Half-yearly Report
FIDELITY JAPANESE VALUES PLC
Preliminary announcement of unaudited Half-Yearly results for the six months
ended 30 June 2013
Contents
Investment Objective and Highlights 1
Summary of Results 2
Chairman's Statement 3
Manager's Half-Yearly Review 6
Directors' Responsibility Statement 9
Twenty Largest Investments 10
Financial Statements 12
Investor Information 22
Directory 23
Glossary of Terms 24
Warning to Shareholders - Share Fraud Warning 28
Investment Objective and Highlights
The investment objective of the Company is to achieve long term capital growth
from an actively managed portfolio of securities primarily of small and medium
sized Japanese companies listed or traded on Japanese stockmarkets.
Performance (six months to 30 June 2013)
Six
months
to
30
June
2013
Net Asset Value ("NAV") per Ordinary Share Total Return - undiluted +36.0%
Ordinary Share Price Total Return +39.9%
Russell/Nomura Mid-Small Cap Index* (in sterling terms) +22.6%
* The Company's Benchmark Index
As at 30 June 2013
As
at
30
June
2013
Equity Shareholders' Funds £92.9m
Market Capitalisation £82.3m
Capital Structure: Ordinary Shares of 25p each 113,954,834
Standardised Performance - Total Return (%)
01/07/ 01/07/ 01/07/ 01/07/ 01/07/
12 11 10 09 08
to to to to to
30/06/ 30/06/ 30/06/ 30/06/ 30/06/
13 12 11 10 09
NAV per ordinary share - undiluted +29.2 -9.9 +16.9 +16.0 -16.4
Ordinary share price +37.6 -9.5 +14.9 +11.6 -16.6
Russell/Nomura Mid-Small Cap Index (in
sterling terms) +20.5 -5.7 +3.4 +10.9 +4.2
Sources: Fidelity and Datastream
Past performance is not a guide to future returns
Summary of Results
30 31
June December %
2013 2012 change
Assets
£
Total portfolio exposure1 108.0m £70.2m +53.8
Shareholders' funds £92.9m £58.0m +60.2
NAV per ordinary share - undiluted 81.54p 59.94p +36.0
NAV per ordinary share - diluted2 n/a 59.19p
StockmarketData
Russell/Nomura Mid-Small Cap Index (in
sterling terms) 2.17 1.77 +22.6
Yen/£ exchange rate 150.66 140.55 -6.7
period
Ordinary share price3 end 72.25p 51.63p +39.9
high 80.38p 55.50p
low 50.50p 47.88p
period
Discount - undiluted3 end 11.4% 13.9%
high 12.6% 16.4%
low 8.6% 12.8%
Results for the six months to 30 June4 2013 2012
Revenue (loss)/return per ordinary share (0.09p) 0.09p
Capital return/(loss) per ordinary share 23.61p (1.18p)
Total return/(loss) per ordinary share 23.52p (1.09p)
1 The total exposure of the investment portfolio, including exposure to the
investments underlying the long CFDs
2 There was no diluted net asset value per ordinary share at 30 June 2013
because there were no longer any subscription shares in issue at that date. At
31 December 2012 there was dilution because there were subscription shares in
issue and the NAV per ordinary share was higher than the exercise price of the
rights attached to those subscription shares
3 The high and low figures relate to the six months to 30 June 2013 and the
year to 31 December 2012
4 See pages 12 and 13
Sources: Fidelity and Datastream
Past performance is not a guide to future returns
Chairman's Statement
I have pleasure in presenting the Half-Yearly Report for the six months ended
30 June 2013.
During the period under review, the Company's NAV per share rose by 36.0%,
compared to an increase of 22.6% in the Russell/Nomura Mid-Small Cap Index
(sterling adjusted). Over the same period the share price rose by 39.9%, with
the discount narrowing from 13.9% to 11.4%.
As can be seen from the Attribution Analysis opposite, Index performance, stock
selection and gearing all contributed to performance, whilst the decline in the
value of the yen against sterling had a negative impact.
A commentary on both the portfolio and the prospects for the Japanese economy
may be found in the Manager's Half Yearly Review on pages 6 to 8.
Six
months
to
30
June
2013
Attribution Analysis (pence)
NAV per share at 31 December 2012 (undiluted) 59.94
Impact of the Index* +18.86
Impact of Index Income* +0.80
Impact of Stock Selection +5.83
Impact of Gearing* +4.77
Impact of Exchange Rate -5.34
Impact of Charges -0.61
Impact of Share Issues/Repurchases -2.85
Cash/Residual +0.14
NAV per share at 30 June 2013 (undiluted) 81.54
* in yen terms
GEARING
The Company continues to gear through the use of Contracts For Difference
("CFDs"). Total portfolio exposure was £108.0m as at 30 June 2013, equating to
gearing of 16.3% (see page 11).
SHARE REPURCHASES
During the six months to 30 June 2013, 100,000 ordinary shares were repurchased
for cancellation.
SUBSCRIPTION SHARES
The final date on which the subscription shares could be exercised was 28
February 2013. Between 31 December 2012 and the final subscription date, a
total of 7,032,140 subscription shares were exercised by shareholders. In
accordance with the Articles of Association, the Company appointed a trustee in
respect of the outstanding 10,200,009 subscription shares following the final
subscription date. The trustee subsequently exercised all of the outstanding
subscription shares and sold the resulting ordinary shares in the market on the
same terms.
