Annual Financial Report

RNS Number : 7869Z
Aberdeen Japan Investment Trust PLC
01 June 2016
 

ABERDEEN JAPAN INVESTMENT TRUST PLC

 

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 MARCH 2016

 

 

STRATEGIC REPORT 

 

Net asset value total return 2016

 -6.2%


Share price total return 2016

 -12.0%

2015

+58.2%


2015

+46.6%

 






 

Index total return 2016

-1.7%


Average discount to net asset value 2016*

-6.4%

 

2015

+26.0%


2015

-8.4%

 




*(Discount)/premium ranged from -14.4% to 4.4% during 2016

 






 

Revenue return per Ordinary share 2016

5.67p


Dividend per Ordinary share 2016

 4.20p

 

2015

3.70p


2015

2.60p

 

 

 

1.       CHAIRMAN'S STATEMENT

Overview of the year ended 31 March 2016

The year was marked by political and economic uncertainties as commodity prices plunged, growth in China slowed, Prime Minister Abe's reforms struggled to produce growth or inflation, the EU referendum loomed and US monetary policy wavered. Global stock markets gyrated, the US dollar appreciated against most major currencies and the Company experienced a challenging second full year of its Japan-only mandate.

 

Over the year, your Company's net asset value (NAV) returned -6.2%, compared to the benchmark Topix return of -1.7%, in sterling terms.  This 4.5% NAV underperformance is largely due to a loss on the currency hedge almost all of which came in the first quarter of 2016 when the yen strengthened despite negative interest rates and Brexit worries weakening sterling.  A further negative impact of the gearing amounting to -1.7% was offset by the good stock selection seen at the portfolio level relative to the index.   A detailed analysis of the portfolio's performance is set out in the Manager's Review.

 

Since the change of the mandate in late 2013 your Company has delivered a strong NAV return of 38.7%, outperforming the index by 19.4%, in which the currency hedge has been virtually neutral with a small 0.5% gain over the whole period.   As has been noted previously, the currency hedge, which was about 46% of NAV at the year end, manages currency related risk, and in so doing will periodically produce either gains or losses, as was the case this year. The long term strength of the Company is in the Manager's approach to investing which has proved its worth by sustaining the underlying outperformance against the benchmark despite the volatility of the markets.

 

Confidence in Japan was strong in the first half of the year. The market rose 9.6% by mid-August in local currency terms and the discount narrowed from 6.7% as at 31 March 2015 to reach a small premium during July and August.  This allowed the Company to issue a total 1.23 million new shares, equivalent to about 8.4% of its opening issued share capital, at a premium to NAV value ranging from 1.1% to 2.7% and raised additional capital for the Company totalling £6.8 million. However, thereafter the market fell by almost 20% by the year end (again in local currency terms) and the discount to NAV per Ordinary share widened to 12.5% at the year end.  As a result the Company's share price total return for the year fell by 12.0%.

 

The Board closely monitors the discount level and has in place a mechanism to buy back shares at certain levels.  In early 2016, as discounts across the investment trust sector widened, the Company's discount traded at times above 10% and a number of small buybacks were undertaken.  During March 2016, a total of 229,000 shares were bought back to be held in treasury; a further 3,500 shares were bought back subsequent to the year end.  Overall the discount averaged 9.5% over the last 90 days of the financial year and there is therefore no requirement under the articles for the Company to put forward a continuation vote to shareholders.  

 

Gearing

The Company continued to make use of a closed-ended vehicle's opportunity to gear through its Yen 1.3 billion fixed term and Yen 800 million floating facilities with ING Bank.  Although shareholders' funds decreased marginally from £79.9 million to £79.7 million, the strengthening of the yen against sterling over the course of the year resulted in an increase in the Company's net gearing position from 8.5% to 12.1% at 31 March 2016.  The Board continues to monitor the level of gearing and considers a gearing level of around 10% to be appropriate, although as highlighted previously, with market fluctuations, this may range between 5% and 15%. 

 

Dividend

The net income for the year increased as dividend levels are gradually increasing in Japan.  The Board aims to maintain a stable dividend paying not less than the amount required to maintain investment trust status. Based on this policy the Board is recommending a final dividend of 4.2p per Ordinary share in respect of the year ended 31 March 2016 (2015 - 2.6p). 

 

If approved, the dividend will be paid on 8 July 2016 to shareholders on the register as at close of business on 10 June 2016. The ex-dividend date is 9 June 2016.

 

Board

Sir David Warren was appointed as a Director of the Company on 1 December 2015.  Sir David's career in the British Diplomatic Service has spanned over 35 years with extensive experience of Asia and, in particular, of Japan when he served three times in the British Embassy in Tokyo and was British Ambassador from 2008 to 2012.

 

As part of the Board's on-going succession planning, Sir Andrew Burns has indicated that he intends to retire from the Board at the AGM to be held in July 2016 and will not be seeking re-election. On behalf of the Board I would like to thank Andrew very much for his contribution and wise counsel to the Company.

 

Outlook

The International Monetary Fund recently trimmed its global growth forecast for the fourth time in 12 months. Structural problems, such as China's slowdown and advanced economies' continued weaknesses, are constraining global growth, leaving world markets vulnerable to unexpected shocks.  Japan's stock market, like its major counterparts elsewhere, reflects this uncertainty.  It is the second largest in the world and yet it is under-researched. Tellingly, a third of all listed Japanese companies, many with significant international businesses, failed to get any attention from analysts, compared to 4% in the US.  The Manager's local presence in Tokyo gives a front row seat to unfolding corporate developments and allows them to unearth good companies that have been neglected by mainstream analysts. 

 

In the past year, the challenges facing the Japanese stock market have confirmed the value of the Manager's approach of seeking out the best companies through its tough screening process. The solid fundamentals of the underlying investments in your Company's portfolio and their long-term growth potential remain undiminished, despite being buffeted by global headwinds. At the same time, the Manager's long-term buy-and-hold approach is aligned with the interests of your Company and the scope for improving long term returns is substantial.

 

The Board is therefore confident of the attractiveness of investing in Japan and that the good start to the Japan only mandate will be maintained in the future.  

 

Neil Gaskell

Chairman

 

31 May 2016

 

 

2.       INVESTMENT MANAGER'S REVIEW

Overview

Japan, like the rest of Asia, faced considerable market turbulence during the year under review. Local equities had a good start but later gave up those gains to end almost 2% lower in sterling terms. Broadly, the market wobbles reflected global growth concerns and depressed commodity prices. Monetary policy divergence between the US and the rest of the world also curbed investor appetite. Risk aversion peaked at the turn of the year, when persistent concerns over the health of China's economy and a renewed slump in the oil price sparked a global market rout.

