Final Results
FIDELITY JAPANESE VALUES PLC
Preliminary Announcement of Results
For the year ended 31 December 2010
Chairman's Statement
For the year ended 31 December 2010
The Year's Results: NAV (undiluted) 68.44p (+12.88p; +23.2%)
The ordinary share price: 57.25p (+8.75p; +18.0%)
The subscription share price: 11.75p (+3.47p, +41.9%)
Discount: 16.4% (12.7% in 2009)
PERFORMANCE REVIEW
Over the year to 31 December 2010, your Company's net asset value increased
23.2%, outperforming the benchmark Index by 4.6 percentage points in sterling
terms.
The increase in value was primarily due to currency gains, as the yen
appreciated against sterling by 18.4% over the year. Stock selection, gearing
and the rise in the stockmarket also contributed to performance as detailed in
the attribution analysis below. The use of Contracts For Difference ("CFDs")
offered the most cost effective means of obtaining leverage in
prevailing market conditions.
Attribution Analysis
Year ended
31 December 2010
(pence)
NAV at 31 December 2009 55.56
Impact of the Index (in yen terms) 0.11
Impact of the Index Income (in yen terms) 0.97
Impact of the Exchange Rate 10.50
Impact of Stock Selection 2.13
Impact of Gearing 0.48
Impact of Charges -1.11
Cash/Residual -0.20
NAV at 31 December 2010 68.44
The Company's positive stock selection was largely attributable to holdings in
fast growing internet-related businesses and niche auto parts makers. A rapid
increase in demand for smartphones and tablet PCs created new business
opportunities for internet-based service providers. At the same time, signs of
a cyclical recovery buoyed investor confidence in automobiles and auto parts
makers. Despite a sharp appreciation of the yen, these companies were set to
report record profits thanks to growing demand from developing countries and
aggressive cost-cutting efforts.
As a result of the tragic events of the last week, referred to later in my
statement, our share price has inevitably fallen back.
MARKET REVIEW
After peaking in mid-April 2010, Japanese equities corrected sharply at the end
of August. Mounting concerns about rapid yen appreciation, the uncertain
outlook for the US economy and a lack of meaningful policy action by the
Japanese authorities depressed share prices and the Japanese market
significantly underperformed its global counterparts.
In the autumn, large scale currency intervention and additional monetary easing
by the Bank of Japan appeared to put a stop to this underperformance. However,
investor interest was short lived and share prices tailed off under pressure
from further yen appreciation.
It was the advent of further quantitative easing in the US in the first week of
November that proved to be the key turning point for the Japanese market.
Expectations of a brighter outlook for the US economy led to a reversal in the
yen and a subsequent rebound in share prices. Thereafter, comparatively stable
overseas economic data, robust interim earnings, the announcement by the
Japanese government of a 5% cut in the rate of corporation tax and an extended
tax break on securities investment contributed to a further upswing in share
prices.
Meanwhile, overseas investors, encouraged by the reversal in the yen, stepped
up their net purchases of Japanese stocks. December marked a fourth consecutive
month of net buying and total purchases for the year sharply exceeded the 2009
level.
Over the year, the performance of mid/small-cap stocks compared favourably with
that of larger companies. A recovery in corporate earnings became clear from
the middle of the 2009 fiscal year and smaller companies appeared undervalued.
GEARING
The Company gears through the use of CFDs. Total portfolio exposure was £80.14m
as at the year end, equating to gearing of 22.4%.
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. He 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, Nicholas Barber is subject
to re-election at the forthcoming Annual General Meeting. He has proved to be a
most diligent member of the Board and has discharged his duties as Senior
Independent Director conscientiously. The Board recommends to shareholders that
they vote in favour of the proposal.
I have also been on the Board for more than nine years 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, and following an evaluation of their performance by their fellow
Directors and on the other Directors' recommendation, Philip Kay and David
Miller will seek re-election at the forthcoming Annual General Meeting. They
both continue to provide an invaluable contribution to the direction of the
Company.
It is my intention to step down from the Board at the conclusion of the
business of the Annual General Meeting in 2012 and Nicholas Barber has
indicated his intention to retire later that year. In preparation for this, and
following a review of Board composition, we were pleased to welcome Sir Laurie
Magnus and David Robins to the Board on 1 October 2010 and 1 February 2011
respectively. Their experience in financial matters and investment trusts is
well suited to the Company's needs and their previous exposure to Asia and
Japan respectively is most pertinent.
Although the appointment of two new non-executive Directors leads to a
temporary increase in the size of the Board, it ensures sufficient scope for
succession planning. Having been appointed during the course of the year, both
will seek election to the Board at this year's Annual General Meeting and the
Board is happy to recommend the proposals. It is the Board's intention to
appoint Sir Laurie Magnus to the position of Audit Committee Chairman at the
conclusion of the business of the Annual General Meeting in 2011.