Since the subscription shares were issued in November 2009 they have raised a
total of £10.5m for the Company, both improving liquidity and allowing
operating costs to be spread across a larger number of ordinary shares.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties faced by the Company fall into the
following broad categories: market risk, performance risk, share price risk,
currency risk, gearing risk, tax and regulatory risks, operational risks and
financial instrument risks. Information on each of these areas is given in the
Business Review section within the Annual Report for the year ended 31 December
2012.
GOING CONCERN
The Board receives regular reports from the Manager and the Directors have a
reasonable expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future. Thus they continue to adopt
the going concern basis of accounting in preparing the financial statements as
outlined in the Annual Report for the year ended 31 December 2012.
Shareholders at the Annual General Meeting held on 14 May 2013 approved the
resolution that the Company should continue as an investment trust. The next
such continuation vote will take place in 2016.
ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE
The Alternative Investment Fund Managers Directive ("AIFMD") is a European
Directive that affects many investment funds, including the Company, that are
managed or promoted within the European Union. The Board has been advised that
the Directive is unlikely to have any material effect on the services provided
by, or to, the Company although the regulations implementing the Directive will
require the amendment of, and supplement to, many of the contracts under which
services are provided to the Company; some additional reporting, both to
investors and to the Financial Conduct Authority; and an enhanced role for the
custodian, which will be required to satisfy a new and wide-ranging set of
regulations. The Board has been further advised that the only consequence of
note for shareholders is a potential increase in the operating costs of the
Company. At this juncture, it is too early to know whether this will be the
case and, if so, the size of any increase, not least because the Directive is
not due to apply to the Company, under the transitional regime applicable in
the United Kingdom, until 22 July 2014. In the meantime, there are a number of
uncertainties as to how the provisions will, in practice, be implemented and
the costs that will result. The Board will continue to seek to restrict any
increase in operating costs to that necessary for compliance with the new
regulatory regime.
OUTLOOK
Since the December 2012 election, Prime Minister Abe's government has
stimulated an improvement in sentiment towards Japan. On coming to power Mr.
Abe instituted the "Three Arrows" policy, aimed at ending two decades of
deflation and economic stagnation. The first two arrows of Mr. Abe's policy
initiative are an aggressive fiscal and monetary package involving a ¥50
trillion a year quantitative easing programme, a 2% inflation target and a ¥10
trillion stimulus package. The third arrow - structural reform - seeks to
promote sustainable growth through addressing some of the inefficiencies in the
Japanese economy. There are early signs that "Abenomics" is bearing fruit with
a number of domestic economic indicators having improved, whilst the
devaluation of the yen should continue to help exporters. Nonetheless, whilst
the outlook is undoubtedly brighter than it was a year ago, it is important
that the "Three Arrows" policy, and in particular the proposed structural
reform, is successfully implemented.
The Japanese stock market has rebounded strongly in the year to date and there
are grounds for believing that progress can be maintained over the medium term.
In the shorter term concerns over the tapering of quantitative easing in the
US, the level of Chinese growth and the continuing Eurozone crisis may further
affect global investor sentiment.
David Robins
Chairman
30 July 2013
Manager's Half-Yearly Review
Japan is back in the limelight for the first time in nearly ten years since Mr.
Koizumi's premiership. Japanese stocks enjoyed an uninterrupted rise from
mid-November 2012 to mid-May 2013. Prime Minister Abe's economic policies
(often referred to as "Abenomics") clearly changed sentiment and reflationary
expectations created strong tailwinds for the stock market.
Second-time Prime Minister Shinzo Abe, whose Liberal Democratic Party (LDP)
prevailed in lower-house elections in December 2012, launched "Three Arrows" -
expansionary monetary policy, aggressive fiscal policy and structural reforms -
aimed at achieving economic recovery and an end to deflation. Within the first
three months of Mr. Abe's tenure, a dramatic politicised regime change at the
Bank of Japan led to an unprecedented setting of an inflation target of 2%
followed by a huge quantitative easing programme. As a result, the yen has
fallen by 14% against the US dollar for the year to date, and Mr. Abe's promise
to support Japanese exporters by bringing down the value of the yen has become
self-fulfilling. The speed and trajectory of the first two arrows fuelled
expectations that Prime Minister Abe, unlike his recent predecessors who held
office for less than a year and successively failed to tackle the country's
economic malaise, might be able to create a virtuous cycle. If inflation sets
in, consumers will spend; if companies see increasing demand and profitability,
they will increase capital spending and wages for workers. This should lead to
higher demand, then to higher production, and so on.
Having returned more than 70% in local currency terms since November 2012, the
Russell/Nomura Mid-Small Cap Index experienced sharp corrections towards the
end of May amid global risk aversion triggered by the US Federal Reserve's
Quantitative Easing ("QE") tapering signals, rising bond yields, and concerns
about growth in China and other emerging nations. However, the market has since
recovered some poise and Japan remains one of the best-performing markets in
the world year-to-date.
PORTFOLIO REVIEW
Against the favourable market background, your Company's net asset value rose
by 36.0% to 81.54p per share. Meanwhile, the share price rose by 39.9% to
72.25p per share and the discount to NAV continued to narrow.
The Company significantly outperformed its Benchmark Index, the Russell/Nomura
Mid-Small Cap Index, which returned 22.6% (in sterling terms)during the review
period. Core holdings in internet-related services and renewable energy rose
sharply and added value. Some individual stock picks resonated well with
improving macro indicators such as housing, wages, employment and tourism.