 

The Bank of Japan's (BOJ) unexpected move in late January in imposing negative interest rates exacerbated volatility. Japanese ten-year yields, the closest proxy to the BOJ's policy rate, fell below zero for the first time ever in February following the decision. While the central bank's intention was to weaken the yen in the short term and stimulate the economy in the long term, the move produced some unintended consequences. Most notably, the yen strengthened rather than weakened against most major currencies. The currency's ascent was due largely to perceptions that it was a safe haven during uncertain times, and especially because of the dollar's depreciation, after the Federal Reserve pared back expectations for interest-rate increases.  Lower interest rates normally lead to a country's currency depreciating, helping its exporters in the longer term.  Banks bore the brunt of the sell-off, as negative interest rates would put further pressure on interest margins.

 

On the economic front, private consumption was weak as households tightened their purse strings; anaemic wage rises were partly to blame. Industrial production also faltered as exports waned, while inflation remained well below the Bank of Japan's 2% target. After more than three years of Abenomics, a sustained rise in economic activity has proven elusive.

 

Portfolio review

The Trust's equity portfolio (i.e. excluding the impact of hedging) performed in line with the benchmark's return which fell by 1.7% over the review period.  The NAV underperformance versus the benchmark in the first six months, as reported in the half yearly report (excluding the hedge), was offset by an outperformance during the second half of the year of 9.4% in the NAV. 

 

In terms of stock-level performance, the Trust's holdings in the consumer staples and financial sectors contributed the most to performance. Among our consumer holdings, Japan Tobacco was a notable contributor. The cigarette company's shares did well after it unexpectedly sought regulatory approval to raise prices from April; with its application being recently approved. In addition, its solid international operations supported full-year earnings, with expanding European market share offsetting sluggish demand in Russia.

 

Another key contributor was men's grooming products maker Mandom. Its earnings met expectations after lowering its forecast in the wake of a fatal explosion on its Indonesian aerosol production line. Although the company will post an extraordinary loss of 1.5 billion yen as costs related to the accident, the core personal care products business remains intact. At home, its female grooming business gained traction, with growth seen across categories and increasing demand from both inbound travellers and domestic consumers. Okinawa-based retailer San-A was another beneficiary of upbeat earnings, as brisk inbound tourism boosted sales.

 

In financials, Daito Trust Construction did particularly well. The rental housing builder's shares gained from recent data that revealed better-than-expected orders in February amid still-robust housing occupancy levels. The company recently bought a 37.5% stake in home-care services provider Solasto, with the intention of building up a nursing home business through the latter's platform. With the nation's population ageing rapidly, demand for healthcare and nursing homes is naturally expected to increase. Our lack of exposure to Mitsubishi UFJ's shares provided a further boost as the lender came under pressure after the imposition of negative interest rates. The Trust's holdings in Bank of Yokohama and Suruga Bank detracted from performance for the same reason. However, Suruga's focus on retail loans is likely to provide some buffer, thereby making it more resilient than its rivals. The Trust continues to maintain a light exposure to local banks. We have been cautious about investing in the banking sector because of scepticism over its prospects. 

 

Elsewhere, Asahi Intecc posted solid second-quarter results that were driven by healthy domestic and overseas sales of its medical devices, cost rationalisation and a favourable currency effect. The medical products manufacturer is well-positioned in the medium term, with limited competition for its market position. Upcoming product launches should provide it with further growth opportunities. Daikin Industries' core air-conditioning business recovered, particularly in China, which makes up a significant portion of group profits. Separately, the company is acquiring US air-filter maker Flanders for US$430 million as it seeks expansion.

 

Conversely, Shin-Etsu Chemical continued to weigh on performance, even though its third-quarter results met expectations. Falling sales of certain chips eroded profits in the semiconductor silicon business, but its PVC segment did well because of better export margins. The company is investing 20 billion yen to expand capacity at its silicones business to meet growing demand from automotive, cosmetics and healthcare applications.

 

Other laggards included several holdings that were previously dampened by their exposure to China. These included Nippon Paint, Nabtesco and Fanuc. Nippon Paint cut its full-year forecast amid weak sales for its decorative and industrial paints. Machinery maker Nabtesco lagged because of lacklustre sales for its aircraft and hydraulic division, along with a rise in restructuring costs. But sales have recovered recently and demand for hydraulic equipment appears to have bottomed. The fall in robot-maker Fanuc's share price was due to a deceleration in capital spending by smartphone makers and weaker machine-tool demand.

 

Taking advantage of a rally in its share price, we sold autoparts maker FCC because of deteriorating business fundamentals. The company has been investing in the four-wheel clutch business but returns from investments looked poor and lacked visibility. It also faced repeated hiccups in starting up new plants, which pushed up costs in turn. The other key portfolio activity was the introduction of stock exchange operator Japan Exchange Group, which was mentioned in the interim report.

 

Outlook

Investor sentiment has improved in recent weeks, but volatility could return as a dominant theme in 2016. Numerous risks threaten to derail a still-frail world economy, and Japan will not be immune from the headwinds. Divergent monetary policy is a source of uncertainty as more central bankers venture into the unfamiliar territory of negative interest rates. Across the region, a further misstep by Beijing could revive global market turmoil. Renewed stress in emerging markets could spark further currency depreciations and greater capital flight.

 

At home, policymakers' inability to lift the economy on to a sustained growth path remains a key worry. Little headway has been made in tackling the structures essential to boosting productivity and competitiveness. Meanwhile, there are few signs that the negative interest rate programme is having a meaningful impact in terms of raising levels of consumption and investment. Recent deterioration in GDP growth and external demand increases the likelihood that next year's consumption tax hike will be delayed again. Earnings and dividend outlook appear muted against this backdrop. The upcoming upper house election may turn out to be a vote on effectiveness of the prime minister's economic policies.

 

That said, this dim backdrop should not cloud corporate achievements.  Japan's best companies, having gained much experience from  overcoming the tough economic challenges of the 'lost decades', have not been sitting idle waiting for a turnaround. Many have been expanding overseas for some time, which allows them to benefit from growth elsewhere, while others are growing domestic share. Some have also relocated their manufacturing to lower-cost countries. Encouragingly, corporate governance is also improving, albeit at a slower pace than we would like. As such, our optimism stems from our faith in the ability of the management in the Trust's holdings, to continue to perform well. After all, investing in Japan is not about investing in the economy but in the companies themselves which we know and understand.

 

Aberdeen Investment Management Kabushiki Kaisha

Investment Manager

 

31 May 2016

 

 

3.       OVERVIEW OF STRATEGY

Business Model

This report provides shareholders with details of the Company's business model and strategy as well as the principal risks and challenges it faces.

 

The Company is an investment trust which seeks to deliver a competitive return to its shareholders through the investment of its funds in accordance with the investment policy as approved by shareholders. 

 

The Board appoints and oversees an investment manager, decides the appropriate financial policies to manage the assets and liabilities of the Company, ensures compliance with legal and regulatory requirements and reports objectively to shareholders on performance.