The Directors have a wide range of appropriate skills and experience to make up
a balanced Board for your Company.
I have, together with representatives of the Manager (including Shinji Higaki)
and the Company's broker, continued to hold meetings with shareholders during
the year.
SUBSCRIPTION SHARES
The rights attaching to a total of 107,067 subscription shares were exercised
during the year ended 31 December 2010, at which point the total number of
subscription shares in issue was 19,008,314. Since the year end the rights
attaching to a further 1,612,509 subscription shares have been exercised.
Further details on the subscription shares may be found in the Directors'
Report.
SHARE REPURCHASES
Purchases of ordinary and subscription shares for cancellation are made at the
discretion of your Board and within guidelines set from time to time by the
Board in the light of prevailing market conditions. Share repurchases will only
be made when they will result in an enhancement to the net asset value of
ordinary shares for the remaining shareholders. In recent years share
repurchases have been used sparingly due to their impact on liquidity and
gearing. Your Board continues to believe that the ability to repurchase shares
is a valuable tool and therefore a resolution to renew your Company's authority
to repurchase shares will be proposed at the forthcoming Annual General
Meeting.
ANNUAL GENERAL MEETING - 12 MAY 2011
The Annual General Meeting will be held at midday on 12 May 2011 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 the Directors and the Portfolio Manager. Following the meeting the
Portfolio Manager will give a presentation on the past year and the prospects
for the current year.
OUTLOOK
The horrific pictures that we have seen of the devastating effects of the
Sendai earthquake and subsequent tsunami confirm to us all that our thoughts
should be with the people of Japan. We are confident that their natural
resilience will prevail during these difficult times. Fortunately, Fidelity's
Tokyo office has not been directly impacted and the personnel are working to
ensure that a normal level of service is provided. Contingency plans are in
place if the situation should worsen in any way.
It is extremely difficult to write an outlook so close to the events. Although
it appears that most companies in our portfolio have little direct exposure to
the heavily affected region, the disruptions to infrastructure, transport and
power are of serious concern. In particular this applies to the nuclear
problems.
At the time of writing, the Bank of Japan has demonstrated its willingness to
support the Japanese economy by injecting liquidity into money markets and
increasing the size of its asset purchase programme. These moves have been
welcomed although concerns have been raised regarding the Japanese government's
increasing debt position.
The disaster came at a time when the outlook for Japan was starting to look
more positive, for the reasons set out in the Manager's Review in the Annual
Report. We hope that, despite the effects of the disaster, this improved state
of affairs will return soon. The Board considers that it is important to retain
perspective when considering the outlook and to maintain a long term view
supporting long term investment in Japan.
William Thomson
Chairman
18 March 2011
Enquiries:
Chris Davies, FIL Investments International - 01737 837 723
Rebecca Burtonwood, FIL Investments International, Company Secretary - 01737
836 869
FIDELITY JAPANESE VALUES PLC
Income Statement
for the year ended 31 December 2010
2010 2009
revenue capital total revenue capital total
£'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on - 10,584 10,584 - (668) (668)
investments designated at
fair value through profit
or loss
Net gains on derivative - 1,562 1,562 - 1,694 1,694
instruments held at fair
value through profit or
loss
Income
- Overseas dividends 838 - 838 920 - 920
- Dividends on long 250 - 250 6 - 6
Contracts For Difference
Investment management fee (760) - (760) (682) - (682)
Other expenses (458) - (458) (639) - (639)
Exchange (losses)/gains (24) 466 442 2 (1,419) (1,417)
on other net assets
Exchange gains on loans - - - - 2,980 2,980
Net (loss)/return before (154) 12,612 12,458 (393) 2,587 2,194
finance costs and
taxation
Finance costs (75) - (75) (239) - (239)
Net (loss)/return on (229) 12,612 12,383 (632) 2,587 1,955
ordinary activities
before taxation
Taxation on (loss)/return (58) - (58) (64) - (64)
on ordinary activities *
Net (loss)/returnon (287) 12,612 12,325 (696) 2,587 1,891
ordinary activities after
taxation for the year
(Loss)/returnper ordinary (0.30p) 13.19p 12.89p (0.73p) 2.71p 1.98p
share (1)
A Statement of Total Recognised Gains and Losses has not been prepared as there
are no gains and losses other than those reported in this Income Statement.
The total column of the Income Statement is the profit and loss account of the
Company. All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued in the year.
