Final Results
FIDELITY JAPANESE VALUES PLC
Preliminary Announcement of Results
For the year ended 31 December 2008
Chairman's Statement
For the year ended 31 December 2008
The Year's Results: NAV 53.58p (-19.6%)
The Share Price and the Discount:
Price: 41.75p (down 16.75p; -28.6%)
Discount: 22.1% (12.3% in 2007)
PERFORMANCE REVIEW
The net asset value fell by 13.09p per share during 2008. This was a fall in
absolute terms and also represented an underperformance relative to our
Benchmark Index, the Russell Nomura Mid/Small Cap Index (when expressed in
sterling). So what happened? The year can be split into two parts. Performance
in the first half of 2008 was strong and your Company's shares outperformed its
Benchmark Index as well as its peer group. However, after the summer renewed
concerns about a global recession and the negative effect of yen appreciation
on Japanese corporate earnings triggered a series of violent declines. In the
second half of the review period, your Company's holdings in technology
exporters and commodity-price-sensitive stocks severely undermined performance,
both in absolute and relative terms and this more than removed the gains of the
first half.
For the year as a whole, as can be seen from the attribution analysis below,
the fall in markets accounted for 25.15p of the decline in net asset value per
share and stock selection by the Portfolio Manager a further 6.52p. However,
the decline was partially offset by currency gains (+28.67p). Unfortunately the
share price fell by a further 16.75p reflecting a widening of the discount to
22.1% due to lack of interest in Japanese smaller companies.
Performance was further weakened by the effect of gearing (-8.83p) which had
risen because of the decline in gross assets, although this was partly offset
by the yen's appreciation against sterling. The Board's view is that over the
longer term the portfolio will benefit from an eventual recovery in the
stockmarket and therefore to reduce borrowings at a depressed level of the
market is not in the long-term interests of shareholders.
Attribution analysis
Year ended 3 years to
31 December 2008 31 December 2008
(pence) (pence)
Opening Net Asset Value 66.67 123.56
Impact of the Index (in yen terms) -25.15 -59.08
Impact of stock selection (in yen -6.52 -19.57
terms)
Impact of exchange rate, cash and 28.67 29.80
residual
Impact of gearing (in yen terms) -8.83 -16.83
Impact of share repurchasing 0.12 0.15
Impact of other costs -1.38 -4.45
Net Asset Value 53.58 53.58
MARKET REVIEW
2008 proved to be an extraordinary year and a very disappointing one for equity
investors. The financial crisis that dawned in 2007 evolved into a truly global
phenomenon, as shockwaves reverberated from its epicentre in the US across
Western Europe, Asia and into emerging markets. In the autumn, the collapse of
Lehman Brothers and the rejection of the US government's initial bailout plan
marked a watershed that sent equity markets into freefall and unleashed
unprecedented levels of volatility. While Japan was far less exposed to the
leverage and asset market excesses that dominated Western economies, the
synchronised global downturn that gathered pace towards the end of the year
dealt a severe blow to its export-dependent economy. This situation was
exacerbated by the yen's steep appreciation against both the US dollar and the
euro. Industries that drove Japan's longest period of post-war growth were
hardest hit, with auto and electrical machinery companies seeing a sharp drop
in demand. By the end of the year, the Bank of Japan had cut its rate to a mere
0.1% and adopted a range of measures aimed at easing financing conditions.
Although the government announced two stimulus plans, at the time of writing
neither had yet been implemented. Over the year, Japanese small-cap stocks
outperformed larger companies for the first time in three years, a trend that
reflected investors' preference for domestic-oriented names over those exposed
to the risks of global recession and a strong yen.
GEARING
The Company's loans with Royal Bank of Scotland are due for repayment this year
and the extent to which these will be renewed is being kept under the most
careful scrutiny. Cash has been lodged with the Bank to ensure that the
Company's levels of net gearing remain within the loan covenants and further
details of this are provided in the financial statements. Additional cash is
also currently held by the Company to reduce the overall level of net gearing.