 

The Directors do not envisage any change in this model in the foreseeable future.

 

Investment Objective

To achieve long-term capital growth principally through investment in listed Japanese companies which are believed by the Investment Manager to have above average prospects for growth.  

 

The Board's strategy is represented by its investment policy, financial policies, and risk management policies.

 

Investment Policy

The Company primarily invests in the shares of companies which are listed in Japan.  The portfolio is constructed through the identification of individual companies of any market capitalisation size and in any business sector, which offer long-term growth potential. 

 

The portfolio is selected from the 3,500 listed stocks in Japan and is actively managed to contain between 30 and 70 stocks which, in the Manager's opinion, represent the best basis for producing higher returns than those of the market as a whole in the long term. There will therefore inevitably be periods in which the Company's portfolio both outperforms and also underperforms the market as represented by the Company's benchmark.

 

The Board does not impose any restrictions on these shorter term performance variations from the benchmark, nor any limits on the concentration of stock or sector weightings within the portfolio, except that no individual shareholding shall exceed 10% of the Company's portfolio at the time of purchase, although market movements may subsequently increase this percentage.

 

The full text of the Company's investment policy is provided on page 60 of the 2016 Annual Report.

 

Investment Approach

The Investment Manager's investment philosophy is that markets are not always efficient. The Investment Manager's approach is therefore that superior investment returns are attainable by investing in good companies, defined in terms of the fundamentals that in the Manager's opinion drive share prices over the long-term.  The Manager follows a bottom-up investment process based on a disciplined evaluation of companies through visits at least twice a year by its fund managers who are based in Japan. The Manager estimates a company's worth in two stages, quality, defined by reference to management, business focus, the balance sheet and corporate governance, and then price  calculated by reference to key financial ratios, the market, the peer group and business prospects.  The selection of the portfolio of shares is the major source of the good performance of the portfolio and no stock is bought without the fund managers having first met management. Stock selection is key in constructing a diversified portfolio of companies with macroeconomic, political factors and benchmark weightings being secondary.  

 

Given the long-term fundamental investment philosophy, the Manager expects to hold most companies in which the Company invests for extended periods of time and this accounts for the relatively low level of activity within the portfolio.

 

Financial Policies

The Board's main financial policies cover the management of shareholder capital, risk management of the Company's asset and liabilities, including currency risk, the use of gearing and the reporting to shareholders of the Company's performance and financial position.

 

Management of shareholder capital

The Board's policy for the management of shareholder capital is primarily to ensure its long term growth. This growth will reflect both the Manager's investment performance and from time to time the issue of shares when sufficient demand exists to do this without diluting the value of existing shareholder capital.  The Board aims normally to pay a dividend each year and not less than the minimum required to maintain investment trust status.  The Board will authorise the buyback of shares in order to avoid excessive variability in the discount and if, despite this, the average discount exceeds 10% during the 90 day period preceding its financial year end, the Board will offer shareholders the opportunity to wind up the Company at the next AGM.

 

Risk Management

The policy for risk management is primarily focused on the investment risk in the portfolio using the Manager's risk management systems and risk parameters, overseen by the Board.

 

Derivatives

The Company may use derivatives from time to time for the purpose of mitigating risk in its investments, including protection against currency movements. The performance of the Company is subject to fluctuations in the Yen/£ exchange rate. The Company's exposure to Yen fluctuations is offset by the natural hedge provided by any borrowing in Yen as well as by investments in Japanese companies which have significant sources of income from exports of goods or from non-Japanese operations. 

 

The Board has currently determined that approximately 45% of the Company's Yen net assets should be hedged against fluctuations in the Yen/£ exchange rate through the use of rolling forward contracts. The Board monitors the hedging policy and its effects on the Company's performance on a regular basis and, in its absolute discretion, but following consultation with the Manager, will determine what levels of Sterling hedge are appropriate in light of market movements and the composition of the portfolio from time to time. 

 

The wider corporate risks, including those arising from the increasingly regulated and competitive market place, are managed directly by the Board.  The principal risks are more fully described under the paragraph 'Principal Risks and Uncertainties'.

 

Use of Gearing

Gearing is the amount of borrowing used to increase the Company's portfolio of investments in order to enhance returns when and to the extent it is considered appropriate to do so or to finance share buybacks when necessary. The level of borrowing is subject to a maximum of 25% of net assets but will normally be set at a stable and lower level than the maximum. The Board has currently established a gearing level of around 10% of net assets although, with stock market fluctuations, this may range between 5-15%.

 

Principal Risks and Uncertainties

The Company's risks are regularly monitored at Audit Committee meetings and the Board believes that the Company is resilient to most short term operational risks which are effectively mitigated by the internal controls of the Manager and Depositary.  Identification and mitigation  of other longer term and strategic risks which might threaten its business model, future performance or solvency are robustly assessed by the Audit Committee  and  managed by the Board. The principal risks and uncertainties faced by the Company are described in the table below, together with the mitigating actions.

 

Description

Mitigating Action

Investment strategy risk

The Company and its investment objective may become unattractive to investors. The value of Japanese equities may be affected by factors not associated with the UK, including the general health of the Japanese economy and political events in and around Japan, which can affect investor demand.

 

 

The Board monitors longer term trends in investor demand and, if appropriate, can propose changes to the investment objective to the shareholders.

Investment risk

Investment risk arises from the Company's exposure to variations of share prices within its portfolio in response to individual company and to wider Japanese or international factors. Investment in a focussed portfolio of shares can lead to greater short term changes in the portfolio's value than in a larger portfolio of stocks and these variations will be amplified by the use of gearing.

 

The Board regularly monitors the investment performance of the portfolio and the performance of the Manager in operating the investment policy against the long term objectives of the Company and, where appropriate, has in place mitigation measures such as the currency hedging policy.

 

 

Reputation

The attractiveness of the Company to investors is based on the good reputation of the Manager as well as of investment trusts generally. Were investments trusts to fall out of favour as a route for investors or Aberdeen's reputation as Manager of the Company to weaken, it is likely that investor demand would decline.

 

The Board monitors shareholder sentiment regularly and would be able to take remedial action were its reputation to be threatened.

 

Regulatory compliance risk

The Company operates under a set of UK, European and international laws and regulations.

 

The Board is active in ensuring that it fully complies with all applicable laws and regulation and is assisted by the Manager and other advisers in doing this. The Board believes that, while the consequences of non-compliance can be severe, the control arrangements it has put in place reduce the likelihood of this happening.

Performance risk

Inappropriate investment decisions may result in the Company's underperformance against the Benchmark index and Peer Group and a widening of the Company's discount.

 

The Board regularly reviews performance data and attribution analysis and other relevant factors and, were an underperformance likely to be sustained, would be able to take remedial measures.

