Interim Results

Atlantis Japan Growth Fund Ld 09 January 2003 FOR IMMEDIATE RELEASE RELEASED BY MANAGEMENT INTERNATIONAL (GUERNSEY) LIMITED ATLANTIS JAPAN GROWTH FUND LIMITED PRELIMINARY ANNOUNCEMENT THE BOARD OF DIRECTORS OF ATLANTIS JAPAN GROWTH FUND LIMITED ANNOUNCE UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2002: UNAUDITED BALANCE SHEET As at 31 October 2002 (Expressed in United States Dollars) 2002 2001 $'000 $'000 FIXED ASSETS Investments at market value 196,104 226,900 (cost $223,032,457; 2001 - $259,623,053) CURRENT ASSETS Due from brokers 354 1,689 Dividends and interest receivable 400 585 Bank balances 4,938 9,331 5,692 11,605 CURRENT LIABILITIES Due to brokers 1,063 2,264 Creditors and accrued expenses 435 471 Loans payable 24,433 24,481 Unsettled forward foreign exchange - 1,833 25,931 29,049 NET CURRENT LIABILITIES (20,239) (17,444) TOTAL NET ASSETS $175,865 $209,456 Represented by: CAPITAL & RESERVES Called-up share capital 204 204 Share premium 192,650 192,650 Other reserves (16,989) 16,602 TOTAL SHAREHOLDERS' FUNDS $175,865 $209,456 NET ASSET VALUE PER ORDINARY $8.61 $10.25 SHARE Based on 20,435,627 (2001 - 20,435,627) ordinary shares and a Net Asset Value of $175,865,000 (2001 - $209,456,000) UNAUDITED STATEMENT OF TOTAL RETURN (incorporating the Revenue Account) For the six months ended 31 October 2002 (Expressed in United States Dollars) Revenue Capital Total $'000 $'000 $'000 Realised loss on sales of investments - (13,798) (13,798) Unrealised depreciation of investments - (5,043) (5,043) Exchange gain/(loss) 60 (1,318) (1,258) Investment income 1,001 - 1,001 Deposit interest 13 - 13 1,074 (20,159) (19,085) Investment management fee 1,508 - 1,508 Administration fees 114 - 114 Custodian fees 109 - 109 Directors' fees and expenses 62 - 62 Registrar and transfer agent fees 3 - 3 Interest expense and bank charges 137 - 137 Audit fee 8 - 8 Printing and advertising fees 30 - 30 Legal and professional fees 46 - 46 Listing fees 14 - 14 Miscellaneous expenses 1 - 1 2,032 - 2,032 DEFICIT ON ORDINARY ACTIVITIES BEFORE TAX (958) (20,159) (21,117) Tax on ordinary activities (150) - (150) DEFICIT ATTRIBUTABLE TO EQUITY SHAREHOLDERS (1,108) (20,159) (21,267) DEFICIT PER ORDINARY SHARE : $(0.054) $(0.986) $(1.040) Based on the weighted average of 20,435,627 Ordinary Shares and the deficit Attributable to Equity Shareholders noted above. UNAUDITED STATEMENT OF TOTAL RETURN (incorporating the Revenue Account) For the six months ended 31 October 2001 (Expressed in United States Dollars) Revenue Capital Total $'000 $'000 $'000 Realised loss on sales of investments - (20,039) (20,039) Unrealised appreciation of investments - 11,868 11,868 Exchange loss (13) (1,769) (1,782) Investment income 1,091 - 1,091 Bond interest 5 - 5 Deposit interest 30 - 30 1,113 (9,940) (8,827) Investment management fee 1,622 - 1,622 Administration fees 136 - 136 Custodian fees 126 - 126 Directors' fees and expenses 66 - 66 Registrar and transfer agent fees 17 - 17 Interest expense and bank charges 94 - 94 Insurance 10 - 10 Audit fee 10 - 10 Printing and advertising 28 - 28 Legal and professional 24 - 24 Miscellaneous expenses 1 - 1 2,134 - 2,134 DEFICIT ON ORDINARY ACTIVITIES BEFORE TAX (1,021) (9,940) (10,961) Tax on ordinary activities (218) - (218) DEFICIT ATTRIBUTABLE TO EQUITY SHAREHOLDERS (1,239) (9,940) (11,179) DEFICIT RETURN PER ORDINARY SHARE : $(0.061) $(0.486) $(0.547) Based on the weighted average of 20,435,627 Ordinary Shares and the Deficit Attributable to Equity Shareholders noted above. UNAUDITED STATEMENT OF CASH FLOWS For the six months ended 31 October 2002 (Expressed in United States Dollars) 2002 2001 $'000 $'000 $'000 $'000 OPERATING ACTIVITIES Net cash outflow from operating (326) (532) activities SERVICING OF FINANCE Interest paid (142) (112) FINANCIAL INVESTMENT Purchase of investments (91,306) (101,347) Sale of investments 95,415 98,332 Net cash inflow/(outflow) from investing activities 4,109 (3,015) FINANCING Subscription of shares on conversion of warrants - 86 Increase/(Decrease) in cash 3,641 (3,573) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT Increase/(Decrease) in cash as above 3,641 (3,573) Exchange movements (1,318) 4,059 Movement in net debt in the period 2,323 486 Net debt at 1st May (21,818) (15,636) Net debt at 31st October $(19,495) $(15,150) ATLANTIS JAPAN GROWTH FUND LIMITED INVESTMENT MANAGER'S REPORT FOR THE SIX MONTHS ENDED 31ST OCTOBER 2002 PERFORMANCE For the six months ended 31st October 2002 the Net Asset Value of the Fund declined 10.8% to $8.61 per share. This compares with a loss of 16.5% for the Topix and minus 10.1% for the Tokyo Second Market. Since inception in May 1996 the Net Asset Value per share has fallen by approximately 13.2% which compares with a loss of 56.5% for the Topix and a loss of 41.0% for the Tokyo Second Market, all of the above figures in US dollars. The Fund has borrowings of Y3 billion and cash of Y513 million with the Net Asset Value standing at Y21.6 billion (around $176 million). The Fund is approximately 11.5% leveraged. The Fund has no currency hedges at this time which means that a stronger yen has a positive impact on the dollar value of the Fund and vice versa. For the six months under review the yen closed at around 122.8 to the dollar versus 128.4 at the end of April. The stronger yen, up 4.3%, had a favourable impact on the dollar value of the Fund. MARKET OUTLOOK The