Annual Financial Report

FIDELITY ASIAN VALUES PLC ANNUAL FINANCIAL STATEMENT FOR THE YEAR TO 31 JULY 2009 Further to the voluntary disclosure of the Company's annual results for the year ended 31 July 2009 by way of a preliminary announcement dated 29 September 2009, in accordance with the Disclosure and Transparency Rules ("the Rules") 4.1.3 and 6.3.5(2) this announcement contains the text of the preliminary announcement dated 29 September 2009 together with the additional text in compliance with the Rules. The Company's annual report and financial statements for the year ended 31 July 2009 together with the accompanying proxy form have been filed with the UK Listing Authority Document Disclosure team and will shortly be available for inspection at the UK Listing Authority's Document Viewing Facility which is situated at: Financial Services Authority 25 The North Colonnade CanaryWharf London E14 5HS Tel: 020 7676 1000 (Documents will usually be available for inspection within six normal business hours of this notice being given). The annual report and financial statements will shortly be available on the Company's website at www.fidelity.co.uk/its Rebecca Burtonwood, FIL Investments International, Company Secretary - 01737 836869 15 October 2009 Chairman's Statement Performance Over the 12 months to 31 July 2009, the net asset value per share of Fidelity Asian Values PLCincreased by 15.7% compared with an increase in the benchmark MSCI All Countries (Combined) Far Eastex Japan Index of 11.0%. The share price increased by 20.6% over the period. (All figures in sterling terms and on a total return basis.) Over the three and five years to 31 July 2009the Company's net asset value rose by 43.9% and 136.5% respectively against rises of 40.1% and 115.9% by the benchmark. The discount at which ordinary shares traded to the net asset value of the Company widened slightly to 5.91% at the end of the period from 5.42% six months ago. Markets Equities in the Far Eastex Japanregion registered double-digit gains in sterling terms over the 12 month review period. The collapse of Lehman Brothers precipitated the ongoing global financial turmoil leading to a steep decline in world markets in October. Dismal economic data and subdued earnings results drove share prices lower. Subsequently, governments across the region took several policy measures aimed at increasing liquidity and promoting growth. These provided some support to equities. In particular, Chinaannounced a RMB 4 trillion stimulus package and supplemented the move by lowering its cash reserve ratio and interest rates. Mid-March onwards, investors started to respond positively to growing evidence of an economic rebound in China, an improvement in global credit markets and expansionary fiscal and monetary policies. Foreign investors returned to the region encouraged by optimism about an overall recovery underpinned by tentative signs of firmer industrial activity in some areas. Earnings expectations, which had been cut sharply at the end of 2008, were revised upwards, boosting share prices. Consequently, Far Eastex Japanequities outperformed their developed as well as emerging markets peers over the review period. In this environment, information technology stocks benefited the most as confidence among US consumers improved. Consumer discretionary companies, particularly automobile manufacturers, advanced. Non-bank financials including insurance, property and diversified financials were other beneficiaries of an improvement in investor sentiment. Healthcare and industrials were the only two sectors that retreated. In particular, shipping companies suffered due to a drop in cargo rates. The export-oriented markets of Koreaand Singaporefell behind the regional benchmark. On the economic front, interest rates were reduced in countries across the region to spur domestic demand. However, towards the end of the period, most central banks opted to keep rates unchanged in light of deflationary pressures. Real GDPgrowth in China, Korea, Taiwan, Indonesiaand Singaporein the second quarter of 2009 exceeded expectations. In July, the Purchasing Managers' Index in China, an indicator of the health of the manufacturing sector remained above the expansionary threshold of 50 for a fifth consecutive month. Property and automobile sales growth were better than expected and industrial production expanded on a month-on-month basis in many economies in the region. Although regional exports failed to recover, they appeared to stabilise in Korea, Taiwanand Singapore. Outlook In recent months, signs of stabilisation have emerged in many Asian countries, suggesting that the economic downturn may be past its worst and the recession is starting to ease. However, overseas demand for the region's products remains subdued and in particular continues to weigh on export-driven economies such as Korea, Malaysia, Singaporeand