the time of the Company’slaunch, is 95.90p. All UK individuals under presentlegislation are permitted to have £8,500 of capitalgains in the current tax year 2005/2006 (£8,2002004/2005 tax year) before being liable for capitalgains tax. Capital gains are treated as the top slice ofincome and will be taxable at 10% for taxpayers up tothe starting rate limit, 20% for basic rate taxpayers or40% for higher rate taxpayers.



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Total return performance from launch to 31 December 2005

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NAV and share price in pence from launch to 31 December 2005

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31 Dec 1998

31 Dec 1997

31 Dec 1996

31 Dec 1995

31 Dec 1994

31 Dec 1993

31 Dec 1992

31 Dec 1991

+167.4% +171.6%

%

Total return performance relative to the benchmark index from launch to 31 December 2005

Based on figures at month end only

Prices rebased to 100



Corporate Information

Manager, Secretary and Registered OfficeFidelity Investments InternationalBeech GateMillfield LaneLower KingswoodTadworthSurreyKT20 6RP

Financial Advisers and StockbrokersWinterflood Investment Trusts The Atrium Building Cannon Bridge 25 Dowgate Hill LondonEC4R 2GA

Independent AuditorsPricewaterhouseCoopers LLPChartered Accountants and Registered AuditorsSouthwark Towers32 London Bridge Street LondonSE1 9SY

Bankers and CustodianJPMorgan Chase Bank (London Branch)125 London WallLondonEC2Y 5AJ

RegistrarsCapita RegistrarsThe Registry34 Beckenham RoadBeckenhamKentBR3 4TU

LawyersSlaughter and MayOne Bunhill RowLondonEC1Y 8YY

Robert Walther1,2

Chairman(age 62, date ofappointment asDirector: 24 September1991; date ofappointment asChairman: 22 May 2001)

was Group Chief Executive of ClericalMedical Investment Group and a Member ofthe Executive Committee of Halifax PLCuntil he retired in late 2001. He joined theClerical Medical Group in 1965, wasappointed Investment Manager in 1976 andInvestment Director in 1985. He is also aDirector of Nationwide Building Society andBUPA.

Simon Fraser(age 46, date ofappointment: 26 July2002) has beenPresident of FidelityInternational’s EuropeanInstitutional Businesssince 2005. He started

his career at Fidelity in 1981 as an analystand he spent a number of years in Japan,most recently as Chief Investment Officer forthe Asia/Pacific region. He returned to theUK in 1999 to take up the position of ChiefInvestment Officer for Fidelity International,a position he held until 2005. He is also adirector of Fidelity Japanese Values PLC.


Board of Directors

Simon Duckworth2

(age 41, date ofappointment:24 February 2003) hasbeen a member of theCorporation of Londonsince 2000 where heserves on both the City’s

Finance Committee and its Police Authority.He sits on the Corporation’s InvestmentSub-Committee. He is a Governor of CityUniversity and of the Cass Business School.He also holds a number of other public andcharitable appointments.

David Simpson2,3

(age 64, date ofappointment: 18 May1998) was formerly aGeneral Manager andSecretary of theStandard Life AssuranceCompany from 1988 to

1996. He is Chairman of F&C Private EquityTrust.

Johan Björkman2

(age 61, date ofappointment:6 November 2001) isChairman ofLjungbergGruppen AB(a listed Swedish realestate company) and

Nordstjernan AB. He is a member of theboards of a number of other Swedishcompanies and has extensive experience ininvestment business.

1 Chairman of the Management Engagement Committee2 Member of the Audit and Management Engagement Committees 3 Chairman of the Audit Committee


Directors’ Report

The Directors have pleasure in presenting their reporttogether with the audited accounts of the Company forthe year ended 31 December 2005.

The Company was incorporated in England and Walesas a public limited company on 16 August 1991 underthe name of Fidelity European Values PLC with theregistered number 2638812.

ACTIVITIES AND STATUSA review of the year’s activities and an indication oflikely future developments are given in the Chairman’sStatement on pages 3 and 4 and in the Manager’sReview on pages 5 and 6.

The Inland Revenue has approved the Company as aninvestment trust under Section 842 of the Income andCorporation Taxes Act 1988 for the accounting periodended 31 December 2003 and has granted provisionalapproval for the accounting period ended31 December 2004, although this approval may besubject to review should there be any subsequentenquiry under Corporation Tax Self Assessment. TheDirectors are of the opinion that, since that date, theCompany has conducted its affairs in a manner whichwill satisfy the conditions for continued approval as aninvestment trust under that Section.

The Company is not a close company and has noemployees. It is registered as an investment companyas defined in Section 266 of the Companies Act 1985and operates as such.

NET ASSET VALUEInvestments were valued at £800,634,000 as at31 December 2005. Shareholders’ funds amounted to£688,608,000 resulting in a net asset value per share of1,094.71p. Changes to investments are shown in note 9to the accounts on pages 34 and 35.

RESULTS AND DIVIDENDSAn amount of £1,772,000 has been transferred toreserves and out of this £1,573,000 will be declaredpayable to shareholders. The amount transferred toreserves is shown on page 28. The change in treatmentof the distribution is due to new requirements under UKGenerally Accepted Accounting Practice. The Directorsrecommend the payment of a dividend of 2.50 penceper ordinary share, payable on 22 May 2006 toshareholders on the register at close of business on 24March 2006 (ex-dividend date 22 March 2006).

SHARE CAPITALShare IssuesNo share issues were made during the year (2004: nil).

Share RepurchasesNo share repurchases were made during the year(2004: nil).

As at 31 December 2005, the total number of shares inissue was 62,903,233 (2004: 62,903,233).

At the Annual General Meeting held on 19 May 2005the Company’s shareholders passed a specialresolution which granted the Directors authority topurchase up to 9,400,000 ordinary shares in the marketfor cancellation. The authority expires on 19 May 2006and a special resolution to renew the authority willtherefore be put to shareholders for approval at theforthcoming Annual General Meeting.

GEARINGThe Company has four fixed interest loans in place:

€50,000,000 at an interest rate of 4.96% repayable on29 December 2006 with The Royal Bank of Scotland plc;

€40,000,000 at an interest rate of 5.54% repayable on29 December 2006 with National Australia Bank Limited;

€35,000,000 at an interest rate of 3.54% repayable on24 November 2008 with Lloyds TSB Bank plc; and

€40,000,000 at an interest rate of 3.23% repayable on22 June 2010 with Lloyds TSB Bank plc.

FINANCIAL INSTRUMENTS RISKSThe financial instruments risks faced by the Companyare detailed in note 19 to the financial statements onpages 38 to 41.

POLITICAL AND CHARITABLE DONATIONSThe Company has not made any political or charitabledonations in the year (2004: nil).

PAYMENT OF CREDITORSThe Company’s principal supplier is the Manager who ispaid in the month following the end of each calendarquarter, in accordance with the terms of theManagement Agreement (detailed below). TheCompany’s policy for the year to 31 December 2006(2005: same) for all suppliers, is to fix terms of paymentwhen agreeing the terms of each business transaction toensure that the supplier is aware of these terms and toabide by the agreed terms of payment. The Companydid not have any trade creditors in the year (2004: nil).Other suppliers are paid in accordance with theindividual payment terms agreed with each supplier.

MANAGEMENT COMPANYDuring the year to 31 December 2005, the Manager,Fidelity Investments International, a subsidiary ofFidelity International Limited, provided management,accounting, administrative and secretarial services tothe Company under an agreement entered into on7 October 1991. On 6 February 2006 the Companyentered into a new agreement (the “ManagementAgreement”) with Fidelity Investments International.


Directors’ Report

The same services are provided as detailed in thecontract dated 7 October 1991, however, theCompany has taken the opportunity to review theterms in accordance with industry standards.Accordingly the notice period has been reduced to sixmonths’ notice in writing from twelve months inaccordance with similar such changes in the industry.

The Management Agreement provides for a quarterlyfee of an amount equal to 0.25 per cent (plus VAT) ofthe value of the Company’s assets under management(as defined in the Management Agreement, whichexcludes the value of any investment in any other fundwhich is managed by the Manager or an Associate ofthe Manager) payable quarterly in arrear and calculatedas of the last business day of March, June, Septemberand December in each year. In addition the Companyhas agreed to pay to the Manager a fee for secretarialand administration services, payable quarterly in arrear,at the rate of £25,000 per annum (plus VAT).

The Management Agreement will continue unless anduntil terminated by either party giving to the other notless than six months’ notice in writing. TheManagement Agreement may, however, be terminatedwithout compensation if the Company is liquidated in2007, or in any subsequent year thereafter, pursuant tothe procedures laid down in the Articles of Associationof the Company. The Management Agreement mayalso be terminated forthwith as a result of a materialbreach of the Agreement or on the insolvency of theManager or the Company. In addition, the Companymay terminate the agreement by six months’ notice ifthe Manager ceases to be a subsidiary of FidelityInternational Limited or if the Board shall resolve attwo successive quarterly meetings that there has beena material and continuing underperformance in theportfolio of assets.

The Management Engagement Committee met on19 January 2006 and reviewed the performance of theManager for the year to 31 December 2005. Furtherdetails of this review are included in the Company’sCorporate Governance Statement on pages 21 and 22.The Committee concluded that it was in the interestsof shareholders that the appointment of the Managershould continue.

The Manager also provides certain services, includingmarketing and administration, in connection with theFidelity Investment Trust Share Plan and the FidelityIndividual Savings Account under an agreement dated4 March 1996. The amount payable for these servicesfor the year to 31 December 2005 was £213,522 (2004:£291,423). If the amount paid by the Manager for theprovision of these services by third parties is less thanthis amount, the balance is carried forward to cover thecost of the provision of these services in future years.

An amount of £2,589,522 (2004: £2,023,353) was dueto the Manager under the above agreements at31 December 2005 and is included in creditors in note11 on page 35.

Fidelity has recently adopted a broker segmentationpolicy, which has reduced the number of brokers usedand allows it to concentrate on those brokers who, inits opinion, offer the best service in terms of overallexecution. These brokers are Fidelity’s “core” brokers.At the same time, the Manager evaluates the researchprovided by other brokers and uses some of them fortheir research. These brokers are called SecondaryState Research firms (“SSRs”).

