FIDELITY JAPANESE VALUES PLC Preliminary Announcement of Unaudited Interim Results for the six months ended 30 June 2004 Interim report Performance We, the Board and the Manager, are pleased to be able to report that during the first six months of this year, the net asset value of our ordinary shares rose by 35.0% to 81.57 pence per share, outpacing the benchmark (the Russell Nomura Mid-Small Cap Index), which rose by 15.1%. The share price rose by 45.6% to 74.25 pence per share. During the period, the Company's portfolio performed exceptionally well, producing an excellent return for shareholders, one that was better than the market by a significant margin. An analysis of performance is set out in the table below: Net asset value at 31 December 2003 60.4p Impact of rise in the Russell Nomura Index 11.5p Impact of stock selection 7.3p Impact of the change in the yen (2.8p) Impact of gearing 5.2p Net asset value at 30 June 2004 81.6p Please note that past performance is not a guide to future returns. The value of investments can go down as well as up, and may be affected by exchange rate fluctuations. The net asset value of the Company appreciated rapidly in March and the beginning of April, as increasing expectations that the recovery in the domestic economy would broaden, generated considerable interest from overseas investors. Our performance mirrored the downturn in the market in late April and early May, when concerns about surging oil prices and monetary tightening in the US and China eroded general confidence. From late May, however, our performance started to recover again and finished the half-year period in a resounding fashion. The fund manager's individual investment decisions added significant value to our performance, with internet-based services companies and retailers making the largest contributions. A sizable bias towards the retail sector also paid off, as many of the constituent companies produced significant improvements to their fiscal 2003 earnings, thanks in part to previous restructuring efforts. They now appear poised for an improvement in sales growth. During the six months under review, service-oriented companies continued to account for a large part of the Company's portfolio. A number of new additions were made in this sector, including Cyber Agent, OPT and Rakuten. Exposure to wholesale firms with improving profitability was increased. Following their strong performance, some of the positions in the retail sector were reduced during the last few weeks. The Market and Outlook After bottoming in the first quarter of 2003, Japanese equities enjoyed a 12-month rally, spurred by improving corporate fundamentals, progress in banks' efforts to write off their non-performing loans and signs that the export-driven economic recovery had spread to domestic areas. Furthermore, fiscal 2003 earnings results exceeded expectations. According to Toyo Keizai, smaller companies (TSE2 excluding financials) reported a 3.4% year-on-year increase in sales and a 33.5% jump in recurring profits. For the financial year ending March 2005, the same firms forecasted a similar increase in revenue (+3.0% year-on-year) and further double-digit profit growth (+13.8% year-on-year). The Bank of Japan's quarterly Tankan survey (released on 1 July 2004) showed that the business conditions for small manufacturing companies turned positive for the first time since December 1991. The data underlines the fact that the economic recovery, which was previously concentrated among large manufacturers, has clearly spread to other areas. Moreover, as smaller companies are by nature geared towards the domestic economy, they tend to outperform during periods of recovery. Many smaller companies involved in domestic sectors, such as real estate and construction, have continued to implement structural reforms and should see the fruits of their labour emerging during the current fiscal year. There are also a number of emerging industries, such as e-commerce and communications services, in which smaller companies are highly active. Growth in these new sectors should provide further momentum for the small-company universe. We continue to find attractive investment opportunities among smaller companies through daily company visits and the input of our extensive Tokyo-based research team. By utilising an in-depth bottom-up stock picking approach, the manager aims to identify reasonably valued shares of companies that are strengthening their competitive advantages or developing new growth businesses in order to sustain their earnings potential over the longer term. By order of the Board Fidelity Investments International 12 August 2004 Enquiries: Vicky Francis - Fidelity Investments International 01737 837929 Issued by Fidelity Investments International. Authorised and regulated by the Financial Services