Interim Results for the six months ended 31 Oct...
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 2016
8th December 2016
The financial information set out in this announcement does not constitute the Company’s statutory accounts for the period ending 31st October 2016.
The financial information for the period ended 31st October 2016 is derived from the financial statements delivered to the UK Listing Authority.
The interim report and financial statements period ended 31st October 2016 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 nor 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 not invest more than 10 per cent in aggregate, of the value of its total assets in other listed closed-ended investment funds except in the case of investment in closed-ended investment funds which themselves have published investment policies to invest no more than 15 per cent of their total assets in other listed closed-ended investment funds, in which case the limit is 15 per cent.
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
At each redemption point the Company may (a) notionally allocate assets and liabilities into a separate pool (the "redemption pool") for the purpose of funding valid redemption requests for that redemption point or (b) fund the valid redemption requests from available cash. 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 is the Investment Manager and Alternative Investment Fund Manager pursuant to the Alternative Investment Fund Managers Directive.
Atlantis Investment Research Corporation (“AIRCâ€), established in Tokyo, is the Investment Adviser.
AIRC, through Taeko Setaishi and her 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 2016
PERFORMANCE
During the six month period ended 31st October 2016 most of the major indices moved lower during May and June but then recovered and moved higher during July to October which resulted in the Topix climbing 7.18% and the Second Market advancing 11.67%. The Company’s Net Asset Value per share fared less well, declining 1.2% during the same period. This was due in part to the dilutionary effect (2.7%) of the increase in the number of shares created from the successful exercise of the shareholder Subscription Right. Note all figures calculated in USD and on a total return basis.
The Company remained concentrated on medium sized and smaller growth companies and cyclical growth companies, all of which underperformed during the period under review. Many of the best performing companies were cyclical lower quality recovery stocks, an area where the Company has little or no exposure.
Aggressive buying by the Bank of Japan and the Government Pension Fund has pumped trillions of JPY into the market. However a lot of the buying has concentrated on Exchange Traded Funds (“ETFsâ€), especially Nikkei 225 ETFs, which of course buy only bigger stocks. This had a negative impact on both our relative and absolute performance since, as stated above, we are holding and buying mostly medium sized and smaller stocks.
The Company’s holdings are concentrated in some of the following sectors: service/retail, technology including software and electronics, healthcare and medical equipment, trucking, machinery, real estate including Real Estate Investment Trusts (“REITsâ€), and semiconductor manufacturing equipment. The Company has little or no exposure to heavy industry including iron and steel, non-ferrous metals, shipping, construction, oil, electric power, shipbuilding, autos, or the major trading houses.
It should be noted that some of the best performing sectors this calendar year include construction, other manufacturing, gas, paper and pulp, all sectors which we find unattractive and where the Company has little or no exposure.
At the end of October 2016 borrowings totalled ¥600 million and cash stood at around ¥666 million which means the Company has no net gearing. The JPY ended the period at ¥104.95 against the USD, a gain of 2.1% from the closing rate of ¥107.13 at the end of April 2016.
The Company ended the period with 73 holdings compared with 64 holdings at the end of April and has no exposure to convertible bonds, or derivatives of any kind. It has no foreign exchange hedges and, excluding cash, is invested entirely in listed Japanese companies including three REITs.
MARKET COMMENT AND INVESTMENT STRATEGY
Some of our investors have asked us why the Company has recently been underperforming and what measures are we taking to improve performance? Our investment style is to find and buy growing companies selling at reasonable prices, especially based on projected earnings for the next 2-3 years or more.
However, there may be times when the market is concentrating on areas which the Company tends to be underweight including lower quality stocks or companies that are not expected to grow earnings much if at all over the longer term, where management is below average, and the investment risk is above average. We are not momentum investors, we are not fashion investors, and we plan to continue to concentrate primarily on growth companies and cyclical growth companies.
At times our strategy may result in periods of underperformance. However, assuming that our earnings projections prove accurate for the companies in which we invest, over the longer term we would hope to outperform the major indices.
Due in part to the stronger JPY, slower than expected economic growth, flat consumer spending, weak exports and lower than expected earnings growth for the six month period ended October, there has been net selling by overseas investors in most months. It should be noted that overseas investors account for 60-70% of daily trading, and many domestic investors including individuals have remained on the sidelines and have in some months been on the sell side.
We think the economy is likely to strengthen progressively over the next 12 to 18 months and project rising corporate earnings for fiscal 2017 ending March 2018. Since Donald Trump’s victory in the US presidential election, the JPY strength has been substantially reversed which should aid a recovery in Japanese exports. We expect overseas investors to move to become buyers, the government buying to spread to smaller and mid-cap stocks (which is already happening) and we expect corporations to continue to remain on the buy side. Given the above we are cautiously optimistic and plan slowly to invest some of the available cash the Company holds into attractive stocks, but only very selectively.
There are of course possible challenges including the JPY, disappointing earnings, slower than expected GDP growth, geopolitical events, and slower than expected recovery in the world economy.
Atlantis Investment Research Corporation
November 2016
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 2016.
In the opinion of the Company's Directors, the condensed Directors’ Interim Report and Unaudited Financial Statements 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.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors confirm, to the best of our knowledge, that:
- the condensed 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 Directors’ Interim Report and Investment Adviser’s Interim Report include a fair review of important events that have occurred during the first six months of the financial year and their impact on the condensed 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 include a fair review of the information concerning related party transactions required by DTR 4.2.8R.
CAPITAL VALUES
At 31st October 2016 the value of net assets available to shareholders was $97,552,059 (30th April 2016: $86,957,813) and the Net Asset Value per share was $2.14/£1.76 (30th April 2016: $2.16/£1.48).
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 comprise 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 Directors conduct robust reviews of these risks and agrees policies for their management. These policies have remained substantially unchanged since 30th April 2006.
Performance
The Directors regularly monitor the Company’s investment performance against a number of indices and the AIC Japanese smaller companies sub-sector peer group.
Discount
A disproportionate widening of the discount relative to the Company’s peers could result in loss of value for shareholders. The Directors review 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. In any event, shareholders will be given the opportunity to vote on whether or not the Company should continue at the Annual General Meeting in 2019.
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 Directors rely 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, the UKLA Listing Rules, Prospectus Rules, Disclosure Transparency Rules and the rules of the London Stock Exchange.
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 Directors 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 Incorporation 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 2016 and 30th April 2016 was effectively Nil.
The credit facility for ¥ 600,000,000 was rolled over every three months in accordance with its terms most recently on 7th October 2016.
