Interim Results
ATLANTIS JAPAN GROWTH FUND LIMITED
(“AJGF†or the “Companyâ€)
(A closed-ended investment company incorporated in Guernsey with registration number 30709)
Interim Results for the six months ended 31st October 2015
16 December 2015
The financial information set out in this announcement does not constitute the Company’s statutory accounts for the period ending 31st October 2015.
The financial information for the period ended 31st October 2015 is derived from the financial statements delivered to the UK Listing Authority.
The interim report and financial statements period ended 31st October 2015 will shortly be posted to shareholders and will also be available on the company website: www.atlantisjapangrowthfund.com
Introduction
INVESTMENT OBJECTIVE
Atlantis Japan Growth Fund Limited (the “Companyâ€) aims to achieve long term capital growth through investment wholly or mainly in listed Japanese equities.
INVESTMENT POLICY
The Company may invest up to 100 per cent of its gross assets in companies quoted on any Japanese stock exchange including, without limitation, the Tokyo Stock Exchange categorised as First Section, Second Section, JASDAQ, Mothers and Tokyo PRO, or the regional stock exchanges of Fukuoka, Nagoya, Sapporo and Osaka Securities Exchange.
The Company may also invest up to 20 per cent of its Net Asset Value (the “NAVâ€) at the time of investment in companies listed or traded on other stock exchanges but which are either controlled and managed from Japan or which have a material exposure to the Japanese economy.
The Company may also invest up to 10 per cent of its NAV at the time of investment in securities which are neither listed or traded on any stock exchange or over-the-counter market.
In general, investment will be through investments in equity shares in, or debt issued by, investee companies. However, the Company may also invest up to 20 per cent of its NAV at the time of investment in equity warrants and convertible debt.
The Company will not invest in more than 10 per cent of any class of securities of an investee company. The Company will not invest in derivative instruments save for the purpose of efficient portfolio management.
The Company may borrow, with a view to enhancing capital returns, up to a maximum of an amount not exceeding 20 per cent of NAV at the time of borrowing.
Investment Policy for the Redemption Pool
In advance of each redemption point the Company notionally allocates assets and liabilities into a separate pool (the "redemption pool") for the purpose of funding valid redemption requests for that redemption point. With regard to the redemption pool, the Company aims to liquidate the necessary assets to meet qualifying redemption requests in a timely manner, and to minimise the impact that such redemptions will have to existing shareholders and the Company as a whole.
INVESTMENT MANAGER AND INVESTMENT ADVISER
Tiburon Partners LLP has been appointed as Investment Manager of the Company.
Atlantis Investment Research Corporation, (“AIRCâ€) has been appointed as Investment Adviser of the Company. AIRC, established in Tokyo, will, through Edwin Merner and his colleagues, advise the Investment Manager on the day-to-day conduct of the Company’s investment business, the role it has played since the launch of the Company in May 1996.
Investment Adviser’s Interim Report
For the six months ended 31st October 2015
PERFORMANCE
The Japanese Stock Markets were strong through spring and into summer but were then hit by profit taking with overseas investors, who had been aggressive buyers earlier in the year, moving to the sell side pushing the market lower, especially in August and September. However in October the markets rallied resulting in sharply higher prices but even so the Topix was down 2.69% and the Company’s Net Asset Value per share fell 2.95% for the six month period ended 30th October 2015. During the last 12 months the Company’s Net Asset Value per share is up 10.08% compared with a gain of 10.04% for the Topix. For the last three years the Company’s Net Asset Value per share is up 60.16% which compares with a gain of 47.11% for the Topix. Note all figures are calculated in US dollars and on a total return basis.
At the end of October 2015 borrowings totalled ¥1.25 billion ($10.36 million) and cash stood at around ¥259 million ($2.16 million) which indicates that the Company’s net gearing was around 9.1%. The JPY ended the period at ¥120.66 compared with ¥118.90 at the end of April 2015, a loss of 1.46%. The Company continues to have no foreign exchange hedges.
The Company ended the period with 92 holdings compared with 80 holdings at the end of April and has no exposure to bonds, convertible bonds, or derivatives of any kind and, excluding cash, is invested entirely in listed Japanese companies.
MARKET COMMENT AND INVESTMENT STRATEGY
The Abe government continues to pump money into the economy and the current easy money policy is expected to continue for some time. However, economic growth remains somewhat disappointing. Consumer spending is patchy with department and convenience store and supermarket sales up in some months and down in others, perhaps partly due to the weather. However wages are slowly rising, bonuses are up, the unemployment rate remains at the lowest level in years and most companies will be aggressively expanding their work force next spring hiring the largest number of new graduates in many years.
Inflation remains at a very low level, in fact the government believes some inflation would be positive since it would encourage consumer spending and help boost GDP growth. Private capital investments seem to be creeping higher. Housing seems to be improving and, as mentioned previously, government spending is expected to remain at a high level helped by the Bank of Japan’s easy monetary policy.
For the current year ending March 2016 the Investment Adviser is expecting GDP growth in the order of 1% increasing to around 1.5% the following year. Corporate earnings continue to rise and, for the year ending next March, are expected to be in the 10-13% range and continue to climb during the following year.
Valuations remain undemanding in terms of price-earnings ratio, price to book ratio, and real dividend yield and there are still many stocks selling at very attractive levels. Overseas investors, who account for 60-70% of daily trading volume, were on the buy-side in May but were big sellers during the following few months and then moved back to the buy-side in October. The Investment Adviser expected that events in China and Southeast Asia, or slower than expected growth in the US and selling in many major stock markets might lead to net selling by overseas investors and might also result in lower Tokyo stock prices. However it was encouraging that local investors, both individuals and institutional investors and corporations, were at times net buyers during the period, often buying when overseas investors were selling.
The Investment Adviser anticipates that the market will continue to be impacted by the trend of the JPY (a sideways to weaker yen is perceived as positive) net buying or selling by overseas investors, trends in China, Southeast Asia, and the US and Europe and the ups and downs of the major world stock markets, economic trends including corporate earnings, and of course geopolitical events.
At this time the Investment Adviser remains cautiously optimistic on the outlook of the Japanese Stock Market and would expect to remain fully invested.