Taiwan. A lower than expected rise in unemployment, coupled with sustained industrial activity indicates that domestic demand is helping to compensate for a decline in exports and there is growing evidence of an economic recovery. Asian equity markets have outperformed the global indices since the beginning of 2009; analysts have been raising their corporate earnings forecasts for many companies in the region resulting in a recovery in stock valuations. Although it may still be early to talk of green shoots, investor confidence is improving and the increasing evidence of a recovery in the Far Eastregion, ex Japan, should continue to drive stockmarkets. Dividend Subject to shareholders' approval at the 2009 Annual General Meeting the Directors recommend that a final dividend in respect of the year to 31 July 2009of 1.00p pence per share (2008:0.81p) be paid to shareholders on the register at close of business on 16 October 2009(ex dividend date 14 October 2009) on 16 December 2009. As the Company's objective is long term capital growth any revenue surplus is a function of a particular year's business and it should not be assumed that dividends will continue to be paid in future. Tender Offer and Reduction in Capital During the year under review, a tender offer was made for up to 40% of the Company's issued share capital. The Board took this action to avoid the potentially destabilising effect on the share price of certain shareholders wishing to realise their holdings. Following shareholders' approval at an Extraordinary General Meeting of the Company held on 5 September 2008and completion of the Tender offer a total of 41,262,764 ordinary shares were cancelled from the Register of Members. This equated to 40% of the issued share capital immediately prior to the offer being made. Exiting shareholders bore the costs involved and the remaining shareholders received the benefit of an uplift in the net asset value of some 2% on the day the Tender offer was completed. Gearing The Lloyds TSB Bank PLCloan of US$11 million was repaid on 25 September 2009. The current net gearing parameters set by the Board are between 0% and 10%. Directorate This year three Directors will retire, two of whom, will offer themselves for re-election. As detailed in the biographies in the Annual Report the Directors have a wide range of appropriate skills and experience to make up a balanced Board for your Company. I am subject to annual re-election due to my tenure on the Board exceeding nine years and Miss Matthews is subject to annual re-election under the Listing Rules due to her recent employment relationship with the Manager. Miss Matthews will retire from employment with the Manager in October 2009. Sir Robin McLaren will retire from the Board after the Annual General Meeting. He has served as a Director since 1997 and I would like to thank Sir Robin for his contribution to the Company and personally for the quality and independence of advice that he has given me over the years. His experience in Asiaand his work as Senior Independent Director have been extremely valuable. A successor for the role of Senior Independent Director will be appointed in due course. A selection process for a new member of the Board is currently underway. Annual General Meeting The 2009 Annual General Meeting will be held on Monday 7 December 2009at Fidelity's Cannon Streetoffice commencing at 11.00 am. All shareholders and Fidelity Savings Plan and ISA Scheme investors are invited to attend. The Portfolio Manager will be making a presentation on the year under review and immediate prospects for the Company. Sir Victor Garland Chairman 28 September 2009 Manager's Review Markets Over the last 12 months, equities in the Asia Pacific region rose outperforming the global and other emerging and developed markets. However, in October, stocks were dragged down by global financial woes and the continuing stream of weak economic data. Concerns about the reduced availability of funds and a moderating domestic economy weighed upon property stocks, particularly in Hong Kong. Shares in resource firms corrected sharply when it became apparent that developed countries were on the verge of a recession and when demand from emerging economies softened. Over this period health care and utilities sectors, which are seen to provide more stable returns, were favoured over those considered cyclical. This trend reversed in the first quarter of 2009 as equities rebounded, as risk aversion among investors declined due to hopes of a tentative revival in growth. Optimism that government stimulus packages and interest rate cuts will pull the global economy out of recession lent support. Investors responded positively to growing evidence of an economic rebound in China, an improvement in global credit markets and inflationary fiscal and monetary policies. A restocking induced boost in demand, strong