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 2016 based on the assumption of one third of the volume for the last 3 months average volume, 89.9% of the Company's assets can be realised within two weeks and 10.1% can be realised in between two weeks and 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 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 the Association of Investment Companies (“AICâ€) Statement of Recommended Practice (“SORPâ€) 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 OF DIRECTORS COMPOSITION
Andrew Martin Smith and Eric Boyle retired from the Board of Directors on 31st July 2016 and 14th October 2016 respectively.
Richard Pavry was appointed to the Board of Directors on 1st August 2016.
There were no other changes to the Board of Directors during the period.
SUBSCRIPTION RIGHTS ISSUE
The Directors have reviewed the five year programme and believe it should be allowed to continue for the current year.
Eligible applications received from shareholders in respect of the exercise of the 2016 Subscription Right amounted to 3,678,856 new ordinary shares. Accordingly, 3,678,856 new ordinary shares were issued, at an exercise price of 143.76 pence per ordinary share raising gross proceeds of approximately £5.3m. The new ordinary shares rank pari passu in all respects with the existing ordinary shares in issue.
In accordance with the Company's Articles of Incorporation, the Company appointed a trustee (the "Subscription Trustee") to determine whether all or any of the unexercised Subscription Rights in respect of the 3rd October 2016 Subscription Date should be exercised on behalf of the holders of such rights. Having taken account of the subscription price payable to the Company and all costs and expenses of exercise from the sale of ordinary shares arising on the exercise of the unexercised Subscription Rights, the Subscription Trustee determined that there would be net proceeds and, as a result, the Trustee exercised all such unexercised Subscription Rights. Consequently, the Company issued and allotted a further 3,935,590 ordinary shares as a result of the exercise of all of the unexercised Subscription Rights outstanding on 3rd October 2016. These new ordinary shares were issued at the exercise price of 143.76 pence raising gross proceeds of approximately £5.7m and also rank pari passu with the existing ordinary shares.
Applications were made for all 7,614,446 new ordinary shares to be admitted to the Official List of the UK Listing Authority and to trading on the main market of the London Stock Exchange ("Admission"). Admission became effective, and dealings in the new ordinary shares commenced, on 11th October 2016.
7th December 2016
Details of Ten Largest Investments
As at 31st October 2016 the ten largest investments comprise a fair value of $24,592,487 (30th April 2016: $25,068,297) representing 25.3% of Net Asset Value (30th April 2016: 28.8%) with details as below:
Nidec (37,000 shares)
Nidec is the dominant global supplier of the small precision motors that find application in hard disc drives (HDD), automobiles, appliances, and industrial products. Sustained growth over the medium term will be driven by organic expansion into new product areas (mid/large sized motors) and new demand from the auto (EV, ADAS) and appliance sectors. Nidec`s healthy cash flow underpins its aggressive global strategic merger and acquisition program. Nidec`s highly regarded management targets JPY2tr in sales by 2020 and expects to boost ROE from 12% to 18%.
Fair value of $3,585,251 representing 3.7% of the Net Asset Value (30th April 2016: 2.7%)
Trusco Nakayama (56,000 shares)
Trusco is a specialised distributor to factories and outdoor work sites of machine parts, cutting tools, and other industrial consumable items. Upon receipt of an order the company makes a rapid delivery from its extensive inventory. Growth has been achieved through expansion of its customer base and product offerings including Trusco`s private brand. Japan`s industrial recovery provides a strong tailwind to the company`s growth.
Fair value of $2,897,242 representing 3.0% of the Net Asset Value (30th April 2016: 2.6%)
Japan Material (80,000 shares)
Japan Material dispatches engineers who oversee and manage the flow and use of special gases/chemicals and ultra-pure water in semiconductor and flat panel display production facilities. The company also sells these consumables and related supply equipment. Japan Material`s client base is mainly domestic but its Taiwanese and Chinese subsidiaries are making significant inroads into their respective markets. Despite the cyclical nature of the technology sector Japan Material has consistently generated annual earnings growth.
Fair value of $2,839,312 representing 2.9% of the Net Asset Value (30th April 2016: 2.4%)
Nihon M&A Center Inc (80,800 shares)
Nihon M&A Center occupies an attractive growth corner of Japan`s financial sector. The company is an independent M&A advisory firm targeting SMEs seeking either an acquisition to boost their growth potential or a buyer to take over a business without a successor. Deal size is a modest $1m-$5m and acts as a barrier to entry by large investment banks. Nihon M&A can, and frequently does, advise both sides. Nihon M&A has tapped into this steady rise in SME M&A activity by expanding its number of consultants (258) and increasing its referral partner financial institutions (958). Given the steady growth prospects for Nihon M&A the Investment Adviser regards the company as a key holding over the medium term.
Fair value of $2,629,051 representing 2.7% of the Net Asset Value (30th April 2016: 2.4%)
SBS (250,000 shares)
SBS is a holding company specializing in food and low temperature logistic and ancillary support services. A consolidation is underway in the Japanese logistics industry. SBS has been aggressively expanding its businesses through the acquisition of existing regional companies. SBS also has a property management segment and a development business line which are largely self-financing through property sales and lease back arrangements. SBS had to absorb a capital loss with the 2015 sale of an Indian subsidiary and remains circumspect regarding external acquisitions.
Fair value of $2,217,617 representing 2.3% of the Net Asset Value (30th April 2016: 1.8%)
Ichigo (500,000 shares)
Ichigo is a Japanese real estate asset manager which operates and adds value across the full spectrum of real estate asset management including private funds, several specialised J-REITS (hotels, offices), property management, and building maintenance. Ichigo, in its infrastructure fund, has 116MW of solar generating capacity which is among the largest in the real estate sector. An off-shore wind farm project is under study.
Fair value of $2,172,360 representing 2.2% of the Net Asset Value (30th April 2016: 3.8%)
Yumeshin (300,000 shares)
Yumeshin provides on a project basis contracted engineering and technical white collar personnel to construction companies. The national shortage of qualified engineers and managers is expected to tighten further over the medium term due to projected Tokyo office and 2020 Olympic related construction activity. Yumeshin has recently expanded into blue collar placement and technical training. The company pays out 90% of net profits as dividends providing shareholders an approximate 5% yield.
Fair value of $2,123,767 representing 2.2% of the Net Asset Value (30th April 2016: 2.7%)
Stanley Electric (75,000 shares)
Stanley is one of Japan’s major automobile/motorcycle headlight manufacturers and it also assembles a wide range of other vehicle lighting fixtures. The company has been a leader in introducing LED headlamps to the auto sector and data releases indicate that Stanley LED headlights are being adopted in an increasing number of global auto assemblers` models. Given the 3x premium LED headlights command over halogen lights the Investment Advisor believes a sales mix shift in favour of LED headlights will have a positive impact on Stanley`s earnings over the medium term .
