Fidelity European Trust PLC ($FEV)

I think with the music stopping, good morning, ladies and gentlemen. It's now 11:00 a.m. and a quorum is present. And I'm delighted to declare the Fidelity European Trust 2026 Annual General Meeting open. As Chairman of your Board, I'm delighted to welcome shareholders both in this room as well as those attending online via the Lumi platform. I would also like to say a very special welcome to our new shareholders from the Henderson European Trust who join us today for the first time. Let me now introduce members of your Board, starting from where I am. First, we have Paul Yates, Senior Independent Director. Next to Paul is Fleur Meijs, Chair of the Audit Committee. After Fleur, we then have Milyae Park who will be assuming the role of Senior Independent Director at the conclusion of the AGM. Sir Ivan Rogers and then 2 new additions to the Board, Vicky Hastings and Rutger Koopmans. Vicky and Rutger we welcome on to the company's Board following the combination with Henderson European Trust and as well as providing representation for former Henderson European Trust shareholders, Vicky brings a strong investment background and Rutger who is a Dutch national, brings a wealth of experience as a financial professional and both are very strong addition for the company's Board. Please, can I also introduce Company Secretary; and next to her is Claire Dwyer, Head of Investment Companies of Fidelity. I think we can all agree that 2025, and certainly, 2026 have been very busy periods on the world political stage with geopolitical tensions dominating markets. And I'm sure you're very keen to hear our managers' news on what this means for European markets. 2025 was also a very busy year for the company, culminating in the combination with Henderson European Trust at the end of September. With net assets now in excess of EUR 2 billion, Fidelity European Trust is in the top 10 by assets of all equity investment companies. As part of the transaction, Fidelity agreed a lower management fee, which in turn has resulted in lower ongoing charges. In addition, Fidelity made a material contribution towards the cost of the transaction, which meant that the transaction had no cost impact on existing shareholders. At the same time, the Board has adopted an enhanced discount management policy with the aim of maintaining the share price discount to net asset value in mid-single digits in normal market conditions. The success of this enhanced policy through share repurchases by the company has seen a narrowing of the discount to net asset value during the reporting period and a discount to net asset value that is average just over 3% over the past 3 months -- sorry, past 12 months. Before we hear from the portfolio managers, Samuel Morse and Marcel Stotzel about performance over the last year, and their outlook, I will first explain if I may please how to submit a question, for those of you in the room and those who are attending remotely. If you are attending the meeting remotely and would like to ask a question, please click on the messaging icon in the navigation bar at the top of the screen and use the ask a question box to submit your question. For those shareholders here in person we will be using roving microphones. So please raise your hand if you wish to ask a question and someone will come to you with a microphone. The notice of meeting has been made available to all shareholders. And if there are no objections, I propose to take the notice of meeting as read. Thank you. Our voting procedure today will be by way of a poll in accordance with the company's Articles of Association. The poll will be conducted using poll cards for those of you attending in person and for those of you attending remotely by using the voting functionality on the online platform. If you submitted your vote before the meeting via proxy, you don't need to revote on the poll card or vote electronically unless you wish to change your proxy vote. For those of you attending in person today, you will be -- you will have been given a poll card upon registration by MUFG corporate markets. If you're entitled to vote as a shareholder proxy or corporate representative, but don't have a poll card, please can you raise your hands. Thank you. I will now take a few minutes I'm afraid to explain the voting procedure we'll use today. You can vote at any time during the proceedings until I declare the voting closed. For those of you who are attending online use the online meeting platform, the -- sorry, using the online meeting platform, the voting icon will appear on the navigation bar, as I said. Once you click on this, the resolutions will appear on your screen along with the voting options. Simply select one of these options to cast your vote. You can change your vote as many times as you wish, until the close of the poll. Your vote will have been submitted when the vote received message is displayed. There's no separate submit bottom. I now propose that each of the resolutions as set out in the notice of meeting is put to the meeting. Resolutions 14 and 15 are proposed as special resolutions, all other resolutions are ordinary I can now declare the voting on resolutions is now open. Voting will remain open throughout Samuel Morse's presentation and the question-and-answer session that will follow. And we'll close upon my instruction later in the meeting. But I will give all shareholders a warning when the poll is about to close. I'd now like to invite Sam and Marcel to give their presentation. And after that presentation, Sam and Marcel and the Board will answer any questions you have.