The best performing stock during the review period was Sanix, which was added
to the portfolio in March 2013. This company's mainstay business has been
termite extermination, but it is shifting into small-scale (i.e. sub-mega watt)
solar panel installations by leveraging off its nationwide sales network to
reach a broad range of commercial and residential customers. Thanks to Japan's
new feed-in-tariff programme initiated in 2012 to subsidise the purchasing of
clean energy sold to the power grid, the number of applications for solar power
system installation is growing at record rates; against this background Sanix
is enjoying triple-digit growth in its solar power business.
The core holdings in internet-based services including Kakaku.com, M3 and
Cookpad also ranked in the top ten contributors. The rising penetration of
smartphones and the expansion of Japan's e-commerce market underpinned growth
at Kakaku.com's price comparison site, while the number of users of its
restaurant review site continued to grow. Both M3 (online medical information
services for doctors) and Cookpad (online cooking recipe posting and searching
services) impressed the market with strong earnings growth.
Other major contributors included JP-Holdings (child-care services) and
Livesense (recruitment services). JP-Holdings' strong share price performance
mirrored expectations for Abenomics to boost female labour participation in
Japan, while Livesense rose on the back of a tighter labour market.
Conversely, stock selection in the automobile value chain fared less well.
While auto-parts maker Takata fell on earnings disappointments due to product
recalls, the failure to hold mid-cap automobile makers such as Fuji Heavy
Industries and Mazda Motor, which saw their share prices more than double over
the last six months, was an additional drag on the performance relative to the
Benchmark Index.
During the review period, the Portfolio Manager actively trimmed positions
where further upside appeared limited and recycled into new stocks with
multi-year growth drivers. A balance was maintained between domestic consumer
services, beneficiaries of Abenomics, and pro-cyclical exporters. The Company
capitalised on the strong performance of JP-Holdings, Cookpad and Tokai Tokyo
Financial Holdings to take profits and switched into laggard cyclicals such as
NuFlare Technology (semiconductor production equipment) and Tachi-S (auto
parts). Investments were made in Sekisui Chemical (which owns a pre-fabricated
housing business) and Higashi Nihon House which are both benefiting from
increasing housing starts, as well as LED lighting makers such as Odelic and
Endo Lighting that are levered to energy saving demand. Although defensive
stocks in foods, utilities, pharmaceuticals, and railways remained underweight,
the Portfolio Manager initiated a position in Fuji Kyuko, a railway operator
that serves the area between Tokyo and Mount Fuji. Mr. Abe's policy emphasis on
increasing inbound tourism combined with Mount Fuji's newly gained status as a
world heritage site bodes well for the company.
OUTLOOK
The sharp declines in Japanese stock prices in late May and early June unnerved
investors. However, a period of consolidation was unsurprising given the
uninterrupted rally that we experienced over the previous six months.
Historically speaking, a sizeable pullback is not uncommon during any bull
market phase. We do not think the peak is behind us because the key drivers for
the rally, ranging from aggressive monetary policy to expectations of a better
macro environment and improving earnings, remain intact.
The Upper House elections on 21 July can be seen as a vote of confidence in Mr.
Abe's policies, with the LDP led coalition winning a clear majority. The
election should bring an end to the deadlocked parliament that has slowed the
passage of legislation in recent years and pave the way for a period of
relative political stability over the next three years.
Following the Upper House election, the Prime Minister will need to challenge
vested interests and pick the fights necessary for the successful execution of
his growth and reform policies. The government is set to release the second
round of its growth strategy in the autumn and the content will draw close
examination for details of corporate tax breaks, labour market reforms and
other longer-term issues. Clearly, Mr. Abe's progress on structural reform will
be the key to the long-term success of his revolutionary policy experiment - as
only that can unlock the productive potential of Japan's economy and drive
future growth. We also need to see a united front of political and corporate
leaders actively promoting both growth and asset price inflation.
So far the market rally has been driven by Mr. Abe's policies, and we have seen
early signs of improvements in macro statistics including wages, employment,
consumption and production. Going forward, Japanese companies will have to
prove that the yen is not the only driver of their profit recovery and that
they have concrete strategies to sustain growth. As the corporate titans of the
future are not necessarily those of the past - especially when the macro
landscape is changing rapidly - we believe individual stock selection will make
a difference.
Our stock selection will continue to focus on opportunities where future growth
is not reflected in current share prices. We see such opportunities among
beneficiaries of fast-growing internet services, the rising penetration of
smartphones, renewable energy demand, improving labour market conditions and
asset price reflation. While growth opportunities are abundant in the current
market environment, we are paying more attention to share price valuations so
as not to over-pay for this growth. In the near-term, we will remain mindful of
macro risks including stalled progress in Abenomics, the US Federal Reserve's
tapering of QE3 and China's slowdown - any of which could reduce investors'
confidence.
FIL Investments International
30 July 2013
Directors' Responsibility Statement
The Directors confirm to the best of their knowledge that:
a) the condensed set of financial statements contained within the Half-Yearly
financial report has been prepared in accordance with the UK Accounting
Standards Board's Statement 'Half-Yearly Financial Reports';
b) the Chairman's Statement and the Manager's Half-Yearly Review on pages 3 to
8 (constituting the interim management report) include a fair review of the
information required by Rule 4.2.7R of the FCA's Disclosure and Transparency
Rules and their impact on the condensed set of financial statements and a
description of the principal risks and uncertainties and an assessment of the
Company's status as a going concern for the remaining six months of the
financial year; and
c) in accordance with Disclosure and Transparency Rule 4.2.8R there have been
no transactions involving related parties during the six months to 30 June 2013
and therefore nothing to report with any material effect as a consequence of
such a transaction on the financial position or the performance of the Company
during that period; and there have been no changes in this position since the
last Annual Report that could have a material effect on the financial position
or performance of the Company in the first six months of the current financial
year.
