Final Results
FIDELITY JAPANESE VALUES PLC
Preliminary Announcement of Results
For the year ended 31 December 2009
Chairman's Statement
For the year ended 31 December 2009
The Year's Results: NAV (undiluted) 55.56p (+1.98p; +3.7%)
The ordinary share price: price: 48.50p (+6.75p; +16.2%)
The subscription share price: 8.28p
Discount: 12.7% (22.1% in 2008)
PERFORMANCE REVIEW
Over the year to 31 December 2009, the undiluted net asset value of your
Company's shares rose by 1.98p per share (3.7%). The increase in value was
primarily due to a rebound in the Japanese stockmarket and the Manager's stock
selection. The attribution analysis in the annual report shows that the rise in
the stockmarket accounted for 4.34p of the increase in the net asset value per
share and that the stock selection by our Manager added another 3.70p. Gearing
accounted for an additional 2.31p. On the other hand, the increase in value was
largely offset by currency losses (-7.84p per share) as a result of a weaker
yen against sterling at the year end. The yen in practice had been stronger
during the year but weakened at the time of the year end valuations resulting
in these currency losses.
The increase in net asset value of 3.7% during 2009 represented an
outperformance of 10.0% relative to our Benchmark, the Russell Nomura Mid/Small
Cap Index (when expressed in sterling). Given signs of a more benign global
macroeconomic backdrop and greater stability in financial systems, cyclical
manufacturers performed better than other segments of the market. In the LCD
and semiconductor industries signs of a cyclical bottom supported the share
prices of electronic parts and materials producers. At the same time inventory
restocking and healthier than expected final demand buoyed investor confidence
in automobiles and parts makers. Although the generally strong yen posed
downside risks to exporters' earnings, their aggressive cost-cutting efforts
have created a leaner, more competitive corporate landscape that will translate
into higher operational leverage as revenues improve.
Performance was further enhanced by the effect of gearing. The Board made a
decision in November 2009 to use derivatives for gearing purposes. We expect
the use of Contracts For Difference ("CFDs") will provide the desired level of
gearing at a lower cost.
MARKET REVIEW
Against a backdrop of worldwide monetary easing and aggressive fiscal stimulus,
global equity markets maintained a steady upward trajectory and Japanese stocks
hit a high in August. Thereafter, however, Japanese stocks started to lose
momentum and have since lagged their global peers. A landslide victory in Lower
House elections by the Democratic Party of Japan ("DPJ"), which brought an end
to more than half a century of dominance by the Liberal Democratic Party (LDP),
failed to buoy investor sentiment as the DPJ quickly lost much of its political
momentum after taking power in September.
The weak performance of financials, which faced heavy selling pressure due to
concerns about regulatory and capital adequacy risks, and generally renewed
strength in the yen precipitated market declines in the autumn. It was only in
late November that the yen started to weaken against the dollar, triggering a
sharp rebound in Japanese exporters' share prices. However, this was
insufficient to offset previous declines during the year.
Over the period, smaller companies held up relatively well, outperforming large
caps. At the same time, a number of technology-related companies saw their
share prices respond positively to earnings upgrades. The best performing
sector within the small cap universe was transport equipment (including auto
parts makers), followed by non-ferrous metals and electrical machinery.
GEARING
Following the repayment of the loans with The Royal Bank of Scotland PLC in
August 2009 and November 2009 respectively, the Company has no loans. However,
the Company has obtained equivalent exposure to the market through the use of
Contracts For Difference ("CFDs"). Total assets employed as at 31 December
2008 amounted to £75.17m and, as at 31 December 2009, the total portfolio
exposure was £71.36m comprising assets of £53.10m and exposure through CFDs of
£18.26m. This change to the Company's Investment Policy was authorised by
shareholders at a General Meeting held on 10 November 2009. At 31 December
2009 the long positions of the CFDs amounted to approximately 31.4% of the net
asset value (see the annual report for further details).