Thank you, Chair, and good morning to all of you. It's a beautiful morning in a little bit chilly. Type of our presentation today is, yes, we can. We always like to be a little bit positive and certainly, Marcel and I have a can-do philosophy, but more of that later. First, our compliance department would like to read the following. And I apologize because every year, this slide seems to get bigger and bigger. But I know you're all good speed readers, so I'll just take a couple of gups of water and let you finish this. I hope that hasn't dampened the positive spirit too much. Okay. So what we aim to do today is, first off, review the performance for last year and the performance year-to-date. I know there are a lot of familiar faces in the audience today who are very familiar with our investment approach. But as Chairman said, we have new investors from Henderson European Trust. So we're going to have a quick review of the investment approach. This is going to be a bit of a double app because then I'll invite Marcel to come forward and give a living example, put some flesh on the bones, bring the whole thing to life. And then finally, Marcel will answer or explain what the question is in terms of our answer of yes, we can. So first off, a review of last year's performance and the performance year-to-date. First, I think it's very important always to put investment performance in a longer-term context. And this chart shows how the trust has performed since I took over the portfolio in 2011, more than 15 years ago. And it's important to understand what our investment objective is. It is to outperform the benchmark by 1% to 2% per annum on a consistent basis post fees. And you can see from the boxes on the right-hand side of this chart that we have achieved that over this period of time. And that's very much with the help of Marcel in recent years. And throughout this period, the help of the in-house Fidelity Research Department. But I'm going to focus on the right-hand side of this chart, which is highlighted in white last year and year-to-date. And during this period, we have not outperformed the benchmark, and I'll go through some of the reasons why that was. So looking at last year, I think if I told you at this meeting last year, that your share price would have been up more than 20%. I think many of you in this room would have said that's absolutely fine, we'll take that. Thank you. And that was the case. But of course, we're all a little bit greedy for more. And ultimately, it could have been a lot more than that. So on the right-hand side, you'll see the breakdown of the components of the performance in terms of the NAV return. And you can see that the NAV return was lower than share price return because there was a narrowing of the discount. And although gearing was a positive during a year in which the markets were very strong. And although also the exchange rate because the euro was strong relative to the pound also contributed to that strong return in sterling terms. You can see that our stock selection was very poor relative to the benchmark, down 13%. And that's pretty much as bad as it's been. It's probably the worst year that I've had since I've started running this portfolio. So as I say, in terms of the year, it was strong in absolute terms, but not so strong in relative terms. And we'll go through some of the reasons why that is. I'm going to go through this quite quickly because Marcel will talk to many of these issues in his section. I think in a year that was so strong in absolute terms, we would normally expect to lag the market because we have quite a defensive approach, as you know, and typically, when the market moves up very rapidly over a short space of time, we do lag. Normally, however, we would hope to offset that somewhat through our stock picking, but that wasn't the case in 2025. We had a number of notable underperformers, not least Novo Nordisk which was a big holding in the fund, which suffered greatly when it looked as if the follow-on drug to semaglutide, which is a very successful drug in obesity and in diabetes, is called CagriSema, turned out not to be as differentiated as we had expected. And as a result, the market went from valuing it as a growth stock to deciding that it was likely to be an ex patent stock in the early 30s. That resulted in a big derating. We had a number of other stocks that didn't perform so well last year, some of which have been very strong performers in the past, 3i Group would be a notable case. So whereas in previous years, we've had various headwinds, stock picking has offset those headwinds. That wasn't the case last year. And then a number of other factors conspired against us. We're very underweight Germany. And obviously, Germany was very much in fashion last year, with people getting quite excited about the potential for fiscal expansion. We're underweight aerospace and defense stocks. Defense, in particular, had a very strong year last year. But perhaps most importantly, we were -- generally in this fund, we're focused on dividend growth, therefore, structural growth, and there's certainly a quality bias in the fund. And both growth and quality had a very difficult year last year relative to value stocks. On the right-hand side, you can see the tailwinds. We did have some that went well in terms of some bank stocks, et cetera. But by and large, it was a difficult year, and Marcel will cover more of this in his section. And what about this year so far? Well, certainly, the first quarter was very difficult, both in absolute terms and relative terms. The market was down, obviously, with the news of the Iran war. I'm pleased to say that since then -- since the end of the first quarter, the market has shown a lot of resilience, some might say perhaps too much resilience and anticipating perhaps a swift end to the war. The market has bounced back quite handsomely in April and in May so far. And certainly, our relative performance has picked up since the end of the first quarter or may that last. I think perhaps most encouragingly, some of you may have been reading the newspaper today and one of the companies in our portfolio, which very much fits that moniker being structural growth and high-quality Intertech, you may have seen there's been a private equity approach to the company. So I think many of these companies have now got to a valuation level that is starting to look attractive to corporate buyers, including private equity. I view that very much as a silver lining. But overall, we still struggled year-to-date. But as you know, the first half hasn't ended yet, and we always hope for a strong performance in the second half. So that's really all I mean to say about investment performance. Now I wanted just very quickly to move on to our investment approach. There are 3 key principles in terms of our investing in equities. First up, and there's no surprise as Fidelity Fund Manager were very bottom up. And in our case, we have a particular focus on companies that we think can grow their dividends consistently going forward. More than that, we actually apply top-down risk controls. We try to keep the sectors within plus or minus 5% of the benchmark really to make sure it is the stock selection that drives the performance over the longer term and to make sure that we're running a balanced portfolio. Secondly, we are quite long term in our approach. So generally, we're looking for companies that we think can grow their dividends over the next 3 to 5 years. We find that being long term means that generally, the turnover on the portfolio is relatively low. And that's not necessarily a bad thing because it means that transaction costs, which can be quite a drag on performance in the longer term are also low. Finally, as I mentioned before, we do have quite a cautious approach. We certainly analyze the downside risk in the stocks in which we're invested as much as the upside potential. Generally, the beater on the portfolio as a result is less than 1. So as I said before, we tend to lag in very -- in markets that move up very rapidly over a short space of time. But by contrast, some of our best years have been when the market has fallen and has been risk off. And finally, and very importantly, as it says in the tagline, we will always stay fully invested. And in fact, in this fund, Obviously, we have gearing within a range of 10% to 15%, and we stick with that. We don't really try to time the market. We think that's a bit of a mug's game. So why do we focus on dividend growth? Well, that's really captured in the chart on the right-hand side of this slide. And I've reproduced this chart pretty much every year since I started running this fund in 2011. And what it shows very simply is that the companies which consistently grow their dividends each and every year over various time periods, 5 years, 3 years and 1 years. Those are the companies in the blue bar outperform by quite a handsome margin those companies that don't, which are in the orange bar. So in a way that makes our job very simple, sounds simple, but it's more difficult in terms of execution. We just have to work out which companies over the next 3 to 5 years will grow their dividends consistently and be in those blue bars. And that's really what Marcel and I spend the majority of our time doing here, trying to identify those companies, which over the next 3 to 5 years, will be in those blue bars. And how do we go about that? Well, that's captured on the left-hand side of this chart. We have 4 key criteria that we look for in companies. The top 3 relate to the ability of the company to grow its dividend going forward. We talk about positive fundamentals. Typically, we're looking for companies that achieve a good cash flow return on cash invested, which is sort of our definition of quality. And we're looking for companies that have a good track record in terms of sales, earnings and dividend growth, generally companies that have grown those dividend cycle on cycle. So it is very much about structural growth and quality. Secondly, we like companies that generate cash. Obviously, you can borrow to pay a dividend, but it's not a very sustainable strategy. Generally, we view companies that have a good track record in terms of cash generation as being able to also have a good track record in terms of dividend growth. And finally, and very importantly, we have a preference for companies that have a relatively strong balance sheet. It slightly depends on the nature of the business model if it was like an operationally geared jewelry retailer, you would expect cash on the balance sheet. If it was the utility with the regulated business and stable cash flows, you might expect some debt. But generally, overall, we don't want to own companies where balance sheet leverage could potentially jeopardize their ability to pay or grow the dividend going forward. And then the and is meant to be particularly big just to say we want all this not just at any price, but certainly, hopefully, at least a reasonable price, if not an attractive valuation. So it's not just about dividend growth at any price, it is dividend growth at a reasonable price. So de up, you might call it. And as I say, consistent dividend growth do consistently outperform over time. Okay. So I'm going to invite Marcel now to come up and bring this all to life with an example.