The Half-Yearly financial report has not been audited or reviewed by the
Company's Independent Auditor.
The Half-Yearly financial report was approved by the Board on 30 July 2013 and
the above responsibility statement was signed on its behalf by David Robins,
Chairman.
Twenty Largest Investments as at 30 June 2013
Fair Total
Exposure Value1 Exposure2
Twenty Largest Investments, including long CFDs £'000 £'000 %
Sanix
Provider of sanitation and environmental resource
products and services 4,536 4,536 4.2
M3 (CFD)
Provider of medical related internet services 3,262 1,551 3.0
Kakaku.com (CFD)
Provider of price comparison services and product
information 3,228 1,924 3.0
Sekisui Chemical (CFD)
Producer of housing materials, plastics and flat
panel displays 3,116 1,176 2.9
Livesense
Operator of job placement websites 2,525 2,525 2.3
LIXIL Group
Producer of building materials and house equipment 2,448 2,448 2.3
Sumitomo Electric Industries (CFD)
Manufacturer of electric wire and optical fibre
cables 2,201 265 2.0
Honeys
Manufacturer and retailer of clothing 1,991 1,991 1.8
Disco (CFD)
Manufacturer of precision machinery and diamond
products 1,791 430 1.7
AnicomHoldings
Pet insurance company 1,758 1,758 1.6
Anritsu Company (CFD)
Manufacturer of test and measurement equipment 1,727 (444) 1.6
Sumitomo Rubber (CFD)
Producer of a wide range of rubber based products 1,710 578 1.6
OdelicCompany
Manufacturer of lighting 1,670 1,670 1.5
AEON Financial Service
Provider of financial services 1,670 1,670 1.5
Zeon Corporation
Manufacturer of chemicals 1,634 1,634 1.5
NuFlareTechnology
Manufacturer of semiconducters 1,571 1,571 1.5
Fuji Kyuko
Passenger transportation company 1,531 1,531 1.4
Japan Aviation Electronics Industry
Manufacturer and seller of electrical connectors 1,492 1,492 1.4
NidecCorporation
Manufacturer of electric motors 1,431 1,431 1.4
Gulliver International
Distributor of used cars 1,392 1,392 1.3
Twenty Largest Investments (31.12.12: 42.7%;
30.06.12: 45.9%) 42,684 31,129 39.5
Other Investments (31.12.12: 57.3%; 30.06.12:
54.1%) 65,339 60,405 60.5
Total Portfolio (including long CFDs) 108,023 91,534 100.0
GEARING as at 30 June 2013
£'000
Investments at fair value 84,040
Exposure to long CFDs 23,983
Total portfolio exposure 108,023
Shareholders' funds 92,923
Total portfolio exposure in excess of shareholders' funds 16.3%
1 Fair value represents the carrying value in the Balance Sheet on page 16
2 % of the total exposure of the investment portfolio, including exposure
to the investments underlying the long CFDs
Income Statement
six months six months
ended year ended ended
30.06.13 31.12.12 30.06.12
unaudited audited unaudited
revenue capital total revenue capital total revenue capital total
Notes £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses)
on investments
designated at
fair value
through profit
or loss - 19,064 19,064 - (6,376) (6,376) - (2,671) (2,671)
Gains on
derivative
instruments
held at fair
value through
profit or loss - 6,608 6,608 - 2,635 2,635 - 1,720 1,720
Income 2 836 - 836 1,289 - 1,289 728 - 728
Investment
management fee (534) - (534) (757) - (757) (389) - (389)
Other expenses (276) - (276) (441) - (441) (196) - (196)
Exchange
(losses)/gains
on other net
assets (37) (107) (144) - (384) (384) 20 (199) (179)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net
(loss)/return
before finance
costs and
taxation (11) 25,565 25,554 91 (4,125) (4,034) 163 (1,150) (987)
Finance costs (36) - (36) (76) - (76) (40) - (40)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net
(loss)/return
on ordinary
activities
before
taxation (47) 25,565 25,518 15 (4,125) (4,110) 123 (1,150) (1,027)
Taxation on
(loss)/return
on ordinary
activities 3 (48) - (48) (70) - (70) (38) - (38)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net
(loss)/return
on ordinary
activities
after taxation
for the period (95) 25,565 25,470 (55) (4,125) (4,180) 85 (1,150) (1,065)
========== ========== ========== ========== ========== ========== ========== ========== ==========
(Loss)/return
per ordinary
share 4 (0.09p) 23.61p 23.52p (0.06p) (4.24p) (4.30p) 0.09p (1.18p) (1.09p)
========== ========== ========== ========== ========== ========== ========== ========== ==========
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 period.
These financial statements have been prepared in accordance with the
Association of Investment Companies Statement of Recommended Practice issued in
January 2009.