The investment strategy remains unchanged and the Investment Adviser will continue to buy growing companies including some cyclical growth companies and recovery situations. The aim is to invest in companies with above average earnings growth prospects that can maintain a high level of growth for the next several years or longer.
The team members of the Investment Adviser are based in Japan and continue to place emphasis on company visits including interviews with management. The Investment Adviser believes that one of its major competitive advantages is that it has a professional group continuously visiting Japanese companies. All kinds of companies are visited ranging from very big to very small – involved in all kinds of businesses. Little attention is paid to short term stock market trends or sector allocation. The approach remains very bottom-up and the Investment Adviser is constantly on the lookout for new ideas as well as trying to find undervalued growing companies.
Atlantis Investment Research Corporation
December 2015
Directors’ Interim Report and Statement of Directors Responsibilities
The Directors are pleased to present their interim Report and the Unaudited Financial Statements of the Company for the six month period ended 31st October 2015.
In the opinion of the Company’s Directors, the condensed Directors’ Interim Report enables investors to make an informed assessment of the results and activities of the company for the period. The Interim Report and Financial Statements are unaudited.
CAPITAL VALUES
At 31st October 2015 the value of net assets available to shareholders was $90,182,773 (30th April 2015 - $93,509,272) and the Net Asset Value per share was $2.24/£1.46 (30th April 2015 - $2.31/£1.50).
These capital values are inclusive of the redemption on 30th September 2015 for $1,156,431 (see note 11).
PRINCIPAL RISKS AND UNCERTANTIES
As an investment trust, the Company invests in securities for the long term. The financial investments held as assets by the Company consist of equity shares (see the Schedule of Investments for a breakdown). As such, the holding of securities, investing activities and financing associated with the implementation of the investment policy involves certain inherent risks. Events may occur that could result in either a reduction in the Company’s net assets or a reduction of revenue profits available for distribution.
Set out below are the principal risks inherent in the Company’s activities along with the actions taken to manage them. The Board reviews and agrees policies for managing these risks and these policies have remained substantially unchanged since 30th April 2006.
Performance
The Board regularly monitors the Company’s investment performance against a number of indices and the peer group.
Discount
A disproportionate widening of the discount relative to the Company’s peers could result in loss of value for shareholders. The Board reviews the discount level regularly. The introduction of the Redemption Facility has improved the liquidity in the Company’s shares and helps to narrow the discount to the NAV at which the shares trade.
The Company operates a shareholder approved discount control mechanism whereby the Company will hold a continuation vote if the shares have traded, on average, at a discount of more than 10% to the Net Asset Value per share during any rolling 90 day period, in normal market conditions. If the obligation to hold a continuation vote is triggered, the vote will be held no later than the next practicable annual general meeting of the Company. As of the date of this report, the continuation vote has not been triggered.
Regulatory
The Company operates in a complex regulatory environment and faces a number of regulatory risks. Breaches of regulations, such as Section 1158 of the Corporation Tax Act 2010, The Companies (Guernsey) Law, 2008 and the UKLA Listing Rules, could lead to a number of detrimental outcomes and reputational damage. Section 1158 qualification criteria are continually monitored. The Board relies on the services of the Administrator, Northern Trust International Fund Administration Services (Guernsey) Limited and its professional advisers to ensure compliance with The Companies (Guernsey) Law, 2008 and the UKLA Listing Rules.
Operational
Like most other investment trust companies, the Company has no employees. The Company therefore relies upon the services provided by third parties and is dependent on the control systems of the Investment Manager, Investment Adviser and the Company’s Administrator. The security, for example, of the Company’s assets, dealing procedures, accounting records and maintenance of regulatory and legal requirements depends on the effective operation of these systems. These are regularly tested and monitored.
Market risk
Market risk arises mainly from uncertainty about future prices of financial instruments used in the Company’s business. It represents the potential loss the Company might suffer through holding market positions in the face of price movements.
The market risk is monitored by the Board on a quarterly basis and on a daily basis by the Investment Manager.
Currency risk
The Company’s results for the period and net assets could be significantly affected by currency movements as most of the Company’s assets are denominated in Japanese yen (“JPYâ€). In order to reduce this risk the Company may hedge its exposure to the JPY. The Company did not have any hedging arrangements in place at the period end.
Borrowing and Interest rate risk
The Company finances its operations mainly through its share capital and retained profits, including realised and unrealised capital profits. Additional bank borrowings may be used with a view to enhancing capital returns. However, the Company’s Articles of Association provide that borrowing levels should not exceed 20% of Net Asset Value at the time any borrowing is effected. The level of net borrowing as at 31st October 2015 was 9.1%, and as at 30th April 2015 was 9.8%.
The credit facility for ¥1,250,000,000 was rolled over every three months in accordance with its terms most recently on 9th October 2015.
Liquidity risk and cash flow risk
Assuming a normal market environment, the majority of the Company's assets comprise readily realisable securities, which can be sold to meet funding commitments as necessary. As at 31st October 2015 based on the assumption of one third of the volume for the last 3 months average volume, 71.5% of the Company's assets can be realised within two weeks, 19.0% can be realised between two weeks and one month and the remaining 9.5% in excess of one month.
GOING CONCERN
The Directors believe that the Company has adequate resources to continue in operational existence for the foreseeable future. Whilst the Company’s current liabilities exceed its current assets the Directors do not believe this represents a liquidity risk as the Company has invested in listed and readily realisable investments. Whilst the Company may be obliged to hold a continuation vote in accordance with its discount control mechanism, the Directors do not believe this should automatically trigger the adoption of a non-going concern basis in line with AIC Statement of Recommended Practice which states that it is more appropriate to prepare financial statements on a going concern basis unless a continuation vote has already been triggered and shareholders have voted against continuation. Therefore, the Directors believe the use of the going concern basis is appropriate as there are no material uncertainties relating to events or conditions that may cast significant doubt about the ability of the Company to continue to meet its ongoing obligations.
BOARD COMPOSITION
There were no changes to the Board during the period.
SUBSCRIPTION RIGHTS ISSUE
The Directors note that global markets fell shortly before the Subscription Rights exercise date and this resulted in a reduced take up.
The Directors have reviewed the five year programme and believe it should be allowed to continue for the current year.