Thank you very much, Sam, and thank you, everybody, for joining. Great to see some familiar faces and few new faces, as Sam alluded to. I'm going to bring our investment process to light talking about Inditex. Inditex, for those of you who don't know, is a retailer primarily 3/4 of the revenues from Zara, just up the road here in one new change. And really, the secret source of the Inditex business is being kind of vertically integrated and having proximity sourcing. Now what does that mean in English. If you think about what most of their competitors do and where retail has gone over the years, retailers really designed the product and then send it off to China or some other parts of Asia to get it manufactured and then wait kind of months for it to be manufactured and then shipped back to the west where it gets sold. And Inditex does it very differently. They manufacture large parts in Spain where they're headquartered and they source from surrounding countries to. So what that really means is that they can be a very fast follower, which in fashion, as you can appreciate, is crucial. To put some numbers to it, they can go from design to store in weeks whereas peers go from design to store in months. And that has a couple of really important benefits. Firstly, consumers love it because consumers go into a Zara store and can get something that's up to date with current trends in fashion, et cetera, and kind of very similar to what Louis Vuitton or Gucci may have pushed on their ramp, Zara can quickly follow after that and have a similar style in their stores. The other benefit for the company is obviously that it means that they have much lower markdowns, much lower discounting, much lower write-offs because they can navigate as they go. They can start off with a limited batch of inventory, see how it sells, see how it's doing, see how customers are responding to it and then ramp up more accordingly, whereas other competitors are forced to kind of sit with stuff that isn't being shifted. As a result, the company has done very well in Western Europe where it started, but in other parts of Europe, like-for-like sales still going very strongly. They've actually now finally cracked the North American market or should I say, entered in successfully the North American market, where market share is still only around 1%, that's 5% in Western Europe. But as you can appreciate, if that goes anywhere near 5% that it is in Western Europe, that will be a very strong growth opportunity for Inditex. And you put it all together and you get a very high returns, particularly for a retailer, surprisingly capital-light business model. So I would say positive fundamentals, as per Sam's point, big tick on that. Attractively valued as per the big bold blue and, I would say, yes, definitely so, 3.5% dividend yield is not too shabby for what we think is going to be double-digit dividend growth, 25x earnings for that level of growth, that level of opportunity in the U.S., that level of returns is attractive, in our opinion. Strong balance sheet tick, net cash position, very cash-generative business, plenty of money left to kind of fund that expansion fund store refurbishments, fund tech investments, et cetera, et cetera. And you bring it all together, and it's no surprise in our mind that this company has grown dividends consistently for 20 years. Now that's obviously not a guarantee that it will grow for the next 20 years. That's what Sam and I are here to kind of insure, but it is a nice kind of signpost that they do take dividend growth seriously that they do have the ability in the past at least to have grown it consistently. So I'm going to switch over now to the question, yes, we can. And after a tough year of performance, as Sam touched on, the question is, can we still beat the market? Has -- have we lost our touch? Has the market changed in a way that is no longer means that our style or our process is valid? Or is there something else going on that means that history as a guide a very strong outperformance of the market might not be valid anymore going forward? So I'll start off with 1 of the biggest changes that we've seen over the last 2, 3 years. And if you look at the chart on the left, basically, the orange bar is long-term German interest rates and it's inverted, so that the chart you can see the correlation. So from 2022 onwards, when that orange buy is going very rapidly down, that's German long-term interest rates kind of going up, as I'm sure many of you are aware of, in many developed markets, interest rates have been rising pretty rapidly over the last 3 years. And you can see the correlation of when growth stopped working and started underperforming, when quality started underperforming, was pretty clear that it's long-term rates were the main driver of that. What does that mean in practice? Sam and I are not macroeconomists. The last thing I'm going to do is stand here and tell you I know where long-term interest rates are going. But I'll pause that thought, and I'll come back to it a bit later. If you look at the right chart, that's just showing our exposure to value and growth. And essentially, that's the way of putting numbers to what Sam said, we haven't changed our process. We haven't changed our philosophy. It's still been roughly the same over the last 4 years, but the market has changed. So we'll come back to what that means in terms of a forward-looking basis. Secondly, Sam touched on this, too, the German index that's in the yellow bar over there, the DAX has strongly outperformed over the last few years. And interestingly here, it's not that Sam and I are big bets on Germany, and then we don't believe that this was stimulus, and we think the country is not going to turn itself around or any of that nature. It's really the function of the fact that non-German domestic stocks have done very well that we think has gotten quite a bit ahead of itself. So if I put some numbers to that, only around 20% of the German market is selling into Germany. So only 20% of sales of German-listed companies actually come from Germany. And that's very similar in the U.K. and other markets, too, where the domestic market will only be about 20%. And the reason why we've gotten to that is you've had companies like Siemens or Heidelberg Cement or others that have deliberately diversified themselves away from Germany over the last 10, 20 years because the situation has been tough. So in our humble opinion, that 20% has a right to kind of -- or has a logic behind having re-rated and done very well. The other 80%, we would be much more cautious, that those names have done well just for kind of post code reasons, if I can call it that. And we actually have exposure to German domestic again. So we are in the German Stock Exchange, Deutsche we own other names like MTU that have a big German civil aerospace and