foreign investor buying and progressive reforms drove share prices higher. Favourable political developments, such as closer ties between Taiwan and China and a second term for pro-reform government in India boosted investor sentiment. For most Asian economies, activity continued to contract in the first quarter, with a number of countries registering a steep fall. While weak data for first quarter GDP indicated that the region was feeling the strain of the global downturn, recent evidence of improving growth in the second quarter and an upturn in industrial production in many economies in the region were positive signs of a recovery. Portfolio Review The Company outperformed its benchmark over the review period, with the net asset value rising by 15.7% against the index return of 11.0%. Positive stock selection within the information technology and consumer staples sectors were the largest contributors to performance. Of note, an overweight stance in software & services companies enhanced returns. A position in Tencent Holdings, operator of China's leading internet networking service, contributed as it reported better than expected profits for the first quarter. Similarly, an overweight allocation to semiconductor and semiconductor equipment companies proved rewarding. Notably, a holding in MediaTek enhanced returns, after benefiting from continuous market share expansion and potential benefits from the roll-out of the China 3G platform. Within the consumer staples sector, overweight exposure to Olam International, a supply chain management company involved in agricultural commodities and food ingredients, contributed to returns. The company is one of the world's leading supply chain managers within agriculture; its share price over the period was boosted by favourable sentiment towards potential acquisitions, its strong balance sheet and the introduction of new product segments into its product mix. Although holdings in a number of shipbuilders weighed on absolute returns as the weaker economic environment negatively impacted orders and revenue levels, our underweight positions in these stocks meant that our industrial sector exposure added value relative to the benchmark. Concerns regarding potential order cancellations and rising steel prices were further negatives. Similarly, an underweight allocation to utilities, due to high valuations and limited growth potential proved favourable. These stocks were out of favour, as investors chased sectors that were previously oversold. Select exposure to the consumer discretionary sector added value. Amongst the leading contributors over the review period was a holding in China Dongxiang Group. The stock performed well given its access to high quality sports marketing resources and product positioning. Furthermore the Company continues to see strong new store and sales growth. A holding in Li & Fung, also contributed as consumer spending increased, supported by a drop in crude oil prices. The stock price was further buoyed as a Singapore based investment company increased its stake in the business. Overall, exposure to the sector was raised over the period, particularly in retail companies with strong market positions, which should prove beneficial as market conditions improve. The financials sector was the worst performing sector. In particular, shares in Hang Seng Bank came under pressure due to a weak loan growth outlook and falling fee income. Meanwhile, increasing credit costs weighed on the earnings of Shinhan Financial Group. In addition, underweight holdings in the telecommunications sector detracted from returns. The Portfolio Manager trimmed exposure to the telecommunications sector given unattractive valuations and better opportunities elsewhere. Materials as a sector detracted from absolute returns due to concerns that the spreading financial crisis might lower demand. An underweight exposure in this sector enhanced relative returns. However, an overweight position in China-based, Huabao International Holdings, China's largest tobacco flavour supplier did add value. At a country level, the weighting in China was increased. The country continues to lead the region's economic rebound, while the developed world has gone into recession. In addition exposure to Taiwan was raised amid improved market sentiment and optimistic expectations that the island is going to benefit from the improved cross strait relationship with China. Outlook for the Region Increasing evidence of a recovery in the Asia region should continue to drive its stockmarkets higher however over the short term they are likely to remain volatile. A lower than expected rise in unemployment and sustained industrial activity indicates final demand should help compensate for a decline in exports. Favourable policy measures and low borrowing costs together with the region's high savings rate and low debt levels bode well. Firms