As a consequence of the policy, the “core” brokersearn a larger percentage of the commission paid. These“core” brokers pay away some of the increasedcommission earned to the SSRs, to compensate themfor the research provided to Fidelity. Under FSAregulations this type of payment from one broker toanother is currently treated as “softing”. The Manager’ssoft commission policy complies with the UKregulations. Fidelity adopts a best execution policy thatapplies to all transactions in all instruments, regardlessof the fund or account or location of the trading desk.

The Manager has an arrangement with certain brokerswhereby a portion of commissions from securitytransactions may be paid to the Company to reducetransaction costs. Amounts received by the Companyunder this arrangement are credited to capital. In theyear to 31 December 2005 £236,107 was received(2004: £211,228).

The Company participates in the Manager’s interfundprogramme whereby Fidelity’s traders, on occasion,identify situations where one fund managed by Fidelityis buying the same security that another fund is selling.If a trader can confirm that it would be in the interestsof both accounts to execute a transaction betweenthem rather than in the market then an interfundtransaction is executed.

There is a regulatory requirement on the Manager toobtain best execution and no individual deal is enteredinto which prevents compliance with this requirement.

Mr Simon Fraser is Fidelity International’s PresidentEuropean Institutional Business. Fidelity InternationalLimited is the holding company of Fidelity InvestmentsInternational. Mr Fraser is also a director of othercompanies within the Fidelity International Limitedgroup of companies.

Fidelity International Limited has an interest of 180,559shares in the Company. This follows a sale of a total of465,000 shares during 2005 and a further 180,556shares during January 2006.


Directors’ Report

CORPORATE SOCIAL RESPONSIBILITYThe Manager believes that high standards of corporatesocial responsibility make good business sense andhave the potential to protect and enhance investmentreturns. Consequently, its investment process takessocial, environmental and ethical issues into accountwhen, in its view, these have a material impact oneither investment risk or return.

DIRECTORSDetails of the Directors who served in the year to31 December 2005 are set out on pages 14 and 15. AllDirectors served throughout the year to 31 December2005.

Mr Walther, having been a Director for more than nineyears, is subject to annual re-election. Mr Fraser, as anemployee of the Manager, is also subject to annual re-election. Mr Fraser has waived his entitlement toDirectors’ fees. Mr Simpson retires by rotation and,being eligible, offers himself for re-election at theforthcoming Annual General Meeting.

No Director is under a contract of service with theCompany and no contracts existed during or at theend of the financial period in which any Director wasmaterially interested and which were significant inrelation to the Company’s business, except asdisclosed previously in relation to Mr Fraser’s interest inthe Management Agreement. There have been noother related party transactions requiring disclosureunder Financial Reporting Standard (“FRS”) 8.

The interests of the Directors in the ordinary shares ofthe Company as at 31 December 2005 and31 December 2004 are shown below. There have beenno changes in these holdings since the year end.

SUBSTANTIAL SHARE INTERESTS As at 6 March 2006 notification had been received ofthe following interests in 3% or more of the issuedshare capital of the Company:

Barclays PLC for various Barclays entities 4.01% Legal & General Investment Management 3.05%

At 6 March 2006 25.7% of the issued share capital washeld by investors in the Fidelity Investment Trust PEP,Fidelity ISA and the Fidelity Investment Trust Share Plan.

ANNUAL GENERAL MEETINGAt the Annual General Meeting resolutions will be pro-posed to renew the Directors’ authority to allotsecurities in the Company. The authorities sought bythese resolutions are to replace the existing powers ofthe Directors which expire on the date of the AnnualGeneral Meeting and will provide the Directors withthe flexibility to issue further ordinary shares if theydeem it appropriate to do so. By law, directors are notpermitted to allot new shares (or to grant rights overshares) unless authorised to do so by shareholders.

Resolution 9 provides the Directors with a generalauthority to allot securities in the Company up to anaggregate nominal value of £786,290. If passed, thisresolution will enable the Directors to allot a maximumof 3,145,161 ordinary shares which representsapproximately 5% of the issued ordinary share capitalof the Company as at 6 March 2006.

This authority provides the Directors with a degree offlexibility to increase the assets of the Company by theissue of new shares should any favourableopportunities arise to the advantage of shareholders. Ifnew ordinary shares are allotted for cash, Section 89(1)of the Companies Act 1985 requires such new sharesto be offered to existing holders of ordinary shares(“pre-emption rights”). In certain circumstances it isbeneficial for the Directors to allot shares for cashotherwise than pro rata to existing shareholders andthe Companies Act 1985 provides for shareholders togive such power to the Directors by waiving their pre-emption rights.

Resolution 10 is a special resolution disapplying pre-emption rights and granting authority to the Directors,without the need for further specific shareholderapproval, to make allotments of equity securities forcash by way of (a) rights issues where practicalconsiderations, such as fractions and foreign securitieslaws, make this desirable, and (b) other issues up to anaggregate nominal value of £786,290 (approximately5% of the issued share capital of the Company as at6 March 2006).

The authority to issue ordinary shares for cash underResolution 10 will, inter alia, enable the Directors to

Held at Held at31 December 2005 31 December 2004

Robert Walther 12,251 12,251

Johan Björkman 1,758 1,758

Simon Duckworth 500 500

Simon Fraser 6,797 6,794

David Simpson 6,897 5,300

Analysis of Ordinary Shareholders as at 31 December 2005

% of IssuedShare Capital

Private individuals 41.8

Nominees 25.0

Individual clients of investment managers 21.4

Institutions 11.8

Total 100.0


Directors’ Report

issue additional new ordinary shares to participants inthe Fidelity Investment Trust Share Plan and ISA in theevent that the ordinary shares are trading at a premiumto their net asset value. The Directors would onlyintend to use this power if such premium were inexcess of 2% and they considered that it was in theinterests of shareholders to do so.

Resolution 11 is a special resolution which renews theDirectors’ authority to repurchase the Company’sshares for cancellation. It is proposed that the Boardbe authorised to make arrangements to purchasethrough the London Stock Exchange up to 9,400,000ordinary shares of 25 pence (equivalent to 14.94% ofthe shares in issue at 6 March 2006). By utilising thispower to repurchase shares when they are trading at adiscount to net asset value, the Company will increasethe resulting net asset value per share for remainingshareholders. Purchases of shares will be made at thediscretion of the Board and within guidelines set fromtime to time by the Board in the light of prevailingmarket conditions. Purchases will only be made in themarket at prices below the prevailing net asset value.

The Directors recommend that shareholders vote infavour of these resolutions.

The full text of the resolutions is set out in the Noticeof Meeting contained on pages 42 and 43.

CORPORATE GOVERNANCEFull details are given in the Corporate GovernanceStatement on pages 20 to 23.

STATEMENT OF DIRECTORS’RESPONSIBILITIESThe Directors are responsible for preparing the AnnualReport and the financial statements in accordance withapplicable law and United Kingdom GenerallyAccepted Accounting Practice. Company law requiresthe Directors to prepare financial statements for eachfinancial year which give a true and fair view of the stateof affairs of the Company and of the net revenue of theCompany for that period. In preparing these financialstatements the Directors are required to:

• select suitable accounting policies and then applythem consistently;

• make judgements and estimates that arereasonable and prudent;

• state whether applicable accounting standards havebeen followed, subject to any material departuresdisclosed and explained in the financial statements;and

• prepare the financial statements on the goingconcern basis unless it is inappropriate to presumethat the Company will continue in business.

The Directors are responsible for ensuring that properaccounting records are kept which disclose withreasonable accuracy at any time the financial positionof the Company and to enable them to ensure thatthe financial statements comply with the CompaniesAct 1985. They are also responsible for safeguardingthe assets of the Company and hence for takingreasonable steps for the prevention and detection offraud and other irregularities.

The financial statements may be published on awebsite. The Auditors have represented to your Boardthat their work does not involve any consideration ofthe maintenance and integrity of any websites andaccordingly, the Auditors accept no responsibility forany changes that may have occurred to the financialstatements since they were approved. Overseasvisitors to any website need to be aware thatlegislation in the United Kingdom governing thepreparation and dissemination of the financialstatements may differ from legislation in theirjurisdictions.

INDEPENDENT AUDITORSThe Company’s Auditors, PricewaterhouseCoopersLLP, Chartered Accountants and Registered Auditors,are willing to continue in office and, in accordancewith Sections 385 and 390A of the Companies Act1985, resolutions concerning their re-appointmentand remuneration will be proposed at the AnnualGeneral Meeting.

By Order of the Board

Fidelity Investments InternationalSecretary6 March 2006


Corporate Governance Statement

The Financial Reporting Council issued a revised Codeon Corporate Governance (“the Code”) in July 2003.

The Board has put in place a framework for corporategovernance, which it believes is appropriate for aninvestment trust company and which will enable theCompany to comply with the relevant provisions of theCode and the provisions of the Code of CorporateGovernance published by the Association ofInvestment Trust Companies (“the AITC Code”) whichhas established the framework of best practice forinvestment trusts.

The Board considers that the Company has compliedwith the provisions contained within the Code and theAITC Code throughout the year ended 31 December2005, except where disclosed below, and thisstatement describes how the relevant principles ofgovernance are applied to the Company.

THE BOARD AND ITS COMMITTEESThe BoardThe Board of Directors has overall responsibility for theCompany’s affairs. All matters which are not delegatedto the Company’s Manager under the ManagementAgreement are reserved for the Board’s decision.Matters reserved for the Board include, inter alia,decisions on strategy, management, structure, capital,gearing, financial reporting, risk management,investment performance, share price discount,corporate governance, the appointment of theCompany Secretary and Board appointments.

The Board currently consists of five non-executiveDirectors, four of whom are independent of theCompany’s Manager. Mr Simon Fraser is an employee ofthe Manager and is therefore not independent. Inconsidering the independence of the Chairman, who hasserved as a Director for more than nine years, the Boardhas taken note of the AITC Code and concluded thatlengthy service on a board does not of itself compromiseindependence, indeed his experience and knowledge isof positive benefit to the Board. Nonetheless in the lightof the provisions of the Code Robert Walther will beseeking annual re-election. The independent Directorsform the membership of the Audit Committee and theManagement Engagement Committee.

The Board considers that it meets sufficiently regularlyto discharge its duties effectively and the tableopposite gives the attendance record for the meetingsheld during the year.