Fair value of $2,067,315 representing 2.1% of the Net Asset Value (30th April 2016: 2.1%)
Star Mica (121,700 shares)
Star purchases pre-owned occupied apartments in the greater Tokyo area. The company collects rents from the tenants who typically move out within a few years. This allows Star Mica to refurbish and then resell the unit. Renovation is done within a very short period of time and costs are low since the company has good relations with construction companies and suppliers. The company is also benefiting from the low cost of money. Although a cyclical business, for the next few years Star should be able to grow earnings given the strong demand for moderately priced apartments in the greater Tokyo area.
Fair value of $2,046,596 representing 2.1% of the Net Asset Value (30th April 2016: 2.0%)
Mitsubishi Chemical (305,900 shares)
Mitsubishi Chemical was created through combining the major chemical companies of the Mitsubishi group. The product line-up is extensive and includes but is not limited to, pharmaceuticals, plastics, petrochemicals, and medical equipment. Many of the businesses are cyclical but management is actively pruning low margined petrochemicals from the product list and focus investments on strategic globally competitive businesses. The Investment Adviser is looking for widening profit margins and rising earnings over the next few years.
Fair value of $2,013,976 representing 2.1% of the Net Asset Value (30th April 2016: 1.9%)
Unaudited Schedule of Investments
As at 31st October 2016
| Fair Value | ||||||||||||||||||||
| Holdings | Investments held at fair value through profit or loss | $'000 | % of NAV | |||||||||||||||||
| Advertising: 0.78% (30th Apr 2016: 0.66%) | ||||||||||||||||||||
| 120,000 | Tow | 762 | 0.78 | |||||||||||||||||
| Auto Parts & Equipment: 2.12% (30th Apr 2016: 2.09%) | ||||||||||||||||||||
| 75,000 | Stanley Electric | 2,067 | 2.12 | |||||||||||||||||
| Building Materials: 0.00% (30th Apr 2016: 0.31%) | - | - | ||||||||||||||||||
| Chemicals: 7.22% (30th Apr 2016: 7.95%) | ||||||||||||||||||||
| 50,000 | Daicel | 659 | 0.68 | |||||||||||||||||
| 305,900 | Mitsubishi Chemical | 2,014 | 2.06 | |||||||||||||||||
| 30,000 | Stella Chemifa | 1,056 | 1.08 | |||||||||||||||||
| 90,000 | Teijin | 1,743 | 1.79 | |||||||||||||||||
| 70,000 | Tri Chemical Laboratories | 1,571 | 1.61 | |||||||||||||||||
| Commercial Services: 6.27% (30th Apr 2016: 4.27%) | ||||||||||||||||||||
| 40,000 | Benefit One | 1,159 | 1.19 | |||||||||||||||||
| 120,000 | Creek & River | 860 | 0.88 | |||||||||||||||||
| 90,000 | Gakujo | 977 | 1.00 | |||||||||||||||||
| 80,800 | Nihon M&A Center Inc | 2,629 | 2.69 | |||||||||||||||||
| 50,000 | Toppan Forms | 498 | 0.51 | |||||||||||||||||
| Computers: 4.84% (30th Apr 2016: 4.65%) | ||||||||||||||||||||
| 60,000 | Fujitsu Frontech | 717 | 0.73 | |||||||||||||||||
| 80,000 | Fusion Partners | 723 | 0.74 | |||||||||||||||||
| 140,400 | Information Development | 1,799 | 1.84 | |||||||||||||||||
| 40,000 | SCSK | 1,494 | 1.53 | |||||||||||||||||
| Distribution/Wholesale: 3.59% (30th Apr 2016: 3.57%) | ||||||||||||||||||||
| 47,800 | Sanyo Trading | 605 | 0.62 | |||||||||||||||||
| 56,000 | Trusco Nakayama | 2,897 | 2.97 | |||||||||||||||||
| Diversified Financial Services: 5.26% (30th Apr 2016: 8.69%) | ||||||||||||||||||||
| 180,000 | Financial Products | 1,578 | 1.62 | |||||||||||||||||
| 500,000 | Ichigo | 2,172 | 2.23 | |||||||||||||||||
| 350,000 | Jaccs | 1,374 | 1.41 | |||||||||||||||||
| Electrical Components & Equipment: 5.60% (30th Apr 2016: 4.94%) | ||||||||||||||||||||
| 37,000 | Nidec | 3,585 | 3.67 | |||||||||||||||||
| 105,000 | W-Scope | 1,881 | 1.93 | |||||||||||||||||
| Electronics: 4.17% (30th Apr 2016: 4.14%) | ||||||||||||||||||||
| 13,000 | Iriso Electronics | 716 | 0.73 | |||||||||||||||||
| 2,000 | Keyence | 1,469 | 1.51 | |||||||||||||||||
| 80,000 | Macnica Fuji Electronics | 1,005 | 1.03 | |||||||||||||||||
| 146,700 | Panasonic Industrial Devices SUNX | 882 | 0.90 | |||||||||||||||||
| Engineering & Construction: 4.04% (30th Apr 2016: 3.94%) | ||||||||||||||||||||
| 30,000 | Besterra | 1,245 | 1.28 | |||||||||||||||||
| 120,000 | Nittoc Construction | 567 | 0.58 | |||||||||||||||||
| 300,000 | Yumeshin | 2,124 | 2.18 | |||||||||||||||||
| Environmental Control: 0.00% (30th Apr 2016: 0.09%) | - | - | ||||||||||||||||||
| Food: 1.65% (30th Apr 2016: 0.00%) | ||||||||||||||||||||
| 44,000 | Kenko Mayonnaise | 1,614 | 1.65 | |||||||||||||||||
| Hand/Machine Tools: 1.24% (30th Apr 2016: 0.46%) | ||||||||||||||||||||
| 10,000 | Disco | 1,210 | 1.24 | |||||||||||||||||
| Healthcare-Products: 3.44% (30th Apr 2016: 7.01%) | ||||||||||||||||||||
| 41,000 | Asahi Intecc | 1,777 | 1.82 | |||||||||||||||||
| 85,000 | Cyberdyne | 1,277 | 1.31 | |||||||||||||||||
| 23,900 | Shofu | 305 | 0.31 | |||||||||||||||||