defense business, other names like SAP, Symrise, et cetera, that are German and will have a German business. So it's not so much that bit that we're cautious on. It's much more than 80% that we think has gone in the wrong direction. And really, the exact opposite is the same for the French market. So if you look at the orange bar, that's the CAC40, no better example than Total, right? I mean, the vast majority of Total's revenues come from outside France. It's a French energy company, oil integrated major, but the stock is sold off because they so happen to be headquartered in Paris. And we think that's unjustified. And therefore, we're happy to continue running with the French overweight. It's not an explicit call on French politics, it's an explicit call that some of the non-French domestic names have sold off because of postcode reasons. And you can see it's slightly adjusted over time, particularly Germany as we bought Siemens Energy for stock-picking reasons. But by and large, we think that's actually a good position to have. And that French, German kind of jaws can narrow over time. And then lastly, on defense, in particular, I mean this is aerospace and defense charts, but really defense has been the main driver of this. And defense has done obviously well since the original Russian invasion, but it really kind of got turbocharged in around March last year when JD Vance had his infamous Munich Security Conference speech and really kind of called on Europe to up defense spending materially, which is exactly what happened. Defense spending went 2%, 3% of GDP at best to kind of more like 3%, 4%, 5%, potentially over the coming years trajectory. And for us, it's we had some exposure in terms of MTU, but when we looked at the other defense names, they really didn't fit our core criteria, no history of dividend growth, poor cash conversion, often kind of very lumpy businesses, no structural growth historically. And you might now say, Marcel, you're living in the past. Don't you know all of this is going to change going forward, they're going to see strong growth, and that will kind of cure all of the worse, have some sympathy with that, particularly for German defense stocks, but you can see how rapidly kind of the market got overexuberant and before we knew it, these stocks were trading on very nosebleed-type territories. So while not owning was definitely an error to begin with, I'm glad that we didn't compound that error by buying at the top. And this chart has continued to go down as defense stocks over the last 6 months, in some instances, down 30% to 50%. So we may definitely should have -- could have owned them to begin with, now that they've pulled back to what we think are more reasonable valuations, we definitely are kicking the tires on a number of those names. So if you cast your memory very briefly back a few minutes ago to when we were chatting about value and growth and value and growth has had a a very different time over the last few years than it had over the decade before that. If we think about what it actually means, what a growth stock very simply, is probably easy to define is a stock that's going to grow faster than the market, substantially so in some instances. The stock that's a quality stock simplistically defined as a company with higher returns, return on equity, return on invested capital than the market, sometimes substantially so and value stocks are stocks where the valuation is lower to offset for the fact that they don't have the other 2. And there's a really interesting juncture that we had right now in the trust, which if you look at the chart on the left, you can see the dividend yield of the fund of the trust relative to the dividend yield of the market and the numbers in the top left-hand corner there. So you can see the index 2.1% dividend yield, the fund 3.1% dividend yield 100%. And if you look back over the time that Sam has been running this fund since 2011, it's very rarely been higher than that. In fact, almost never barring 2 kind of spikes. This trust has almost always traded at a premium to the market and justifiably so, because you stood here and we've told you over the last 17 years, that yes, we're more expensive, i.e., lower dividend yield in the market, but that's justified because of the attributes on the right, that are still the case and have always been the case, higher growth in the market, higher returns than the market and lower volatility, which is a very crude proxy for risk. So higher growth, higher returns, lower risk that's historically always demanded a premium from Mr. Market until now. So we say, in a way, the debate now of value versus growth verse quality for our trust right now where we stand is somewhat moot because in a way, you can have your cake and eat it, i.e., pay the same valuation for the market in terms of dividend yield, but get all those positive characteristics too. And that hasn't been the case often in the last in history, as you can see. And when it has been, has tended to kind of correct quite quickly. So obviously, history is not always necessarily a guide, but as they say, history does rhyme. And if that's the case, we don't feel the need to all of a sudden pivot to be a value fund, changed half of the funds throughout everything, throughout all that we've done. What we do need to do, though, primarily is get back the power of stock picking. And this is my favorite chart. You'll remember I said that I like it so much. I thought it should hang in the but still not there, surprisingly. And it wasn't one of the items stolen in the recent Libra You'll be happy to know. But the reason why I say this is a beautiful chart just shows the power of stock picking. And I appreciate this is a very long time period, 35-odd years. But that's exactly the reason why I think it's great. If you think about what's happened over the 35 years, different styles, different managers, obviously, Antony Bolts on run it in a very different way than Sam and I do, then Tim McCarran did, all kinds of -- as different as could be the environments and the managers, the only 1 constant was the Fidelity analyst team and the Fidelity research behind that. That's the only constant really over those 35 years, and that hasn't changed. They still -- we still have an army of really high-quality guys and girls around the world doing bottom-up stock picking. And that engine in our mind remains as strong as possible. So the key takeaway for us is the environment has been tough. We think if history is a guide, now relative to the market, it's a good time to buy. And really, if that takes care of itself, as we feel it will, over the fullness of time, and we get back to stock picking being the main driver, we don't see any reason why that stock-picking merger should have changed over the last year or 2. So with that, I will hand over to Q&A.