DIRECTORS’ RESPONSIBILITY STATEMENT
The Directors confirm to the best of their knowledge that:
- the condensed set of interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting.;
- as required by DTR 4.2.7R of the FCA’s Disclosure and Transparency Rules, the interim management report includes a fair review of important events that have occurred during the first six months of the financial year and their impact on the condensed set of interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
- the interim financial statements includes a fair review of the information concerning related party transactions required by DTR 4.2.8R
Approved by the Board
Noel Lamb Andrew Martin Smith
Chairman Director
15th December 2015
Details of Ten Largest Investments
As at 31st October 2015 the ten largest investments comprise a fair value of $25,107,951 (30th April 2015: $26,601,745) representing 27.9% of Net Asset Value (30th April 2015: 28.4%) with details as below:
Tokio Marine Holdings (94,500 shares, cost $3,014,982)
One of Japan’s leading insurance companies, Tokio has now entered the life insurance business and has expanded overseas business with overseas sales expected to exceed 50% of total sales in the near term. An expected decrease in the combined loss ratio and expanding new premiums written should result in steadily rising sales and earnings in coming years.
Fair value of $3,674,892 representing 4.1% of the Net Asset Value (30th April 2015: 4.2%)
Ai Holdings (122,000 shares, cost $1,743,848)
Ai has several businesses including security surveillance equipment installed in apartments, lobbies, hallways, elevators and parking garages. The company offers a competitive service and has been rapidly gaining market share. The company is also involved in cutting machines for hobby use, issuing cards for hospital patient and credit use. The company has been successful in taking over poorly run companies and then growing their businesses. The Investment Adviser expects continued high growth in coming years.
Fair value of $2,989,964 representing 3.3% of the Net Asset Value (30th April 2015: 2.7%)
Macnica Fuji Holdings (205,000 shares, cost $2,622,776)
Macnica recently acquired Fuji and is engaged in the distribution of electronic parts including ICs, PLDs, and a wide range of other parts used in both consumer and industrial electronics. In recent years, overseas sales have been expanding and the Investment Adviser thinks this trend will continue as more and more Japanese manufacturers increase their offshore production.
Fair value of $2,776,264 representing 3.1% of the Net Asset Value (30th April 2015: 1.8%)
Lintec Corp (108,400 shares, cost $2,267,315)
The company manufactures a wide range of tapes used in packaging. In recent years the company has been increasing production and sales of adhesive materials used in optical products including LCDs and PLDPs. Lintec is also producing materials used in the production of solar batteries.
Fair value of $2,561,423 representing 2.8% of the Net Asset Value (30th April 2015: 2.6%)
Hard Off Corporation (194,100 shares, cost $1,749,942)
The company runs several chain stores selling used goods including clothing, books and electrical appliances. The company also has franchise stores and has been steadily growing sales in recent years as Japanese consumers become more and more interested in recycling. Most stores are located in major population areas in Japan.
Fair value of $2,467,776 representing 2.7% of the Net Asset Value (30th April 2015: 0.9%)
Senko Co. (324,000 shares, cost $1,654,253)
Senko is a trucking company distributing a wide range of industrial goods including construction materials, chemicals and resins. The company also distributes goods for some of Japan’s major department stores. Senko also operates several distribution centres.
Fair value of $2,258,374 representing 2.5% of the Net Asset Value (30th April 2015: 2.0%)
Sakai Moving Service (45,000 shares, cost $1,100,330)
Sakai is one of Japan’s major moving companies and is strong in helping individuals moving to new homes or apartments and operates a nationwide sales system. The Investment Adviser expects the company to continue to gain market share over the longer terms as it opens new offices and increases staff.
Fair value of $2,256,434 representing 2.5% of the Net Asset Value (30th April 2015: 2.9%)
Hito Communications (93,200 shares, cost $858,288)
Hito is an outsourcing company specializing in providing well trained staff for stores selling electronics goods, mostly electronic discount stores. The company is also now supplying staff to several clothing chains. The economy is recovering and some of Hito’s customers should do well as consumer spending climbs which in turn will help lift the company’s sales and earnings.
Fair value of $2,049,311 representing 2.3% of the Net Asset Value (30th April 2015: 2.8%)
Raito Kogyo (212,400 shares, cost $1,929,005)
Raito is a specialized construction company that is involved in landslide protection for roads of all sorts, tunnel waterproofing, and specialized civil engineering including maintenance for roads and tunnels. The company is now benefiting from strong demand including maintenance related work.
Fair value of $2,049,096 representing 2.3% of the Net Asset Value (30th April 2015: 1.8%)
Ryobi Ltd (544,000 shares, cost $1,793,118)
The company is involved in several businesses including manufacturing die casts sold to both local and overseas auto companies. Ryobi also produces door closers, electric tools including drills, and is also making small and medium sized printing equipment.