| Healthcare-Services: 2.81% (30th Apr 2016: 1.91%) | ||||||||||||||||||||
| 13,000 | Ain | 878 | 0.90 | |||||||||||||||||
| 36,000 | PeptiDream | 1,859 | 1.91 | |||||||||||||||||
| Home Furnishings: 2.99% (30th Apr 2016: 2.56%) | ||||||||||||||||||||
| 62,000 | Foster Electric | 1,141 | 1.17 | |||||||||||||||||
| 170,000 | Panasonic | 1,777 | 1.82 | |||||||||||||||||
| Insurance: 2.26% (30th Apr 2016: 3.99%) | ||||||||||||||||||||
| 60,000 | Anicom | 1,347 | 1.38 | |||||||||||||||||
| 80,400 | Newton Financial Consulting | 863 | 0.88 | |||||||||||||||||
| Internet: 0.95% (30th Apr 2016: 5.60%) | ||||||||||||||||||||
| 45,000 | Designone Japan | 915 | 0.94 | |||||||||||||||||
| 1,800 | Morningstar Japan | 5 | 0.01 | |||||||||||||||||
| Iron/Steel: 0.77% (30th Apr 2016: 0.00%) | ||||||||||||||||||||
| 70,000 | Daido Metal | 756 | 0.77 | |||||||||||||||||
| Leisure Time: 2.91% (30th Apr 2016: 0.45%) | ||||||||||||||||||||
| 40,000 | Tosho | 1,734 | 1.78 | |||||||||||||||||
| 25,000 | Yonex | 1,104 | 1.13 | |||||||||||||||||
| Lodging: 0.00% (30th Apr 2016: 0.36%) | - | - | ||||||||||||||||||
| Machinery-Construction & Mining: 3.12% (30th Apr 2016: 3.13%) | ||||||||||||||||||||
| 100,000 | Mitsubishi Electric | 1,355 | 1.39 | |||||||||||||||||
| 150,000 | Tadano | 1,686 | 1.73 | |||||||||||||||||
| Machinery-Diversified: 5.04% (30th Apr 2016: 1.15%) | ||||||||||||||||||||
| 70,000 | Daifuku | 1,269 | 1.30 | |||||||||||||||||
| 70,000 | Freund | 1,128 | 1.16 | |||||||||||||||||
| 100,000 | Nissei Plastic Industrial | 792 | 0.81 | |||||||||||||||||
| 140,000 | Nittoku Engineering | 1,727 | 1.77 | |||||||||||||||||
| Miscellaneous Manufacturing: 0.00% (30th Apr 2016: 0.29%) | - | - | ||||||||||||||||||
| Real Estate: 5.48% (30th Apr 2016: 6.13%) | ||||||||||||||||||||
| 80,000 | Mitsubishi Estate | 1,587 | 1.63 | |||||||||||||||||
| 148,000 | Pressance | 1,706 | 1.75 | |||||||||||||||||
| 121,700 | Star Mica | 2,047 | 2.10 | |||||||||||||||||
| REITS: 3.79% (30th Apr 2016: 4.88%) | ||||||||||||||||||||
| 860 | Ichigo Hotel REIT Investment | 979 | 1.00 | |||||||||||||||||
| 500 | MCUBS MidCity Investment | 1,625 | 1.67 | |||||||||||||||||
| 1,100 | Tosei Reit Investment | 1,095 | 1.12 | |||||||||||||||||
| Retail: 3.77% (30th Apr 2016: 4.93%) | ||||||||||||||||||||
| 25,000 | Balnibarbi | 762 | 0.78 | |||||||||||||||||
| 51,100 | G-7 | 654 | 0.67 | |||||||||||||||||
| 92,000 | Qol | 1,453 | 1.49 | |||||||||||||||||
| 60,000 | Yossix | 807 | 0.83 | |||||||||||||||||
| Semiconductors: 4.73% (30th Apr 2016: 2.44%) | ||||||||||||||||||||
| 80,000 | Japan Material | 2,839 | 2.91 | |||||||||||||||||
| 40,000 | Lasertec | 777 | 0.80 | |||||||||||||||||
| 11,000 | Tokyo Electron | 994 | 1.02 | |||||||||||||||||
| Software: 3.47% (30th Apr 2016: 3.04%) | ||||||||||||||||||||
| 40,000 | Cresco | 871 | 0.89 | |||||||||||||||||
| 70,000 | FINDEX | 661 | 0.68 | |||||||||||||||||
| 174,100 | Jastec | 1,841 | 1.90 | |||||||||||||||||
| Telecommunications: 1.41% (30th Apr 2016: 0.00%) | ||||||||||||||||||||
| 15,000 | Hikari Tsushin | 1,378 | 1.41 | |||||||||||||||||
| Textiles: 1.20% (30th Apr 2016: 1.34%) | ||||||||||||||||||||
| 100,000 | Seiren | 1,172 | 1.20 | |||||||||||||||||
| Transportation: 4.28% (30th Apr 2016: 4.54%) | ||||||||||||||||||||
| 70,000 | Hamakyorex | 1,305 | 1.34 | |||||||||||||||||
| 30,000 | Sakai Moving Service | 650 | 0.67 | |||||||||||||||||
| 250,000 | SBS | 2,218 | 2.27 | |||||||||||||||||
| Total Japan: (30th Apr 2016: 99.51%) | 96,768 | 99.20 | ||||||||||||||||||
| Total Listed Equities: (30th Apr 2016: 99.51%) | 96,768 | 99.20 | ||||||||||||||||||
| Total Investments held at fair value through profit or loss | 96,768 | 99.20 | ||||||||||||||||||
| Cash and cash equivalents (30th Apr 2016: 6.22%) | 7,036 | 7.21 | ||||||||||||||||||
| Other net liabilities (30th Apr 2016: (5.73%)) | (6,252) | (6.41) | ||||||||||||||||||
| Net assets attributable to equity shareholders | 97,552 | 100.00 | ||||||||||||||||||
Unaudited Statement of Comprehensive Income
For the six months ended 31st October 2016
| 31st October 2016 | 31st October 2015* | |||||||
| Revenue | Capital | Total | Revenue | Capital | Total | |||
| Notes | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | ||
| Income | ||||||||
| 4 | Net gains/(losses) on investments held at fair value through profit or loss | - | 16,633 | 16,633 | - | (1,592) | (1,592) | |
| Net (losses)/gains on foreign exchange | - | (480) | (480) | - | 95 | 95 | ||
| Dividend income | 783 | - | 783 | 728 | - | 728 | ||
| 783 | 16,153 | 16,936 | 728 | (1,497) | (769) | |||
| Expenses | ||||||||
| 6 | Investment management fees | (444) | - | (444) | (461) | - | (461) | |
| 7 | Depositary fees | (38) | - | (38) | (65) | - | (65) | |
| 8 | Administration fees | (71) | - | (71) | (74) | - | (74) | |
| Registrar and transfer agent fees | - | - | - | (12) | - | (12) | ||
| 9 | Directors' fees and expenses | (106) | - | (106) | (146) | - | (146) | |