Thank you. Thank you, Sam, and Marcel for that very interesting and helpful presentation and your views on the outlook. Just a bit of housekeeping just before we take questions. For those asking a question remotely, your question will be put to the meeting by Claire Dwyer. For any questions that we aren't able to answer today, a personal response will be provided in writing after the meeting. For those of you in the room, if you have a question, please can you raise your hand and when invited to speak state your name and, if relevant, the name of the organization you represent before asking your question. So can we now take the first question from the floor, please. Thank you. you're going to get a mic.

When will performance turn around? Is that the question? the previous slide not this, yes, this slide.

Can be the market? Yes. If I had a crystal ball of that nature, it would be wonderful. But I would say if you look at composing what the main issues are German defense is probably the easiest one. It looks like it's sold off, we might kind of neutralize that underweight if we buy a position there. Values growth, if interest rates are really the main driver of that difference as we believe that is. Yes, rates can obviously go up. But as many economists will tell you we're getting to precariously higher rates as they are already. So I'm kind of -- I'd be suspicious of the view that they can go up another 300, 400 bps from here without something breaking in the system, and that's when I'm more defensive, cautious nature will come to the fall. And then lastly, on kind of Germany over France, that's also tougher to call, but I don't think we're going to see another big boom in terms of stimulus and shock to the market as we saw in the past. So then really -- and I come back to it, and the reason I said for last is it all comes down to stock picking again. And this is kind of hard to give a definitive answer. As Sam touched on April and May were much better in terms of stock picking. I appreciate that extremely short time period. But that's really the main question that we need to answer and unsatisfying, I can't really tell you when that's going to turn around. All I can tell you is that Sam and myself are are really doing our utmost to get back to what had been 16, 15 years, a very strong stock picking before that.

Yes. I should add on this slide, a bit of a caveat because we always say that generally, when the trust or the fund is the same dividend yield as a market. That's a good time to buy it. But I should stress, it's a good time to buy on a relative basis, not necessarily an absolute basis because this doesn't tell you anything about what the market may do. And as I mentioned in my part of the speech, generally, we do struggle when the market is moving up very rapidly. But if the reverse were to happen, none of you will be very happy because the market may be going down. But generally, we probably added the most value in difficult risk off markets. And I think what's going on in the Middle East is very interesting in that respect. The market has kind of shrugged it off and said, everything is fine, don't worry. Taco, he's going to get the U.S. out of there before it's too late. But we were saying that after 3 or 4 days into the war, we're now well into the second month. So it's partly about the market environment as well. But I just wanted to make sure that we put that caveat in place there. It's a good time potentially to buy the fund, but probably more on a relative basis than necessarily in an absolute basis, yes.