THE BOARD
Your Board continues to monitor corporate governance issues, reviewing and
updating processes as appropriate. In accordance with the Listing Rules, Simon
Fraser, following an evaluation of his performance by his fellow Directors and
on their recommendation, will seek re-election at the forthcoming Annual
General Meeting. Simon Fraser retired from his executive responsibilities at
Fidelity in 2008, however he has agreed to continue his directorship of the
Company. Simon retires and seeks re-election on an annual basis due to his
recent employment relationship with the Manager and his directorship of another
investment trust managed by Fidelity, namely Fidelity European Values PLC.
Having been on the Board for more than nine years I will also retire and,
following an evaluation of my performance by my fellow Directors and on their
recommendation, I will seek re-election at the forthcoming Annual General
Meeting.
SHARE REPURCHASES
Purchases of 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 2008 1,450,000
shares were repurchased. Your Board continues to believe that the ability to
repurchase shares is a valuable tool and therefore a resolution to renew your
Company's authority to repurchase shares will be proposed at the forthcoming
Annual General Meeting.
ANNUAL GENERAL MEETING - 14 MAY 2009
The Annual General Meeting will be held at midday on 14 May 2009 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.
OUTLOOK
At the time of writing, the downturn has already engulfed most of the developed
and developing world and appears to be gathering momentum. Current share prices
reflect the likelihood that corporate results are expected to deteriorate in
coming months and the second half of the Japanese fiscal year of 2008 (ending
31 March 2009) is shaping up as one of the worst periods in Japan's post-war
economic history. In fact, the International Monetary Fund recently issued a
forecast which said that the Japanese economy would contract by 2.6% in 2009, a
sharp downgrade from its previous estimate of a 0.2% decline. As we witnessed
in the Japanese third-quarter results season (ending 31 December 2008),
Japanese companies are coming to terms with an increasingly difficult operating
environment and the balance of earnings revisions is likely to remain deeply
negative for the time being. Announcements of rationalisation efforts, cost
cutting and staff reductions are also set to continue. On a more positive note,
global policy makers have responded to the crisis by releasing an unprecedented
wave of fiscal and monetary policy easing. As the year progresses, these
measures should start to take effect and we could start to see an improvement
in sentiment as the crisis bottoms out. Stockmarkets will undoubtedly
anticipate recovery, although it is too early to see specific pointers as to
when this will take place. However, as the Manager's Review states, the
immediate outlook remains uncertain and the future direction of share prices
will be partly determined by the ultimate depth of the current crisis and its
effect on corporate earnings. Small-cap stocks appear attractive both on an
absolute basis and relative to their larger counterparts and it is possible
that they will start recovering ahead of a wider rebound as was the case
following a market bottom in 2003.
William Thomson
Chairman
16 March 2009
Enquiries:
Chris Davies - FIL Investments International - 01737 837 723
Tracey Cousins, Head of Company Secretariat, FIL Investments International -
01737 836 883
FIDELITY JAPANESE VALUES PLC
Income Statement
- for the year ended 31 December 2008
2008 2007
revenue capital total revenue capital total
£'000 £'000 £'000 £'000 £'000 £'000
Losses on investments* - (5,946) (5,946) - (11,710) (11,710)
Income
- Overseas dividends 1,284 - 1,284 986 - 986
- Deposit interest 4 - 4 5 - 5
Investment management fee (719) - (719) (850) - (850)
Other expenses (338) - (338) (354) - (354)
Exchange gains on other 15 2,871 2,886 3 203 206
net assets
Exchange losses on loans - (9,612) (9,612) - (708) (708)
Net return/(loss) before 246 (12,687) (12,441) (210) (12,215) (12,425)
finance costs and
taxation
Interest payable (269) - (269) (202) - (202)
Net loss on ordinary (23) (12,687) (12,710) (412) (12,215) (12,627)
activities before
taxation
Taxation on loss on (89) - (89) (69) - (69)
ordinary activities **
Net losson ordinary (112) (12,687) (12,799) (481) (12,215) (12,696)
activities after taxation
for the year
Lossper ordinary share (1 (0.12p) (13.23p) (13.35p) (0.49p) (12.52p) (13.01p)
)
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.
* Losses on investments include the foreign exchange gains made on the
investments arising from the strong appreciation of the yen during the year.