Reconciliation of Movements in Shareholders' Funds
share capital
share premium redemption other capital revenue total
capital account reserve reserve reserve reserve equity
Notes £'000 £'000 £'000 £'000 £'000 £'000 £'000
Opening
shareholders'
funds: 1
January 2012 25,225 698 2,437 57,955 (10,364) (13,416) 62,535
Issue of
ordinary
shares on the
exercise of
rights
attached to
subscription
shares 5 2 2 - - - - 4
Exercise of
rights
attached to
subscription
shares and
conversion
into ordinary
shares 5 (1) 1 - - - - -
Repurchase of
ordinary
shares 5 (63) - 63 (129) - - (129)
Net (loss)/
return on
ordinary
activities
after
taxation for
the period - - - - (1,150) 85 (1,065)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Closing
shareholders'
funds: 30
June 2012 25,163 701 2,500 57,826 (11,514) (13,331) 61,345
========== ========== ========== ========== ========== ========== ==========
Opening
shareholders'
funds: 1
January 2012 25,225 698 2,437 57,955 (10,364) (13,416) 62,535
Issue of
ordinary
shares on the
exercise of
rights
attached to
subscription
shares 5 3 4 - - - - 7
Exercise of
rights
attached to
subscription
shares and
conversion
into ordinary
shares 5 (1) 1 - - - - -
Repurchase of
ordinary
shares 5 (159) - 159 (328) - - (328)
Net loss on
ordinary
activities
after
taxation for
the year - - - - (4,125) (55) (4,180)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Closing
shareholders'
funds: 31
December 2012 25,068 703 2,596 57,627 (14,489) (13,471) 58,034
Issue of
ordinary
shares on the
exercise of
rights
attached to
subscription
shares 5 4,308 5,170 - - - - 9,478
Exercise of
rights
attached to
subscription
shares and
conversion
into ordinary
shares 5 (862) 862 - - - - -
Repurchase of
ordinary
shares 5 (25) - 25 (59) - - (59)
Net return/
(loss) on
ordinary
activities
after
taxation for
the period - - - - 25,565 (95) 25,470
---------- ---------- ---------- ---------- ---------- ---------- ----------
Closing
shareholders'
funds: 30
June 2013 28,489 6,735 2,621 57,568 11,076 (13,566) 92,923
========== ========== ========== ========== ========== ========== ==========
Balance Sheet
30.06.13 31.12.12 30.06.12
unaudited audited unaudited
Notes £'000 £'000 £'000
Fixed assets
Investments designated at fair
value through profit or loss 84,040 55,087 56,168
---------- ---------- ----------
Current assets
Derivative assets held at fair
value through profit or loss 7,938 1,941 2,435
Debtors 2,705 2,632 815
Cash at bank 742 674 3,898
---------- ---------- ----------
11,385 5,247 7,148
---------- ---------- ----------
Creditors
Derivative liabilities held at
fair value through profit or loss (444) (301) (1,310)
Other creditors (2,058) (1,999) (661)
---------- ---------- ----------
(2,502) (2,300) (1,971)
---------- ---------- ----------
Net current assets 8,883 2,947 5,177
---------- ---------- ----------
Total net assets 92,923 58,034 61,345
========== ========== ==========
Capital and reserves
Share capital 5 28,489 25,068 25,163
Share premium account 6,735 703 701
Capital redemption reserve 2,621 2,596 2,500
Other reserve 57,568 57,627 57,826
Capital reserve 11,076 (14,489) (11,514)
Revenue reserve (13,566) (13,471) (13,331)
---------- ---------- ----------
Total equity shareholders' funds 92,923 58,034 61,345
========== ========== ==========
Net asset value per ordinary
share
Undiluted 6 81.54p 59.94p 63.11p
Diluted 6 n/a 59.19p 61.89p
========== ========== ==========
Cash Flow Statement
six six
months year months
ended ended ended
30.06.13 31.12.12 30.06.12
unaudited audited unaudited
£'000 £'000 £'000
Operating activities
Investment income received 426 917 388
Income received on long CFDs 172 294 120
Investment management fee paid (444) (790) (412)
Directors' fees paid (56) (182) (115)
Other cash payments (383) (471) (226)
---------- ---------- ----------
Net cash outflow from operating
activities (285) (232) (245)
---------- ---------- ----------
Servicing of finance
Interest paid on long CFDs (36) (76) (40)
---------- ---------- ----------
Net cash outflow from servicing of
finance (36) (76) (40)
---------- ---------- ----------
Financial investment
Purchase of investments (58,555) (51,491) (18,319)
Disposal of investments 48,877 48,137 18,242
---------- ---------- ----------
Net cash outflow from financial
investment (9,678) (3,354) (77)
---------- ---------- ----------
Derivative activities
Proceeds from long CFD positions
closed 754 986 586
---------- ---------- ----------
Net cash inflow from derivative
instruments 754 986 586
---------- ---------- ----------
Net cash (outflow)/inflow before
financing (9,245) (2,676) 224
---------- ---------- ----------
Financing
Exercise of rights attached to
subscription shares 9,479 6 4
Repurchase of ordinary shares (59) (328) (129)
---------- ---------- ----------
Net cash inflow/(outflow) from
financing 9,420 (322) (125)
---------- ---------- ----------
Increase/(decrease) in cash 175 (2,998) 99
========== ========== ==========
Reconciliation of net cash movements
to movement in net funds
Net funds at the beginning of the
period 674 4,056 4,056
---------- ---------- ----------
Net cash inflow/(outflow) 175 (2,998) 99
Exchange movements (107) (384) (257)
---------- ---------- ----------
Change in net funds 68 (3,382) (158)
---------- ---------- ----------
Net funds at the end of the period 742 674 3,898
========== ========== ==========
Notes to the Financial Statements
1 ACCOUNTING POLICIES
The Half-Yearly financial statements have been prepared on the basis of the
accounting policies set out in the Company's annual report and financial
statements for the year ended 31 December 2012.