The Company is using CFDs in the same way that it used the traditional bank
loans - to increase the exposure to stocks. Due to the accounting treatment of
CFDs, the exposure to shares held through CFDs is not treated on the Company's
Balance Sheet in the same way as its normal equity investments. Only the
unrealised gains and losses of the CFDs are shown.
Realised and unrealised gains and losses are reported via the capital column of
the Income Statement, with income and expenses relating to CFDs being reported
via the income column. Proceeds of CFDs are shown as a separate cash flow
item.
Additional disclosures to the financial statements have been included
explaining the Company's geared position through the use of CFDs, including
details on how they are measured and how they are reported. Additional
information is also given detailing the underlying exposure to the CFD
holdings, and the full portfolio listing in the annual report includes
underlying exposure reporting. Further details on the use CFDs may be found in
the Directors' Report.
SUBSCRIPTION SHARES
At the General Meeting in November, a Bonus Issue of one subscription share for
every five ordinary shares held by qualifying shareholders was authorised,
together with the adoption of new Articles of Association for the Company. Each
subscription share gives the holder the right, but not the obligation, to
subscribe for one ordinary share at the end of each month from the end of
February 2010 until the end of February 2013 inclusive. Each subscription share
may only be exercised once. The exercise price is 55 pence per share based on
the Company's NAV at 5.00pm on 10 November 2009, plus a 1% premium to such NAV,
rounded up to the nearest whole penny. A total of 19,115,381 subscription
shares were allotted on 11 November 2009. The subscription shares were listed
and dealings commenced on these shares on 12 November 2009. The rights
attaching to a total of 59,156 subscription shares were exercised at the end of
February 2010, resulting in an allotment of 59,156 ordinary shares of 25p
each. Further details on the subscription shares may be found in the
Directors' Report.
THE BOARD
Your Board continues to monitor corporate governance issues, reviewing and
updating processes as appropriate. In accordance with the Listing Rules, Simon
Fraser, following an evaluation of his performance by his fellow Directors and
on their recommendation, will seek
re-election at the forthcoming Annual General Meeting. Simon Fraser retired
from his executive responsibilities at Fidelity in 2008, however he has agreed
to continue his directorship of the Company. Simon Fraser retires and seeks
re-election on an annual basis due to his recent employment relationship with
the Manager and his directorship of another investment trust managed by
Fidelity, namely Fidelity European Values PLC. Having been on the Board for
more than nine years and because he has not retired at the last two AGMs,
Nicholas Barber is subject to retirement by rotation and seeks re-election at
the forthcoming Annual General Meeting. He has proved to be a most diligent
member of the Board and has discharged his duties as Senior Independent
Director conscientiously.
Having been on the Board for more than nine years I will also retire and,
following an evaluation of my performance by my fellow Directors and on their
recommendation, I will seek re-election at the forthcoming Annual General
Meeting.
SHARE REPURCHASES
Purchases of ordinary and subscription shares for cancellation are made at the
discretion of your Board and within guidelines set from time to time by the
Board in the light of prevailing market conditions. Share repurchases will only
be made when they will result in an enhancement to the net asset value of
ordinary shares for the remaining shareholders. In recent years share
repurchases have been used sparingly due to their impact on liquidity and
gearing. Your Board continues to believe that the ability to repurchase shares
is a valuable tool and therefore a resolution to renew your Company's authority
to repurchase shares will be proposed at the forthcoming Annual General
Meeting.
ANNUAL GENERAL MEETING - 13 MAY 2010
The Annual General Meeting will be held at midday on 13 May 2010 at Fidelity's
offices at 25 Cannon Street in the City of London and all investors are
encouraged to attend. It is the one occasion in the year when shareholders can
meet all of the Directors as well as representatives from the Manager.
Following the meeting the Portfolio Manager will give a presentation on the
past year and the prospects for the current year.
CONTINUATION VOTE
The Articles of Association of the Company require a continuation vote every
three years. An ordinary resolution that the Company continue as an investment
trust for a further three years was passed at the 2007 Annual General Meeting.
A further continuation vote will take place at this year's Annual General
Meeting.