Senior independent directorAs the Board consists entirely of non-executiveDirectors, the Board has concluded that there is noneed to appoint a senior independent Director. This isin accordance with the AITC Code.

Board balanceThe Board consists of Directors who between them,have good knowledge and wide experience of businessin Europe and of investment trusts. Biographical detailsof all Directors including their directorships are given onpages 14 and 15 of this report. The Board ensures thatit conducts its business at all times with only theinterests of the shareholders in mind and quiteindependently of any other associations. It meets atleast four times a year and endeavours to provideleadership in terms of the direction of the Company.Between these meetings there is regular contact withthe Manager.

Appointments to the BoardThe Company complies with the requirements of theAITC Code in respect of appointments to the Board.Whilst the independent Directors take the lead in theappointment of new Directors, any proposal for a newDirector will be discussed and approved by all of theBoard. As a consequence, there is no NominationCommittee. External consultants may be used toidentify potential candidates. Upon appointment, eachDirector receives training on the investment operationsand administration functions of the Company, togetherwith a summary of their duties and responsibilities. TheDirectors also receive regular briefings from, amongstothers, the AITC, the Auditors and the CompanySecretary regarding any proposed developments orchanges in law or regulations that affect the Companyand/or the Directors.

The terms and conditions of appointment of Directorsare available for inspection at the registered office ofthe Company.

Performance evaluationA process for the evaluation of the Board, itsCommittees and its Directors has been put in placeand this takes the form of written questionnaires and, ifappropriate, interviews. The performance of theChairman is evaluated by the other Directors on anannual basis. The Company Secretary and InvestmentManager also participated in part of these processes toprovide all-round feedback to the Board. The results ofthese evaluations were issued to and discussed by theBoard. The process is considered to be constructive interms of identifying areas for improving the functioningand performance of the Board.

Re-electionAs required by company law, all newly appointedDirectors stand for election by the shareholders at thenext Annual General Meeting following theirappointment. The Directors retire by rotation and offerthemselves for re-election by shareholders every threeyears. Directors who have reached the age of 70 aresubject to annual re-election. Directors who haveserved on the Board for more than nine years are



subject to annual re-election. The representative of theManager is subject to annual re-election. A procedurehas been put in place whereby formal letters ofappointment, which specify the terms of appointment,are issued to new Directors on appointment and toexisting Directors as they retire and are subject to re-election at the Annual General Meeting.

As mentioned on page 18 Messrs Walther, Fraser andSimpson will retire and will be seeking re-election atthe forthcoming Annual General Meeting.

The Audit Committee consists of all the independentDirectors, and is chaired by Mr David Simpson. TheCommittee considers that collectively its members havesufficient recent and relevant financial experience todischarge their responsibilities fully. The Committee’sauthority and duties are clearly defined in its writtenterms of reference which are available for inspection atthe Company’s registered office and are included onthe Company’s website. These include responsibility forreviewing the interim report and annual report andaccounts, reviewing the scope and results of the auditand the effectiveness and cost of the audit process andreviewing the Company’s internal financial controls.They also include responsibility for reviewing andmonitoring the external Auditors’ independence andobjectivity with particular regard to the provision ofnon-audit services. The Audit Committee of the Boardmeets the Auditors at least once a year to review theseand other appropriate matters. In the year to31 December 2005 the Audit Committee discharged itsresponsibilities by inter alia:

• Reviewing the Company’s draft annual and interimfinancial statements prior to Board approval andreviewing the external Auditors’ report on theannual financial statements;

• Reviewing the appropriateness of the Company’saccounting policies;

• Reviewing and approving the audit fee andreviewing non-audit fees payable to the Company’sexternal Auditors;

• Reviewing the external Auditors’ terms ofengagement;

• Reviewing the external Auditors’ plan for the auditof the Company’s accounts;

• Reviewing the external Auditors’ quality controlprocedures;

• Reviewing and monitoring the effectiveness of theexternal audit process and the external Auditors’independence and objectivity;

• Considering the scope of work undertaken by theManager’s internal audit department;

• Reviewing a semi-annual report on risk and internalcontrols and reporting to the Board; and

• Considering and reconfirming that it does not needan internal audit function given that the Companydelegates its day to day operations to third parties.

The Management Engagement Committee consists ofall of the independent Directors and is chaired by MrRobert Walther. The Committee is charged withreviewing and monitoring the performance of theManager in respect of its contract and the fees it ispaid. This Committee meets once a year and reportsto the Board of Directors, making recommendationswhere appropriate.

The level of remuneration of the Manager is agreed bythe Management Engagement Committee; it relates tothe investment management function, on which apercentage of the funds under management is paid,and to the administrative function.

The criteria which are taken into consideration inreviewing the performance of the Manager are set out below:

• Quality of team – the skills and particularly theexperience of the team involved in managing allaspects of the Company’s business;

• Commitment of the Manager to the investmenttrust business generally and to the Company inparticular;

• Managing the Company – in running andcontrolling the administration, the accounting andthe secretaryship of the Company;

• Investment management – portfolio managementskills, experience and track record and otherinvestment related considerations includinggearing, currencies, hedging, buybacks etc;

• Shareholders – shareholder consciousness andrelations, discount management and commitmentto the Company’s goals; and

• Management Agreement – consideration of fees,notice periods and duties.

Robert Walther 4/5 2/2 1/1David Simpson 5/5 2/2 1/1Johan Björkman 5/5 2/2 1/1Simon Fraser 5/5 n/a n/aSimon Duckworth 5/5 2/2 1/1

(Figures indicate those meetings for which each Director was eligible to attend and attended in the year.)

Board Audit Committee Management EngagementMeetings Meetings Committee Meetings



The Committee met on 19 January 2006 and reviewedthe performance of the Manager for the year to31 December 2005. The Committee noted theCompany’s good performance record over the short,medium and longer term and the commitment, qualityand continuity of the team which was responsible forthe Company. The Committee concluded that it was inthe interests of shareholders that the appointment ofthe Manager should continue. Details of the newManagement Agreement appear on pages 16 and 17.

Supply and agenda of informationThe quarterly Board meeting papers are the key sourceof regular information for the Board, the contents ofwhich are determined by the Board and containsufficient information on the financial condition of theCompany. Key representatives of the Manager attendeach Board meeting, enabling the Board to probefurther on matters of concern or seek clarification oncertain issues. The Directors have access to the adviceand services of the Company Secretary through itsappointed representative, who is responsible to theBoard for ensuring that Board procedures are followedand that applicable rules and regulations are compliedwith. The Directors also have the ability to takeindependent professional advice, if necessary, at theCompany’s expense. The Company maintains Directors’and Officers’ liability insurance.

Directors’ remunerationThe level of Directors’ fees is determined by the wholeBoard and therefore a separate RemunerationCommittee has not been appointed. Since all Directorsare non-executive, the Company is not required tocomply with the principles of the Code in respect ofexecutive directors’ remuneration. Directors’ fees aredisclosed fully in the Annual Report (see the Directors’Remuneration Report on pages 24 and 25).

ACCOUNTABILITY AND AUDITFinancial reportingSet out on page 19 is a statement by the Directors oftheir responsibilities in respect of the annual report andfinancial statements. The Auditors have set out theirreporting responsibilities within the IndependentAuditors’ Report on page 26.

Going concernThe Directors believe that it is appropriate to continueto adopt the going concern basis in preparing theaccounts since the assets of the Company consistmainly of securities which are readily realisable and,accordingly, the Company has adequate financialresources to continue in operational existence for theforeseeable future.

Internal controlThe Directors review the effectiveness of the Company’ssystems of internal control on an ongoing basis. Theidentification, control and evaluation of risks identified,covering financial, operational and compliance mattersis formulated by a series of quarterly investmentperformance reports, a semi-annual internal controlsreport and quarterly compliance reports as provided bythe Manager. The systems of internal controls aredesigned to manage rather than eliminate risk of failureto achieve business objectives and can only providereasonable, but not absolute, assurance againstmaterial mis-statement or loss. The Board hascontractually delegated to external agencies, includingthe Manager, the management of the investmentportfolio, the custodial services (which include thesafeguarding of the assets), the registration servicesand the day-to-day accounting and company secretarialrequirements. Each of these contracts was entered intoafter full and proper consideration by the Board of thequality and cost of services offered including thecontrol systems in operation in so far as they relate tothe affairs of the Company.

The Board, assisted by the Manager, has undertaken asemi-annual risk and control assessment. The businessrisks have been analysed and recorded in a risk andinternal controls report which is reviewed regularly.Whilst the Company, in common with most investmenttrusts, has no internal audit department, theeffectiveness of these controls is monitored by theManager’s compliance and internal audit functions.The Audit Committee has received and reviewed thereport on the effectiveness of the internal controlsmaintained on behalf of the Company and an annualcompliance report from the Manager’s GlobalOversight Director. The Board also receives each yearfrom the Manager a report on its internal controlswhich includes a report from the Manager’s reportingaccountants on the control procedures in operationaround the investment management andadministration processes. By means of the proceduresset out above and in accordance with The TurnbullInternal Control Guidance, the Directors haveestablished an ongoing process for identifying,evaluating and managing the significant risks faced bythe Company and have reviewed the effectiveness ofthe internal controls systems throughout the year.

Voting policyThe Board has adopted the Manager’s Principles ofOwnership in relation to investments. These principlesinclude the pursuit of an active investment policythrough portfolio management decisions, voting onresolutions at general meetings and maintaining acontinuing dialogue with the management of investee



companies. In its Principles of Ownership, the Managerexpressly declares that it supports the Statement ofPrinciples drawn up in 2002 by the InstitutionalShareholders’ Committee setting out theresponsibilities of institutional shareholders and agents.

The Manager instructs proxy voting on behalf of theCompany in accordance with the Manager’s existingguidelines and policies.

ShareholdersThe Board regularly monitors the shareholder profile ofthe Company and liaises with the Manager and theCompany’s broker to canvass shareholder opinion andcommunicate its views to shareholders. The Board isconcerned to provide the maximum opportunity fordialogue between the Company and shareholders. Itbelieves the Company’s institutional shareholders dohave proper access to the Manager at any time and tothe Board if they so wish. If any shareholder wishes tocontact a member of the Board directly they shouldcontact the Company Secretary whose details aregiven on page 45. All shareholders, particularlyindividual shareholders, are encouraged to attend theAnnual General Meeting at which there is always apresentation of the past year’s results and theforthcoming year’s prospects, followed by theopportunity to meet the Management and the Board.

