Final Results
FIDELITY JAPANESE VALUES PLC
Preliminary Announcement of Results
For the year ended 31 December 2007
The Year's Results: NAV 66.67p (-16.2%)
The Share Price and the Discount:
Price: 58.50p (down 15.00p; -20.4%)
Discount: 12.3% (7.7% in 2006)
PERFORMANCE REVIEW
It has been another difficult year for your Company as for the second year in
succession the net asset value of your Company's shares has declined. The fall
in net asset value of 16.2% during 2007 represented an underperformance of 7.7%
relative to our Benchmark Index, the Russell Nomura Mid/Small Cap Index (when
expressed in sterling). 3.3% (-2.68p) of this underperformance was represented
by negative stock selection with the balance being the effect of gearing, other
costs and currency. The bear market in Japan also resulted in a widening of the
discount of all Japanese investment trust shares and as a result the share
price fell by 20.4%.
Your Company's results suffered from disappointing performance by the holdings
in the technology and consumer sectors. LCD and semiconductor-related
technology stocks boosted your Company's performance during the third quarter,
but they gave up all of their gains towards the end of the year when concerns
about a global recession and yen appreciation impacted share prices. Retail and
consumer services stocks also fell as consumer spending failed to recover
during the year.
This performance was further weakened by the effect of gearing which had risen
because of the decline in gross assets, although this was partly offset by the
yen's appreciation against sterling. The level of gearing is reviewed regularly
by your Board.
MARKET REVIEW
During the first half of 2007, global stockmarkets were buoyed by optimism
about the sustainability of global economic expansion into 2008. Since the
summer however, the sub-prime lending problem has spilled into the global
financial system, changing the direction of stockmarkets. At first, the
sub-prime problem was seen as an issue of re-pricing in credit markets, but the
escalating risk of credit shrinkage started to have a larger than expected
impact on the global financial sector. While stock prices have retreated around
the world, the economic outlook for 2008 has worsened considerably. In Japan,
signs that the economy was slowing emerged in the second half of 2007, with
personal consumption falling as food and energy prices rose and wages
stagnated. Japan's government lowered its forecast for this year's economic
growth from an earlier projection of 2.1% to 1.3% in the current fiscal year.
Tighter building regulations introduced in 2007 were the prime cause of this
decline in the economy. Japan's economic growth has been dependent on exports
and the stockmarket has remained concerned that the yen may strengthen further
and export growth may fall as a result of a potential global recession.
Japanese small-cap stocks continued to underperform their larger peers for a
second consecutive year. This was due to a marked reduction in the activity of
Japanese domestic investors, who dominate transactions in the small-cap
markets, and a lack of catalysts such as upward revisions, new business
start-ups or mergers and acquisitions.
THE MARKET AND OUTLOOK
As I write, we cannot be certain that Japanese equities have fully priced in
expectations of a deteriorating macro economic environment. For the fiscal year
2008, private-sector economists have begun downgrading their GDP forecasts,
with the consensus now calling for growth of 1.8%, while the government
maintains a projection of 2% growth. While the consensus view points towards a
reacceleration in economic growth from the second half of 2008, a number of
potential hurdles lie in wait. The most prominent of these include an outright
global recession, heightened pressure on profit margins from higher input costs
and a stronger yen, a delayed recovery in housing starts and a lack of
reform-oriented political leadership. Acknowledging these risks, the Bank of
Japan is holding its target interest rate unchanged at 0.5%. If, contrary to
current market expectations, economic recovery in the second half of 2008 lacks
sufficient punch it could cause corporate earnings to decline and lead stock
prices lower.
The Japanese market undoubtedly faces multiple headwinds and potential upside
catalysts are likely to remain elusive for the time being. In the meantime, we
think valuation levels could provide a measure of downside support. Japanese
equities now look increasingly good value. On a dividend yield basis, Japanese
small-cap stocks are looking increasingly attractive and a large number of them
are trading below book value.
Although concerns in the market, such as daily fluctuations in currency
exchange rates, movements in macro economic indicators and short term earnings
revisions, can be disruptive, your Board is encouraged to see that Shinji
Higaki and his colleagues at Fidelity Investments Japan stay focused on
companies that they think are capable of executing operational and strategic
changes to improve competitive advantage, sustain profitability and improve
shareholder value; the recent declines in share prices should provide them with
opportunities to pick such stocks. We hope this will benefit your Company in
due course.