 

Share price and Discount risk

The principal risks described above each can affect the movement of the Company's share price and in some cases have the potential to increase the discount in the market value of the Company compared with the NAV.

 

The Board actively monitors the discount and believes that the combined effect of good investment performance, the risk mitigation arrangements described above and its ability to authorise buyback of shares when necessary, will both reduce discount and limit its variability.   

 

 

Key Performance Indicators (KPIs)

The key performance indicators (KPIs) which the Board uses to monitor the Company's performance are established industry measures, and are as follows:

 

 


An analysis of the KPIs is provided below.  Performance is compared against the Company's benchmark index and its Peer Group.  In view of the Manager's style of investing, there can be, in the short-term, considerable divergence from both comparators.  The Board uses a three year rolling performance for both the KPI measuring NAV total return against the benchmark index and also that for the share price total return compared with the Peer Group, but since the change of mandate also changed the Peer Group, the latter KPI is currently calculated from October 2013. The KPI for the annual average discount is compared with that for its Peer Group. The average discount for the first half of the year exceeded that of the Peer Group but, as market uncertainties developed in the second half year, the discount widened. As a result, the average for the year fell behind the Peer Group average.   

 

Promoting the Company

The Board recognises the importance of promoting the Company to prospective investors both for improving liquidity and enhancing the value and rating of the Company's shares. The Board believes an effective element of achieving this is through participation in the promotional programme run by the Aberdeen Group on behalf of a number of investment trusts under its management.

 

The purpose of the programme is both to enable the Company to communicate the long-term attractions of the Company effectively with existing shareholders and to gain new shareholders with the aim of improving liquidity and enhancing the value and rating of the Company's shares. The Company also supports the Aberdeen Group's investor relations programme of regional roadshows, promotional and public relations campaigns. 

 

In addition, the Company's website contains a daily update on the latest portfolio performance and a monthly summary of investment performance together with information about the Japanese market, details of the principal risks of investing in the Company and any other significant developments within the Company.   

 

Board Diversity

The Board recognises the importance of having a diverse group of Directors with the right mix of competencies to allow the Board to fulfil its obligations. At 31 March 2016 there were four male Directors and one female Director, all of whom bring different experience and skills and contribute distinctively to the Board's performance. The Board's statement on diversity is set out on page 25 of the 2016 Annual Report.

 

Employee, Environmental, Social and Human Rights Issues

The Company has no employees as it has delegated operational management to the Manager. There are therefore no disclosures to be made in respect of employees. The Company's approach to corporate responsible investment is outlined on page 27 of the 2016 Annual Report.

 

Viability Statement

The Company's business model is designed to deliver long term capital growth to its shareholders through investment in large and liquid stocks in the global equity markets. Its plans are therefore based on having no fixed or limited life provided the global equity markets continue to operate normally.

 

The Board has assessed its prospects over a three year period in accordance with the 2014 UK Corporate Governance Code.  In making this assessment, the Board has considered the principal risks and related mitigating actions for the Company as set out above and matters such as significant economic or stock market volatility, a substantial reduction in the liquidity of the portfolio, or changes in investor sentiment which could have an impact on  the Company's prospects  in the future.

 

The Board considers that, given that it is invested in readily realisable listed securities, and has a relatively low level of fixed expenses and of debt, it will be able to meet its liabilities when they fall due for the foreseeable future but that a three year period reflects appropriately the inherent and increasing uncertainties involved in assessment of its prospects over a longer period.

 

Accordingly, taking into account the Company's current position and its prospects, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for a period of three years from the date of this Report.

 

 

The Strategic Report was approved by the Board of Directors and signed on its behalf by:

 

for Aberdeen Japan Investment Trust PLC

 

Neil Gaskell

Chairman

31 May 2016

 

 

5.       RESULTS

 

Financial Highlights

 

 

 

Performance (total return)

 




Return since


1 year

3 year

5 year

8 October 2013


return

return

return

(change of mandate)

Net asset value

-6.2%

+27.2%

+55.1%

+38.7%

Index

-1.7%

+16.5%

+30.1%

+19.3%

Share price

-12.0%

+20.2%

+56.2%

+32.9%

Peer Group share price

-3.5%

+48.7%

+102.9%

+30.9%

Average discount - Company

-6.4%

-7.8%

-9.9%

-7.7%

Average discount - Peer Group

-4.5%

-5.9%

-8.1%

-5.7%

Source: Aberdeen Asset Managers Limited, Lipper & Morningstar.

Total return represents capital return plus dividends reinvested.

Dividend calculations are based on reinvestment at the ex-dividend date. NAV returns are based on cum-income NAV with debt at fair value.

Based on share price and NAV per Morningstar (ie as available in the market, not including unreleased R&A NAVs).

Peer Group is the Japan sector of Morningstar.

Index represents the MSCI AC Asia Pacific (including Japan) Index (in Sterling terms) up to 7 October 2013 and the TOPIX (in Sterling terms) from 8 October 2013.

 

 

Dividends

 

Rate

Ex-dividend date

Record date

Payment date

Proposed final dividend 2016

4.20p

09 June 2016

10 June 2016

08 July 2016

Final dividend 2015

2.60p

18 June 2015

19 June 2015

16 July 2015

 

 

INVESTMENT PORTFOLIO

 

Top Ten Investments

As at 31 March 2016

 


Valuation

Total

Valuation



2016

assets

2015

Company

Sector

£'000

%

£'000

Shin-Etsu Chemical Company





Despite the challenging environment, the Japanese maker of specialised chemicals remains a leader in its industry, due to its technological edge and a greater focus on profits than most rivals.

Chemicals

4,720

5.2

4,251

Keyence Corporation





The leading maker of sensors has a cash generative business and is backed by a strong balance sheet and technological expertise.

Electronic & Electrical Equipment

4,360

4.8

4,127

Japan Tobacco Inc





The world's third-largest cigarette company with a dominant domestic market share, Japan Tobacco has made good overseas acquisitions and is positioned to gain from exposure to emerging markets.

Tobacco

4,296

4.8

3,791

KDDI Corporation





One of Japan's leading telecommunications services providers offering mobile, fixed-line and cable TV services. The company was also one of the first of its kind to introduce bundling between mobile handset and FTTH (fibre to the home), which has allowed for good customer retention.

Mobile Telecommunications

3,819

4.2

2,480

Nabtesco Corporation





The industrial equipment maker has a high market share in its businesses thanks to its technological edge in niche areas. It also has healthy finances and a good track record on cost controls.

Industrial Engineering

3,800

4.2

3,747

Seven & I Holdings Company





A Japanese retail conglomerate with interests in  a wide range of domestic businesses including convenience stores, discount stores, supermarkets, department stores and food services, which gives its earnings a defensive edge.