* This relates to overseas taxation only
FIDELITY JAPANESE VALUES PLC
Reconciliation of Movements in Shareholders' Funds
for the year ended 31 December2010
share share capital other capital revenue total
premium redemption reserve reserve reserve equity
capital account reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Opening 23,894 44 2,437 58,911 (21,620) (12,453) 51,213
shareholders'
funds:
1 January 2009
Net recognised - - - - 2,587 - 2,587
capital gains for
the year
Bonus issue of 956 - - (956) - - -
subscription shares
Net revenue loss - - - - - (696) (696)
after taxation for
the year
Closing 24,850 44 2,437 57,955 (19,033) (13,149) 53,104
shareholders'
funds:
31 December 2009
Net recognised - - - - 12,612 - 12,612
capital gains for
the year
Exercise of rights (5) 5 - - - - -
attached to
subscription shares
and conversion into
ordinary shares
Issue of ordinary 27 32 - - - - 59
shares on exercise
of rights attached
to subscription
shares
Net revenue loss - - - - - (287) (287)
after taxation for
the year
Closing 24,872 81 2,437 57,955 (6,421) (13,436) 65,488
shareholders'
funds:
31 December 2010
FIDELITY JAPANESE VALUES PLC
Balance Sheet
as at 31 December 2010
2010 2009
£'000 £'000
Fixed assets
Investments designed at fair value through profit 62,564 49,743
or loss
Current assets
Derivative assets held at fair value through 2,339 1,692
profit or loss
Debtors 191 926
Cash at bank 1,237 2,403
3,767 5,021
Creditors
Derivative liabilities held at fair value through (363) (101)
profit or loss
Other creditors (480) (1,559)
(843) (1,660)
Net current assets 2,924 3,361
Total net assets 65,488 53,104
Capital and reserves
Share capital 24,872 24,850
Share premium account 81 44
Capital redemption reserve 2,437 2,437
Other reserve 57,955 57,955
Capital reserve (6,421) (19,033)
Revenue reserve (13,436) (13,149)
Total equity shareholders' funds 65,488 53,104
Net asset value per ordinary share
Basic 68.44p 55.56p
Diluted 66.21p 55.47p
FIDELITY JAPANESE VALUES PLC
Cash Flow Statement
for the year ended 31 December2010
2010 2009
£'000 £'000
Operating activities
Investment income received 780 906
CFD dividends received 238 -
Investment management fee paid (733) (696)
Directors' fees paid (104) (94)
Other cash payments (405) (489)
Net cash outflow from operating activities (224) (373)
Servicing of finance
Interest paid on CFDs and bank loans (80) (273)
Net cash outflow from servicing of finance (80) (273)
Financial investment
Purchase of investments (76,205) (90,680)
Disposal of investments 74,025 106,195
Net cash (outflow)/inflowfrom financial investment (2,180) 15,515
Derivative activities
Proceeds of derivatives instruments 1,176 103
Net cash inflow from derivative instruments 1,176 103
Net cash (outflow)/inflow before financing (1,308) 14,972
Financing
Exercise of rights attached to subscription shares 58 -
1.565% fixed rate unsecured loan repaid - (9,475)
1.34% fixed rate unsecured loan repaid - (11,497)
Cash collateral held with lender - 7,045
Net cash inflow/(outflow) from financing 58 (13,927)
(Decrease)/Increase in cash (1,250) 1,045
1. Basic (losses)/returns per ordinary share are based on the revenue loss on
ordinary activities after taxation in the year of £287,000 (2009: £
696,000), the capital return in the year of £12,612,000 (2009: £2,587,000)
and the total return in the year of £12,325,000 (2009: £1,891,000) and on
95,653,233 ordinary shares (2009: 95,577,453) being the weighted average
number of ordinary shares in issue during the year.
There is no dilution (2009: none) of the (losses)/returns per ordinary share
because the average ordinary share price for the year was below the exercise
price of the subscription shares.
The above statements have been prepared on the basis of the accounting policies
as set out in the financial statements in the annual report to 31 December
2010. This preliminary statement, which has been agreed with the Auditor, was
approved by the Board on 18 March 2011. It is not the Company's statutory
financial statements. The statutory financial statements for the financial
year ended 31 December 2009 have been delivered to the Registrar of Companies.
The statutory financial statements for the financial year ended 31 December
2010 have been approved and audited but have not yet been filed. The statutory
financial statements for the financial years ended 31 December 2009 and 31
December 2010 received unqualified audit reports, did not include a reference
to any matters to which the Auditor drew attention by way of emphasis without
qualifying the report and did not contain statements under section 498(2) and
(3) of the Companies Act 2006.
The annual report and financial statements will be posted to shareholders as
soon as is practicable and in any event no later than 7 April 2011.
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