30.06.13 31.12.12 30.06.12
unaudited audited unaudited
£'000 £'000 £'000
2 INCOME
Income from investments designated
at fair value through profit or loss
Overseas dividends 671 1,005 541
Income from derivatives held at fair
value through profit or loss
Dividends on long CFDs 165 284 187
---------- ---------- ----------
Total income 836 1,289 728
========== ========== ==========
30.06.13 31.12.12 30.06.12
unaudited audited unaudited
£'000 £'000 £'000
TAXATION ON (LOSS)/RETURN ON ORDINARY
3 ACTIVITIES
Overseas taxation suffered 48 70 38
========= ======== =========
= == =
30.06.13 31.12.12 30.06.12
unaudited audited unaudited
4 (LOSS)/RETURN PER ORDINARY SHARE
Revenue (loss)/return per
ordinary share - pence (0.09) (0.06) 0.09
Capital return/(loss) per
ordinary share - pence 23.61 (4.24) (1.18)
---------- ---------- ----------
Total return/(loss) per ordinary
share - pence 23.52 (4.30) (1.09)
========== ========== ==========
The (loss)/return per ordinary
share is based on the net (loss)
/return on ordinary activities
after taxation for the period
divided by the weighted average
number of ordinary shares in
issue during the period.
30.06.13 31.12.12 30.06.12
unaudited audited unaudited
Net revenue (loss)/return on
ordinary activities after
taxation for the period - £'000 (95) (55) 85
Net capital return/(loss) on
ordinary activities after
taxation for the period - £'000 25,565 (4,125) (1,150)
---------- ---------- ----------
Net total return/(loss) on
ordinary activities after
taxation for the period - £'000 25,470 (4,180) (1,065)
========== ========== ==========
Weighted average number of
ordinary shares in issue during
the period 108,279,905 97,168,062 97,412,746
========== ========== ==========
30.06.13 31.12.12 30.06.12
unaudited audited unaudited
shares £'000 shares £'000 shares £'000
SHARE
5 CAPITAL
Issued,
allotted and
fully paid:
Ordinary
shares of
25 pence
each
Beginning of
the period 96,822,685 24,206 97,447,975 24,362 97,447,975 24,362
Issue of
ordinary
shares on
the
conversion
of rights
attached to
subscription
shares 17,232,149 4,308 12,710 3 7,902 2
Repurchase
of ordinary
shares (100,000) (25) (638,000) (159) (250,000) (63)
---------- ---------- ---------- ---------- ---------- ----------
End of the
period 113,954,834 28,489 96,822,685 24,206 97,205,877 24,301
========== ========== ========== ========== ========== ==========
Issued,
allotted and
fully paid:
Subscription
shares of
5 pence each
Beginning of
the period 17,232,149 862 17,244,859 863 17,244,859 863
Exercise of
rights
attached to
subscription
shares and
conversion
into
ordinary
shares (17,232,149) (862) (12,710) (1) (7,902) (1)
---------- ---------- ---------- ---------- ---------- ----------
End of the
period - - 17,232,149 862 17,236,957 862
========== ========== ========== ========== ========== ==========
Total share
capital 28,489 25,068 25,163
========== ========== ==========
The subscription shares were issued as a bonus issue to ordinary shareholders
on 11 November 2009 on the basis of one subscription share for every five
ordinary shares held. Each subscription share gave the holder the right, but
not the obligation, to subscribe for one ordinary share upon payment of the
subscription price of 55 pence per subscription share, on the last business day
of each month, commencing in February 2010.
The final date to exercise these rights was 28 February 2013. After 28 February
2013, the Company appointed a trustee who exercised all the remaining rights
attached to the subscription shares that had not been exercised by
shareholders. The resulting ordinary shares were sold in the market and the
profits of this sale, being the net proceeds less the 55 pence per share cost
of exercising the rights and after deduction of expenses and fees, were paid to
the holders of those outstanding subscription shares.
6 NET ASSET VALUE PER ORDINARY SHARE
The undiluted net asset value per ordinary share is based on net assets of £
92,923,000 (31.12.12: £58,034,000 and 30.06.12: £61,345,000) and on 113,954,834
(31.12.12: 96,822,685 and 30.06.12: 97,205,877) ordinary shares, being the
number of ordinary shares in issue at the period end.
There is no diluted net asset value per ordinary share at 30 June 2013 because
all the rights attached to subscription shares were exercised during the period
and there are no longer any subscription shares in issue. The diluted net asset
value per ordinary share for prior periods has been calculated on the basis of
what the financial position would have been if all the rights attached to the
outstanding subscription shares (31.12.12: 17,232,149 and 30.06.12: 17,236,957)
had been exercised on those dates. This basis of calculation is in accordance
with guidelines laid down by the Association of Investment Companies.
7 INVESTMENT TRANSACTION COSTS
Transaction costs are incurred on the acquisition and disposal of investments.
These are included in the gains/(losses) on investments designated at fair
value through profit or loss in the capital column of the Income Statement and
are summarised below:
30.06.13 31.12.12 30.06.12
unaudited audited unaudited
£'000 £'000 £'000
Purchases 62 64 24
Sales 48 58 23
---------- ---------- ----------
110 122 47
========== ========== ==========
8 UNAUDITED FINANCIAL STATEMENTS
The results for the six months to 30 June 2013 and 30 June 2012, which are
unaudited, constitute non-statutory accounts within the meaning of Section 435
of the Companies Act 2006. The figures and financial information for the year
ended 31 December 2012 are extracted from the latest published financial
statements. These financial statements, on which the Independent Auditor gave
an unqualified report, have been delivered to the Registrar of Companies.