with strong balance sheets and solid management should grow their market share and emerge stronger. The improvements in economic data in the Asia Pacific ex Japan region in the past few months have increased investors' conviction that the recovery is sustainable. Essentially, evidence on stabilisation in industrial activity remains strong but the sustainability of the pick-up depends on final demand. Concurrently, fiscal policy seems to be gaining traction and households are expected to continue to benefit from government support. The upturn in consumer confidence in the region bodes well for an anticipated upturn, partially offsetting the weakness in exports. A better investment climate and thawing global markets should buoy growth, while regional governments continue to provide short term fiscal support. However, a rapid global recovery seems unlikely and uncertainty remains as world trade decelerates. Here, government influenced investment should prove helpful during 2009. The region is likely to outperform global equities over the longer term given its structural growth, favourable demographics and high savings rate. FIL Investments International 28 September 2009 Principal Risks and Uncertainties Due to the current economic climate, shareholders will have concerns about the current reduction in the value of some of their investments. The Board confirms that there is an ongoing process for identifying, evaluating and managing the principal risks which fall under the general headings of strategic, operational and management. This process is regularly reviewed by the Board in accordance with the Financial Reporting Council's document Internal Control: Revised Guidance for Directors on the Combined Code. An internal controls report, which includes a risk matrix and the assessment of risks applicable to the Company, is prepared by the Manager and considered by the Audit Committee. Risks are identified, introduced and graded and this process, together with the policies and procedures for the mitigation of risks, is updated and the report is reviewed at least once a year. The Board reviews and agrees policies, which have remained unchanged since the beginning of the accounting period, for managing risks and summaries of these are set out below. Market risks The Company's assets consist mainly of listed securities and the principal risks are therefore market related such as market recessions, interest rate movements, deflation/inflation, terrorism and protectionism. Risks to which the Company is exposed and which form part of the market risks category are included in Note 18 to the financial statements together with summaries of the policies for managing these risks. These comprise: equity price risk; market price risk; foreign currency risk; interest rate risk; liquidity risk and credit risk. The Company had a fixed term, fixed rate loan facility in place which was repaid on 25 September 2009. The extent to which any loan facilities are retained or renewed is always kept under the most careful scrutiny. In addition a day to day overdraft facility can be used if required. The impact of limited finance from counterparties including suppliers has not affected the Company to date, however there are alternative suppliers available in the market place should the need arise. The Company relies on a number of main counterparties, namely the Manager, Registrar, Custodian and Auditor. The Manager is a member of a privately owned group of companies on which a regular report is provided to the Board. The Manager, Registrar and Custodian are subject to regular audits by Fidelity's internal controls team and the counterparties' own internal controls reports are received by the Board and any concerns investigated. Performance risks The achievement of the Company's performance objective relative to the market involves risk. Strategy, asset allocation and stock selection might lead to underperformance of the benchmark Index and target. Management of these risks is carried out by the Board which, at each Board meeting, considers the asset allocation of the portfolio and the risks associated with particular countries and industry sectors within the parameters of the investment objective. The Portfolio Manager is responsible for actively monitoring the portfolio selected in accordance with the asset allocation parameters and seeks to ensure that individual stocks meet an acceptable risk-reward profile. The NAV of the Company is published each working day. Income - dividends risks The Company's objective of long term capital growth relies less on income to support dividends than investment trust companies with a more income oriented target. Nevertheless, generating income to meet expenses and provide adequate reserves is subject to the risk that income generation from its investments fails to meet the level required. The Board monitors this risk through