Fair value of $2,024,417 representing 2.3% of the Net Asset Value (30th April 2015: 1.4%)
Unaudited Schedule of Investments
| Fair Value | ||||||||||
| Holdings | Investments held at fair value through profit or loss | $'000 | % of NAV | |||||||
| Advertising: 1.79% (30th Apr 2015: 0.60%) | ||||||||||
| 121,400 | Hakuten | 497 | 0.55 | |||||||
| 103,000 | Tow | 693 | 0.77 | |||||||
| 250,000 | Tyo | 425 | 0.47 | |||||||
| Auto Parts & Equipment: 0.59% (30th Apr 2015: 2.32%) | ||||||||||
| 45,000 | Seiren | 533 | 0.59 | |||||||
| Banks: 2.97% (30th Apr 2015: 3.20%) | ||||||||||
| 39,400 | Sumitomo Mitsui Financial Group | 1,587 | 1.76 | |||||||
| 281,000 | Sumitomo Mitsui Trust | 1,089 | 1.21 | |||||||
| Building Materials: 1.37% (30th Apr 2015: 0.69%) | ||||||||||
| 191,800 | Toyo Shutter | 1,234 | 1.37 | |||||||
| Chemicals: 9.81% (30th Apr 2015: 10.08%) | ||||||||||
| 77,100 | Atect | 627 | 0.71 | |||||||
| 100,000 | Kinugawa Rubber Industrial | 563 | 0.63 | |||||||
| 108,400 | Lintec | 2,561 | 2.84 | |||||||
| 7,200 | MEC | 43 | 0.05 | |||||||
| 305,900 | Mitsubishi Chemical | 1,928 | 2.14 | |||||||
| 95,000 | Nicca Chemical | 783 | 0.87 | |||||||
| 220,000 | Osaka Organic Chemical Industry | 1,145 | 1.27 | |||||||
| 100,600 | Yushiro Chemical Industry | 1,170 | 1.30 | |||||||
| Commercial Services: 6.82% (30th Apr 2015: 10.64%) | ||||||||||
| 177,500 | Gakujo | 1,577 | 1.75 | |||||||
| 93,200 | Hito Communications | 2,049 | 2.27 | |||||||
| 46,500 | Kanamoto | 945 | 1.05 | |||||||
| 76,900 | Mainichi Comnet | 730 | 0.81 | |||||||
| 20,400 | Nihon M&A Center Inc | 847 | 0.94 | |||||||
| Computers: 1.79% (30th Apr 2015: 3.03%) | ||||||||||
| 210,400 | Information Development | 1,615 | 1.79 | |||||||
| Distribution/Wholesale: 4.54% (30th Apr 2015: 4.05%) | ||||||||||
| 122,000 | Ai Holdings | 2,990 | 3.32 | |||||||
| 150,000 | Morito | 1,097 | 1.22 | |||||||
| Diversified Financial Services: 8.25% (30th Apr 2015: 8.76%) | ||||||||||
| 30,300 | IBJ Leasing | 644 | 0.71 | |||||||
| 639,500 | Ichigo | 1,664 | 1.85 | |||||||
| 51,900 | Imamura Securities | 623 | 0.69 | |||||||
| 108,600 | Kyokuto Securities | 1,408 | 1.56 | |||||||
| 280,000 | Mito Securities | 924 | 1.02 | |||||||
| 298,800 | Tokai Tokyo Financial | 1,835 | 2.03 | |||||||
| 38,400 | UCS | 354 | 0.39 | |||||||
| Electronics: 7.02% (30th Apr 2015: 6.31%) | ||||||||||
| 134,500 | Kyowa Electronics Instruments | 499 | 0.55 | |||||||
| 205,000 | Macnica Fuji Electronics | 2,776 | 3.08 | |||||||
| 73,800 | Marubun | 535 | 0.59 | |||||||
| 25,000 | Panasonic Industrial Devices SUNX | 138 | 0.15 | |||||||
| 205,000 | Sumida | 1,380 | 1.53 | |||||||
| 200,000 | Suzuki | 1,013 | 1.12 | |||||||
| Engineering & Construction: 2.27% (30th Apr 2015: 2.35%) | ||||||||||
| 212,400 | Raito Kogyo | 2,049 | 2.27 | |||||||
| Food: 0.80% (30th Apr 2015: 0.23%) | ||||||||||
| 30,000 | Halows | 722 | 0.80 | |||||||
| Gas: 0.00% (30th Apr 2015: 0.62%) | - | - | ||||||||
| Hand/Machine Tools: 0.00% (30th Apr 2015: 1.28%) | - | - | ||||||||
| Healthcare-Products: 3.60% (30th Apr 2015: 0.72%) | ||||||||||
| 20,000 | Cyberdyne | 249 | 0.28 | |||||||
| 68,000 | Mani | 1,245 | 1.38 | |||||||
| 134,100 | Shofu | 1,748 | 1.94 | |||||||
| Home Builders: 0.71% (30th Apr 2015: 0.00%) | ||||||||||
| 38,000 | Sekisui House | 638 | 0.71 | |||||||
| Home Furnishings: 0.59% (30th Apr 2015: 1.08%) | ||||||||||
| 45,000 | Panasonic | 535 | 0.59 | |||||||
| Insurance: 6.84% (30th Apr 2015: 6.46%) | ||||||||||
| 48,700 | Newton Financial Consulting | 536 | 0.59 | |||||||
| 147,600 | T&D | 1,960 | 2.17 | |||||||
| 94,500 | Tokio Marine Holdings | 3,675 | 4.08 | |||||||
| Internet: 2.45% (30th Apr 2015: 1.41%) | ||||||||||
| 32,000 | Hamee | 695 | 0.77 | |||||||
| 140,300 | Matsui Securities | 1,248 | 1.38 | |||||||
| 40,400 | Morningstar Japan | 101 | 0.11 | |||||||
| 22,600 | Tea Life | 175 | 0.19 | |||||||
| Leisure Time: 1.55% (30th Apr 2015: 1.41%) | ||||||||||
| 300,000 | Tokyo Dome | 1,402 | 1.55 | |||||||
| Lodging: 1.69% (30th Apr 2015: 1.31%) | ||||||||||
| 604,000 | Royal Hotel | 1,527 | 1.69 | |||||||
| Machinery-Construction & Mining: 1.33% (30th Apr 2015: 1.25%) | ||||||||||
| 114,000 | Mitsubishi Electric | 1,200 | 1.33 | |||||||
| Machinery-Diversified: 4.74% (30th Apr 2015: 5.47%) | ||||||||||
| 112,800 | Aida Engineering | 1,085 | 1.20 | |||||||
| 100,000 | CKD | 918 | 1.02 | |||||||
| 100,000 | Nittoku Engineering | 921 | 1.02 | |||||||
| 260,000 | Pegasus Sewing Machine Manufacturing | 1,047 | 1.16 | |||||||
| 80,000 | Yamashin-Filter | 309 | 0.34 | |||||||
| Media: 0.95% (30th Apr 2015: 0.97%) | ||||||||||
| 103,300 | Nippon BS Broadcasting | 857 | 0.95 | |||||||
| Metal Fabricate/Hardware: 4.68% (30th Apr 2015: 2.48%) | ||||||||||
| 65,000 | Alinco | 617 | 0.68 | |||||||