Thank you. Claire..

We've got a question online, Chairman. Thank you. So it's to the portfolio managers. And AI seems to be reshaping the world. How do you think about AI?

Yes, I'll take that. So actually, a number of the holdings that we've bought kind of over the last 6 months play nicely into that theme. There's a view that Europe doesn't have AI winners. And I think that's completely false. We might not have as many you might know as a greater proportion of the market, but there definitely are and particularly companies that sell into data centers, cell power or gas turbines or white goods or any of that kind of thing, electricals, there are a number of European companies that we've actually added to a number of them or bought or added to a number of them over the last 6 months. So the likes of the grand Schneider, Siemens Energy we've bought over the last 6 months. So Sam and I are definitely believers. And I think in particular, what we've seen over the last few months in terms of Agentic AI and basically having I sometimes joke that our internal agentic AI tools are a little bit like 3, 4 versions of myself, which might be a good thing to some people, might be a bad thing to others, but certainly makes me much more productive, enhances my efficiency and enhances the process. So yes, we definitely big believers. Where I would say, it's maybe not directly answering the question, is we do conversely also believe that the impact on certain software holdings that we own is probably overstated, very enterprise, very sticky, likes of SAP, Amadeus, et cetera. So conversely, we're somewhat bullish on the AI winners but also somewhat bullish on the particular AI losers that we own, and that gives the fundament balance at the same time.

But that is an area where we doing a lot of work because I mean the yellow pages was a very good business model. And then it was obviously essentially worked out by the Internet. So we do need to be careful in these very strong business franchises today that they are not imperiled by AI. And so that's what that our analysts and ourselves continually are pouring over.

I think there was a question over there.

Richard Dennis, private shareholder. The slide you got up at the moment, what strikes me is that with the 4 categories you've got there, the smallest differential is between your volatility and the index volatility, would you like to comment on that? And would you prefer your you to be higher on volatility or considerably higher than the index is showing on that slide?

Yes. Great question. I'll take it because there was one. There was a thought that came into my head as I was presenting it actually is you need to remember that this is also including the impact of gearing. So it will kind of increase that volatility all else equal, that gearing that we would have versus an unlevered basis. But yes, I said very crudely that volatility is a measure of risk. It is that in a way, it isn't. So volatility, obviously, when stocks are going up, it's not necessarily a bad thing, volatility if it's causing stocks to go down in this measure as drawdown is a bigger issue. So out of those 4, I would say, it's the one that to us has the least signaling value, and we should at least interpret it. But yes, to answer your question directly, there have been times historically and obviously, volatility in the market has also gone up materially, where that spread has been bigger.

And generally, we would expect our volatility to be lower than the market, much lower on an unlevered basis, and that's true in the open-ended fund -- and we would also expect our beta to be lower than the market generally over time because of our cautious approach and focus on businesses with strong balance sheets. And you might say, well, Sam, generally, the market goes up over time, so surely you want to beat or more than one. But actually, I think we've demonstrated now over a long period of time, 16 years, that we can outperform the market, a rising market over that period despite having a beta less than one.

And just 1 point. The volatility when markets go down, that's when we see that gap too. So when markets go up, our volatility is closer. But if we look at, for example, COVID or the Russian invasion or those kind of heavy stress periods, then you'll also see our volatility be materially lower than the market, which then provides that downside floor that we saw during those periods to0.

The mic is coming. Thank you.

Jeremy Dobbin, private shareholder HL platform. We hear a lot in the media at the moment. And I know like they like bad news that markets are overvalued. Americas, particularly with their debt issues seem to perhaps have a bigger issue than we have in this part of the world. But we're told that if America sneezes, the rest of us catches cold. If the American market does take a dive with -- because they are very especially, and I appreciate the S&P is predominantly with -- it's all in the 30 stocks without predominantly with AI. Are we -- is Europe going to be as affected do you think Europe or do you think Europe will sort of sort of carry on the way it's without being too badly affected.

I mean I think the short answer to your question is you'll get 2 different answers from us. My answer would be I completely agree with you. I think valuations are very extended, particularly in the U.S. you could say that, I mean, for instance, the most recent reporting result season, Q1 was very strong in the U.S., much stronger than anticipated. So that's driving that to a certain extent and justifying it perhaps. But in my book, valuations are very over extended in the U.S. and over extended elsewhere as well. I mean, even in Europe, valuations are still above where they've historically been, even if we're not quite as extended as the U.S. So I think if the U.S. went off the ball for whatever reason, AI, et cetera, the direction certainly would be down. I think Europe would follow down, but because it's perhaps a little less exposed to that area, it might not fall quite as dramatically as the U.S. because it has a little bit more of a cushion in terms of relative valuation and less exposure to that area. But in response to the previous question about when that, I think, is a probable scenario, and it's not a very happy scenario from your perspective because the share price would go down. But certainly, I think I would expect our relative performance to be better in that environment.