THE PORTFOLIO MANAGER
As previously advised, having been with Fidelity since 1981, Asako Kibe, the
Portfolio Manager, retired at the end of September 2007 and Shinji Higaki was
appointed as Portfolio Manager to your Company.
THE BOARD
Your Board continues to monitor corporate governance issues, reviewing and
updating processes as appropriate.
In accordance with the Listing Rules, Simon Fraser, President of Fidelity
International's Investment Solutions Group, will retire and, following an
evaluation of his performance by his fellow Directors and on their
recommendation, will seek re-election at the forthcoming Annual General
Meeting. 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. In accordance with the Company's Articles of Association, which
require that a Director retires by rotation at the third annual general meeting
after his last appointment, Philip Kay and David Miller will also retire and,
following an evaluation of their performance by their fellow Directors and on
the other Directors' recommendation, will seek re-election at the forthcoming
Annual General Meeting.
SHARE REPURCHASES
Purchases of 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 NAV for the remaining shareholders. In
recent years share repurchases have been used sparingly due to their impact on
liquidity and gearing. However, in the year to 31 December 2007 1,180,000
shares were repurchased, with a further 1,200,000 shares repurchased since the
year end. 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.
ARTICLES OF ASSOCIATION
Following the implementation of part of the Companies Act 2006 various changes
are required to your Company's Articles of Association and therefore a
resolution to approve these changes will be proposed at the forthcoming Annual
General Meeting.
ANNUAL GENERAL MEETING - 14 MAY 2008
The Annual General Meeting will be held at midday on 14 May 2008 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.
William Thomson
Chairman
19 March 2008
KEY PERFORMANCE INDICATORS ("KPIs")
Given the identification of the Company's objective and strategy, the Board has
identified KPIs against which performance can be measured, detailed below:
Year ended 3 Years ended 5 Years ended
31 December 2007 31 December 200 31 December 200
7 7
Net Asset Value Return -16.2% -6.4% +55.7%
Share Price Return -20.4% -5.3% +67.1%
Russell Nomura Mid/Small Cap -8.5% +8.4% +58.4%
Index (in sterling terms)
The Directors also monitor the various factors contributing to investment
results, as set out in the attribution analysis below (all data in pence per
share):
ATTRIBUTION ANALYSIS
Year to 31 December 2007 3 years to 31 December 200
(pence) 7(pence)
Opening Net Asset Value 79.59 71.26
Impact of the Index (in yen -10.12 15.55
terms)
Impact of stock selection -2.68 -7.29
(in yen terms)
Impact of currency & cash 3.38 -10.01
Impact of gearing (in yen -2.38 0.84
terms)
Impact of share 0.09 0.09
repurchasing
Impact of other costs -1.21 -3.77
Net Asset Value 66.67 66.67
Enquiries:
Richard Miles, Corporate Communications, Fidelity Investments International
- 020 7961 4921
Tracey Cousins, Senior Company Secretary, Fidelity Investments International
- 01737 836 883
FIDELITY JAPANESE VALUES PLC
Income Statement
- for the year ended 31 December
2007 2006
revenue capital total revenue capital total
£'000 £'000 £'000 £'000 £'000 £'000
Losses on investments - (11,710) (11,710) - (44,456) (44,456)
Income
- Overseas dividends 986 - 986 1,023 - 1,023
- Deposit interest 5 - 5 4 - 4
Investment management fee (850) - (850) (998) - (998)
Other expenses (354) - (354) (412) - (412)
Exchange gains/(losses) 3 203 206 3 (130) (127)
Exchange (losses)/gains - (708) (708) - 2,070 2,070
on loans
Net loss before finance (210) (12,215) (12,425) (380) (42,516) (42,896)
costs and taxation
Interest payable (202) - (202) (214) - (214)
Net loss on ordinary (412) (12,215) (12,627) (594) (42,516) (43,110)
activities before
taxation
Taxation on ordinary (69) - (69) (72) - (72)
activities *
Losson ordinary (481) (12,215) (12,696) (666) (42,516) (43,182)
activities after taxation