| Insurance fees | (7) | - | (7) | (10) | - | (10) | ||
| Audit fees | (26) | - | (26) | (22) | - | (22) | ||
| Printing and advertising fees | (20) | - | (20) | (31) | - | (31) | ||
| Legal and professional fees | (157) | - | (157) | (115) | - | (115) | ||
| Listing fees | (7) | - | (7) | - | - | - | ||
| Miscellaneous expenses | (26) | - | (26) | (31) | - | (31) | ||
| (902) | - | (902) | (967) | - | (967) | |||
| Finance cost | ||||||||
| Interest expense and bank charges | (72) | - | (72) | (81) | - | (81) | ||
| (Loss)/profit before taxation | (191) | 16,153 | 15,962 | (320) | (1,497) | (1,817) | ||
| Taxation | (118) | - | (118) | (116) | - | (116) | ||
| (Loss)/profit for the period | ||||||||
| (309) | 16,153 | 15,844 | (436) | (1,497) | (1,933) | |||
| Other comprehensive income | ||||||||
| 3 | Exchange losses on translation | - | - | (14,380) | - | - | (804) | |
| Total comprehensive income/(loss) for the period | - | - | 1,464 | - | - | (2,737) | ||
| Basic and diluted (deficit)/earnings per ordinary share | ||||||||
| 10 | $(0.008) | $0.397 | $0.389 | $(0.011) | $(0.037) | $(0.048) | ||
*Where applicable, the comparative Statement of Comprehensive Income has been restated and does not correspond to the Financial Statements for the six months ended 31st October 2015 (refer to Note 3 for more details).
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 IAS 34. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies.
The Notes form an integral part of these Financial Statements.
Unaudited Statement of Changes in Equity
For the six months ended 31st October 2016
| Ordinary Share capital | Share premium | Revenue reserve | Capital reserve/ realised |
Capital reserve/unrealised | Capital reserve/ exchange |
Accumulated other comprehensive income | Total | ||||||||||
| Notes | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | |||||||||
| Balances at 1st May 2016 | - | - | (26,737) | 85,380 | 39,919 | (20,579) | 8,975 | 86,958 | |||||||||
| Movements during the period | |||||||||||||||||
| 16 | Subscriptions | - | 13,387 | - | - | - | - | - | 13,387 | ||||||||
| 17 | Redemptions | - | (3,751) | - | - | - | - | - | (3,751) | ||||||||
| Shares bought into treasury | - | - | (506) | - | - | - | - | (506) | |||||||||
| Transfer from capital reserve | - | (9,636) | - | - | - | - | - | (9,636) | |||||||||
| Transfer to share premium | - | - | - | 9,636 | - | - | - | 9,636 | |||||||||
| 4 | Net realised gains on investments held at fair value through profit or loss | - | - | (1,576) | 1,576 | - | - | - | - | ||||||||
| 4 | Net unrealised gains on investments held at fair value through profit or loss | - | - | (15,057) | - | 15,057 | - | - | - | ||||||||
| Net losses on foreign exchange | - | - | 480 | - | - | (480) | - | - | |||||||||
| Exchange losses on translation | - | - | 14,380 | - | - | - | (14,380) | - | |||||||||
| Total comprehensive income | - | - | 1,464 | - | - | - | - | 1,464 | |||||||||
| Balances at 31st October 2016 | - | - | (27,552) | 96,592 | 54,976 | (21,059) | (5,405) | 97,552 | |||||||||
The Notes form an integral part of these Financial Statements.
Unaudited Statement of Changes in Equity
For the six months ended 31st October 2015*
| Ordinary Share capital | Share premium | Revenue reserve | Capital reserve/ realised |
Capital reserve/ unrealised |
Capital reserve/ exchange |
Accumulated other comprehensive income | Total | ||||||||||
| Notes | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | |||||||||
| Balances at 1st May 2015 | - | - | (25,995) | 75,941 | 49,031 | (19,576) | 14,108 | 93,509 | |||||||||
| Movements during the period | |||||||||||||||||
| 16 | Subscriptions | - | 574 | - | - | - | - | - | 574 | ||||||||
| 17 | Redemptions | - | (1,163) | - | - | - | - | - | (1,163) | ||||||||
| Transfer from capital reserve | - | 589 | - | - | - | - | - | 589 | |||||||||
| Transfer to share premium | - | - | - | (589) | - | - | - | (589) | |||||||||
| 4 | Net realised gains on investments held at fair value through profit or loss | - | - | (5,530) | 5,530 | - | - | - | - | ||||||||
| 4 | Net unrealised losses on investments held at fair value through profit or loss | - | - | 7,122 | - | (7,122) | - | - | - | ||||||||
| Net gains on foreign exchange | - | - | (95) | - | - | 95 | - | - | |||||||||
| Exchange losses on translation | - | - | 804 | - | - | - | (804) | - | |||||||||
| Total comprehensive loss | - | - | (2,737) | - | - | - | - | (2,737) | |||||||||
| Balances at 31st October 2015 | - | - | (26,431) | 80,882 | 41,909 | (19,481) | 13,304 | 90,183 | |||||||||
*Where applicable, the comparative Statement of Changes in Equity has been restated and does not correspond to the Financial Statements for the six months ended 31st October 2015 (refer to Note 3 for more details).
The Notes form an integral part of these Financial Statements.