General Retailers

3,688

4.1

3,647

Amada Holdings Company





A manufacturer of sheet metal fabrication machines. The company has a leading position especially among Japanese small to mid-size enterprises thanks to its core technology and effective sales strategy leveraging its internal financing operations.

Industrial Engineering

3,311

3.7

2,717

Toyota Motor Corporation





Japan's largest car manufacturer, it also operates financing services through its subsidiaries. The Manager likes it for its global presence and solid overseas growth prospects.

Automobiles & Parts

3,156

3.5

2,867

Fanuc Corporation





A leading manufacturer of factory automation systems, equipment and robots that has an excellent track record of being able to maintain margins with robust cash flow and a strong net cash position.

Industrial Engineering

3,073

3.4

4,084

East Japan Railway Company                             





Provider of rail transportation services including the shinkansen (bullet train) network in the Kanto & Tohoku regions.

Travel & Leisure

3,002

3.3

2,859

Top ten investments


37,225

41.2


 

 

Investment Portfolio - Other Investments

As at 31 March 2016

 


Valuation

Total

Valuation



2016

assets

2015

Company

Sector

£'000

%

£'000

Chugai Pharmaceutical Company

Pharmaceuticals & Biotechnology

2,882

3.2

2,947

Daito Trust Construction Company

Real Estate Investment & Services

2,611

2.9

2,020

Astellas Pharma Inc

Pharmaceuticals & Biotechnology

2,576

2.8

2,520

Kansai Paint Company

Chemicals

2,507

2.8

2,219

Pigeon Corporation

Personal Goods

2,317

2.6

2,553

Daikin Industries

Industrial Engineering

2,222

2.5

1,930

San-A Company

Food & Drug Retailers

2,108

2.3

1,309

Honda Motor Company

Automobiles & Parts

2,082

2.3

1,955

Yahoo Japan Corporation

Software & Computer Services

2,077

2.3

1,716

Suruga Bank

Banks

2,056

2.3

812

Top twenty investments


60,663

67.2


Aeon Financial Service Company

Financial Services

1,981

2.2

1,399

Sysmex Corporation

Health Care Equipment & Services

1,934

2.1

1,571

Daibiru Corporation

Real Estate Investment & Services

1,882

2.1

1,637

Makita Corporation

Household Goods & Home Construction

1,868

2.1

1,480

Canon Inc

Technology Hardware & Equipment

1,868

2.1

3,267

Unicharm Corporation

Personal Goods

1,851

2.0

2,687

Mandom Corporation

Personal Goods

1,833

2.0

2,089

Bank Of Yokohama

Banks

1,664

1.8

1,890

Shimano Inc

Leisure Goods

1,506

1.7

1,316

Nippon Paint Holdings Company

Chemicals

1,499

1.7

1,926

Top thirty investments


78,549

87.0


USS Company

General Retailers

1,460

1.6

1,334

Mitsubishi Estate Company

Real Estate Investment & Services

1,346

1.5

1,346

Asahi Intecc Company

Health Care Equipment & Services

1,321

1.5

1,774

Denso Corporation

Automobiles & Parts

1,292

1.4

1,072

Calbee Inc

Food Producers

1,233

1.4

1,923

Resorttrust Inc

Travel & Leisure

1,187

1.3

1,474

Japan Exchange Group Inc.

Financial Services

1,166

1.3

-

Asics Corporation

Personal Goods

1,016

1.1

1,794

Aisin Seiki Company

Automobiles & Parts

418

0.5

855

Total investments


88,988

98.6


Net current assets{A}


1,258

1.4


Total assets


90,246

100.0







{A}        Excludes bank loans of £2,476,000

Unless otherwise stated, foreign stock is held and all investments are equity holdings.

In the 2015 valuation column "-" denotes stock not held at last year end.

 

 

GOING CONCERN

The Company's assets consist of equity shares in companies listed on recognised stock exchanges and in most circumstances are realisable within a short timescale. 

 

The Company does not have a fixed life. However, under the articles of association, if, in the 90 days preceding the Company's financial year-end (31 March), the Ordinary shares have been trading, on average, at a discount in excess of 10% to the underlying NAV over the same period, notice will be given of an ordinary resolution to be proposed at the following AGM to approve the continuation of the Company.  In the 90 days to 31 March 2016, the Ordinary shares traded at an average discount of 9.5% to the underlying NAV.  Accordingly, no resolution on the continuation of the Company will be put to the Company's shareholders at the Annual General Meeting.

 

After making enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. This takes account of the liquidity of the Company's investments, and that the earliest date that the Company may be subject to a continuation vote is at the Annual General Meeting of the Company to be held in 2017. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

 

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. 

 

Company law requires the Directors to prepare financial statements for each financial year.  Under that law they have elected to prepare the financial statements in accordance with UK Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. 

 

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.  In preparing these financial statements, the Directors are required to: 

 

-         select suitable accounting policies and then apply them consistently; 

-         make judgments and estimates that are reasonable and prudent; 

-         state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and 

-         prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. 

 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006.  They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. 

 

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations. 

 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website.  Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 

 

Responsibility statement of the Directors in respect of the annual financial report

We confirm that to the best of our knowledge:

 

-         the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company taken as a whole; and

-         the Directors' report includes a fair review of the development and performance of the business and the position of the issuer, together with a description of the principal risks and uncertainties that they face.

 

We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

 

For and on behalf of Aberdeen Japan Investment Trust PLC

 

Neil Gaskell

Chairman

31 May 2016

 

 

FINANCIAL STATEMENTS

 

STATEMENT OF COMPREHENSIVE INCOME

 


Year ended 31 March 2016

Year ended 31 March 2015



Revenue

Capital

Total

Revenue

Capital

Total


Notes

£'000

£'000

£'000

£'000

£'000

£'000

(Losses)/gains on investments

9

-

(883)

(883)

-

23,988

23,988

Income

2

1,681

-

1,681

1,222

-

1,222

Exchange (losses)/gains

13

-

(5,093)

(5,093)

-

1,338

1,338

Investment management fee

3

(280)

(420)

(700)

(238)

(357)

(595)

Administrative expenses

4

(325)

(15)

(340)

(293)

(7)

(300)



_____

_____

_______

______

______

_____

Net return before finance costs and taxation


1,076

(6,411)

(5,335)

691

24,962

25,653









Finance costs

5

(33)

(49)

(82)

(29)

(44)

(73)



_____

_____

_______

______

______

_____

Net return on ordinary activities before taxation


1,043

(6,460)

(5,417)

662

24,918

25,580









Taxation on ordinary activities

6

(168)

-

(168)

(122)

-

(122)



_____

_____

_______

______

______

_____

Net return on ordinary activities after taxation


875

(6,460)

(5,585)

540

24,918

25,458



_____

_____

_______

______

______

_____









Return per Ordinary share (pence)

8

5.67

(41.85)

(36.18)

3.70

170.77

174.47



_____

_____

_______

______

______

_____







The total column of this statement represents the profit and loss account of the Company.