The Notice of the Annual General Meeting and relatedpapers are sent to shareholders at least 20 workingdays before the meeting.

All proxy votes are counted and, except where a poll iscalled, are reported for each resolution after it hasbeen dealt with on a show of hands.

The Notice of Meeting on pages 42 to 43 sets out thebusiness of the Annual General Meeting. A separateresolution is proposed on each substantially separateissue including the Annual Report and Accounts.

The Chairman of the Audit Committee will be availableto answer questions at the Annual General Meeting.

On behalf of the Board

Robert Walther6 March 2006

REMUNERATION OF DIRECTORS1

No Director received any bonus, taxable expenses, compensation for loss of office or non-cash benefits for theyear ended 31 December 2005 or the year ended 31 December 2004.

2005 fees (£) 2004 fees (£)

Robert Walther2 22,000 18,500

Johan Björkman 16,000 13,500

Simon Duckworth 16,000 13,500

Simon Fraser3 – –

David Simpson 18,000 15,000

Total 72,000 60,500

1 audited information2 with effect from 1 January 2006, Mr Walther’s fee has been increased to £24,000 pa3 Mr Fraser waived his Director’s fees of £16,000 in 2005 and £13,500 in 2004.

The Company’s investment objective is to achieve long-term capital growth from the stockmarkets of ContinentalEurope.


Directors’ Remuneration Report

REMUNERATION COMMITTEEAs the Board of Directors is comprised solely of non-executive Directors it is exempt under the Listing Rulesfrom appointing a Remuneration Committee. Thedetermination of the Directors’ fees is a matter dealtwith by the whole Board.

The Company’s Articles of Association limit theaggregate fees payable to the Board of Directors to atotal of £150,000 per annum. Subject to this overalllimit it is the Company’s policy to determine the levelof Directors’ fees having regard to the level of fees

payable to non-executive directors in the industrygenerally, the role that individual Directors fulfil andthe time committed to the Company’s affairs.

No Director has a service contract with the Company.The Company does not offer payments to Directorson termination.

The Company’s performance is measured against theFTSE World Europe (ex UK) Index as this is the mostappropriate in respect of its asset allocation.

Robert Walther

6 March 2006


Directors’ Remuneration Report

31 December 2005 – financial year end

6 March 2006 – announcement of results

3 April 2006 – publication of this report

19 May 2006 – Annual General Meeting

30 June 2006 – half year end

August 2006 – announcement of interim results to30 June 2006

August 2006 – publication of Interim Report

50

100

150

200

250

31

Dec 2005

31

Dec 2004

31

Dec 2003

31

Dec 2002

31

Dec 2001

31

Dec 2000

+4.2%

+80.2%

+106.2%

Performance from 31 December 2000 to 31 December 2005 (on a total return basis)

On behalf of the Board

Financial Calendar

Financial Calendar – the key dates in the Company’s calendar for the year from 31 December 2005:




Independent Auditors’ Report to the Shareholders of FidelityEuropean Values PLC

We have audited the financial statements of FidelityEuropean Values PLC for the year ended31 December 2005 which comprise the IncomeStatement, the Reconciliation of Movements inShareholders’ Funds, the Balance Sheet, the CashFlow Statement and the related notes. These financialstatements have been prepared under the accountingpolicies set out therein. We have also audited theinformation in the Directors’ Remuneration Report thatis described as having been audited.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORSThe Directors’ responsibilities for preparing the AnnualReport and the financial statements in accordance withapplicable law and United Kingdom AccountingStandards (United Kingdom Generally AcceptedAccounting Practice) are set out in the Statement ofDirectors’ responsibilities. The Directors are alsoresponsible for preparing the Directors’ RemunerationReport.

Our responsibility is to audit the financial statementsand the part of the Directors’ Remuneration Report tobe audited in accordance with relevant legal andregulatory requirements and International Standards onAuditing (UK and Ireland).

This report, including the opinion, has been preparedfor and only for the Company’s members as a body inaccordance with Section 235 of the Companies Act1985 and for no other purpose. We do not, in giving thisopinion, accept or assume responsibility for any otherpurpose or to any other person to whom this report isshown or into whose hands it may come save whereexpressly agreed by our prior consent in writing.

We report to you our opinion as to whether the financialstatements give a true and fair view and whether thefinancial statements and the part of the Directors’Remuneration Report to be audited have been properlyprepared in accordance with the Companies Act 1985.We also report to you if, in our opinion, the Directors’Report is not consistent with the financial statements, ifthe Company has not kept proper accounting records, ifwe have not received all the information andexplanations we require for our audit, or if informationspecified by law regarding Directors’ remuneration andtransactions is not disclosed.

We review whether the Corporate GovernanceStatement reflects the Company’s compliance with thenine provisions of the 2003 FRC Combined Codespecified for our review by the Listing Rules of theFinancial Services Authority, and we report if it does not.We are not required to consider whether the Board’sstatements on internal control cover all risks andcontrols, or form an opinion on the effectiveness of the

Company’s corporate governance procedures or its riskand control procedures.

We read other information contained in the AnnualReport and consider whether it is consistent with theaudited financial statements. The other informationcomprises the Chairman’s Statement, the Manager’sReview, the Directors’ Report, the CorporateGovernance Statement and the unaudited part of theDirectors’ Remuneration Report. We consider theimplications for our report if we become aware of anyapparent misstatements or material inconsistencies withthe financial statements. Our responsibilities do notextend to any further information.

BASIS OF AUDIT OPINIONWe conducted our audit in accordance withInternational Standards on Auditing (UK and Ireland)issued by the Auditing Practices Board. An auditincludes examination, on a test basis, of evidencerelevant to the amounts and disclosures in the financialstatements and the part of the Directors’ RemunerationReport to be audited. It also includes an assessment ofthe significant estimates and judgements made by theDirectors in the preparation of the financial statements,and of whether the accounting policies are appropriateto the Company’s circumstances, consistently appliedand adequately disclosed.

We planned and performed our audit so as to obtain allthe information and explanations which we considerednecessary in order to provide us with sufficient evidenceto give reasonable assurance that the financialstatements and the part of the Directors’ RemunerationReport to be audited are free from materialmisstatement, whether caused by fraud or otherirregularity or error. In forming our opinion we alsoevaluated the overall adequacy of the presentation ofinformation in the financial statements and the part ofthe Directors’ Remuneration Report to be audited.

OPINIONIn our opinion: • the financial statements give a true and fair view, in

accordance with United Kingdom GenerallyAccepted Accounting Practice, of the state of theCompany’s affairs as at 31 December 2005 and ofits net return and cash flows for the year thenended; and

• the financial statements and the part of theDirectors’ Remuneration Report to be audited havebeen properly prepared in accordance with theCompanies Act 1985.

PricewaterhouseCoopers LLPChartered Accountants and Registered AuditorsLondon6 March 2006

2005 2004restated*

revenue capital total revenue capital totalNotes £’000 £’000 £’000 £’000 £’000 £’000

Gains on investments 9 – 175,905 175,905 – 104,793 104,793

Income 2 16,965 – 16,965 12,546 – 12,546

Investment management fee 3 (8,252) – (8,252) (5,882) – (5,882)

Other expenses 4 (920) – (920) (902) – (902)

Exchange gains/(losses) 54 (213) (159) (22) (294) (316)

Exchange gains/(losses) on loans 14 – 702 702 – (2) (2)________ ________ ________ ________ ________ ________

NET RETURN BEFORE FINANCE COSTS AND TAXATION 7,847 176,394 184,241 5,740 104,497 110,237

Interest payable 5 (3,801) – (3,801) (3,239) – (3,239)________ ________ ________ ________ ________ ________

NET RETURN ON ORDINARY ACTIVITIES BEFORE TAXATION 4,046 176,394 180,440 2,501 104,497 106,998

Taxation on return on ordinary activities 6 (2,274) (65) (2,339) (1,254) (315) (1,569)________ ________ ________ ________ ________ ________

NET RETURN ON ORDINARY ACTIVITIES AFTER TAXATION FOR THE YEAR ATTRIBUTABLE TO EQUITY SHAREHOLDERS 1,772 176,329 178,101 1,247 104,182 105,429____ ____ ____ ____ ____ ____RETURN PER ORDINARY SHARE 8 2.82p 280.32p 283.14p 1.98p 165.62p 167.60p____ ____ ____ ____ ____ ____


Income Statement for the year ended 31 December

A Statement of Total Recognised Gains and Losses has not been prepared as there are nogains and losses other than those reported in this Income Statement.All revenue and capital items in the above statement derive from continuing operations.No operations were acquired or discontinued in the year.*see note 20 on page 41.The notes on pages 31 to 41 form an integral part of the financial statements.

1

The notes on pages 31 to 41 form an integral part of these financial statements.