Unaudited Statement of Financial Position
As at 31st October 2016
| 31st October 2016 |
30th April 2016 |
|||
| Notes | $'000 | $'000 | ||
| Non-Current Assets | ||||
| 14 | Investments held at fair value through profit or loss | 96,768 | 86,526 | |
| Current Assets | ||||
| Due from brokers | 496 | 455 | ||
| Dividends receivable | 478 | 711 | ||
| Prepaid expenses and other receivables | 5 | - | ||
| Cash and cash equivalents | 7,036 | 5,413 | ||
| 8,015 | 6,579 | |||
| Current Liabilities | ||||
| Due to brokers | (1,177) | (39) | ||
| Payables and accrued expenses | (337) | (508) | ||
| 11 | Loans payable | (5,717) | (5,600) | |
| (7,231) | (6,147) | |||
| Net Current Assets | 784 | 432 | ||
| 15 | Net Assets | 97,552 | 86,958 | |
| Equity | ||||
| Ordinary share capital | - | - | ||
| Share premium | - | - | ||
| Revenue reserve | (27,552) | (26,737) | ||
| Capital reserve | 130,509 | 104,720 | ||
| Accumulated other comprehensive income | (5,405) | 8,975 | ||
| Net Assets Attributable to Equity Shareholders | 97,552 | 86,958 | ||
| Net Asset Value per Ordinary Share* | $2.14 | $2.16 | ||
*Based on the Net Asset Value at the period/year end divided by the number of shares in issue: 45,624,358 (30th April 2016: 40,182,900) (See Note 15).
Approved by the Board of Directors on 7th December 2016.
The Notes form an integral part of these Financial Statements.
Unaudited Statement of Cash Flows
For the six months ended 31st October 2016
| 31st October 2016 | 31st October 2015* | ||||
| $'000 | $'000 | ||||
| Notes | |||||
| Cash flows from operating activities | |||||
| Profit/(loss) before taxation | 15,962 | (1,817) | |||
| Adjustments to reconcile profit/(loss) before taxation to net cash flows from operating activities | |||||
| Interest expense and bank charges | 72 | 81 | |||
| (Increase)/decrease in investments held at fair value through profit or loss | (10,242) | 3,626 | |||
| Increase in due from brokers | (41) | (195) | |||
| Decrease in dividends receivable | 233 | 332 | |||
| Increase in prepaid expenses and other receivables | (5) | (49) | |||
| Increase/(decrease) in due to brokers | 1,138 | (721) | |||
| (Decrease)/increase in payables and accrued expenses | (171) | 6 | |||
| Taxation paid | (118) | (116) | |||
| Net cash inflow from operating activities | 6,828 | 1,147 | |||
| Cash flows from financing activities | |||||
| Interest paid | (68) | (81) | |||
| 16 | Subscriptions | 13,387 | 574 | ||
| 17 | Redemptions | (3,751) | (1,163) | ||
| 13 | Shares bought into treasury | (506) | - | ||
| Net cash inflow/(outflow) from financing activities | 9,062 | (670) | |||
| Net increase in cash and cash equivalents | 15,890 | 477 | |||
| Cash and cash equivalents at beginning of period | 5,413 | 1,374 | |||
| Effect of exchange losses on cash and cash equivalents | (14,267) | (953) | |||
| Cash and cash equivalents at end of period | 7,036 | 898 | |||
*Where applicable, the comparative Statement of Cash Flows has been restated and does not correspond to the Financial Statements for the six months ended 31st October 2015 (refer to Note 3 for more details).
The notes form an integral part of these financial statements.
Notes to the Unaudited Financial Statements
For the six months ended 31st October 2016
1. GENERAL INFORMATION
Atlantis Japan Growth Fund Limited (the “Companyâ€) was incorporated in Guernsey on
13th March 1996. The Company commenced activities on 10th May 1996. The Company is an authorised closed-ended investment scheme registered in Guernsey. The Company’s equity shares are listed on the London Stock Exchange.
As an investment trust, the Company is not regulated as a collective investment scheme by the Financial Conduct Authority. However, it is subject to the UKLA Listing Rules, Prospectus Rules, Disclosure Transparency Rules and the rules of the London Stock Exchange.
The Company’s investment objective is to achieve long term capital growth through investment wholly or mainly in listed Japanese equities.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The condensed interim Financial Statements for the six months ended 31st October 2016 have been prepared in accordance with IAS 34 Interim Financial Reporting and the Association of Investment Companies (“AICâ€) Statement of Recommended Practice (“SORPâ€) for Investment Trust Companies and Venture Capital Trusts to the extent it is not in conflict with IAS 34 and the Principal Documents.
The condensed interim Financial Statements do not include all of the information required for annual financial statements, and should be read in conjunction with the Company’s Financial Statements as at and for the year ended 30th April 2016 which were prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS").
The significant accounting policies adopted in these condensed interim Financial Statements are consistent with those applied by the Company in its Financial Statements as at and for the year ended 30th April 2016.
3. CHANGE IN FUNCTIONAL CURRENCY
As a result of the adjustments relating to the change in functional currency from USD to GBP set out in more detail in the Financial Statements for the year ended 30th April 2016, the prior period comparatives have been restated to correct errors over certain amounts which were reflected on a USD functional currency basis previously. There has been no impact on the Net Asset Value of the Company.
As a result of these adjustments, $14,108,281 has been reclassified from the capital reserve to accumulated other comprehensive income in the Balances at 1st May 2015 per the Statement of Changes in Equity for the six months ended 31st October 2015.
The impact of these adjustments on each line item of the Statement of Comprehensive Income affected for the six months ended 31st October 2015 are shown below.
Statement of Comprehensive Income
| 31st October 2015 (Prior Period) | Restatement | 31st October 2015 (Restated) | |||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | |||
| $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | |||
| Income | |||||||||||
| Net losses on investments held at fair value through profit or loss | - | (1,709) | (1,709) | - | 117 | 117 | - | (1,592) | (1,592) | ||
| Net (losses)/gains on foreign exchange | - | (599) | (599) | - | 694 | 694 | - | 95 | 95 | ||
| 728 | (2,308) | (1,580) | - | 811 | 811 | 728 | (1,497) | (769) | |||
| Loss before taxation | (320) | (2,308) | (2,628) | - | 811 | 811 | (320) | (1,497) | (1,817) | ||
| Loss for the period | |||||||||||
| (436) | (2,308) | (2,744) | - | 811 | 811 | (436) | (1,497) | (1,933) | |||
| Other comprehensive income | |||||||||||
| Exchange losses on translation | - | - | - | - | - | (804) | - | - | (804) | ||
| Total comprehensive loss for the period | - | - | (2,744) | - | - | 7 | - | - | (2,737) | ||
| Basic and diluted deficit per ordinary share | |||||||||||
| $(0.011) | $(0.057) | $(0.068) | $0.000 | $0.020 | $0.020 | $(0.011) | $(0.037) | $(0.048) | |||
4. NET GAINS/(LOSSES) ON INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
| 31st October 2016 | 31st October 2015* | ||||
| $'000 | $'000 | ||||
| Realised gains on investments held at fair value through profit or loss | 4,179 | 6,900 | |||
| Realised losses on investments held at fair value through profit or loss | (2,603) | (1,370) | |||
| Net realised gains on investments held at fair value through profit or loss | 1,576 | 5,530 | |||
| Unrealised gains on investments held at fair value through profit or loss | 18,575 | 5,542 | |||
| Unrealised losses on investments held at fair value through profit or loss | (3,518) | (12,664) | |||
| Net unrealised gains/(losses) on investments held at fair value through profit or loss | 15,057 | (7,122) | |||
| Net gains/(losses) on investments held at fair value through profit or loss | 16,633 | (1,592) | |||
*Where applicable, certain comparative numbers have been restated and do not correspond to the Financial Statements for the six months ended 31st October 2015 (refer to Note 3 for more details).