for the year
Lossper ordinary share (1 (0.49p) (12.52p) (13.01p) (0.68p) (43.29p) (43.97p)
)
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 onlyFIDELITY JAPANESE VALUES PLC
Reconciliation of Movements in Shareholders' Funds
- for the year ended 31 December
called up share capital other capital capital revenue total
share premium redemption reserve reserve reserve reserve equity
capital account reserve realised unrealised
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Opening 24,551 44 1,780 60,369 2,993 42,805 (11,194) 121,348
shareholders'
funds: 1
January 2006
Net - - - - 14,504 (57,020) - (42,516)
recognised
gains/
(losses) for
the year
Loss after - - - - - - (666) (666)
taxation
Closing 24,551 44 1,780 60,369 17,497 (14,215) (11,860) 78,166
shareholders'
funds:
31 December
2006
Net - - - - (25,637) 13,422 - (12,215)
recognised
(losses)/
gains for the
year
Repurchase of (295) - 295 (778) - - - (778)
ordinary
shares
Loss after - - - - - - (481) (481)
taxation
Closing 24,256 44 2,075 59,591 (8,140) (793) (12,341) 64,692
shareholders'
funds:
31 December
2007
FIDELITY JAPANESE VALUES PLC
Balance Sheet
- as at 31 December
2007 2006
£'000 £'000
Fixed assets
Investments at fair value through profit or loss 78,122 91,617
Current assets
Debtors 392 417
Cash at bank 937 419
1,329 836
Creditors - amounts falling due within one year
Other creditors (419) (655)
Net current assets 910 181
Total assets less current liabilities 79,032 91,798
Creditors - amounts falling due after more than
one year
Fixed rate unsecured loans (14,340) (13,632)
Total net assets 64,692 78,166
Capital and reserves
Called up share capital 24,256 24,551
Share premium account 44 44
Capital redemption reserve 2,075 1,780
Other reserve 59,591 60,369
Capital reserve - realised (8,140) 17,497
Capital reserve - unrealised (793) (14,215)
Revenue reserve (12,341) (11,860)
Total equity shareholders' funds 64,692 78,166
Net asset value per ordinary share 66.67p 79.59p
FIDELITY JAPANESE VALUES PLC
Cash Flow Statement
- for the year ended 31 December
2007 2006
£'000 £'000
Operating activities
Investment income received 925 923
Interest received 4 4
Investment management fee paid (920) (1,114)
Directors' fees paid (60) (99)
Other cash payments (347) (233)
Net cash outflow from operating activities (398) (519)
Returns on investments and servicing of finance
Interest paid (200) (218)
Net cash outflow from returns on investments and (200) (218)
servicing of finance
Financial investment
Purchase of investments (115,268) (73,870)
Disposal of investments 117,138 73,321
Net cash inflow/(outflow)from financial investment 1,870 (549)
Net cash inflow/(outflow) before financing 1,272 (1,286)
Financing
Repurchase of ordinary shares (778) -
Net cash outflow from financing (778) -
Increase/(decrease) in cash 494 (1,286)
1. Losses per ordinary share are based on the net revenue loss on ordinary
activities after taxation of £481,000 (2006: £666,000), the capital loss in the
year of £12,215,000 (2006: £42,516,000) and the total loss in the year of £
12,696,000 (2006: £43,182,000) and on 97,571,864 ordinary shares (2006:
98,207,453) 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 annual financial statements to 31 December 2007. This
preliminary statement, which has been agreed with the auditors, was approved by
the Board on 19 March 2008. It is not the Company's statutory financial
statements. The statutory financial statements for the financial year ended 31
December 2006 have been delivered to the Registrar of Companies. The statutory
financial statements for the financial year ended 31 December 2007 have been
approved and audited but have not yet been filed. The statutory financial
statements for the financial years ended 31 December 2006 and 31 December 2007
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 237(2) and (3) of the
Companies Act 1985.
The annual report and financial statements will be posted to shareholders as
soon as is practicable and in any event no later than 11 April 2008.
Friday, 31st May 2024
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