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

called up share capital capital capitalshare premium redemption reserve reserve revenue total

capital account reserve realised unrealised reserve equityNotes £’000 £’000 £’000 £’000 £’000 £’000 £’000

Opening shareholders’funds as previously stated: 1 January 2004 15,725 58,615 100 245,461 83,589 3,766 407,256

Effect of prior year adjustment as a result of a change in accounting policy regarding the treatment of proposed dividends 20 – – – – – 944 944

________ ________ ________ ________ ________ ________ ________Opening shareholders’ funds as restated: 1 January 2004 15,725 58,615 100 245,461 83,589 4,710 408,200

Net recognised gains for the year – – – 59,986 44,196 – 104,182

Revenue after taxation – – – – – 1,247 1,247

Dividend paid 7 – – – – – (944) (944)________ ________ ________ ________ ________ ________ ________

Shareholders’ funds as restated: 31 December 2004 15,725 58,615 100 305,447 127,785 5,013 512,685

Effect of changing prices from middlemarket to bid market at 1 January 2005 9 – – – – (1,077) – (1,077)

Net recognised gains for the year 14 – – – 119,303 57,026 – 176,329

Revenue after taxation 14 – – – – – 1,772 1,772

Dividend paid 7 – – – – – (1,101) (1,101)________ ________ ________ ________ ________ ________ ________

Closing shareholders’ funds: 31 December 2005 15,725 58,615 100 424,750 183,734 5,684 688,608____ ____ ____ ____ ____ ____ ____

2005 2004restated*

Notes £’000 £’000

FIXED ASSETS

Investments held at fair value through profit or loss 9 800,634 572,722________ ________

CURRENT ASSETS

Debtors 10 1,712 1,690

Cash at bank 3,259 4,455________ ________

4,971 6,145________ ________

CREDITORS – AMOUNTS FALLING DUE WITHIN ONE YEAR

Fixed rate unsecured loans 11 (61,855) –

Other creditors 11 (3,596) (2,623)________ ________

(65,451) (2,623)________ ________

NET CURRENT (LIABILITIES)/ASSETS (60,480) 3,522________ ________

TOTAL ASSETS LESS CURRENT LIABILITIES 740,154 576,244____ ____CREDITORS – AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

Fixed rate unsecured loans 12 (51,546) (63,559)________ ________

TOTAL NET ASSETS 688,608 512,685____ ____CAPITAL AND RESERVES

Called up share capital 13 15,725 15,725

Share premium account 14 58,615 58,615

Capital redemption reserve 14 100 100

Capital reserve – realised 14 424,750 305,447

Capital reserve – unrealised 14 183,734 127,785

Revenue reserve 14 5,684 5,013________ ________

TOTAL EQUITY SHAREHOLDERS’ FUNDS 688,608 512,685____ ____NET ASSET VALUE PER ORDINARY SHARE 15 1,094.71p 815.04p____ ____

* See note 20 on page 41

The financial statements on pages 27 to 41 were approved by the Board of Directors on 6 March 2006 and were signed onits behalf by:

Robert Walther, Chairman

The notes on pages 31 to 41 form an integral part of these financial statements


Balance Sheet as at 31 December


Cash Flow Statement for the year ended 31 December

2005 2004Notes £’000 £’000

OPERATING ACTIVITIES

Investment income received 13,882 10,873

Interest received 117 72

Investment management fee paid (7,496) (5,601)

Directors’ fees paid (75) (52)

Other cash payments (921) (874)________ ________

NET CASH INFLOW FROM OPERATING ACTIVITIES 16 5,507 4,418________ ________

RETURNS ON INVESTMENTS AND SERVICING OF FINANCE

Interest paid (3,673) (3,239)________ ________

NET CASH OUTFLOW FROM RETURNS ON INVESTMENTSAND SERVICING OF FINANCE (3,673) (3,239)

________ ________TAXATION

Overseas taxation recovered 874 399________ ________

TAXATION RECOVERED 874 399________ ________

FINANCIAL INVESTMENT

Purchase of investments (557,685) (382,807)

Disposal of investments 504,390 385,297________ ________

NET CASH (OUTFLOW)/INFLOW FROM FINANCIAL INVESTMENT (53,295) 2,490________ ________

EQUITY DIVIDEND PAID (1,101) (944)____ ____NET CASH (OUTFLOW)/INFLOW BEFORE FINANCING (51,688) 3,124

________ ________FINANCING

3.23% fixed rate unsecured loan drawn down 26,625 –

3.54% fixed rate unsecured loan drawn down 23,919 –________ ________

NET CASH INFLOW FROM FINANCING 50,544 –________ ________

(DECREASE)/INCREASE IN CASH 17 (1,144) 3,124____ ____

The notes on pages 31 to 41 form an integral part of these financial statements


Notes to the Financial Statements

1. ACCOUNTING POLICIES

The Company has prepared its financial statements in accordance with United Kingdom Generally Accepted AccountingPractice ("UK GAAP") and the AITC Statement of Recommended Practice ("SORP") for Investment Trusts dated January2003 and revised in December 2005. Prior year adjustments, as shown in note 20 on page 41, have arisen due to thechange in the accounting treatment of proposed dividends as explained in note i).

a) Basis of accounting – The financial statements have been prepared on a going concern basis and under the historicalcost convention, modified to include the revaluation of fixed asset investments and on the assumption that approval asan investment trust will be granted.

b) Income – Income from equity investments is credited to revenue on the date on which the right to receive thepayment is established. Interest receivable on fixed interest securities is accounted for on an accruals basis so as toreflect the effective interest rate on the security. Franked dividends are accounted for net of any tax credit. Unfrankedinvestment income includes tax deducted at source. Interest receivable on short term loans and deposits, interestpayable and expenses of management are dealt with on an accruals basis. Where the Company has elected to receiveits dividends in the form of additional shares rather than cash, the amount of the cash dividend is recognised as income.Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital reserves.

c) Special dividends – Special dividends are treated as a capital receipt or a revenue receipt depending on thecircumstances and facts of each particular case.

d) Expenses and finance costs – All expenses are accounted for on an accruals basis and are charged in full to therevenue column of the Income Statement. Finance costs are accounted for on an accruals basis and in accordance withthe provisions of Financial Reporting Standard ("FRS") 26 "Financial Instruments: Measurement".

e) Taxation – The tax effect of different items of income or expenses is allocated between the capital return and revenuereturn using the marginal basis. Deferred taxation is recognised in respect of all timing differences that have originated, butnot reversed, at the balance sheet date, where transactions or events that result in an obligation to pay more, or a right topay less tax in the future have occurred. A deferred tax asset is recognised when it is more likely than not that the asset willbe recoverable.

f) Foreign currency – The Directors, having regard to the currency of the Company's share capital and the predominantcurrency in which its investors operate, have determined the functional currency to be sterling. Transactionsdenominated in foreign currencies are calculated in sterling at the rate of exchange ruling as at the date of transactions.Assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date.Realised and unrealised capital gains and losses, including exchange differences on the translation of foreign currencyassets and liabilities, are dealt with in capital reserves - realised and unrealised.

g) Valuation of investments – In accordance with FRS26 investments are classified as held at fair value through profit orloss. Listed investments are valued at bid market price. However, no adjustments have been made to the prior period'sresults as the Company has taken advantage of paragraph 108D of the Standard and disclosed the effect of valuinginvestments at bid price as shown in Note 9 on page 34. Unlisted investments are valued at bid market prices ruling wherean organised market in such investments exists; other unquoted investments are included at Directors' estimate of fairvalue. Where a price is not readily available the holding would be valued at cost unless circumstances indicate a differentvaluation is warranted. In general, valuations are increased where a substantial arm's length transaction has occurredsubsequent to acquisition, at a price higher than cost. Valuations are decreased where subsequent transactions have takenplace at a price lower than cost or where Fidelity's Fair Value Committee is aware that the company is experiencingoperating difficulties.

h) Capital reserve – realised – Gains and losses on the realisation of investments and realised exchange differences of acapital nature are accounted for in the capital reserve – realised.

Capital reserve – unrealised – Increases and decreases in the valuation of investments held at the year end andunrealised exchange differences of a capital nature are accounted for in the capital reserve – unrealised.

i) Dividends – FRS21: "Events after the Balance Sheet Date" – In accordance with FRS21 dividends declared andapproved by the Company after the balance sheet date have not been recognised as a liability of the Company at thebalance sheet date. Prior year results have been restated accordingly and this is shown on note 20 on page 41.



j) Presentation – The revised SORP has given rise to the following changes in the presentation of the financialstatements:

(i) the Statement of Total Return is now called the Income Statement and the total column, as opposed to the revenuecolumn, is now the profit and loss account of the Company;

(ii) a new primary statement, the Reconciliation of Movements in Shareholders' Funds, has been introduced. Thedividends paid by the Company are now reported through this statement.

2005 2004£’000 £’000

2. INCOME

Income from listed investments

UK dividends 325 55

Overseas dividends 16,517 12,410________ ________

16,842 12,465

Other income

Deposit interest 123 81________ ________

Total income 16,965 12,546____ ____

2005 2004£’000 £’000

3. INVESTMENT MANAGEMENT FEE

Investment management fee 7,079 5,169

Irrecoverable VAT thereon 1,173 713________ ________

8,252 5,882____ ____A summary of the terms of the Management Agreement is provided in the Directors' Report on pages 16 and 17.

2005 2004£’000 £’000

4. OTHER EXPENSES

Directors’ fees 72 61

Custody fees 360 339

Marketing expenses 214 291

Other expenses 250 193

Auditors’ remuneration

Audit 24 18________ ________

920 902____ ____Details of the breakdown of Directors' fees are provided on page 24 within the Directors' Remuneration Report.

The audit fee includes an amount of £4,250 (2004: nil) relating to the review of the interim financial statements.

2005 2004£’000 £’000

5. INTEREST PAYABLE

On loans repayable within five years

Bank overdraft 1 3

Fixed rate unsecured loans 3,800 3,236________ ________

3,801 3,239____ ____

2005 2004revenue capital total revenue capital total

£’000 £’000 £’000 £’000 £’000 £’0006. TAX ON ORDINARY ACTIVITIES

a) Analysis of charge in the year

Corporation tax 2,158 25 2,183 1,574 3 1,577

Double taxation relief (2,158) (25) (2,183) (1,574) (3) (1,577)________ ________ ________ ________ ________ ________

– – – – – –________ ________ ________ ________ ________ ________

Overseas taxation suffered 3,066 26 3,092 1,934 3 1,937

Overseas taxation recovered (753) – (753) (368) – (368)

Taxation (credit)/charge for use of revenue expenses (39) 39 – (312) 312 –

________ ________ ________ ________ ________ ________Total current taxation for the year (see note 6b) 2,274 65 2,339 1,254 315 1,569____ ____ ____ ____ ____ ____b) Factors affecting the taxation charge for the year

The taxation assessed for the year is higher than the standard rate of corporation tax in the UK for an investment trustcompany (30%) (2004: 30%).

The differences are explained below.

2005 2004£’000 £’000

Revenue return on ordinary activities before taxation 4,046 2,501____ ____Corporation tax at 30% (2004: 30%) 1,214 750

Effects of:

Income not included for taxation purposes (97) (16)

Excess expenses for the period 1,002 528

Overseas taxation 2,313 1,566

Double taxation relief (2,158) (1,574)________ ________

Current corporation tax charge (note 6a) 2,274 1,254____ ____Investment trust companies are exempt from taxation on capital gains if they meet the Inland Revenue criteria set out ins842 Income and Corporation Taxes Act 1988 for a given period. Therefore, any capital return is not included in theabove reconciliation.

c) The deferred tax asset of £2,419,000 in respect of unutilised expenses at 31 December 2005 (2004: £1,384,000) hasnot been recognised as it is unlikely that this asset will be utilised.