Authority. CB19102 FIDELITY JAPANESE VALUES PLC Statement of Total Return (incorporating the revenue account) for the six months ended 30 June 2004 for the six months for the year ended for the six months ended ended 30.06.04 31.12.03 30.06.03 unaudited audited unaudited Revenue Capital Total Revenue Capital Total Revenue Capital Total notes [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 Gains on investments 3 - 20,710 20,710 - 17,973 17,973 - 2,064 2,064 Income 4 408 - 408 657 - 657 393 - 393 Investment management fee (459) - (459) (673) - (673) (287) - (287) Other expenses (139) - (139) (266) - (266) (115) - (115) Exchange losses 5 - (136) (136) - (14) (14) - (267) (267) (Loss)/net return before finance costs and taxation (190) 20,574 20,384 (282) 17,959 17,677 (9) 1,797 1,788 Exchange gains/ (losses) on loans - 544 544 - (40) (40) - 572 572 Interest payable (131) - (131) (286) - (286) (140) - (140) (Loss)/r eturn on ordinary activities before tax (321) 21,118 20,797 (568) 17,919 17,351 (149) 2,369 2,220 Tax on ordinary activities (27) - (27) (66) - (66) (39) - (39) (Loss)/r eturn on ordinary activities after tax for the period 6 (348) 21,118 20,770 (634) 17,919 17,285 (188) 2,369 2,181 Realised gain on warrants unexercised 7, 11 - 10,197 10,197 - - - - - - Total (348) 31,315 30,967 (634) 17,919 17,285 (188) 2,369 2,181 returns (Loss)/r eturn on ordinary share 7 Basic (0.35p) 31.89p 31.54p (0.65p) 18.25p 17.60p (0.19p) 2.41p 2.22p Fully - - - - - - (0.16p) 2.01p 1.85p diluted These accounts have been prepared in accordance with the AITC Statement of Recommended Practice ("SORP") issued in January 2003. FIDELITY JAPANESE VALUES PLC Balance Sheet as at 30 June 2004 30.06.04 31.12.03 30.06.03 unaudited audited unaudited notes [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 Fixed assets Investments 95,079 72,616 54,795 Current assets Debtors - amounts falling due within 250 865 292 one year Cash at bank 2,432 3,248 5,867 2,682 4,113 6,159 Creditors - amounts falling due within one year Fixed rate unsecured loans 8 (16,117) (16,660) - Other creditors (1,536) (731) (672) (17,653) (17,391) (672) Net current (liabilities)/assets (14,971) (13,278) 5,487 Total assets less current liabilities 80,108 59,338 60,282 Creditors - amounts falling due after more than one year Fixed rate unsecured loans 8 - - (16,048) Total net assets 80,108 59,338 44,234 Capital and reserves Called up share capital 24,551 24,551 24,551 Share premium account 40 40 40 Capital redemption reserve 1,780 1,780 1,780 Other reserves Other reserve 60,369 60,369 60,369 Warrant exercise reserve 3 2 2 Warrant reserve - 10,198 10,198 Capital reserve - realised 12 (11,835) (30,687) (12,277) Capital reserve - unrealised 12 14,873 2,410 (31,550) Revenue reserve (9,673) (9,325) (8,879) Total equity shareholders' funds 80,108 59,338 44,234 Net asset value per ordinary share 9 81.57p 60.42p 45.04p The results for the six months to 30 June 2004 and 30 June 2003, which are unaudited, constitute non-statutory accounts within the meaning of s240 of the Companies Act 1985. The figures and financial information for the year ended 31 December 2003 have been extracted from the latest published accounts of the Company and do not constitute the statutory accounts for that year. Those accounts have been delivered to the Registrar of Companies and included the report of the auditors, which was unqualified and did not contain a statement under either section 237(2) or 237(3) of the Companies Act 1985. FIDELITY JAPANESE VALUES PLC Cash Flow Statement for the six months ended 30 June 2004 30.06.04 31.12.03 30.06.03 unaudited audited unaudited [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 Operating activities Investment income received 362 570 342 Interest received 2 9 4 Investment management fee (420) (631) (284) paid Directors' fees paid (47) (32) (24) Other cash payments (83) (179) (84) Net cash outflow from operating activities (186) (263) (46) Returns on investments and servicing of finance Interest paid (132) (286) (141) Net cash outflow from returns on investments and servicing (132) (286) (141) of finance Financial investment Purchase of investments (50,838) (42,489) (8,026) Exchange (losses)/gains (187) 16 (34) Disposals of investments 50,475 43,379 11,427 Net cash (outflow)/inflow from financial investment (550) 906 3,367 (Decrease)/increase in (868) 357 3,180 cash Copies of the interim report will be posted to shareholders as soon as practicable. Copies will also be available to the public from the Company's registered office, Beech Gate, Millfield Lane, Lower Kingswood, Tadworth, Surrey KT20 6RP. Notes to the Accounts 1. Accounting policies - The interim financial statements have been prepared on the basis of the accounting policies set out in the Company's annual report and accounts dated 31 December 2003. 