All revenue and capital items in the above statement derive from continuing operations.

The accompanying notes are an integral part of the financial statements.

 

 

STATEMENT OF FINANCIAL POSITION

 


As at

As at



31 March 2016

31 March 2015


Notes

£'000

£'000

Fixed assets




Investments designated at fair value through profit or loss

9

88,988

86,312



___________

___________

Current assets




Debtors

10

625

597

Cash at bank and in hand


897

490



___________

___________



1,522

1,087



___________

___________

Creditors: amounts falling due within one year

11



Foreign currency bank loans


(2,476)

-

Other creditors


(264)

(148)



___________

___________



(2,740)

(148)



___________

___________

Net current (liabilities)/assets


(1,218)

939



___________

___________

Total assets less current liabilities


87,770

87,251





Creditors: amounts falling due in more than one year




Foreign currency bank loans

11

(8,047)

(7,302)



___________

___________

Net assets


79,723

79,949



___________

___________

Share capital and reserves




Called-up share capital

12

1,582

1,459

Share premium


6,656

-

Capital redemption reserve


2,273

2,273

Capital reserve

13

67,162

74,663

Revenue reserve


2,050

1,554



___________

___________

Equity shareholders' funds


79,723

79,949



___________

___________





Net asset value per ordinary share (pence)

14

511.29

547.91



___________

___________

 

 

STATEMENT OF CHANGES IN EQUITY

 

 

For the year ended
31 March 2016












Capital






Share

Share

redemption

Capital

Revenue




capital

premium

reserve

reserve

reserve

Total


Notes

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 31 March 2015


1,459

-

2,273

74,663

1,554

79,949

Return on ordinary activities after taxation


-

-

-

(6,460)

875

(5,585)

Dividend paid

7

-

-

-

-

(379)

(379)

Issue of Ordinary shares

12

123

6,656

-

-

-

6,779

Purchase of Ordinary shares to be held in treasury

12

-

-

-

(1,041)

-

(1,041)



______

______

_____

_____

_____

______

Balance at 31 March 2016


1,582

6,656

2,273

67,162

2,050

79,723



______

______

_____

_____

_____

______









For the year ended
31 March 2015












Capital






Share

Share

redemption

Capital

Revenue




capital

premium

reserve

reserve

reserve

Total



£'000

£'000

£'000

£'000

£'000

£'000

Balance at 31 March 2014


1,459

-

2,273

49,745

1,671

55,148

Return on ordinary activities after taxation


-

-

-

24,918

540

25,458

Dividend paid

7

-

-

-

-

(657)

(657)



______

______

_____

_____

_____

______

Balance at 31 March 2015


1,459

-

2,273

74,663

1,554

79,949



______

______

_____

_____

_____

______

 

 

STATEMENT OF CASHFLOWS

 

Year ended

Year ended


31 March 2016

31 March 2015


£'000

£'000

Net return on operating activities before finance costs and taxation

(5,335)

25,653

Adjustment for:



Losses/(gains) on investments

883

(23,988)

Increase in other creditors

18

11

Expenses taken to capital reserve

15

7

Movement in outstanding forward contracts

170

281

Oveseas withholding tax

(168)

(122)

Increase in accrued dividend income

(160)

(28)

Decrease/(increase) in other debtors

60

(12)


______

______

Net cash (outflow)/inflow from operating activities

(4,517)

1,802


______

______

Investing activities



Purchases of investments

(19,256)

(9,493)

Sales of investments

15,685

6,959

Expenses allocated to capital

(3)

(1)


______

______

Net cash outflow from investing activities

(3,574)

(2,535)


______

______

Financing activities



Bank and loan interest paid

(82)

(71)

Equity dividends paid

(379)

(657)

Proceeds from issue of Ordinary shares

6,779

- 

Purchase of own shares to treasury

(1,041)

- 

Movement in bank loans outstanding

3,221

1,478


______

______

Net cash inflow from financing activities

8,498

750


______

______

Increase in cash

407

17


______

______




Analysis of changes in cash during the year



Opening balance

490

473

Increase in cash as above

407

17


______

______

Closing balance

897

490


______

______

 

 

Notes to the Financial Statements


For the year ended 31 March 2016


1.

Accounting policies


(a)

Basis of accounting and going concern



The financial statements have been prepared in accordance with Financial Reporting Standard 102 and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'.  They have also been prepared on the assumption that approval as an investment trust will continue to be granted. The financial statements have been prepared on a going concern basis. The Directors believe this is appropriate for the reasons outlined in the Directors' Report on page 22 of the 2016 Annual Report.






These financial statements are the first since FRS 102 (The Financial Reporting Standard applicable in the UK and Republic of Ireland) came into effect for accounting periods beginning on or after 1 January 2015. An assessment of the impact of adopting FRS 102 has been carried out and found that no restatement of balances as at the transition date, 1 April 2015, or comparative figures in the Statement of Financial Position or the Statement of Comprehensive Income is considered necessary. The Company has early adopted Amendments to FRS 102 - Fair value hierarchy disclosures issued by the Financial Reporting Council in March 2016.





(b)

Valuation of investments



The Company's business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment strategy, and information about the portfolio is provided internally on that basis to the Company's Board of Directors. Accordingly, upon initial recognition the Company designates the investments 'at fair value through profit or loss'. Fair value is taken to be the investment's cost at the trade date (excluding expenses incidental to the acquisition which are written off in the Statement of Comprehensive Income, and allocated to 'capital' at the time of acquisition).






Subsequent to initial recognition, investments continue to be designated at fair value through profit or loss, which is deemed to be bid prices, where the bid price is available, or otherwise at fair value based on published price quotations.





(c)

Income  



Dividends, including taxes deducted at source, are included in revenue by reference to the date on which the investment is quoted ex-dividend. Special dividends are reviewed on a case-by-case basis and may be credited to capital, if circumstances dictate. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Company's right to receive payment is established. Where the Company has elected to receive its dividends in the form of additional shares rather than cash, the amount of the cash dividend is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital reserves. Interest receivable on bank balances is dealt with on an accruals basis.






Where applicable the dividend income is disclosed net of irrecoverable taxes deducted at source. UK dividend income is recorded net of tax credits.





(d)

Expenses



All expenses are accounted for on an accruals basis. Expenses are allocated to revenue in the Statement of Comprehensive Income except as follows:



expenses which are incidental to the acquisition or disposal of an investment are allocated to capital in the Statement of Comprehensive Income and separately identified and disclosed in note 9; and



expenses are allocated and borne by capital where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect, the investment management fee is allocated 40% to revenue and 60% to realised capital reserves to reflect the Company's investment policy and prospective income and capital growth.





(e)

Taxation



The charge for taxation is based on the revenue return for the financial period.