the receipt of detailed income reports and forecasts which are considered at each meeting. Share price risks The price of the Company's shares relative to the benchmark Index and in absolute terms, as well as its discount to NAV, are not factors the Company is able to control. Some short term influence over the discount may be exercised by the use of share repurchases at acceptable prices. The Company's share price, NAV and discount volatility are monitored daily by the Manager and considered by the Board at each of its meetings. Gearing risks The Company has the option to invest up to the total of any loan facilities held in equities. In a rising market the Company would benefit but in a falling market the impact would be detrimental. In order to manage the level of gearing the Board regularly considers this item and sets gearing limits accordingly. The Portfolio Manager follows these and may invest part of the loan facility in Fidelity Institutional Cash Fund plc and short term cash deposits to control the level of net gearing. Control systems risks The Company is dependent on the Manager's control systems and those of its Custodian and Registrars, both of which are monitored and managed by the Manager in the context of the Company's assets and interests on behalf of the Board. The security of the Company's assets, dealing procedures and the maintenance of investment trust status under s842 of ICTA, among other things, rely on the effective operation of such systems. These are regularly tested and a programme of internal audits is carried out by the Manager to maintain standards. Other risks Other risks monitored on a regular basis include loan covenants, which are subject to daily monitoring when loans are in place, together with the Company's cash position, and the continuation vote (at a time of poor performance). Related Party Transactions No Director is under a contract of service with the Company and no contracts existed during or at the end of the financial period in which any Director was materially interested and which was significant in relation to the Company's business. There have been no other related party transactions requiring disclosure under Financial Reporting Standard ("FRS") 8. Directors' responsibility Statement The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with UK Generally Accepted Accounting Practice. The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss for the period. In preparing these financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for ensuring that proper accounting records are kept which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that its financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Under applicable law and regulations the Directors are also responsible for preparing a Directors' Report, including a Business Review, a Directors' Remuneration Report and a Corporate Governance Statement that comply with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website www.fidelity.co.uk/its. Visitors to the website need to be aware that legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. We confirm that to the best of our knowledge: the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and the Directors' Report includes a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties it faces. Approved by the Board on 28 September 2009 and signed on its behalf. Sir Victor Garland Chairman 28 September 2009 Enquiries: Chris Davies - Head of Investment Trusts, FIL Investments International - 01737 837 723 Anne Read - Corporate Communications, FIL Investments International - 0207 961 4409 Rebecca Burtonwood, Company Secretary, FIL Investments International - 01737 836 869 Rebecca Tyerman - Company Secretariat, FIL Investments International - 01737 837 758 FIDELITY ASIAN VALUES PLC Income Statement - for the year ended 31 July 2009 2009 2008 revenue capital total revenue capital total £'000 £'000 £'000 £'000 £'000 £'000 Gains/(losses) on investments - 9,210 9,210 - (26,390) (26,390) Income - overseas dividends 2,626 - 2,626 4,188 - 4,188 - overseas scrip dividends 84 - 84 241 - 241 - deposit interest 55 - 55 150 - 150 - interest on VAT recovered on 2 - 2 - - - investment management fees* Investment management fee (861) - (861) (1,688) - (1,688) Other expenses (402) - (402) (474) - (474) Exchange gains/(losses) on 153 1,972 2,125 (14) (26) (40) other net assets Exchange losses on loans - (1,409) (1,409) - (247) (247) Net return/(loss) before 1,657 9,773 11,430 2,403 (26,663) (24,260) finance costs and taxation Interest payable (444) - (444) (516) - (516) Net return/(loss) on ordinary 1,213 9,773 10,986 1,887 (26,663) (24.776) activities before taxation Taxation on return on ordinary (233) - (233) (398) - (398) activities** Net return/(loss) on ordinary 980 9,773 10,753 1,489 (26,663) (25,174) activities after taxation for the year Return/(loss) per ordinary 1.49p 