2005 2004£’000 £’000

7. DIVIDENDS

Final dividend of 1.75 pence per share paid for the year ended 31 December 2004 (2003: Interim dividend of 1.50 pence) 1,101 944____ ____The Directors' have proposed a final dividend of 2.50 pence per share, amounting in total to £1,573,000, which issubject to approval by the shareholders at the Annual General Meeting and has not been included as a liability in thesefinancial statements.

2005 2004revenue capital total revenue capital total

8. RETURN PER ORDINARY SHARE

Basic 2.82p 280.32p 283.14p 1.98p 165.62p 167.60p____ ____ ____ ____ ____ ____Returns per ordinary share are based on the net revenue return on ordinary activities after taxation of £1,772,000 (2004:£1,247,000) and the capital return in the year of £176,329,000 (2004: £104,182,000) and on 62,903,233 ordinary shares(2004: 62,903,233) being the weighted average number of ordinary shares in issue during the year.

2005 2004£’000 £’000

9. INVESTMENTS

Listed in the UK 4,269 2,067

Listed overseas 796,365 570,655________ ________

Total listed investments 800,634 572,722________ ________

2005listed UK listed overseas total

£’000 £’000 £’000

Opening book cost 1,559 434,810 436,369

Opening unrealised appreciation 508 135,845 136,353________ ________ ________

Opening valuation 2,067 570,655 572,722________ ________ ________

Effect of changing prices from middle market to bid market at 1 January 2005 (1) (1,076) (1,077)

________ ________ ________2,066 569,579 571,645

Movements in the year

Purchases at cost 5,006 552,933 557,939

Sales – proceeds (2,019) (502,771) (504,790)

Sales – realised (losses)/gains on sales (428) 119,892 119,464

(Decrease)/increase in unrealised appreciation (356) 56,797 56,441

Taxation on capital dividends – (65) (65)________ ________ ________

Closing valuation 4,269 796,365 800,634____ ____ ____Closing book cost 4,118 604,864 608,982

Closing unrealised appreciation 151 191,501 191,652________ ________ ________

4,269 796,365 800,634____ ____ ____



2005 2004£’000 £’000

Realised gains on sales 119,464 58,884

Increase in unrealised appreciation 56,441 45,909________ ________

Gains on investments 175,905 104,793____ ____The annualised portfolio turnover rate for the year is 78.8% (2004: 83.0%).

2005 2004Costs of investment transactions £’000 £’000

Purchases expenses 773 635

Sales expenses 686 651________ ________

1,459 1,286____ ____

2005 2004£’000 £’000

10. DEBTORS

Securities sold for future settlement 848 566

Overseas taxation recoverable 461 582

Currency receivable 286 323

Brokers’ rebate receivable 41 –

Other debtors 76 219________ ________

1,712 1,690____ ____

2005 2004£’000 £’000

11. CREDITORS – AMOUNTS FALLING DUE WITHIN ONE YEAR

Securities purchased for future settlement 397 98

Currency payable 287 323

Loan interest payable 137 9

Other creditors 2,775 2,193

Fixed rate unsecured loan @ 4.96% per annum 34,364 –

Fixed rate unsecured loan @ 5.54% per annum 27,491 –________ ________

65,451 2,623____ ____

2005 2004£’000 £’000

12. CREDITORS – AMOUNTS FALLING DUE AFTER ONE YEAR



Fixed rate unsecured loan @ 4.96% per annum – 35,310

Fixed rate unsecured loan @ 5.54% per annum – 28,249________ ________

51,546 63,559____ ____





The fixed rate loan from The Royal Bank of Scotland plc of €50,000,000 was drawn down on 28 December 2001 for aperiod of five years at an interest rate of 4.96% per annum. The loan is repayable on 29 December 2006.

The fixed rate loan from National Australia Bank Limited of €40,000,000 was drawn down in two tranches; €33,000,000on 24 December 2001 and €7,000,000 on 28 December 2001, for a period of five years at an interest rate of 5.54% perannum. The loan is repayable on 29 December 2006.

The fixed rate loan from Lloyds TSB Bank plc of €40,000,000 was drawn down on 22 June 2005 for a period of five yearsat an interest rate of 3.23% per annum. The loan is repayable on 22 June 2010.

The fixed rate loan from Lloyds TSB Bank plc of €35,000,000 was drawn down on 22 November 2005 for a period ofthree years at an interest rate of 3.54% per annum. The loan is repayable on 24 November 2008.

The Company has entered into an arrangement with The Royal Bank of Scotland plc whereby if total borrowings exceed 50%of the Company’s assets sufficient money is placed in a charged account with the bank to reduce borrowings to below 50%.

The Company has also entered into an arrangement with National Australia Bank Limited whereby if total borrowingsexceed 40% of the Company’s assets sufficient money is placed in a charged account with the bank to reduce borrowingsto below 40%.

The Company has also entered into an arrangement with Lloyds TSB Bank plc whereby if total borrowings exceed 50% ofthe Company’s assets sufficient money is placed in a charged account with the bank to reduce borrowings to below 50%.

As at 31 December 2005 there were no cash deposits with the bank subject to a charge in favour of The Royal Bank ofScotland plc, National Australia Bank Limited or Lloyds TSB Bank plc (2004: nil).

Redemption costs may be payable in the event of the Directors electing to prepay the unsecured loans.

2005 2004£’000 £’000

13. CALLED UP SHARE CAPITAL

Authorised:

136,000,000 (2004: 136,000,000) ordinary shares of 25 pence each 34,000 34,000____ ____Issued, allotted and fully paid:

62,903,233 (2004: 62,903,233) ordinary shares of 25 pence each 15,725 15,725____ ____



2005share capital capital capital revenue

premium redemption reserve reserve reserveaccount reserve realised unrealised restated*

£’000 £’000 £’000 £’000 £’00014. RESERVES

At 31 December 2004: as previously stated 58,615 100 305,447 127,785 3,912

Effect of prior year adjustment as a result of a change in the accounting policy regarding the treatment of proposed dividends – – – – 1,101

________ ________ ________ ________ ________At 31 December 2004: as restated 58,615 100 305,447 127,785 5,013

Effect of changing prices from middle market to bid market at 1 January 2005 – – – (1,077) –

Exchange losses on other net assets – – (161) (52) –

Net gain on realisation of investments – – 119,464 – –

Increase in unrealised appreciation – – – 56,441 –

Exchange gains on loans – – – 702 –

Taxation on capital dividends – – – (65) –

Net recognised gains for the period – – – – 1,772

Dividend paid to shareholders – – – – (1,101)________ ________ ________ ________ ________

End of year 58,615 100 424,750 183,734 5,684____ ____ ____ ____ ____*see note 20 on page 41

15. NET ASSET VALUE PER SHARE

The basic net asset value per ordinary share is based on net assets of £688,608,000 (2004: £512,685,000) and on62,903,233 (2004: 62,903,233) ordinary shares, being the number of ordinary shares in issue at the year end.

2005 2004£’000 £’000

16. RECONCILIATION OF NET REVENUE BEFORE FINANCE COSTS AND TAXATION TO NET CASH INFLOW FROM OPERATING ACTIVITIES

Net return before finance costs and taxation 184,241 110,237

Capital return for the year (176,394) (104,497)________ ________

Net revenue return before finance costs and taxation 7,847 5,740

Increase/(decrease) in other creditors 546 (3,691)

Decrease in other debtors 180 4,303

Overseas taxation suffered (3,066) (1,934)________ ________

Net cash inflow from operating activities 5,507 4,418____ ____



2005 2004£’000 £’000

17. RECONCILIATION OF NET CASH MOVEMENTS TO MOVEMENT IN NET DEBT

Net debt at the beginning of the year (59,104) (62,308)____ ____Net cash (outflow)/inflow (1,144) 3,124

Fixed rate unsecured loans drawn down (50,544) –

Foreign exchange movement (52) 82

Foreign exchange movement on fixed rate unsecured loans 702 (2)________ ________

Change in net debt (51,038) 3,204________ ________

Net debt at the end of the year (110,142) (59,104)____ ____Cash Exchange

2005 flows movements 2004£’000 £’000 £’000 £’000

Analysis of balances

Cash at bank 3,259 (1,144) (52) 4,455

Fixed rate unsecured loans (113,401) (50,544) 702 (63,559)________ ________ ________ ________

End of year (110,142) (51,688) 650 (59,104)____ ____ ____ ____

2005 2004share share

capital loans total capital loans total£’000 £’000 £’000 £’000 £’000 £’000

18. ANALYSIS OF CHANGES IN FINANCING DURING THE YEAR

Beginning of year 74,440 63,559 137,999 74,440 63,557 137,997

Fixed rate unsecured loans drawn down – 50,544 50,544 – – –

Change in value of fixed rate unsecured loans – (702) (702) – 2 2

________ ________ ________ ________ ________ ________End of year 74,440 113,401 187,841 74,440 63,559 137,999____ ____ ____ ____ ____ ____

19. FINANCIAL INSTRUMENTS

The investment objective of the Company is detailed in the Objective & Highlights on page 1. In pursuit of thisobjective, the Company may be exposed to various forms of risk, as described below.

The Company’s financial instruments comprise:• Equity shares held in accordance with the Company’s investment objective and policies• Cash, liquid resources and short term debtors and creditors that arise from its operations• Euro borrowings to finance operations

The risks arising from the Company's financial instruments are market price risk, which comprises interest rate risk andforeign currency exposure, liquidity risk and counterparty credit risk. The Board reviews and agrees policies for managingeach of these risks, which are summarised below. These policies have remained unchanged since the beginning of theaccounting period.

It is, and has been throughout the year under review, the Company’s policy that no trading in financial instruments shallbe undertaken.



Short term debtors and other short term creditors are excluded from the following analyses.

Market price riskMarket 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 movementsand changes in exchange rates. The Board meets quarterly to consider the asset allocation of the portfolio and the riskassociated with particular industry sectors within the parameters of the investment objective. The Manager is responsible foractively monitoring the existing portfolio selected in accordance with the overall asset allocation parameters describedabove and seeks to ensure that individual stocks also meet an acceptable risk/reward profile.