2. Statement of Total Return - The revenue column on this statement is the profit and loss account of the Company. 3. Gains on investments - Realised and unrealised gains and losses on investments. 4. Income 30.06.04 31.12.03 30.06.03 unaudited audited unaudited Overseas dividends 406 648 389 Deposit interest 2 9 4 408 657 393 5. Exchange losses - Attributable to other assets and liabilities, excluding borrowings. 6. (Loss)/return on ordinary activities - Attributable to equity shareholders. 7. (Loss)/return per ordinary share - Basic returns per ordinary share are based on the loss on ordinary activities after taxation of [pounds sterling]348,000 (31.12.03: [pounds sterling]634,000; 30.06.03: [pounds sterling]188,000) and the capital appreciation in the period of [pounds sterling] 31,315,000 (31.12.03: [pounds sterling]17,919,000; 30.06.03: [pounds sterling]2,369,000) and on 98,206,662 ordinary shares (31.12.03: 98,206,253; 30.06.03: 98,206,253), being the weighted average number of shares in issue during the period. According to the provisions of FRS14, the fully-diluted returns have been calculated on the assumptions that the warrants in issue were converted on the first day of the financial period on a weighted average basis for the period over which they were outstanding, and that the proceeds from conversion have been used by the Company to purchase its own shares at a fair market price. The capital and total returns per ordinary share shown above include an amount of [pounds sterling]10,197,000 arising from the gain on warrants unexercised. The return from ordinary activities after tax for the period was therefore: Capital return: [pounds sterling]21,118,000; 21.50p per ordinary share Total return: [pounds sterling]20,770,000; 21.15p per ordinary share There were no warrants in issue at the period end, consequently fully-diluted returns per ordinary share have not been calculated. 8. Loan Facility - The fixed rate loan from JPMorgan Chase Bank of Yen 1,680,000,000 was drawn down on 25 November 1999 for a period of five years at a fixed rate of 2.155% per annum. If total borrowings exceed 39% of the Company's assets, sufficient money is deposited in a charged account with JPMorgan Chase Bank to reduce borrowings to below 39%. At 30 June 2004 there was no such cash deposited (31.12.03: Nil; 30.06.03: Yen 730,000,000). The release of any deposit is contingent on the borrowing ratio of the Company being reduced to 37% for a period of five consecutive business days. The fixed rate loan from JPMorgan Chase Bank of Yen 1,499,040,000 was drawn down on 27 August 2002 for a period of two years at a fixed rate of 1.05% per annum and is repayable on 13 August 2004. The Company entered into a facility with The Royal Bank of Scotland plc on 10 August 2004 for an amount of Yen 1,499,040,000 at a rate of approximately 1.565% which is expected to be drawn down in full on 13 August 2004 and is repayable on 13 August 2009. It is the Board's intention that the proceeds of the drawdown will be used to repay the loan for the same amount from JPMorgan Chase Bank. 9. Net asset value per ordinary share - The net asset value per ordinary share is based on net assets of [pounds sterling]80,108,000 (31.12.03: [pounds sterling]59,338,000; 30.06.03: [pounds sterling] 44,234,000) and on 98,207,453 (31.12.03: 98,206,253; 30.06.03: 98,206,253) ordinary shares, being the number of ordinary shares in issue at the period end. 10. Share repurchases - No shares were repurchased for cancellation during the period. 11. Exercise of warrants - On 30 April 2004, 1,200 ordinary shares of 25p per share were issued and allotted, fully paid at a price of 100p per share, following an exercise of warrants. The remaining 20,395,347 warrants expired unexercised. 12. In prior periods gains and losses on investments have been misallocated between the realised capital reserve and the unrealised capital reserve. A correction for this has been posted through reserves in the current period in accordance with accounting standards. The corrected figures for the prior periods would have been: 31 December 2003 30 June 2003 Capital Reserves- Realised ([pounds sterling]21,191,000) ([pounds sterling]8,726,000) Capital Reserves- ([pounds sterling]7,086,000) ([pounds sterling]35,101,000) Unrealised These changes do not affect the net asset value reported for the two periods and are solely a reallocation between the two reserves. 13. The results for the six months to 30 June 2004 and 30 June 2003, which are unaudited, constitute non-statutory accounts within the meaning of s240 of the Companies Act 1985. The latest published accounts for the year ended 31 December 2003, on which the auditors gave an unqualified report, have been delivered to the Registrar of Companies. END
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