| 170,700 | Okada Aiyon | 1,582 | 1.75 | |||||||
| 544,000 | Ryobi | 2,024 | 2.25 | |||||||
| Miscellaneous Manufacturing: 0.22% (30th Apr 2015: 5.53%) | ||||||||||
| 25,000 | Kito Corp | 200 | 0.22 | |||||||
| Office Furnishings: 0.20% (30th Apr 2015: 0.00%) | ||||||||||
| 25,000 | Itoki | 183 | 0.20 | |||||||
| Pharmaceuticals: 0.11% (30th Apr 2015: 0.07%) | ||||||||||
| 2,600 | Medical Ikkou | 96 | 0.11 | |||||||
| Real Estate: 7.01% (30th Apr 2015: 9.29%) | ||||||||||
| 425,000 | Arealink | 518 | 0.57 | |||||||
| 13,500 | Housecom | 188 | 0.21 | |||||||
| 100,000 | Japan Property Management Center | 1,022 | 1.13 | |||||||
| 260,800 | Keihanshin Building | 1,450 | 1.61 | |||||||
| 26,600 | Pressance | 1,070 | 1.19 | |||||||
| 60,000 | Seibu Holdings | 1,224 | 1.36 | |||||||
| 64,400 | Toubu Jyuhanco | 851 | 0.94 | |||||||
| Retail: 9.50% (30th Apr 2015: 9.60%) | ||||||||||
| 55,000 | Amiyaki Tei | 1,960 | 2.17 | |||||||
| 194,100 | Hard Off Corp | 2,468 | 2.74 | |||||||
| 54,000 | HUB | 866 | 0.96 | |||||||
| 178,600 | Misawa | 1,063 | 1.18 | |||||||
| 207,700 | Nextage | 1,424 | 1.58 | |||||||
| 21,000 | St Marc | 627 | 0.70 | |||||||
| 110,000 | Watt Mann | 153 | 0.17 | |||||||
| Semiconductors: 1.34% (30th Apr 2015: 0.00%) | ||||||||||
| 20,900 | Samco | 161 | 0.18 | |||||||
| 48,000 | Tera Probe | 465 | 0.52 | |||||||
| 38,000 | Thine Electronics | 575 | 0.64 | |||||||
| Software: 1.01% (30th Apr 2015: 0.00%) | ||||||||||
| 94,200 | Jastec | 912 | 1.01 | |||||||
| Storage/Warehousing: 1.40% (30th Apr 2015: 1.48%) | ||||||||||
| 390,000 | Mitsui-Soko | 1,267 | 1.40 | |||||||
| Telecommunications: 0.64% (30th Apr 2015: 1.28%) | ||||||||||
| 40,800 | WirelessGate | 578 | 0.64 | |||||||
| Textiles: 97.27% (30th Apr 2015: 0.00%) | ||||||||||
| 150,000 | Suminoe Textile | 431 | 0.48 | |||||||
| Transportation: 9.84% (30th Apr 2015: 4.94%) | ||||||||||
| 55,000 | AIT | 518 | 0.57 | |||||||
| 91,000 | Hamakyorex | 1,848 | 2.05 | |||||||
| 45,000 | Sakai Moving Service | 2,256 | 2.50 | |||||||
| 210,000 | SBS | 1,953 | 2.17 | |||||||
| 324,000 | Senko | 2,258 | 2.50 | |||||||
| 5,500 | Zero | 46 | 0.05 | |||||||
| Total Japan (30th Apr 2015: 108.91%) | 98,217 | 108.90 | ||||||||
| Total Equities (30th Apr 2015: 108.91%) | 98,217 | 108.90 | ||||||||
| Total Investments | 98,217 | 108.90 | ||||||||
| Cash (30th Apr 2015: 1.47%) | 898 | 1.00 | ||||||||
| Other Net Liabilities (30th Apr 2015: (10.38%)) | (8,932) | (9.90) | ||||||||
| Net Assets Attributable to Holders of Redeemable | ||||||||||
| Participating Shares at fair value | 90,183 | 100.00 | ||||||||
Unaudited Statement of Comprehensive Income
| (Unaudited) | (Unaudited) | |||||||
| Six months ended 31st October 2015 | Six months ended 31st October 2014 | |||||||
| Revenue | Capital | Total | Revenue | Capital | Total | |||
| Notes | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | ||
| Income | ||||||||
| 3 | Net (losses)/gains on investments held at fair value through profit or loss | - | (1,709) | (1,709) | - | 4,911 | 4,911 | |
| Net gains on foreign exchange | - | (599) | (599) | - | 900 | 900 | ||
| Dividend income | 728 | - | 728 | 851 | - | 851 | ||
| 728 | (2,308) | (1,580) | 851 | 5,811 | 6,662 | |||
| Expenses | ||||||||
| 4 | Investment management fee | 461 | - | 461 | 459 | - | 459 | |
| 5 | Depositary fees | 65 | - | 65 | 57 | - | 57 | |
| 6 | Administration fees | 74 | - | 74 | 73 | - | 73 | |
| 6 | Registrar and transfer agent fees | 12 | - | 12 | 7 | - | 7 | |
| 7 | Directors' fees and expenses | 146 | - | 146 | 145 | - | 145 | |
| Insurance fees | 10 | - | 10 | 9 | - | 9 | ||
| Audit fee | 22 | - | 22 | 27 | - | 27 | ||
| Printing and advertising fees | 31 | - | 31 | 23 | - | 23 | ||
| Legal and professional fees | 115 | - | 115 | 271 | - | 271 | ||
| Listing fees | - | - | - | 1 | - | 1 | ||
| Miscellaneous expenses | 31 | - | 31 | 13 | - | 13 | ||
| 967 | - | 967 | 1,085 | - | 1,085 | |||
| Finance cost | ||||||||
| Interest expense and bank charges | 81 | - | 81 | 98 | - | 98 | ||
| (Loss)/profit before taxation | (320) | (2,308) | (2,628) | (332) | 5,811 | 5,479 | ||
| Taxation | (116) | - | (116) | (131) | - | (131) | ||
| (Loss)/profit and total comprehensive income/(loss) for the year | ||||||||
| (436) | (2,308) | (2,744) | (463) | 5,811 | 5,348 | |||
| Basic and diluted (deficit)/earnings per ordinary share | ||||||||
| 9 | $(0.011) | $(0.057) | $(0.068) | $(0.011) | $0.134 | $0.123 | ||
All of the Company’s income and expenses are included in the above loss/profit for the period and therefore the loss for the period is also the Company’s comprehensive loss for the period, as defined by IAS 1 (revised). In arriving at the result for the period, all amounts above relate to continuing activities.