Investor Information
CONTACT INFORMATION
Private Investors: call free on 0800 41 41 10 9am to 6pm, Monday to Saturday.
Financial advisers: can call free on 0800 41 41 81 8am to 6pm, Monday to
Friday. www.fidelity.co.uk/its
Existing shareholders who have a specific query regarding their holding or need
to provide updated information, for example a change of address, should contact
the appropriate administrator.
Holders of ordinary shares Capita Registrars, Registrars to Fidelity Japanese
Values PLC, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU.
Telephone: 0871 664 0300 (calls cost 10p per minute plus network extras. Lines
are open from 8.30am to 5.30pm, Monday to Friday). Email:
ssd@capitaregistrars.com
Details of individual shareholdings and other information can also be obtained
from the Registrars' website: www.capitaregistrars.com
Fidelity Share Plan investors Fidelity Investment Trust Share Plan, PO Box
12062, Mellon House, Ingrave Road, Brentwood, Essex CM14 9LX. Telephone: 0845
358 1107 (calls to this number are charged at 3.95p per minute from a BT
landline. Other telephone service providers' costs may vary).
Fidelity ISA investors Fidelity, using the freephone numbers given opposite, or
by writing to: UK Customer Service, Fidelity Worldwide Investment, Oakhill
House, 130 Tonbridge Road, Hildenborough, Tonbridge, Kent TN11 9DZ.
General enquiries should be made to Fidelity, the Investment Manager and
Secretary, at the Company's registered office:
FIL Investments International, Investment Trusts, Beech Gate, Millfield Lane,
Lower Kingswood, Tadworth, Surrey KT20 6RP. Telephone: 01732 36 11 44 Fax:
01737 83 68 92 www.fidelity.co.uk/its
FINANCIAL CALENDAR
30 June 2013 - Half-Yearly period end
-
30 July 2013 Announcement of Half-Yearly results
-
Mid August 2013 Publication of Half-Yearly report
-
31 December 2013 Financial year end
-
March/April 2014 Publication of Annual Report
-
May 2014 Annual General Meeting
Directory
BOARD OF DIRECTORS
David Robins (Chairman)
David Miller, OBE (Senior Independent Director)
Sir Laurie Magnus (Audit Committee Chairman)
Simon Fraser
Philip Kay
MANAGER, SECRETARY AND
REGISTERED OFFICE
FIL Investments International
Beech Gate
Millfield Lane
Lower Kingswood
Tadworth
Surrey
KT20 6RP
FINANCIAL ADVISERS AND STOCKBROKERS
Canaccord Genuity
88 Wood Street
London
EC2V 7QR
INDEPENDENT AUDITOR
Grant Thornton UK LLP
Chartered Accountants and Registered Auditor
30 Finsbury Square
London
EC2P 2YU
BANKERS AND CUSTODIAN
JPMorgan Chase Bank (London Branch)
125 London Wall
London
EC2Y 5AJ
REGISTRARS
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
LAWYERS
Slaughter and May
One Bunhill Row
London
EC1Y 8YY
Speechly Bircham LLP
6 New Street Square
London
EC4A 3LX
Glossary of Terms
BENCHMARK
Russell/Nomura Mid-Small Cap Index against which the performance of the Company
is measured.
CONTRACT FOR DIFFERENCE (CFD)
A Contract For Difference is a derivative. It is a contract between the Company
and an investment house at the end of which the parties exchange the difference
between the opening price and the closing price of an underlying asset (which,
for the Company's Contracts For Difference are equity shares, which the Company
might otherwise purchase directly). It does not involve the Company buying or
selling the underlying asset, only agreeing to receive or pay the movement in
its share price. A Contract For Difference allows the Company to gain access to
the movement in the share price by depositing a small amount of cash known as
margin. The Company only uses "long" Contracts For Difference. On "long"
Contracts For Difference, dividends are received and interest is paid.
If the closing price is higher than the opening price the Contract For
Difference is in profit and it is included within "Derivative assets held at
fair value through profit or loss". If the closing price is lower than the
opening price the Contract For Difference is showing a loss and it is included
within "Derivative liabilities held at fair value through profit or loss".
DERIVATIVES
Financial instruments (such as futures, options and Contracts For Difference)
whose value is derived from the value of an underlying asset.
DISCOUNT
If the share price of the Company is lower than the net asset value per share,
the Company's shares are said to be trading at a discount. The discount is
shown as a percentage of the net asset value. The opposite of a discount is a
premium. It is more common for an investment trust to trade at a discount than
a premium.
FAIR VALUE
The fair value is the best estimate of the value of the investments, including
derivatives, at a point in time and this is measured as:
• Listed investments valued at bid prices, or last market prices, where
available, otherwise at published price quotations;
• Unlisted investments valued using an appropriate valuation technique in
the absence of an active market; and
• Contracts For Difference are valued as the difference between the
settlement price of the contract and the value of the underlying shares in the
contract (unrealised gains or losses).
GEARING
Gearing describes the level of a Company's leverage and is usually expressed as
a percentage of shareholders' funds. It can be obtained through the use of bank
loans, bank overdrafts or Contracts For Difference in order to increase a
Company's exposure to stocks. Gearing is permitted in order to buy or gain
exposure to further investments. If assets rise in value, gearing magnifies the
return to ordinary shareholders. Correspondingly, if the assets fall in value,
gearing magnifies the fall. Contracts For Difference are used as a way of
gaining exposure to the price movements of shares without buying the underlying
shares directly.