5. RELATED PARTY DISCLOSURES
The Investment Manager, Depositary, Administrator and Directors are considered related parties to the Company as they have the ability to control, or exercise significant influence over, the Company in making financial or operational decisions. (See Notes 6 to 9 for details of transactions with these related parties during the period ended 31st October 2016.)
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 2016 and 30th April 2016 are as follows:
| Ordinary Shares |
Ordinary Shares |
||||
| 31st October 2016 |
30th April 2016 |
||||
| †Andrew Martin Smith | - | 30,000 | |||
| Noel Lamb | 10,000 | 10,000 | |||
| Philip Ehrmann | 24,000 | - | |||
| Richard Pavry | 20,000 | - |
†Andrew Martin Smith retired on 31st July 2016.
The above interests of all Directors were unchanged as at the date of this report.
As at 31st October 2016, a family member of the President of the Investment Adviser held 946,000 ordinary shares of the Company (30th April 2016: 946,000).
6. INVESTMENT MANAGEMENT FEE
Under the terms of the Investment Management Agreement, 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.
The Company pays to the Investment Manager a fee accrued daily and paid monthly in arrears at the annual rate of 1 per cent of the weekly Net Asset Value of the Company.
Redemption Pool Investment Management Fees
The Investment Manager shall also be entitled to receive a fee from the Company of 1 per cent per annum of the daily Net Asset Value of any redemption pool together with transaction charges.
For the six months ended 31st October 2016, total investment management fees were $443,974 (31st October 2015: $461,262) of which $77,323 (30th April 2016: $68,926) was due and payable as at that date.
In addition to investment management fees, Tiburon Partners LLP, as Marketing Agent, earned fees of $14,049 during the six months ended 31st October 2016 (31st October 2015: $Nil) of which $5,185 (30th April 2016: $Nil) was due and payable as at that date.
7. DEPOSITARY FEES
Under the terms of the Depositary Agreement, fees are payable to the Depositary, Northern Trust (Guernsey) Limited, 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 Depositary Fees
The Depositary shall 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 2016, total depositary fees were $38,208 (31st October 2015: $64,737) of which $14,720 (30th April 2016: $29,365) was due and payable as at that date.
8. ADMINISTRATION FEES
Under the terms of the Administration Agreement, the Company pays to the Administrator, Northern Trust International Fund Administration Services (Guernsey) Limited, 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 of £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 2016, total administration fees were $70,838 (31st October 2015: $73,535) of which $13,004 (30th April 2016: $45,744) was due and payable as at that date.
9. 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 2016, total directors’ fees and expenses were $106,298 (31st October 2015: $146,334) of which $42,876 (30th April 2016: $58,413) was due and payable as at that date.
10. BASIC AND DILUTED EARNINGS/(DEFICIT) PER ORDINARY SHARE
The basic and diluted earnings/(deficit) per ordinary share figure is based on the profit/(loss) for the period of $15,843,690 (31st October 2015*: $(1,933,221)) and on 40,742,696 being the weighted average number of shares in issue during the six months ended 31st October 2016 (31st October 2015: 40,403,459).
The earnings/(deficit) per ordinary share figure can be further analysed between revenue and capital, as below.
| 31st October 2016 | 31st October 2015* | ||||
| $'000 | $'000 | ||||
| Net revenue loss | (309) | (436) | |||
| Net capital (loss)/profit | 16,153 | (1,497) | |||
| Net total profit/(loss) | 15,844 | (1,933) | |||
| Weighted average number of ordinary shares | |||||
| in issue during the period | 40,742,696 | 40,403,459 | |||
| $ | $ | ||||
| Revenue loss per ordinary share | (0.008) | (0.011) | |||
| Capital profit/(loss) per ordinary share | 0.397 | (0.037) | |||
| Total profit/(loss) per ordinary share | 0.389 | (0.048) | |||
*Where applicable, certain comparative numbers have been restated and do not correspond to the Financial Statements for the six months ended 31st October 2015 (refer to Note 3 for more details).
11. LOANS PAYABLE
| Loan | Interest | Maturity | 31st October 2016 | 30th April 2016 | ||
| Amount | Rate | Date | $'000 | $'000 | ||
| 3 year committed variable rate | ||||||
| credit facility | ||||||
| ¥600,000,000 | 1.34% | 8th Jul 2016 | - | 5,600 | ||
| ¥600,000,000 | 1.33% | 9th Dec 2016 | 5,717 | - | ||
| Loan due for repayment within one year | 5,717 | 5,600 | ||||
The credit facility is provided by Royal Bank of Scotland International Limited (“RBSâ€). As at 31st October 2016, the Company had drawn down Â¥600,000,000 ($5,716,736) (31th April 2016: Â¥600,000,000/$5,600,411) of the Â¥1,500,000,000 borrowable under the terms of the facility agreement.
Under the terms of the facility agreement, the Company is required to comply with the following financial covenants:
- the Company’s portfolio must contain at least 60 investments, of which at least 50 must be in investments quoted on the Tokyo Stock Exchange or any other equivalent exchange approved by RBS, at all times;
- the amount of the credit facility drawn down must not exceed 25% of the value of the Company’s portfolio at any time; and
- the Company’s NAV must not fall below $58,000,000 at any time.
The Company complied with all of the above the financial covenants during the six months ended 31st October 2016 and the year ended 30th April 2016.
(Losses)/gains on foreign exchange on the Company’s loan amounted to $(1,105,124) during the six months ended 31st October 2016 (31st October 2015: $69,954).
12. FORWARD CURRENCY CONTRACTS
There were no forward currency contracts held during the six months ended 31st October 2016 (31st October 2015: None).
13. SHARE CAPITAL AND SHARE PREMIUM
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. The holders of C shares shall not have the right to attend or vote at any general meeting of the Company. The holders of C shares shall be entitled, in that capacity to receive a special dividend of such amount as the Directors may resolve to pay out of the net assets attributable to the C share class and from income received and accrued attributable to the 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 confer 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. Treasury shares do not confer an entitlement to any dividends declared.