The total column in this statement represents the Company’s Statement of Comprehensive Income, prepared in accordance with IFRS. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies.
Uuaudited Statement of Changes In Equity
For the six months ended 31st October 2015
| Capital | |||||||||||||||
| Ordinary | Capital | Capital | Reserve/ | ||||||||||||
| Share | Share | Revenue | Reserve/ | Reserve/ | Exchange | ||||||||||
| Capital | Premium | Reserve | Realised | Unrealised | Differences | Total | |||||||||
| Notes | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | ||||||||
| Balances at 1st May 2015 | - | - | (25,995) | 113,946 | 15,805 | (10,247) | 93,509 | ||||||||
| Movements during the year | |||||||||||||||
| 11 | Redemptions | - | (1,156) | - | - | - | - | (1,156) | |||||||
| Shares bought into treasury | - | - | - | - | - | - | |||||||||
| Proceeds from reissue of treasury shares | - | - | 574 | - | - | - | 574 | ||||||||
| Transfer from capital reserve | - | 1,156 | - | - | - | - | 1,156 | ||||||||
| Transfer to share premium | - | - | - | (1,156) | - | - | (1,156) | ||||||||
| 3 | Net realised gains on investments held at fair value through profit or loss | - | - | (5,360) | 5,360 | - | - | - | |||||||
| 3 | Net unrealised losses on investments held at fair value through profit or loss | - | - | 7,069 | - | (7,069) | - | - | |||||||
| Gains on foreign exchange | - | - | 599 | - | - | (599) | - | ||||||||
| Total comprehensive loss | - | - | (2,744) | - | - | - | (2,744) | ||||||||
| Balances at 31st October 2015 | - | - | (25,857) | 118,150 | 8,736 | (10,846) | 90,183 | ||||||||
Unaudited Statement of Changes In Equity
For the six months ended 31st October 2014
| Capital | |||||||||||||||
| Capital | Capital | Reserve/ | |||||||||||||
| Ordinary Share | Share | Revenue | Reserve/ | Reserve/ | Exchange | ||||||||||
| Capital | Premium | Reserve | Realised | Unrealised | Differences | Total | |||||||||
| Notes | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | ||||||||
| Balances at 1st May 2014 | - | - | (21,539) | 107,085 | 10,173 | (11,633) | 84,086 | ||||||||
| Movements during the year | |||||||||||||||
| 11 | Redemptions | - | (4,029) | - | - | - | - | (4,029) | |||||||
| Shares bought into treasury | - | - | (735) | - | - | - | (735) | ||||||||
| Proceeds from reissue of treasury shares | - | - | 383 | - | - | - | 383 | ||||||||
| Transfer from capital reserve | - | 4,029 | - | - | - | - | 4,029 | ||||||||
| Transfer to share premium | - | - | - | (4,029) | - | - | (4,029) | ||||||||
| 3 | Net realised gains on investments held at fair value through profit or loss | - | - | (6,376) | 6,376 | - | - | - | |||||||
| 3 | Net unrealised losses on investments held at fair value through profit or loss | - | - | 1,465 | - | (1,465) | - | - | |||||||
| Loss on foreign exchange | - | - | (900) | - | - | 900 | - | ||||||||
| Total comprehensive income | - | - | 5,348 | - | - | - | 5,348 | ||||||||
| Balances at 31st October 2014 | - | - | (22,354) | 109,432 | 8,708 | (10,733) | 85,053 | ||||||||
Unaudited Statement of Financial Position
For the six months ended 31st October 2015
| 31st October 2015 | 30th April 2015 | ||
| $'000 | $'000 | ||
| Non Current Assets | |||
| Investments held at fair value through profit or loss | 98,217 | 101,843 | |
| Current Assets | |||
| Due from brokers | 2,307 | 2,112 | |
| Dividends receivable | 491 | 823 | |
| Prepaid expenses and other receivables | 122 | 73 | |
| Cash and cash equivalents | 898 | 1,374 | |
| 3,818 | 4,382 | ||
| Current Liabilities | |||
| Due to brokers | (1,170) | (1,891) | |
| Payables and accrued expenses | (322) | (316) | |
| Loans payable | (10,360) | (10,509) | |
| (11,852) | (12,716) | ||
| Net Current Liabilities | (8,034) | (8,334) | |
| Net Assets | 90,183 | 93,509 | |
| Equity | |||
| Ordinary share capital | - | - | |
| Share premium | - | - | |
| Revenue reserve | (25,857) | (25,995) | |
| Capital reserve | 116,040 | 119,504 | |
| Net Assets Attributable to Equity Shareholders | 90,183 | 93,509 | |
| Net Asset Value per Ordinary Share* | $2.24 | $2.31 | |
*Based on the Net Asset Value at the period end divided by the number of shares in issue: 40,182,900 (30th April 2015 – 40,455,909) (See Note 8)
Approved by the Board of Directors on 15th December 2015 and signed on its behalf by:
Noel Lamb Andrew Martin Smith
Chairman Director
Uuaudited Statement of Cash Flows
| 31st October 2015 | 30th April 2015 | ||||
| Notes | $'000 | $'000 | |||
| Reconciliation of profit/(loss) for the year to net cash flows | |||||
| from operating activities | |||||
| (Loss)/profit before taxation | (2,628) | 15,761 | |||
| 3 | Net losses/(gains) on investments held at fair value through profit or loss | 1,709 | (15,709) | ||
| Net gains on foreign exchange | 599 | (478) | |||
| Interest expense and bank charges | 81 | 180 | |||
| Decrease in dividends receivable | 332 | 123 | |||
| Increase in prepaid expenses and other receivables | (49) | (73) | |||
| Increase in payables and accrued expenses | 6 | 106 | |||
| Taxation paid | (116) | (304) | |||
| Net cash outflow from operating activities | (66) | (394) | |||
| Investing Activities | |||||
| Purchase of investments held at fair value through profit or loss | (34,761) | (81,337) | |||
| Sale of investments held at fair value through profit or loss | 35,021 | 89,967 | |||
| Net cash inflow from investing activities | 260 | 8,630 | |||
| Net cash inflow before financing | 194 | 8,236 | |||
| Cash flows from financing activities | |||||
| Interest paid | (81) | (181) | |||
| Redemptions | (1,156) | (5,788) | |||
| Shares bought into treasury | 574 | (1,537) | |||
| Net loans drawn down | - | - | |||
| Net cash outflow from financing activities | (663) | (7,506) | |||
| Net increase in cash and cash equivalents | (469) | 730 | |||
| Exchange movements | (7) | (51) | |||
| Movement in cash and cash equivalents in the year | (476) | 679 | |||
| Cash and cash equivalents at beginning of year | 1,374 | 695 | |||
| Cash and cash equivalents at end of year | 898 | 1,374 | |||
Notes to the Unaudited Financial Statements
For the six months ended 31st October 2015
1. GENERAL
Atlantis Japan Growth Fund Limited (the “Companyâ€) was incorporated in Guernsey on
13th March 1996. The Company commenced activities on 10th May 1996.