Fair value of financial assets and liabilitiesFinancial assets and liabilities are stated in the balance sheet at values which are not materially different to their fairvalues. As explained in Note 1 investments are now shown at fair value which is interpretated to be bid price. In the caseof cash, book value approximates to fair value due to the short maturity of the instruments. The exceptions are the longterm fixed rate unsecured loans, whose fair values as at 31 December 2005 given below, have been calculated bydiscounting future cash flow at current euro interest rates.

2005 2004fair value book value fair value book value

£’000 £’000 £’000 £’000

Fixed rate unsecured loan @ 3.23% per annum 27,544 27,491 – –

Fixed rate unsecured loan @ 3.54% per annum 24,303 24,055 – –

Fixed rate unsecured loan @ 4.96% per annum 35,012 34,364 36,901 35,310

Fixed rate unsecured loan @ 5.54% per annum 28,161 27,491 29,839 28,249________ ________ ________ ________115,020 113,401 66,740 63,559____ ____ ____ ____

Interest rate riskThe Company finances its operations through share capital raised. In addition, financing has been obtained through foureuro denominated fixed rate unsecured bank loans, which fall due for repayment on 29 December 2006 (two loans), 24November 2008 and 22 June 2010. The Company is therefore not exposed to a financial risk arising as a result of anyincrease in euro interest rates on these loans. The Board imposes borrowing limits to ensure gearing levels areappropriate to market conditions.

The Company's financial assets are mainly invested in equity shares and other investments which neither pay interest norhave a maturity date. The Company also has cash balances invested at short term market interest rates which thereforecarry no material risk.

The interest profile of the Company’s financial liabilities excluding short term creditors, as at 31 December 2005 and2004 was as follows:

2005 2004weighted weighted

average averagefixed rate weighted period fixed rate weighted periodfinancial average for which financial average for whichliabilities interest rate rate is fixed liabilities interest rate rate is fixed

£’000 £’000Currency

Euro 113,401 4.38% 27 months 63,559 5.22% 24 months____ ____ ____ ____ ____ ____



Foreign currency riskThe Company’s total return and balance sheet can be affected by foreign exchange movements because the Companyhas assets and income which are denominated in currencies other than the Company’s base currency (sterling).

The Board has identified three principal areas where foreign currency risk could impact the Company:• Movements in rates affecting the value of investments and loans• Movements in rates affecting short term timing differences• Movements in rates affecting the income received

The Company does not hedge the sterling value of investments or other net assets priced in other currencies by the use ofderivatives. However, it has increased finance available to the Company for its investment activities with foreign currencyborrowings, thereby hedging part of the movements which are a result of exchange movements.

The Company might also be subject to short term exposure from exchange rate movements, for example between thedate when an investment is bought or sold and the date when settlement of the transaction occurs. Income denominatedin foreign currencies is converted to sterling on receipt.

The following is an analysis of the Company’s currency exposure as at 31 December 2005 and 2004:

2005 2004net net

currency currency currency currency currency currencymonetary monetary monetary monetary monetary monetary

assets liabilities assets assets liabilities assetsCurrency £’000 £’000 £’000 £’000 £’000 £’000

Danish krone 13,559 (43) 13,516 48,633 (98) 48,535

Deutschemark – – – 479 – 479

Euro 593,678 (114,062) 479,616 413,238 (63,568) 349,670

Hungarian forint 9,198 – 9,198 7,494 – 7,494

Norwegian krone 34,907 – 34,907 22,284 – 22,284

Polish zloty 8,636 – 8,636 3,558 – 3,558

Swedish krona 40,130 (85) 40,045 26,774 – 26,774

Swiss franc 91,581 – 91,581 41,432 – 41,432

Turkish lira 4,442 – 4,442 12 – 12

US dollar 5,073 – 5,073 11,085 – 11,085________ ________ ________ ________ ________ ________

Total 801,204 (114,190) 687,014 574,989 (63,666) 511,323

UK sterling 4,401 (2,807) 1,594 3,878 (2,516) 1,362________ ________ ________ ________ ________ ________

Balance sheet total 805,605 (116,997) 688,608 578,867 (66,182) 512,685____ ____ ____ ____ ____ ____

Liquidity riskThe Company’s assets mainly comprise readily realisable securities, which can be easily sold to meet fundingcommitments if necessary. Short term flexibility is achieved by the use of overdraft facilities as required. Details of theCompany’s borrowing commitments are explained in Note 12.

The maturity profile of the Company’s financial liabilities at 31 December 2005 and 2004 is as follows:

2005 2004£’000 £’000

Within one year 61,855 –

After more than one year but less than two years – 63,559

After more than two years but less than five years 51,546 –________ ________113,401 63,559____ ____

The Company does not have any undrawn committed borrowing facilities.

Counterparty riskCertain transactions in securities that the Company enters into expose it to the risk that the counterparty will not delivereither the shares (on a purchase) or the cash (on a sale) after the Company has fulfilled its responsibilities. There is also acounterparty risk associated with deposit takers.

The Company buys and sells investments on a delivery versus payment basis to manage risk.

The Company only buys and sells investments through brokers which have been approved by the Manager as anacceptable counterparty. Additionally, limits are set as to the maximum exposure to any broker at any time, the limitsbeing reviewed on a regular basis.

2005 2004Shareholders’ funds Shareholders’ funds

£’000 £’00020. PRIOR YEAR ADJUSTMENTS AND RESTATEMENTS

Opening balance as previously stated: 1 January 2004 511,584 407,256

Effect of prior year adjustment as a result of a change in accounting policy regarding the treatment of proposed dividends 1,101 944

________ ________Opening balance as restated: 1 January 2004 512,685 408,200

Effect of changing prices at 1 January 2005 (1,077) –

Other recognised gains for the period 176,329 104,182

Revenue after taxation 1,772 1,247

Dividend paid (1,101) (944)________ ________

Closing balance as restated: 31 December 2005 688,608 512,685____ ____

21. CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS

There were no contingent liabilities or capital commitments as at 31 December 2005 (2004: nil).

22. TRANSACTIONS WITH THE MANAGER

The Directors have complied with the provisions of FRS8 which require disclosure of related party transactions andbalances. Fidelity Investments International is the Manager and Secretary of the Company and details of the servicesprovided and fees paid are given on pages 16 and 17.




Notice of Meeting

Notice is hereby given that the Annual GeneralMeeting of Fidelity European Values PLC will be heldat 25 Cannon Street, London EC4M 5TA on 19 May2006 at 12 noon for the following purposes:

ORDINARY BUSINESS1. To receive and adopt the Directors’ Report and

Accounts for the year ended 31 December 2005.

2. To approve a final dividend.

3. To re-elect Mr Walther as a Director.

4. To re-elect Mr Fraser as a Director.

5. To re-elect Mr Simpson as a Director.

6. To approve the Directors’ Remuneration Report forthe year ended 31 December 2005.

7. To re-appoint PricewaterhouseCoopers LLP asAuditors of the Company, to hold office until theconclusion of the next general meeting at whichaccounts are laid before the Company.

8. To authorise the Directors to determine theAuditors’ remuneration.

SPECIAL BUSINESSResolutions 9 and 10 will, if approved, authorise theDirectors to allot a limited number of the currentlyunissued ordinary shares for cash without first offeringsuch shares to existing ordinary shareholders pro ratato their existing holdings. The limit set by the Board is5% of the number of ordinary shares of the Companyin issue on 6 March 2006. The Directors will only issuenew shares under this authority to take advantage ofopportunities in the market as they arise and only ifthey believe it is advantageous to the Company’sshareholders to do so.

To consider and, if thought fit, to pass the followingresolutions which will be proposed, Resolution 9 as anordinary resolution and Resolution 10 as a specialresolution:

9. THAT the Directors be and they are herebygenerally and unconditionally authorised inaccordance with Section 80 of the Companies Act1985 (the “Act”) to exercise all the powers of theCompany to allot relevant securities (as defined inthat section) up to an aggregate nominal amount of£786,290 (approximately 5% of the aggregatenominal amount of the issued share capital of theCompany as at 6 March 2006) such authority toexpire at the conclusion of the next Annual GeneralMeeting of the Company or the date 15 monthsafter the passing of this resolution, whichever is the

earlier, but so that this authority shall allow theCompany to make offers or agreements before theexpiry of this authority which would or mightrequire relevant securities to be allotted after suchexpiry as if the authority conferred by this resolutionhad not expired.

10.THAT, subject to the passing of Resolution 9 set outabove, the Directors be and they are herebyauthorised, pursuant to Section 95 of the Act toallot equity securities (as defined in Section 94 ofthe Act) for cash pursuant to the authority given bythe said Resolution 9 as if Section 89 (1) of the Actdid not apply to any such allotment, provided thatthis power shall be limited:

a) to the allotment of equity securities in connectionwith a rights issue in favour of all holders of a classof relevant equity securities where the equitysecurities attributable respectively to the interestsof all holders of securities of such class are eitherproportionate (as nearly as may be) to therespective numbers of relevant equity securitiesheld by them or are otherwise allotted inaccordance with the rights attaching to such equitysecurities (subject in either case to such exclusionsor other arrangements as the Board may deemnecessary or expedient in relation to fractionalentitlements or legal or practical problems underthe laws of, or the requirements of, any regulatorybody or any stock exchange in any territory orotherwise); and

b) to the allotment (otherwise than pursuant to a rightsissue) of equity securities up to an aggregatenominal amount of £786,290 (approximately 5% ofthe aggregate nominal amount of the issued sharecapital of the Company as at 6 March 2006); and

c) to the allotment of equity securities at a price of notless than the net asset value per share

and this power shall expire at the conclusion of thenext Annual General Meeting of the Company orthe date 15 months after the passing of thisresolution, whichever is the earlier, save that thisauthority shall allow the Company to make offers oragreements before the expiry of this authority, andthe Directors may allot equity securities in relationto such an offer or agreement as if the authorityconferred by this resolution had not expired.

Resolution 11 is a special resolution which, if approved,will renew the Company’s authority to purchase itsshares for cancellation. The limit set by the Board is14.94% of the number of ordinary shares in issue on 6March 2006. Purchases of shares will be made at thediscretion of the Board and within guidelines set from


Notice of Meeting

time to time by the Board and in the light of prevailingmarket conditions. Purchases will only be made in themarket at prices below the prevailing net asset valueper share, thereby resulting in an increase in net assetvalue per share.