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.
Issued Ordinary Shares
| Number of Shares | Share Capital | Share Premium | |||||||||
| $’000 | $’000 | ||||||||||
| In issue at 31st October 2016 | 45,624,358 | - | - | ||||||||
| In issue at 30th April 2016 | 40,182,900 | - | - | ||||||||
| Reconciliation of number of shares | |||||||||||
| Number of Shares | Number of Shares | ||||||||||
| 31st October 2016 | 31st October 2015 | ||||||||||
| Shares of no par value | |||||||||||
| Issued shares at the start of the period | 40,182,900 | 40,455,909 | |||||||||
| Re-issue of treasury shares | - | - | |||||||||
| Subscription of shares | 7,614,446 | 296,903 | |||||||||
| Redemption of shares | (1,910,488) | (569,912) | |||||||||
| Purchase of shares into Treasury | (262,500) | - | |||||||||
| Number of shares at the end of the period | 45,624,358 | 40,182,900 | |||||||||
| Shares held in Treasury | |||||||||||
| Opening balance | 2,701,686 | 2,701,686 | |||||||||
| Shares bought in to Treasury during the period | 262,500 | - | |||||||||
| Treasury shares re-issued | - | - | |||||||||
| Number of shares at the end of the period | 2,964,186 | 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.
14. FAIR VALUE HIERARCHY
The fair value of investments traded in active markets (such as publicly traded derivatives and trading securities) are based on quoted market prices at the close of trading on the Statement of Financial Position date. The quoted market price used for investments held by the Company is the last traded price; the appropriate quoted market price for financial liabilities is the current asking price.
A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis.
For instruments for which there is no active market, the Company may use internally developed models, which are usually based on valuation methods and techniques generally recognised as standard within the industry. Valuation models may be used primarily to value unlisted equity, debt securities and other debt instruments for which markets were or have been inactive during the financial year. Some of the inputs to these models may not be market observable and are therefore estimated based on assumptions.
The following table sets out fair value measurements using the IFRS 13 fair value hierarchies:
| At 31st October 2016 | ||||||||
| Investments at fair value through profit or loss | ||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||
| $’000 | $’000 | $’000 | $’000 | |||||
| Equity Investments | 96,768 | - | - | 96,768 | ||||
| 96,768 | - | - | 96,768 | |||||
| At 30th April 2016 | ||||||||
| Investments at fair value through profit or loss | ||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||
| $’000 | $’000 | $’000 | $’000 | |||||
| Equity Investments | 86,526 | - | - | 86,526 | ||||
| 86,526 | - | - | 86,526 | |||||
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset as follows:
Level 1 - valued using quoted prices in active markets for identical assets or liabilities.
Level 2 - valued by reference to valuation techniques using observable inputs other than quoted prices included within level 1.
Level 3 - valued by reference to valuation techniques using inputs that are not based on observable market data.
15. NET ASSET VALUE
| 31st October 2016 | 30th April 2016 | ||||||
| Net Asset Value | $97,552,059 | $86,957,813 | |||||
| Number of Shares in Issue | 45,624,358 | 40,182,900 | |||||
| NAV per Ordinary Share | $2.14 | $2.16 |
16. SUBSCRIPTION RIGHT
Shareholders have the opportunity to subscribe for one new ordinary share for every five ordinary shares held on 1st October in each year. The following subscriptions were made during the period:
| Subscription date | Shares issued | $’000 | |||
| 31st October 2016 | 31st October 2016 | ||||
| 03/10/2016 | 7,614,446 | 13,387 | |||
| 7,614,446 | 13,387 | ||||
| Subscription date | Shares issued | $’000 | |||
| 31st October 2015 | 31st October 2015 | ||||
| 01/10/2015 | 296,903 | 574 | |||
| 296,903 | 574 | ||||
During the six months ended 31st October 2016, a total of $13,386,514 was paid by subscribing shareholders (31st October 2015: $574,416).
17. REDEMPTION FACILITY
Shareholders have the opportunity to make redemptions of part or all of their shareholding on a six-monthly basis subject to the Directors' discretion to decline any redemption requests. The following redemptions were made during the period:
| Redemption date | Shares redeemed | $’000 | |||
| 31st October 2016 | 31st October 2016 | ||||
| 30/09/2016 | (1,910,488) | (3,751) | |||
| (1,910,488) | (3,751) | ||||
| Redemption date | Shares redeemed | $’000 | |||
| 31st October 2015 | 31st October 2015 | ||||
| 30/09/2015 | (569,912) | (1,163) | |||
| (569,912) | (1,163) | ||||
During the six months ended 31st October 2016, a total of $3,750,733 was paid to redeeming shareholders (31st October 2015: $1,163,129).
18. 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 Directors during the six months ended 31st October 2016 (31st October 2015: $Nil).
19. EXCHANGE RATES
The following exchange rates were used to translate assets and liabilities into the reporting currency (USD) at 31st October 2016 and 30th April 2016:
| 31st October 2016 | 30th April 2016 | ||||||
| USD | USD | ||||||
| GBP | 0.8211 | 0.6844 |
The following average exchange rates were used to translate transactions into the reporting currency (USD) during the six months ended 31st October 2016 and 31st October 2015:
| 31st October 2016 | 31st October 2015 | ||||||
| USD | USD | ||||||
| GBP | 0.7480 | 0.6456 |
20. CHANGES IN THE PORTFOLIO
A list, specifying for each investment the total purchases and sales which took place during the six months ended 31st October 2016 may be obtained, upon request, at the registered office of the Company.
21. EVENTS DURING THE REPORTING PERIOD
On 4th May 2016, Edmond de Rothschild Securities (UK) Limited resigned as Financial Adviser and the Company appointed Cantor Fitzgerald Europe as its Financial Adviser.
On 1st June 2016, Aravis Partners LLP resigned as Marketing Agent and the Company appointed Tiburon Partners LLP as its Marketing Agent.
Andrew Martin Smith retired from the Board of Directors on 31st July 2016.
Richard Pavry was appointed to the Board of Directors on 1st August 2016.
Eric Boyle retired from the Board of Directors on 14th October 2016.
There were no other significant events during the period ended 31st October 2016 which require adjustment to or additional disclosure in the Financial Statements.
22. EVENTS AFTER THE REPORTING PERIOD
There were no significant events subsequent to the period ended 31st October 2016 which require adjustment to or additional disclosure in the Financial Statements.
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