During the past year your company significantly outperformed the Russell Nomura
Mid/Small Cap Index (in sterling terms) and there are encouraging signs for
Japanese companies, particularly those focussed on high growth service sectors
and those with exposure to China and elsewhere in Asia. Therefore your Board
recommends that shareholders vote in favour of the continuation vote. A further
continuation vote will take place at the Annual General Meeting in 2013.
OUTLOOK
In the near term, sovereign credit concerns in Europe and other macro
uncertainties such as a tightening of monetary policy in China could
potentially fuel yen appreciation and diminish investors' confidence in
Japanese companies' earnings recovery. However, your Board believes that there
is the potential for Japanese stocks to catch up with their global peers in
2010.
Japan's production recovery is gathering pace due to the completion of
inventory adjustments for electronic components and devices, supported by firm
demand in overseas markets, particularly in Asia and other emerging markets.
This resulted in stronger than expected GDP growth of +4.6% annualised in the
fourth quarter of 2009. While this pace of growth is unlikely to be
sustainable, the implementation of additional stimulus measures by the
government and continued strength in Japanese exports should provide a
reasonably favourable backdrop for corporate earnings.
In the meantime, many Japanese companies have achieved a significant
improvement in profit margins primarily due to far reaching cost cutting
efforts. We believe that these companies will continue to display a clear
recovery trend into the 2010 Japanese fiscal year as they remain disciplined
about cost reductions amid a more benign macro economic environment. There is
potential for these profits to lead to a continuation of the trend of improved
dividend yields.
William Thomson
Chairman
15 March 2010
Enquiries:
Chris Davies, FIL Investments International - 01737 837 723
Rebecca Burtonwood, FIL Investments International, Company Secretary - 01737
836 869
FIDELITY JAPANESE VALUES PLC
Income Statement
- for the year ended 31 December 2009
2009 2008
revenue capital total revenue capital total
£'000 £'000 £'000 £'000 £'000 £'000
Losses on investments designed - (668) (668) - (5,946) (5,946)
at fair value through profit or
loss
Net gains on derivative - 1,694 1,694 - - -
instruments held at fair value
through profit or loss
Income
- Overseas dividends 920 - 920 1,284 - 1,284
- Deposit interest - - - 4 - 4
- Dividends on long Contracts 6 - 6 - - -
For Difference
Investment management fee (682) - (682) (719) - (719)
Other expenses (639) - (639) (338) - (338)
Exchange gains/(losses) on 2 (1,419) (1,417) 15 2,871 2,886
other net assets
Exchange gains/(losses) on - 2,980 2,980 - (9,612) (9,612)
loans
Net (loss)/return before (393) 2,587 2,194 246 (12,687) (12,441)
finance costs and taxation
Interest payable on loans and (239) - (239) (269) - (269)
CFDs
Net (loss)/return on ordinary (632) 2,587 1,955 (23) (12,687) (12,710)
activities before taxation
Taxation on loss on ordinary (64) - (64) (89) - (89)
activities *
Net (loss)/return on ordinary (696) 2,587 1,891 (112) (12,687) (12,799)
activities after taxation for
the year
(Loss)/return per ordinary (0.73p) 2.71p 1.98p (0.12p) (13.23p) (13.35p)
share (1)
A Statement of Total Recognised Gains and Losses has not been prepared as there
are no gains and losses other than those reported in this Income Statement.
The total column of the Income Statement is the profit and loss account of the
Company. All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued in the year.