11. THAT the Company be and is hereby generally andunconditionally authorised in accordance withSection 166 of the Companies Act 1985 (the “Act”)to make market purchases (within the meaning ofSection 163 of the Act) of shares of 25p each in thecapital of the Company (the “shares”) providedthat:

a) the maximum number of shares hereby authorisedto be purchased shall be 9,400,000;

b) the minimum price which may be paid for a share is25p;

c) the maximum price which may be paid for a share isan amount equal to 105% of the average of themiddle market quotations for a share taken fromthe London Stock Exchange Official List for the fivebusiness days immediately preceding the day onwhich the share is purchased;

d) the authority hereby conferred shall expire at theconclusion of the next Annual General Meeting ofthe Company unless such authority is renewed priorto such time; and

e) the Company may make a contract to purchaseshares under the authority hereby conferred prior tothe expiry of such authority which will or may beexecuted wholly or partly after the expiration ofsuch authority and may make a purchase of sharespursuant to any such contract.

By Order of the Board

Fidelity Investments InternationalSecretary 3 April 2006

Notes:1 A shareholder entitled to attend and vote is entitled

to appoint a proxy (or proxies) to attend and, on apoll, vote instead of him. A proxy need not be ashareholder of the Company.

2 A form of proxy is enclosed for use by shareholders.Completion and return of the form of proxy will notprevent a shareholder from subsequently attendingthe meeting and voting in person if they so wish.

3 To be effective, the instrument appointing a proxy,and any power of attorney or other authority underwhich it is signed (or a copy of any such authoritycertified notarially or in some other way approvedby the Directors), must be deposited with theCompany’s Registrars, Capita Registrars, TheRegistry, 34 Beckenham Road, Beckenham, KentBR3 4BR not less than 48 hours before the time forholding the meeting or adjourned meeting or, inthe case of a poll taken more than 48 hours after itis demanded, not less than 24 hours before thetime appointed for the taking of the poll at which itis to be used.

4 In the case of joint holders, the vote of the seniorwho tenders the vote shall be accepted to theexclusion of the votes of the other joint holders andfor this purpose, seniority shall be determined bythe order in which the names stand in the Registerof Members.

5 Pursuant to Regulation 41 of the UncertificatedSecurities Regulations 2001 the Company hasspecified that only those shareholders registered inthe Register of Members of the Company at5.30pm on 17 May 2006 shall be entitled to attendand vote at the meeting in respect of the number ofshares registered in their name at that time.Changes to the Register of Members after 5.30pmon 17 May 2006 shall be disregarded indetermining the rights of any person to attend andvote at the meeting.

6 Shareholders and any proxies or representativesthey appoint agree by attending the meeting thatthey are expressly agreeing that they are willing toreceive any communications, includingcommunications relating to the Company’ssecurities, made at the meeting.

7 No Director has a service contract with theCompany.

Registered Office: Beech Gate, Millfield Lane, LowerKingswood, Tadworth, Surrey KT20 6RP


Investing in Fidelity European Values PLC

INVESTING INSIDE AN ISAA Fidelity ISA (“Individual Savings Account”) can be anexcellent way to get more from your investment,because you will not have to pay income or capitalgains tax on your returns.

• up to £7,000 in a Maxi ISA

• up to £4,000 in a Mini stocks and shares ISA

The minimum investment in the Fidelity ISA is £1,000as a lump sum, £250 as a top-up or £50 a month in aregular savings plan.

5 in 1 ISA – Fidelity European Values PLC is one of fiveinvestment trusts managed by Fidelity. You can investin the entire range through the Fidelity 5-in-1 ISA,which spreads your money equally across all five trusts.This offers a simple and convenient way to investacross Europe, the UK, Japan and Asia – giving you abroadly diversified portfolio in a single investment.

Charges – The standard initial charge for the Fidelity ISAis 3.5%. There are no other charges for the Fidelity ISA,but the Company pays an annual management charge toFidelity of 1% plus VAT, as set out in the Annual Report.

MOVING MONEY FROM PREVIOUS PEPS AND ISASIf you have opened ISAs or PEPs with other investmentcompanies, you can move them into the Fidelity ISA andinvest in Fidelity European Values PLC without losingany tax benefits. This is known as a transfer and it can bea great way to give your portfolio a new focus, or torealign it with your current investment goals. Please notethat during the transfer your money will not be investedin the stockmarket so you may miss out on any growthduring this time.

Charges – The standard initial charge for a transfer is3.5%. You will not have to pay any additional transfercosts. However, please bear in mind that your currentISA or PEP manager may ask you to pay an exit fee.The annual management charge is as described above.

INVESTING OUTSIDE AN ISAIf you prefer to invest outside an ISA, or have alreadyused your full ISA allowance, the Fidelity InvestmentTrust Share Plan offers you a low-cost and convenientway to put money into Fidelity European Values PLC.

The minimum investment is £1,000 as a lump sum, £250as a top-up or £50 a month in a regular savings plan.

Investing for children – The Share Plan is a flexible andinexpensive way to invest on behalf of children. All youhave to do is enter the initials or name of the child inthe Designation Box on the Share Plan applicationform. A special leaflet on investing for children throughinvestment trusts is available from Fidelity.

Charges – There are no charges for buying, selling orholding shares through the Fidelity Investment TrustShare Plan other than Stamp Duty of 0.5%, which iscurrently payable on all share purchases. However, ifyou invest through a Financial Adviser, there may be aninitial charge of up to 3% to pay for advice.

Holding shares directly – If you have shares in FidelityEuropean Values PLC that you bought through abroker or share shop, you can transfer them into theFidelity Investment Trust Share Plan. Doing this allowsyou to reinvest your dividends and make furtherinvestments without having to pay brokerage fees. Youwill also be able to set up a monthly savings plan andreceive statements and valuations twice a year.

INVESTING ONLINEYou can invest online in Fidelity European Values PLCshares via www.fidelity.co.uk/sharenetwork. FidelityShare Network enables you to buy or sell shares in anylisted company during normal London Stock Exchangetrading hours – between 8am and 4.30pm any workingday. Shares in Share Network can either be held director in an ISA, subject to the normal ISA limits andrestrictions. You will be shown a live price and be ableto buy or sell immediately. If an order is placed whenthe market is closed, it will be processed as soon asthe market re-opens. Unlike many online share dealing

The Manager of the Company – Fidelity Investments International – offers a range of options, so that youcan invest in the way that is best for you. As Fidelity European Values PLC is a company listed on theLondon Stock Exchange you can also buy its shares through a stockbroker, share shop or bank.

Tadworth, Surrey KT20 6RP

Internet site: http://www.fidelity.co.uk/its

KEEPING YOU UPDATEDThe share price of Fidelity European Values PLC appears daily in The Financial Times.


Investing in Fidelity European Values PLC

services, Fidelity Share Network gives you CRESTpersonal membership for shares held direct. Thismeans that shares are registered on the CREST systemin your own name and everything relating to yourshares – dividends, annual reports and so on – will besent direct to you and you will be able to attend andvote at shareholder meetings in your own name.Personal CREST membership does not apply to ISAholdings which must be held in the name of the ISAmanager’s nominee under ISA regulations. FidelityShare Network has a very competitive cost structure.Share purchases or sales are executed on line for only£9 per trade. (Stamp duty is also payable onpurchases at the rate of 0.5%). There is an accountadministration fee of £5 per month, however manydifferent shares you own and whatever their value.

CONTACT INFORMATIONPrivate investors: call free to 0800 41 41 10, 9am to 6pm.

Financial advisers: call free to 0800 41 41 81, 8am to6pm, Monday to Friday.

Existing shareholders who have a specific queryregarding their holding or need to provide updateinformation, for example a change of address, shouldcontact the appropriate administrator:

Holders of ordinary shares – Capita Registrars,Registrars to Fidelity European Values PLC, The Registry, 34 Beckenham Road, Beckenham, KentBR3 4TU Telephone: 0870 162 3100

Share Plan investors – Fidelity Investment Trust SharePlan, Lloyds TSB Registrars, The Causeway, Worthing,West Sussex BN99 6DA

ISA/PEP investors – Fidelity, using the freephonenumbers given above, or by writing to:UK Customer Service, Fidelity Investments, OakhillHouse, 130 Tonbridge Road, Hildenborough,Tonbridge, Kent TN11 9DZ

Fidelity Share Network:www.fidelity.co.uk/sharenetwork

General enquiries should be made to Fidelity, theInvestment Manager and Secretary, at the Company’sregistered office:Fidelity Investments InternationalInvestment TrustsBeech Gate, Millfield Lane, Lower Kingswood,

the future. Fidelity only provides information about its products and will not give investment advice based onindividual circumstances. Should you wish to seek advice please contact a Financial Adviser. Issued by Fidelity

Investments International.For the purposes of Sections 21 and 25 of the Financial Services and Markets Act 2000, the content of this report has been approvedby Fidelity Investments International. Issued by Fidelity Investments International.Please note that the value of investments and the income from them may fall as well as rise and the investor may not get back theamount originally invested. Past performance is not a guide to future returns.

Price and performance information is also available at fidelity.co.uk/its

Investors can obtain the real-time share price by phoning FT Cityline on 0906 843 2287. Calls cost 60p a minute.

FURTHER INFORMATION

For application forms or more information about any of the investment options described here, please call the Fidelity Investment Trust Line

on 0800 41 41 10 and talk to a Fidelity customer representative (9am to 6pm).

Alternatively, you may like to visit the Fidelity London Investor Centre at 25 Cannon Street, next to St Paul’s Cathedral.

You can also find out more by visiting fidelity.co.uk/its or contacting your Financial Adviser. The Fidelity Individual Savings Account (“ISA”) is offered and managed by Financial

Administration Services Limited. The Fidelity Investment Trust Share Plan is managed by FidelityInvestments International. Both companies are authorised and regulated by the Financial Services

Authority. The Fidelity Investment Trust Share Plan is administered by Lloyds TSB Registrars and shareswill be held in the name of Lloyds TSB Registrars Savings Nominees Limited. The value of savings andeligibility to invest in an ISA will depend on individual circumstances and all tax rules may change in

Fidelity European Values PLCFidelity European Values PLC Annual Report 2005 Page 1 Financial Summary...

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