2. ACCOUNTING POLICIES
a) Statement of Compliance
The condensed interim financial statements for the six months ended 31st October 2015 have been prepared in accordance with IAS 34, 'Interim Financial Reporting' and the Disclosures and Transparency Rules ("DTRs") of the UK's Financial Conduct Authority.
The condensed interim financial statements do not include all of the information required for full financial statements, and should be read in conjunction with the financial statements for the Company as at and for the year ended 30th April 2015. The financial statements of the Company as at and for the year ended 30th April 2015 were prepared in accordance with International Financial Reporting Standards ("IFRS").
The accounting policies applied by the Company in these condensed interim financial statements are the same as those applied by the Company in its financial statements as at and for the year ended 30th April 2015.
3. NET (LOSSES)/GAINS ON INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
2015 |
2014 |
|||
| $'000 | $'000 | |||
| Realised gains on investments held at fair value through profit or loss | 6,949 | 8,853 | ||
| Realised losses on investments held at fair value through profit or loss | (1,589) | (2,477) | ||
| Net realised gains on investments held at fair value through profit or loss | 5,360 | 6,376 | ||
| Unrealised gains on investments held at fair value through profit or loss | 5,309 | 8,097 | ||
| Unrealised losses on investments held at fair value through profit or loss | (12,378) | (9,562) | ||
| Net unrealised gains/(losses) on investments held at fair value through profit or loss | (7,069) | (1,465) | ||
| Net (losses)/gains on investments held at fair value through profit or loss | (1,709) | 4,911 | ||
4. INVESTMENT MANAGEMENT FEE
The Company pays to the Investment Manager a fee accrued weekly and paid monthly in arrears at the annual rate of 1 per cent of the weekly Net Asset Value of the Company.
Under the terms of the Investment Management Agreement dated 1st August 2014, the Investment Manager, Tiburon Partners LLP, will continue in office until a resignation is tendered or the contract is terminated. In both circumstances, a resignation or termination must be given with a notice period which must not be less than three months, and be in accordance with the Investment Management Agreement. Fees payable to the Investment Adviser are met by the Investment Manager.
Redemption Pool Fees
The Investment Manager is also entitled to receive a fee from the Company of 1 per cent per annum of the weekly Net Asset Value of any redemption pool together with transaction charges.
For the six months ended 31st October 2015, total investment management fees were $461,262 (2014 - $458,550) of which $73,219 (2014 - $71,668) is due and payable as at that date.
5. DEPOSITARY FEES
The Company pays to the Depositary, Northern Trust (Guernsey) Limited, fees payable monthly in arrears, on the Gross Asset Value of the Company as at the last business day of the month at an annual rate of:
| Gross Asset Value | Annual Rate |
| Up to $50,000,000 | 0.035% |
| $50,000,001 to $100,000,000 | 0.025% |
| Thereafter | 0.015% |
The Depositary is also entitled to a global custody fee of 0.03% per annum of the Net Asset Value of the Company, subject to a minimum fee of $20,000, and transaction fees as per the Depositary Agreement.
Redemption Pool Fees
The Depositary is also be entitled to receive a fee from the Company of the Gross Asset Value of any redemption pool, together with transaction charges, at an annual rate of:
| Gross Asset Value | Annual Rate |
| Up to $25,000,000 | 0.035% |
| $25,000,001 to $50,000,000 | 0.025% |
| Thereafter | 0.015% |
For the six months ended 31st October 2015, total depositary fees were $64,737 (2014 - $57,437) of which $26,471 (2014 - $20,623) is due and payable as at that date.
6. ADMINISTRATION FEES
The Company pays to the Administrator a fee accrued weekly and paid monthly in arrears at the annual rate of:
| Net Asset Value | Annual Rate |
| Up to $50,000,000 | 0.18% |
| $50,000,001 to $100,000,000 | 0.135% |
| $100,000,001 to $200,000,000 | 0.0675% |
| Thereafter | 0.02% |
Redemption Pool Administration Fees
At each redemption date a charge in respect of the preparatory work for the set-up and calculation of investment and redemption prices at £7,500 will be payable.
An additional fee will be payable on the fair value of the assets of that redemption pool of:
| Net Asset Value | Annual Rate |
| Up to $25,000,000 | 0.18% |
| $25,000,001 to $50,000,000 | 0.135% |
| Thereafter | 0.0675% |
For the six months ended 31st October 2015, total administration and registrar fees were $85,166 (2014 - $80,655) of which $24,797 (2014 - $12,011) is due and payable as at that date.
7. DIRECTORS’ FEES AND EXPENSES
Each of the Directors is entitled to receive a fee from the Company, being £30,000 per annum for the Chairman, £27,500 per annum for the Chairman of the audit committee and £25,000 per annum for each of the other Directors. In addition, the Company reimburses all reasonably incurred out-of-pocket expenses of the Directors.
For the six months ended 31st October 2015, total Directors’ fees and expenses were $146,334 (2014 - $145,148) of which $112,922 (2014 - $63,797) is due and payable as at that date.
8. SHARE CAPITAL AND SHARE PREMIUM
a) Authorised
The Company is authorised to issue an unlimited number of ordinary shares of no par value.
The Company may also issue C shares being a convertible share in the capital of the company of no par value. C shares shall not have the right to attend or vote at any general meeting of the Company. The holders of C shares of the relevant class shall be entitled, in that capacity to receive a special dividend such amount as the directors may resolve to pay out of the net assets attributable to the relevant C share class and from income received and accrued attributable to the relevant C share class for the period up to the conversion date payable on a date falling before, on or after the conversion date as the Directors may determine. There are no C shares currently in issue.