* This relates to overseas taxation only
FIDELITY JAPANESE VALUES PLC
Reconciliation of Movements in Shareholders' Funds
- for the year ended 31 December 2009
called Share capital other capital revenue total
up share premium redemption reserve reserve reserve equity
capital account reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Opening 24,256 44 2,075 59,591 (8,933) (12,341) 64,692
shareholders'
funds: 1
January 2008
Net recognised - - - - (12,687) - (12,687)
capital losses
for the year
Repurchase of (362) - 362 (680) - - (680)
ordinary shares
Net revenue loss - - - - - (112) (112)
after taxation
for the year
Closing 23,894 44 2,437 58,911 (21,620) (12,453) 51,213
shareholders'
funds:
31 December 2008
Net recognised - - - - 2,587 - 2,587
capital gains
for the year
Bonus issue of 956 - - (956) - - -
subscription
shares
Net revenue loss - - - - - (696) (696)
after taxation
for the year
Closing 24,850 44 2,437 57,955 (19,033) (13,149) 53,104
shareholders'
funds:
31 December 2009
FIDELITY JAPANESE VALUES PLC
Balance Sheet
- as at 31 December 2009
2009 2008
£'000 £'000
Fixed assets
Investments designed at fair value through profit or 49,743 65,324
loss
Current assets
Derivative assets held at fair value through profit 1,692 -
or loss
Debtors 926 1,124
Cash at bank 2,403 2,301
Cash collateral with lender - 7,045
5,021 10,470
Creditors - amounts falling due within one year
Derivative liabilities held at fair value through (101) -
profit or loss
Fixed rate unsecured loans - (23,952)
Other creditors (1,559) (629)
(1,660) (24,581)
Net current assets/(liabilities) 3,361 (14,111)
Total net assets 53,104 51,213
Capital and reserves
Called up share capital 24,850 23,894
Share premium account 44 44
Capital redemption reserve 2,437 2,437
Other reserve 57,955 58,911
Capital reserve (19,033) (21,620)
Revenue reserve (13,149) (12,453)
Total equity shareholders' funds 53,104 51,213
Net asset value per ordinary share
Basic 55.56p 53.58p
Diluted 55.47p
n/a
FIDELITY JAPANESE VALUES PLC
Cash Flow Statement
- for the year ended 31 December 2009
2009 2008
£ £'000
'000
Operating activities
Investment income received 906 1,175
Deposit interest received - 4
Investment management fee paid (696) (690)
Directors' fees paid (94) (81)
Other cash payments (489) (263)
Net cash (outflow)/inflow from operating activities (373) 145
Returns on investments and servicing of finance
Interest paid on fixed rate unsecured loans (273) (252)
Net cash outflow from returns on investments and (273) (252)
servicing of finance
Financial investment
Purchase of investments (90,680) (97,886)
Disposal of investments 106,195 106,226
Net cash inflow from financial investment 15,515 8,340
Derivative activities
Proceeds of derivatives instruments 103
-
Net cash inflow from derivative activities 103
-
Net cash inflow before financing 14,972 8,233
Financing
Repurchase of ordinary shares - (680)
1.565% fixed rate unsecured loan repaid (9,475) -
1.34% fixed rate unsecured loan repaid (11,497) -
Cash collateral held with lender 7,045 (7,045)
Net cash outflow from financing (13,927) (7,725)
Increase in cash 1,045 508
1. Basic (losses)/returns per ordinary share are based on the net revenue
loss on ordinary activities after taxation in the year of £696,000 (2008: £
112,000), the capital return in the year of £2,587,000 (2008: capital loss of £
12,687,000) and the total return in the year of £1,891,000 (2008: total loss of
£12,799,000) and on 95,577,453 ordinary shares (2008: 95,878,956) being the
weighted average number of ordinary shares in issue during the year.
The above statements have been prepared on the basis of the accounting policies
as set out in the financial statements in the annual report to 31 December
2009. This preliminary statement, which has been agreed with the Auditor, was
approved by the Board on 15 March 2010. It is not the Company's statutory
financial statements. The statutory financial statements for the financial
year ended 31 December 2008 have been delivered to the Registrar of Companies.
The statutory financial statements for the financial year ended 31 December
2009 have been approved and audited but have not yet been filed. The statutory
financial statements for the financial years ended 31 December 2008 and 31
December 2009 received unqualified audit reports, did not include a reference
to any matters to which the Auditor drew attention by way of emphasis without
qualifying the report and did not contain statements under section 498(2) and
(3) of the Companies Act 2006.
The annual report and financial statements will be posted to shareholders as
soon as is practicable and in any event no later than 12 April 2010.
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