Yes. No, I think Sam touched on it. I mean the only -- probably all waiting to how my view is entirely different. But it's actually not that -- it's separately different. I fully agree with what Sam has said in terms of markets everywhere are expensive. But I think I'll just lean a little bit more into the fact that Europe is definitely trading, however way you look at relative to the U.S. directly, adjusting for sectors relative to its own history, any of those it's trading quite a bit cheaper than the U.S. Now to Sam's point, that's definitely not going to help if the U.S. nose dives. But if we get the U.S., I don't know, down a few percentage Europe, I think it's still work in that environment, particularly because the sector allocation is different. The starting point is different. So to answer your question, if the U.S. has a cold, maybe Europe can be okay. If the U.S. has pneumonia, I think we all in trouble.

Do you need a mic.

More than one word this time. Two questions. Well, first -- second question, but last first. I don't expect an answer until I've asked the first one. I hope the Chairman hasn't been talking to Michael Dobbs in over the last few weeks at all. That's the question at the end. And we're not intending on what's the word, taking on any more assets from an area that I got out of after a big argument about 4 years ago. But anyway, that's here or there. OCR, you say that we've reduced it. We haven't actually met the target that you put in the document when we agreed to accept Anderson into our investment trust. I think it's 0.6. We only got 0.68, okay? I also noticed that these 0.68 is still the third highest charge in our sector under investment trust. And we are, I think, 6x bigger than one of them and 3x bigger than the other. In fact, over 50% of the market in this one trust, our charges are the third well, third cheapest or the third most expensive actually.

Well, obviously, the -- I mean, I think you do have to recognize that 0.68, which is how we're currently reporting is, in fact, in the accounts, you will note the figure because including the contribution from Fidelity, it's actually down 0.59. But on the fact sheet, we're reporting the steady state, which will be 0.6, but recognizing that is down from 0.76 in last year's annual report. So I note...

Well not anywhere near the same value as our gross value...

I mean it's something we point to scrupulously, but our returns have been stronger but one exception and you're going to say that we do keep an eye on that as a board materially. So if I could say points noted and I think given what we've done in the current year, I think we've taken that on board.

And the other one about Mr. Dobbs, have we spoken to him. Always he's spoken to you? Your opinion, obviously, noted.

Well, these things happen sort of corporately as it happened. I mean, I think that will be an interesting situation.

I have one vote against it, just to let you know if it helps.

Yes, I think suffice it to say thank you, noted your comments. I think when you look at the parties involved, it's going to be a very interesting situation because you have a very strong shareholder at 20% with the name on the 10. So that's a start point. Excellent. Points noted. Thank you. Our focus and strategy is very much on as you've heard, the performance back on getting the performance back on track, which we believe in the investment philosophy and that given the valuations that Sim and Marcel have articulated, it is the question you asked when that's going to come through.

Could ask the same question for you. When you consider what to be used in the future to have any lost years. And how about [indiscernible] ex Chairman JPMorgan [indiscernible] last 10 years...

Thank you, he's got. I know it is one shareholders. Now coming back to your question about the scrutiny as a Board that we have very strong oversight on the portfolio on a very regular basis as a Board, which should be no surprise to you. And we've got every confidence in the investment philosophy. And the reasons behind these headwinds that were described in the annual report and as Marcel and Sam have just explained, there is an extreme in the marketplace of quality growth companies with strong balance sheets have been completely derated. And I think that you didn't show -- there is a chart somewhere in there, but can show that extreme in the market. So as a Board, we are comfortable with the appointment of Fidelity. Yes. the magnitude of there are any more questions.

Helen Beaumont sort of proxy for Fidelity Investments. And that's really what my question is. So it's very much to the Board because at the very beginning, you said the notice of the meeting has been sent to all shareholders. Well, unfortunately, I didn't get it, partly because I've moved, although actually, to be fair, I actually pops got it through an e-mail, but I don't really like it through an e-mail. I like to get it in paper. And because I've moved, there has been a problem, but that's one of the reasons I'm here. But I think the other problem really is the total inadequacy? Is it a broad bridge whoever that you outsource this to it? It is totally unacceptable in appropriate because it's -- I've tried times to use it, and I think anyone else who's used it will fully understand. It's very, very difficult because I gather you have to change your password every 6 months. So you have an Annual General Meeting that's every year. And the thing is you can't just change it, you have to e-mail them and I think they're in the States. And if you're -- just an ordinary person who's not working, you're not on your computer, for all days. So when they come in, so I got the reply 4 or 6 hours later, I wasn't on my computer. I look at it the next day. And it would run out. Do you know what I mean. So it is the barrier to getting there is far, far too high.