The rights which the ordinary shares convey upon the holders thereof are as follows:
Voting Rights
On a show of hands, every Member who is present shall have one vote; and on a poll, a Member present in person or by proxy shall be entitled to one vote per ordinary share held.
Entitlement to Dividends
The Company may declare dividends in respect of the ordinary shares.
Rights in a Winding-up
The holders of ordinary shares will be entitled to share in the Net Asset Value of the Company as determined by the Liquidator.
| b) Issued | |||||
| Ordinary Shares | Number of Shares | Share Capital | Share Premium | ||
| $’000 | $’000 | ||||
| In issue at 31st October 2015 | 40,182,900 | - | - | ||
| In issue at 30th April 2015 | 40,455,909 | - | - | ||
| Reconciliation of number of shares | Number of Shares | Number of Shares | |
| 31st October 2015 | 30th April 2015 | ||
| Shares of no par value | |||
| Issued shares at the start of the period/year | 40,455,909 | 43,894,158 | |
| Re-issue of treasury shares | 296,903 | 200,000 | |
| Redemption of shares | (569,912) | (2,839,174) | |
| Purchase of shares into Treasury | - | (799,075) | |
| Number of shares at the end of the period/year | 40,182,900 | 40,455,909 | |
| Shares held in Treasury | |||
| Opening balance | 2,701,686 | 2,102,611 | |
| Shares bought in to Treasury during the period/year | - | 799,075 | |
| Treasury shares re-issued | (296,903) | (200,000) | |
| Number of shares at the end of the period/year | 2,404,783 | 2,701,686 | |
Shareholders are entitled to receive any dividends or other distributions out of profits lawfully available for distribution and on winding up they are entitled to the surplus assets remaining after payment of all the creditors of the Company.
The shares redeemed in the current period were cancelled immediately.
9. BASIC AND DILUTED /(DEFICIT)/EARNINGS PER ORDINARY SHARE
The basic and diluted (deficit)/earnings per ordinary share figure is based on the (loss)/profit and total comprehensive (loss)/income for the period of $(2,744,484) (2014 – $5,347,665) and on 40,403,459 being the weighted average number of shares in issue at 31st October 2015 (2014: 43,458,353).
The (deficit)/earnings per ordinary share figure can be further analysed between revenue and capital, as below.
| 31st October 2015 | 31st October 2014 | |||
| $'000 | $'000 | |||
| Net revenue loss | (436) | (463) | ||
| Net capital (loss)/profit | (2,308) | 5,811 | ||
| Net total (loss)/profit | (2,744) | 5,348 | ||
| Weighted average number of ordinary shares | ||||
| in issue during the year | 40,403,459 | 43,458,353 | ||
| $ | $ | |||
| Revenue loss per ordinary share | (0.011) | (0.011) | ||
| Capital (loss)/profit per ordinary share | (0.057) | 0.134 | ||
| Total (loss)/profit per ordinary share | (0.068) | 0.123 | ||
10. RELATED PARTY TRANSACTIONS
The Investment Manager, Depositary, Administrator and Directors are considered related parties to the Company under IAS 24 as they have the ability to control, or exercise significant influence over, the Company in making financial or operational decisions. (See notes 4 to 7 for details of transactions with these related parties during the period ended 31st October 2015 and the period ended 31st October 2014.
Certain Directors had a beneficial interest in the Company by way of their investment in the ordinary shares of the Company.
The details of these interests as at 31st October 2015 and 31st October 2014 are as follows:
| Ordinary Shares | Ordinary Shares | |||
| 31st October 2015 | 31st October 2014 | |||
| Andrew Martin Smith | 30,000 | 25,000 | ||
| Noel Lamb | 10,000 | 10,000 |
As at 31st October 2015, a family member of Edwin Merner, Executive President of the Investment Adviser, held 946,000 ordinary shares of the Company.
There were no relevant contracts in force during or at the end of the period in which any Director had an interest. There are no service contracts in issue in respect of the Company’s Directors. No Directors had a non-beneficial interest in the Company during the period under review.
11. REDEMPTION FACILITY
Shareholders have the opportunity to make redemptions of part or all of their shareholding on a six-monthly basis with the Board’s discretion in declining any redemption requests. The following redemptions were made during the period:-
| Redemption date | Shares redeemed 31st October 2015 |
$'000 31st October 2015 |
| 30/09/2015 | 569,912 | (1,156) |
| 569,912 | (1,156) | |
| 31st October 2014 | 31st October 2014 | |
| 30/09/2014 | 2,185,754 | (4,029) |
| 2,185,754 | (4,029) |
As at the period ended 31st October 2015, a total of $1,156,431 was paid to redeeming shareholders. The balance of $Nil is due and payable as at that date.
12. LOAN REPAYMENTS
¥1,250,000,000 was repaid on 10th July 2015 and a new facility for ¥1,250,000,000 was drawn on 10th July 2015. ¥1,250,000,000 was repaid on 9th October 2015 and a new facility for yen 1,250,000,000 was drawn on 9th October 2015.
13. DIVIDENDS
All amounts held in the Company’s revenue reserve are distributable to shareholders by way of dividends.
There were no dividends declared by the Board of Directors during the period ended 31st October 2015 or the period ended 31st October 2014.
14. EXCHANGE RATES
The following exchange rates were used to translate assets and liabilities into the reporting currency (USD) at 31st October 2015 and 30th April 2015:
| 31st October 2015 | 30th April 2015 | |
| USD | USD | |
| GBP | 0.6523 | 0.6468 |
| JPY | 120.6550 | 118.8950 |
15. CHANGES IN THE PORTFOLIO
A list, specifying for each investment the total purchases and sales which took place during the period under review may be obtained, upon request, at the registered office of the Company.
16. EVENTS DURING THE PERIOD
There were no significant events during the period ended 31st October 2015 which require adjustment to or additional disclosure in the Financial Statements.
17. SUBSEQUENT EVENTS
There were no significant events subsequent to the period ended 31st October 2015 which require adjustment to or additional disclosure in the Financial Statements.
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