In a simple example, if a company has £100 million of net assets and £8 million
of borrowings (either via bank loans or long Contracts For Difference) then the
Shareholders' funds are 8% geared. Normally, the higher the gearing, the more
sensitive an investment trust's shares will be to the movements up and down in
the value of the investment portfolio.
NET ASSET VALUE (NAV)
Net asset value is sometimes also described as "shareholders' funds", and
represents the total value of the Company's assets less the total value of its
liabilities. For valuation purposes it is common to express the net asset value
on a per share basis.
PREMIUM
If the share price of the Company is higher than the net asset value per share,
the Company's shares are said to be trading at a premium. The premium is shown
as a percentage of the net asset value. The opposite of a premium is a
discount.
RETURN/(LOSS)
The return/(loss) generated in the period from the investments:
• Revenue Return/(Loss)reflects the dividends and interest from investments
and other income net of expenses, finance costs and taxation;
• Capital Return/(Loss) reflects the return on capital, excluding any
revenue returns; and
• Total Return/(Loss) reflects the aggregate of revenue and capital returns.
SHARE REPURCHASES
An increasingly popular way for investment trust companies to return cash to
their shareholders is through offering to repurchase a proportion of shares
currently held. Companies seek the permission of shareholders to do so at their
annual general meetings allowing them to repurchase a proportion of their total
shares (up to 14.99%) in the market at prices below the prevailing net asset
value per share. This process is also used to enhance the net asset value per
share and to reduce the discount to net asset value.
SHAREHOLDERS' FUNDS
Shareholders' funds are also described as "net asset value" and represent the
total value of the Company's assets less the total value of its liabilities.
TOTAL PORTFOLIO EXPOSURE
The total of fixed asset investments at fair value plus the fair value of the
underlying securities within the Contracts For Difference.
TOTAL RETURN PERFORMANCE
The return on the share price or net asset value per share taking into account
the rise and fall of share prices and the dividends paid to shareholders. Any
dividends received by the shareholder are assumed to have been reinvested in
additional shares (for share price total return) or the Company's assets (for
net asset value total return).
Further Information
The Fidelity Individual Savings Account ("ISA") is offered and managed by
Financial Administration Services Limited. The Fidelity Investment Trust Share
Plan is managed by FIL Investments International. Both companies are authorised
and regulated by the Financial Conduct Authority. The Fidelity Investment Trust
Share Plan is administered by The Bank of New York Mellon and shares will be
held in the name of The Bank of New York Nominees Limited.
The value of savings and eligibility to invest in an ISA will depend on
individual circumstances and all tax rules may change in the future. Fidelity
investment trusts are managed by FIL Investments International. Fidelity only
gives information about its own products and services and does not provide
investment advice based on individual circumstances. Should you wish to seek
advice, please contact a Financial Adviser.
Issued by Fidelity Japanese Values PLC.
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 the amount originally invested.
Past performance is not a guide to future returns. For funds that invest in
overseas markets, changes in currency exchange rates may affect the value of
your investment. Investing in small and emerging markets can be more volatile
than other more developed markets.
Reference in this document to specific securities should not be construed as a
recommendation to buy or sell these securities, but is included for the
purposes of illustration only. Investees should also note that the views
expressed may no longer be current and may have already been acted upon by
Fidelity.
Fidelity, Fidelity Worldwide Investment, the Fidelity Worldwide Investment logo
and symbol are trademarks of FIL Limited.
The content of websites referred to in this document do not form part of this
Half-Yearly Report.
Warning to Shareholders
SHARE FRAUD WARNING
Share fraud includes scams where investors are called out of the blue and
offered shares that often turn out to be worthless or non-existent, or an
inflated price for shares they own. These calls come from fraudsters operating
in 'boiler rooms' that are mostly based abroad.
While high profits are promised, those who buy or sell shares in this way
usually lose their money.
The Financial Conduct Authority (FCA) has found most share fraud victims are
experienced investors who lose an average of £20,000, with around £200m lost in
the UK each year.
PROTECT YOURSELF
If you are offered unsolicited investment advice, discounted shares, a premium
price for shares you own, or free company or research reports, you should take
these steps before handing over any money:
1. Get the name of the person and organisation contacting you.
2. Check the FCA Register at www.fca.org.uk/register/ to ensure they are
authorised.
3. Use the details on the FCA Register to contact the firm.
4. Call the FCA Consumer Helpline on 0800 111 6768 if there are no contact
details on the Register or you are told they are out of date.
5. Search the FCA's website list of unauthorised firms and individuals to
avoid doing business with.
6. REMEMBER: if it sounds too good to be true, it probably is!
If you use an unauthorised firm to buy or sell shares or other investments, you
will not have access to the Financial Ombudsman Service or Financial Services
Compensation Scheme (FSCS) if things go wrong.
REPORT A SCAM
If you are approached about a share scam you should tell the FCA using the
share fraud reporting form at www.fca.org.uk/scams, where you can find out
about the latest investment scams. You can also call the Consumer Helpline on
0800 111 6768.
If you have already paid money to share fraudsters you should contact Action
Fraud on
0300 123 2040
Fidelity, Fidelity Worldwide Investment, the Fidelity Worldwide Investment logo
and symbol are trademarks of FIL Limited
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