Deferred taxation



Deferred taxation is provided on all timing differences, that have originated but not reversed at the Statement of Financial Position date, where transactions or events that result in an obligation to pay more or a right to pay less tax in future have occurred at the Statement of Financial Position date, measured on an undiscounted basis and based on tax rates expected to apply in the period that the timing differences reverse. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the accounts which are capable of reversal in one or more subsequent periods. Due to the Company's status as an investment trust company, and the intention to continue to meet the conditions required to obtain approval for the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.





(f)

Nature and purpose of reserves



Called up share capital



The Ordinary share capital on the Statement of Financial Position relates to the number of shares in issue and in treasury. Only when the shares are cancelled, either from treasury or directly, is a transfer made to the capital redemption reserve.






Share premium account



The balance classified as share premium includes the premium above nominal value from the proceeds on issue of any equity share capital comprising ordinary shares of 10p.



Capital redemption reserve



The capital redemption reserve is used to record the amount equivalent to the nominal value of any of the Company's own shares purchased and cancelled in order to maintain the Company's capital.






Capital reserve



Gains or losses on disposal of investments and changes in fair values of investments are transferred to the capital reserve. The capital element of the management fee and relevant finance costs are charged to this reserve. Any associated tax relief is also credited to this reserve. The costs of share buybacks to be held in treasury are also deducted from this reserve.






Revenue reserve



This reserve reflects all income and costs which are recognised in the revenue column of the Statement of Comprehensive Income. The revenue reserve represents the amount of the Company's reserves distributable by way of dividend.





(g)

Foreign currencies



Transactions involving foreign currencies are converted at the rate ruling at the date of the transaction.






Foreign currency asset and liability balances are translated to Sterling at the middle rate of exchange at the year end. Differences arising from translation are treated as capital gain or loss to capital or revenue within the Statement of Comprehensive Income depending upon the nature of the gain or loss.





(h)

Dividends payable



Final dividends are recognised in the financial statements in the period in which they are paid.





(i)

Borrowings



All secured borrowings are initially recognised at cost, being the fair value of the consideration received, less issue costs where applicable, after initial recognition, all interest bearing borrowings are subsequently measured at amortised cost.  The finance costs of such borrowings are accounted for on an accruals basis using the effective interest rate method and are charged 40% to revenue and 60% to realised capital reserves to reflect the Company's investment policy and prospective income and capital growth. 





(j)

Accounting judgements



The Company's investments and borrowings are made in Japanese yen, however the Board considers the Company's functional currency to be sterling.  In arriving at this conclusion, the Board considered that the shares of the Company are listed on the London Stock Exchange, it is regulated in the United Kingdom, principally having its shareholder base in the United Kingdom, pays dividends and expenses in sterling and also, as disclosed in note 13, it seeks to ensure that the Company's Japanese yen net exposure is appropriately Sterling-hedged through the use of rolling forward currency contracts.  Consequently, the Board also considers the Company's presentational currency to be sterling. 

 


2016

2015

2.

Income

£'000

£'000


From investments designated at fair value through profit and loss:




Overseas dividends

1,681

1,216






Other income




Deposit interest

-

6



______

______


Total income

1,681

1,222



______

______

 

 


2016

2015



Revenue

Capital

Total

Revenue

Capital

Total

4.

Administrative expenses

£'000

£'000

£'000

£'000

£'000

£'000


Promotional fees

52

-

52

46

-

46


Directors' fees

90

-

90

78

-

78


Depositary fees

10

3

13

8

1

9


Transaction costs on investment purchases

-

12

12

-

6

6


Auditor's remuneration:








Grant Thornton UK LLP

-

-

-

23

-

23


KPMG LLP

19

-

19

-

-

-


Other

154

-

154

138

-

138



______

______

______

______

______

______



325

15

340

293

7

300



______

______

______

______

______

______

 


2016

2015



Revenue

Capital

Total

Revenue

Capital

Total

5.

Finance costs

£'000

£'000

£'000

£'000

£'000

£'000


Bank loans

33

49

82

29

44

73



______

______

______

______

______

______

 


2016

2015



Revenue

Capital

Total

Revenue

Capital

Total

6.

Taxation on ordinary activities

£'000

£'000

£'000

£'000

£'000

£'000


(a)

Analysis of charge for the year









Irrecoverable overseas taxation

168

-

168

122

-

122




______

______

______

______

______

______



Total taxation

168

-

168

122

-

122




______

______

______

______

______

______











(b)

Factors affecting total tax charge for the year



The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The differences can be explained below:









2016

2015




£'000

£'000




______

______



Net return on ordinary activities before taxation

(5,417)

25,580




______

______



Net return on ordinary activities multiplied by standard rate of corporation tax in the UK of 20% (2015 - 21%)

(1,083)

5,372



Effects of:





Losses/(gains) on investments not taxable

177

(5,038)



Currency losses/(gains) not taxable

1,019

(281)



Irrecoverable overseas withholding tax suffered

168

122



Losses for which no deferred tax recognised

223

202



Non-taxable overseas dividends

(336)

(255)




______

______



Total tax charge for the year

168

122




______

______





(c)

Provision for deferred taxation



At 31 March 2016 the Company had surplus management expenses and loan relationship debits with a tax value of £1,693,000 (2015 - £1,495,000) in respect of which a deferred tax asset has not been recognised. This is because the Company is not expected to generate taxable income in the future in excess of deductible expenses of that future period, and accordingly, it is unlikely that the Company will generate taxable revenue in the future and therefore will be unable to utilise the existing surplus expenses.

 


2016

2015

7.

Dividends

£'000

£'000


Amounts recognised as distributions to equity holders in the year:




Final dividend 2015 - 2.60p (2014 - 4.50p)

379

657



______

______






In order to comply with the requirements of Sections 1158-1159 of the Corporation Tax Act 2010 the Company is required to make a dividend distribution.



The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability and will be paid on 8 July 2016 to shareholders on the register at the close of business on 10 June 2016.



The table below sets out the total dividends proposed in respect of the financial year, which is the basis on which the requirements of Sections 1158 -1159 are considered. The revenue available for distribution by way of dividend for the year is £2,050,000 (2015 - £1,554,000). Presently, only the revenue reserve can be used for the distribution of dividends.







2016

2015



£'000

£'000


Proposed final dividend for 2016 - 4.20p per ordinary share (2015 -  2.60p)

655

379



______

______

 


2016

2016

2015

2015

8.

Return per ordinary share

p

£'000

p

£'000


Returns per share are based on the following figures:






Revenue return

5.67

875

3.70

540


Capital return

(41.85)

(6,460)

170.77

24,918



______

______

______

______


Total return

(36.18)

(5,585)

174.47

25,458



______

______

______

______


Weighted average number of ordinary shares in issue


15,435,471


14,591,572




_________


_________

 


2016

2015

9.