market peaked in May and in terms of the Nikkei Index, the most widely used index, then declined almost 29% by the end of October. The Topix followed a similar trend, peaking in May and then falling over 24%. The Tokyo Second Market was down over 18% during the same period, note all of the above figures are in yen. In terms of the Nikkei Index, the market is near a 20 year low and down over 77% from the all time high of December 1989. Almost all major sectors were down during the last six months. In recent months overseas investors, individuals, banks for their own accounts, and broker accounts have been net sellers. Due to corporate buy-back programs, corporations have been net buyers in recent months. Pension funds have also been mostly on the buy side and so have local investment trusts. Due to the weak market conditions the number of new shares, including both new listings and secondary offerings, has been fairly limited. Some of the worst performing sectors this year include financials, services, shipbuilding, machinery, non-ferrous metals and drugs. Some of the better performing sectors include the fisheries, rubber, transportations, autos and paper/pulps. ATLANTIS JAPAN GROWTH FUND LIMITED INVESTMENT MANAGER'S REPORT (continued) FOR THE SIX MONTHS ENDED 31ST OCTOBER 2002 After a sharp drop in corporate earnings for the fiscal year ending March 2002, the outlook for the current year is much better with earnings (excluding financials) expected to climb 30-40% or more. However the recovery in earnings is based primarily on restructuring and cost cutting by both big and small corporations. GDP growth for the current fiscal year will at best be only slightly positive. However we are hopeful that the coming fiscal year beginning next April will be characterised by both positive GDP growth and expanding corporate earnings. Despite low interest rates, (note the bellwether 10 year Government bond now yields under 1%), prices remain under pressure with Japan still in a period of deflation characterised by aggressive price cutting. The Government has finally become aware of the gravity of the on-going financial crisis, including rising bad bank loans, but is still only in the early stages of dealing with the problem. However both domestic and external pressures are mounting and we are hopeful of a series of Government moves by both the Central Government and the Bank of Japan in coming months. Japan has a number of challenges including over dependence on the manufacturing sector, a ballooning Government deficit, an aging population and a weak Government unable to make major policy decisions. However there are also many positives, including dominant positions in many high technology areas, low interest rates, huge foreign exchange reserves, positive trade and current account balances, relatively low unemployment, a well educated and disciplined work force and some outstanding corporations in such industries as automobiles, electronics, medical equipment and precision instruments to name but a few. As in the past, we think the stock market will continue to reflect the long term earnings trend and Government policy or lack of it. However at current price levels, stocks now look cheap and are probably in a bottom zone, unless one is assuming a worst case scenario for both Japan and the world economy. OUR STRATEGY AND THE PORTFOLIO As we have often stressed in the past, our basic strategy remains unchanged. We will continue to seek out and invest in undervalued stocks with above average earnings growth potential. These are often stocks completely ignored or forgotten by the market. ATLANTIS JAPAN GROWTH FUND LIMITED INVESTMENT MANAGER'S REPORT (continued) FOR THE SIX MONTHS ENDED 31ST OCTOBER 2002 At this time we think that medium-sized and smaller stocks are more attractive than most of the well known bigger companies which in many cases have already gone ex-growth or have serious management problems and will also be impacted by the low growth economy. There have been many new listings in the last 5 to 10 years and as value investors we are now finding many, many attractive stocks to buy. Many of the fastest growth companies seem to be in health care, retailing, especially discounting and in the service industry. Also some of the technology companies including some of the semiconductor production equipment companies have good recovery prospects and above average long term growth potential. We have reduced our exposure to the software and real estate sectors where fundamentals have been deteriorating since the beginning of the calendar year. We have recognised a number of mistakes, stocks where earnings have disappointed and long term growth prospects have dimmed. We have already sold or are in the process of selling such stocks. Some of our successes are becoming too big as a percentage of the portfolio, usually over 5%, and have therefore been trimmed or even sold in a few cases. Despite the dramatic drop in stock prices in the last six months, we as long term value investors are encouraged by the large number of undervalued stocks now available, in many cases at bargain prices. We are also seeking out and buying selected issues with above average yields. Ed Merner Atlantis Fund Management (Guernsey) Limited November, 2002 This information is provided by RNS The company news service from the London Stock Exchange

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