And I would most definitely endorse that, if I may, my name's Lennar Shooter. I've been with Fidelity for 50 years. And I really wonder whether investment trust of a life because it's indicative of the way that Fidelity is not supporting investment trusts. I mean they've watched all responsibility of helping people that have held investment trusts on their platform. They've watched all responsibility of facilitating invitations to the AGM. And so I appreciate that we're in a world where ETFs and things at lower cost, but I think that that's almost the death now of investment trust because if you start removing some of the benefits of having an investment trust, I mean, I wrote to you didn't get a response needless to say. I've written to -- I've spent hours and hours upon on the phone to people at Fidelity. They're not trained to help you. The relationship managers who once upon a time would be the point of contact would sort things out for you, that doesn't happen. I mean they're doing everything they can to make you to leave a bad taste in your mouth about holding shares in. And I appreciate that we have no legal rights right? And the company doesn't give us any legal rights because we're the beneficial owner rather than the legal owner. But we're being treated disgracely, and this is now the ethos of Fidelity because fidelity, my reason in the situation are primarily concerned with cutting costs because of the competition that is being faced ETFs, and I just think it's a sad reality. But the reality is that we are no longer value customers, we're a nuisance.

On behalf of the Board, can I apologize, and there were a number of points which we will pick up as a Board offline. But I'm going to -- I really do say a huge thank you to you.

I got my invite -- I mean the people at Blue Ridge, I actually have managed to find somebody who is very helpful. I spent a long time on the phone with him and he couldn't even get the system to work. He had to bypass the system. But I ended up phone in the AIC who have a contact with Fidelity that investors don't have, and he immediately phoned me back and sorted out the problem. But the people that Fidelity contact, complete waste of time.

So huge thank you for coming and for being so candid about that feedback. I'm very, very sorry that you've had that experience. So I will speak to my colleagues on the platform side of the business and really exactly what you've said. Some people have said to us that they prefer the online experience, and they actually want to be paperless. I completely understand that's not for everybody.

[indiscernible]

Understood. And I'm very sorry you've had the expense you've had I will -- if you can give me more details, we should speak afterwards, but I will make sure that this is addressed as a priority. I did want to say Fidelity absolutely takes investment trust very seriously.

[indiscernible] And it's not being supported by organizations like today.

I hope that it's very much...

[indiscernible]

I would say that the sector is going through a bit of rightsizing at the moment. And you're right about our far more competitor products I do think this remains hugely integral to our business. And we were very much an active management house. It's...

[indiscernible]

Actually, I do think it is particularly cheap. But I absolutely hear what you're saying, and we will speak to the platform business and let's speak one to one later. And thank you for coming.

Thank you. And this -- can I -- this will be our last question just to give a warning on the voting.

I had the discussion with Alex Denny, extending use lease caused you Fidelity in New York forced the London office to use Broadridge. And before that happened, we used to get a yellow letter inviting us to the meeting. And it's fairly obvious that the absence of the yellow letter somehow means that you don't really want us to come.

Oh, no, we do want you to come, definitely. Look, let me say, thank you for your feedback. I will speak to my colleagues to see what we can do.

Is it true that force London to do things?

No, I think maybe a bit of a misunderstanding.

Alex Danny has left the company now.

Yes.

But he put in a solution in place for me, and I get sent the report by post.

That's good. Well, let's see if we can roll that out more broadly then. Thank you.

Thank you. Thank you. I think that being a last question for which thank you. This will be our last question, but we want to take those points.

My name is Brangelina a long-term shareholder of Fidelity. I've got 2 questions. First one is how merger is going on with Henderson? And what investment philosophy they have? Or do they match with the Fidelity and the dividend policy, whether are they giving any dividend or not?

So the short answer is it completed on the 30th of September 2025. And do you want to comment on the investment philosophy and they were very similar, but.

So there was, I believe, 30% to 40% overlap in the portfolio before that. But I think it's important to kind of make it clear, and you may know this or not, is that we didn't kind of merge the teams or the process borrowing Vicky and it, obviously, who came over the core process, dividend growth, cash generation, all of those things remain kind of the same as last year and this year. So we didn't change our style or philosophy or a thing and enter the vast holdings didn't really change much as a result of the merger. So I just wanted to kind of that be doing that. But other than that I can speak personally, I'm sure Davina speak more. I feel like it's gone very well. We traded the portfolio very smoothly. Great to have Vicky and Rutger on board. Great to have a bunch of new shareholders from our side. And from my side of the business, of the trust, should I say, or went very well through that, but I'll hand over to...

Yes. In terms of our shareholders, very positive because on closing the deal, we agreed the lower annual management fee and also the cost contribution from Fidelity. I mean there was no cost to shareholders. So it was all incremental. That being our last question, the pole will now close. So thank you for all your questions and those that are left outstanding, there will be a follow-up from. Thank you. The formal business has now concluded. And the poll is therefore, closed. For those of you in the room, your poll card will now be collected if you want to hand it in, please. And ladies and gentlemen, that concludes the formal part of this AGM. Based on the proxy votes submitted in advance, all resolutions are passed with a significant majority and will shortly be shown on the screen, maybe not. The results are also available from the company's secretary. The final voting results including the poll voting will be posted on our website as soon as possible after being scrutinized by MUFG corporate markets are registering. At the conclusion of this AGM, Paul will very sadly be stepping down from the Board. And I hope you'll all join me in thanking him for his great contribution to the company over the last 9 years. We'll miss him and his considerable experience, and we wish him well for the future. Thank you. Thank you, Paul. Ending today's AGM, and thank you for your continued support and your questions. And may I invite you to join the Board and the Fidelity team for some refreshments. Thank you.