Investments designated at fair value through profit or loss

£'000

£'000


Opening book cost

64,480

60,514


Opening investment holding (losses)/gains

21,832

(718)



______

______


Opening fair value

86,312

59,796


Movements in the year:




Purchases at cost (excluding transaction costs)

19,244

9,487


Sales - proceeds (net of transaction costs)

(15,685)

(6,959)


Sales - gains on sales

3,837

1,438


(Decrease)/increase in investment holding gains

(4,720)

22,550



______

______


Closing fair value

88,988

86,312



______

______







2016

2015



£'000

£'000


Closing book cost

71,876

64,480


Closing investment holding gains

17,112

21,832



______

______



88,988

86,312



______

______







2016

2015



£'000

£'000


Investments listed on a recognised investment exchange

88,988

86,312



______

______







2016

2015


(Losses)/gains on investments

£'000

£'000


Gains on sales

3,837

1,438


(Decrease)/increase in investment holding gains

(4,720)

22,550



______

______



(883)

23,988



______

______






Transaction costs


During the year expenses were incurred in acquiring or disposing of investments designated as fair value through profit or loss. Expenses incurred in acquiring investments have been expensed through capital and are included within administration expenses in the Statement of Comprehensive Income, whilst expenses incurred in disposing of investments have been expensed through capital and are included within (losses)/gains on investments in the Statement of Comprehensive Income. The total costs were as follows:







2016

2015



£'000

£'000


Purchases

12

6


Sales

10

7



______

______



22

13



______

______

 


2016

2015

10.

Debtors: amounts falling due within one year

£'000

£'000


Forward foreign exchange contracts

-

73


Prepayments and accrued income

620

467


Withholding tax debtor

-

53


Other loans and receivables

5

4



______

______



625

597



______

______






All financial assets are included at amortised cost or at fair value for forward foreign exchange contracts.

 

 


2016

2015

12.

Called-up share capital

Number

£'000

Number

£'000


Allotted, called-up and fully paid






Ordinary shares of 10p each

15,592,572

1,559

14,591,572

1,459


Held in treasury

229,000

23

-

-



______

______

______

______



15,821,572

1,582

14,591,572

1,459



______

______

______

______









Ordinary shares

Treasury shares

Total



Number

Number

Number


Balance brought forward

14,591,572

-

14,591,572


Ordinary shares issued in the year

1,230,000

-

1,230,000


Ordinary shares bought back for holding in treasury

(229,000)

229,000

-



_________

_________

_________



15,592,572

229,000

15,821,572



_________

_________

_________







During the year 1,230,000 Ordinary shares (2015 - £Nil) were issued at a premium of £6,656,000 (2015 - Nil) resulting in proceeds of £6,779,000 (2015 - £Nil). In addition 229,000 Ordinary shares (2015 - £Nil) were bought back and held in treasury at a cost of £1,041,000 (2015 - £Nil).




Since the year end a further 3,500 shares have been purchased to be held in treasury at a cost of £16,000.

 

 

14.

Net asset value per share


The net asset value per share and the net asset values attributable to Ordinary shareholders at the year end calculated in accordance with the Articles of Association were as follows:





Net asset value per share

Net asset values attributable



2016

2015

2016

2015



p

p

£'000

£'000



______

______

______

______


Ordinary shares

511.29

547.91

79,723

79,949



______

______

______

______








The movements during the year of the assets attributable to the Ordinary shares were as follows:





2016

2015



£'000

£'000


Net assets attributable at 1 April 2015

79,949

55,148


Capital return for the year

(6,460)

24,918


Revenue on ordinary activities after taxation

875

540


Dividend paid

(379)

(657)


Issue of Ordinary shares

6,779

-


Purchase of Ordinary shares to be held in treasury

(1,041)

-



______

______


Net assets attributable at 31 March 2016

79,723

79,949



______

______






The net asset value per ordinary share is based on net assets, and on 15,592,572 (2015 - 14,591,572) ordinary shares, being the number of ordinary shares in issue, after deducting 229,000 shares in held in treasury, at the year end.

 

 

16.

Capital management policies and procedures


The Company's capital management objectives are:


-     to ensure that the Company will be able to continue as a going concern; and


-     to maximise the income and capital return to its equity shareholders through an appropriate balance of equity capital and debt. The Board normally seeks to limit gearing to 15% of net assets.




The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes the nature and planned level of gearing, which takes account of the Manager's views on the market and the extent to which revenue in excess of that which is required to be distributed should be retained.




The Company's objectives, policies and processes for managing capital are unchanged from the preceding accounting period and year end positions are presented in the Balance Sheet.

 

17.

Fair value hierarchy


FRS 102 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The Company has early adopted Amendments to FRS 102 - Fair value hierarchy disclosures issued by the Financial Reporting Council in March 2016. The fair value hierarchy shall have the following classifications:




Level 1- unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the measurement date.


Level 2 - inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly or indirectly.


Level 3 - inputs are unobservable (ie for which market data is unavailable) for the asset or liability.



All of the Company's investments are in quoted equities (2015 - same) actively traded on a recognised stock exchange, with their fair value being determined by reference to their quoted bid prices at the reporting date. The total value of the investments (2016 - £88,988,000; 2015 - £86,312,000) have therefore been deemed as Level 1. Forward foreign currency contracts as detailed in note 15 have been categorised as Level 2.

 

 

19.

Related party transactions


Fees payable during the year to the Directors and their interest in shares of the Company are disclosed within the Directors' Remuneration Report on page 32 of the 2016 Annual Report.

 

20.     Additional notes for Annual Financial Report:

The final dividend, subject to shareholder approval, will be paid on 8 July 2016 to shareholders on the register at the close of business on 10 June 2016. The ex-dividend date is 9 June 2016.

 

This Annual Financial Report announcement is not the Company's statutory accounts.  The statutory accounts for the year ended 31 March 2015 have been delivered to the Registrar of Companies.  The statutory accounts for the years ended 31 March 2016 and 31 March 2015 received an audit report which was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not include a statement under section 498(2) or (3) of the Companies Act 2006.  The statutory accounts for the financial year ended 31 March 2016 have been approved by the Board and audited but will not be filed with the Registrar of Companies until after the Company's Annual General Meeting which will be held at 10.30am on 5 July 2016 at Bow Bells House, One Bread Street, London EC4M 9HH.

 

The Annual Report will be posted to shareholders in June 2016 and copies will be available from the Manager or from the Company's website (www.aberdeen-japan.co.uk*).

 

 

Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise and may be affected by exchange rate movements.  Investors may not get back the amount they originally invested.

 

*Neither the Company's website nor the content of any website accessible from hyperlinks on that website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.

 

For Aberdeen Japan Investment Trust PLC

Aberdeen Asset Management PLC, Secretary

 

END


This information is provided by RNS
The company news service from the London Stock Exchange
 
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