The yen had increased by approximately 40% against sterling thereby
significantly improving the performance of the portfolio in sterling terms.
** This relates to overseas taxation only
FIDELITY JAPANESE VALUES PLC
Reconciliation of Movements in Shareholders' Funds
- for the year ended 31 December2008
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 17,497 (14,215) (11,860) 78,166
shareholders'
funds: 1
January 2007
Net - - - - (25,637) 13,422 - (12,215)
recognised
capital
(losses)/
gains for the
year
Repurchase of (295) - 295 (778) - - - (778)
ordinary
shares
Net revenue - - - - - - (481) (481)
loss after
taxation for
the year
Closing 24,256 44 2,075 59,591 (8,140) (793) (12,341) 64,692
shareholders'
funds:
31 December
2007
Net - - - - (15,647) 2,960 - (12,687)
recognised
capital
(losses)/
gains for the
year
Repurchase of (362) - 362 (680) - - - (680)
ordinary
shares
Net revenue - - - - - - (112) (112)
loss after
taxation for
the year
Closing 23,894 44 2,437 58,911 (23,787) 2,167 (12,453) 51,213
shareholders'
funds:
31 December 2008
FIDELITY JAPANESE VALUES PLC
Balance Sheet
- as at 31 December 2008
2008 2007
£'000 £'000
Fixed assets
Investments at fair value through profit or loss 65,324 78,122
Current assets
Debtors 1,124 392
Cash at bank 2,301 937
Cash collateral with lender 7,045 -
10,470 1,329
Creditors - amounts falling due within one year
Fixed rate unsecured loans (23,952) -
Other creditors (629) (419)
(24,581) (419)
Net current (liabilities)/assets (14,111) 910
Total assets less current liabilities 51,213 79,032
Creditors - amounts falling due after more than
one year
Fixed rate unsecured loans - (14,340)
Total net assets 51,213 64,692
Capital and reserves
Called up share capital 23,894 24,256
Share premium account 44 44
Capital redemption reserve 2,437 2,075
Other reserve 58,911 59,591
Capital reserve - realised (23,787) (8,140)
Capital reserve - unrealised 2,167 (793)
Revenue reserve (12,453) (12,341)
Total equity shareholders' funds 51,213 64,692
Net asset value per ordinary share 53.58p 66.67p
FIDELITY JAPANESE VALUES PLC
Cash Flow Statement
- for the year ended 31 December 2008
2008 2007
£'000 £'000
Operating activities
Investment income received 1,175 925
Deposit interest received 4 4
Investment management fee paid (690) (920)
Directors' fees paid (81) (60)
Other cash payments (263) (347)
Net cash inflow/(outflow) from operating activities 145 (398)
Returns on investments and servicing of finance
Interest paid (252) (200)
Net cash outflow from returns on investments and (252) (200)
servicing of finance
Financial investment
Purchase of investments (97,886) (115,268)
Disposal of investments 106,226 117,138
Net cash inflowfrom financial investment 8,340 1,870
Net cash inflow before financing 8,233 1,272
Financing
Repurchase of ordinary shares (680) (778)
Cash collateral held with lender (7,045) -
Net cash outflow from financing (7,725) (778)
Increase in cash 508 494
1. Losses per ordinary share are based on the net revenue loss on ordinary
activities after taxation of £112,000 (2007: £481,000), the capital loss in the
year of £12,687,000 (2007: £12,215,000) and the total loss in the year of £
12,799,000 (2007: £12,696,000) and on 95,878,956 ordinary shares (2007:
97,571,864) 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 2008. This
preliminary statement, which has been agreed with the auditors, was approved by
the Board on 16 March 2009. It is not the Company's statutory financial
statements. The statutory financial statements for the financial year ended 31
December 2007 have been delivered to the Registrar of Companies. The statutory
financial statements for the financial year ended 31 December 2008 have been
approved and audited but have not yet been filed. The statutory financial
statements for the financial years ended 31 December 2007 and 31 December 2008
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 9 April 2009.
Latest directors dealings
- 12 hours ago SSP Group
- 12 hours ago Real Estate Investors
- 12 hours ago WPP
- 13 hours ago Spectris
- 13 hours ago Clarkson