14.85p 16.34p 1.43p (25.57p) (24.14p) share 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 is interest received on VAT on investment management fees reclaimed following the decision of the European Court of Justice in the JPMorgan Claverhouse Investment Trust/AIC case (C-363/05) ** This relates to overseas taxation only. FIDELITY ASIAN VALUES PLC Reconciliation of Movements in Shareholders' Funds - for the year ended 31 July 2009 called share capital other other capital revenue total up share premium redemption non-distributable reserve reserve reserve equity capital account reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Opening 27,336 15,359 3,487 7,367 53,749 64,413 (990) 170,721 shareholders' funds: 1 August 2007 Net - - - - - (26,663) - (26,663) recognised capital losses for the year Repurchase of (1,547) - 1,547 - (9,606) - - (9,606) ordinary shares Revenue after - - - - - - 1,489 1,489 taxation for the year Closing 25,789 15,359 5,034 7,367 44,143 37,750 499 135,941 shareholders' funds: 31 July 2008 Net - - - - - 9,773 - 9,773 recognised capital gains for the year Share premium - (15,359) - - 15,359 - - - account cancelled Capital - - (13,803) - 13,803 - - - redemption reserve cancelled Repurchase of (238) - 238 - (988) - - (988) ordinary shares Ordinary (10,316) - 10,316 - (52,153 - - (52,153) shares cancelled on completion of the Tender offer Costs - - - - (842) - - (842) associated with the Tender offer Loan - - - - (83) - - (83) redemption costs Net revenue - - - - - - 980 980 after taxation for the year Dividend paid - - - - - - (494) (494) to shareholders Closing 15,235 - 1,785 7,367 19,239 47,523 985 92,134 shareholders' funds: 31 July 2009 FIDELITY ASIAN VALUES PLC Balance Sheet - as at 31 July 2009 2009 2008 £'000 £'000 Fixed assets Investments at fair value through profit or loss 98,131 136,356 Current assets Debtors 1,161 634 Cash at bank 425 8,954 1,586 9,588 Creditors - amounts falling due within one year Fixed rate unsecured loan (6,584) - Other creditors (999) (916) (7,583) (916) Net current (liabilities)/assets (5,997) 8,672 Total assets less current liabilities 92,134 145,028 Creditors - amounts falling due after more than one year Fixed rate unsecured loan - (9,087) Total net assets 92,134 135,941 Capital and reserves Called up share capital 15,235 25,789 Share premium account - 15,359 Capital redemption reserve 1,785 5,034 Other non-distributable reserve 7,367 7,367 Other reserve 19,239 44,143 Capital reserve 47,523 37,750 Revenue reserve 985 499 Total equity shareholders' funds 92,134 135,941 Net asset value per ordinary share 151.18p 131.78p FIDELITY ASIAN VALUES PLC Cash Flow Statement - for the year ended 31 July 2009 2009 2008 £ £'000 '000 Operating activities Investment income received 2,655 3,546 Deposit interest received 68 154 Investment management fee paid (1,268) (1,272) Directors' fees paid (93) (60) Other cash payments (337) (566) Net cash inflow from operating activities 1,025 1,802 Returns on investments and servicing of finance Interest paid (495) (511) Net cash outflow from returns on investments and servicing (495) (511) of finance Financial investment Purchase of investments (47,992) (84,344) Disposal of investments 97,560 96,901 Net cash inflow from financial investment 49,568 12,557 Dividend paid to shareholders (494) - Net cash inflow before financing 49,604 13,848 Financing Repurchase of ordinary shares (988) (9,606) Ordinary shares cancelled on completion of the Tender (52,995) - offer Loan redemption costs on completion of the Tender offer (83) - 5.60% fixed rate unsecured loan part repaid (3,912) - Net cash outflow from financing (57,978) (9,606) (Decrease)/increase in cash (8,374) 4,242 Returns/ (losses) per ordinary share are based on the net revenue return on ordinary activities after taxation of £980,000 (2008: £1,489,000), the capital return in the year of £9,773,000 (2008: capital loss £26,663,000) and the total return in the year of £10,753,000 (2008: loss £25,174,000) and on 65,827,251 ordinary shares (2008: 104,262,596) 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 annual financial statements to 31 July 2009. This preliminary statement, which has been agreed with the auditor, was approved by the Board on 28 September 2009. It is not the Company's statutory financial statements. The statutory financial statements for the financial year ended 31 July 2008have been delivered to the Registrar of Companies. The statutory financial statements for the financial year ended 31 July 2009have been approved and audited but have not yet been filed. The statutory financial statements for the financial years ended 31 July 2008 and 31 July 2009 received unqualified audit reports, did not include a reference to any matters to which the auditors 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 9 November 2009.

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