Final Results
Fidelity Japanese Values PLC
Annual Results for the year ended 31 December 2017
Financial Highlights:
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Fidelity Japanese Values PLC delivered positive outperformance in its annual results for the year ended 31 December 2017, resulting in a net asset value (“NAVâ€) total return of +34.1%.
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The discount narrowed from 17.1% to 7.7% over the period, as result of the share price total return of +49.3%, outperforming the Company’s Reference Index which returned +17.5%.
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The Board is proposing to amend the Company’s objective and investment policy to better reflect the Portfolio Manager’s investment approach to include a greater weighting to micro, small and large cap stocks.
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The Board will adopt Fidelity’s new Variable Management Fee which will take effect from 1 July 2018.
Contacts
For further information, please contact:
Natalia de Sousa
Company Secretary, FIL Investments International
01737 837846
Chairman’s Statement
The Board continues to be very focused on improving the future prospects of the Company, believing that this will make the Company more appealing to existing and potential investors. To this end, the Board has proposed a number of changes to the Company, including a change of Investment Policy, Reference Index and name. These are detailed below.
Performance Review
I’m delighted to be able to report that the Company had an excellent year in 2017. Over the 12 months to 31 December 2017, the Company’s net asset value (“NAVâ€) rose by 34.1% to 164.10p per share, almost double the performance of the Russell Nomura Mid/Small Cap Index, which gained by 17.5% in sterling terms. The share price rose even more strongly by 49.3% to 151.50p and as a result the Company’s share discount to NAV narrowed to 7.7% from 17.1% a year ago.
Japanese equities rose strongly over the year, backed by upbeat corporate earnings results, easing political concerns and a steady flow of positive economic data. Prime Minister Shinzo Abe’s landslide victory in the snap general election held in late October provided further momentum. There were periods of diminished appetite for equities owing to North Korea’s ballistic missile launches and accompanying political rhetoric, as well as uncertainty regarding the Trump administration’s ability to push through the President’s policy agenda in the US, but these proved to be temporary. While the yen depreciated against sterling by almost 6% over the calendar year, the very strong performance of the Japanese market meant that overall gains in sterling terms remained robust.
Due Diligence visit to Hong Kong and Tokyo
The Board undertook its annual due diligence trip to Hong Kong and Tokyo in October 2017. While in Hong Kong the Board had the opportunity to meet with Fidelity’s Derivatives, Investment Compliance and Trading teams in order both to meet the relevant people and to better understand the processes and interaction of these teams with Nicholas Price, the Company’s Portfolio Manager, and the analysts in Tokyo. The Board attended a number of company visits while in Japan where the Directors were able to observe Nicholas and the analysts in action as they challenged management teams.
While in Tokyo the Board also had the opportunity to discuss the Company’s performance and future prospects, and whether the objective of the Company, its Reference Index, its peer group and indeed even its name remained appropriate. The objective of the Company is currently to achieve long term capital growth from an actively managed portfolio of securities, primarily of small and medium sized Japanese companies, listed or traded on Japanese stockmarkets. Since his appointment in 2015, Nicholas has also been finding attractive investment opportunities both in smaller and micro-cap stocks and in large and mega-cap stocks. The Company’s portfolio therefore now has a greater exposure to these areas with a marked decrease in exposure to medium sized companies. This reflects both the areas of the market where Nicholas finds opportunities and his personal investment expertise and style, which are likely to continue to favour a relatively greater exposure to micro, small and large cap stocks.
With this in mind, the Board has determined the following:
Proposed Changes to the Objective and Investment Policy
Nicholas’s bias towards smaller companies as a fertile hunting ground for stock picking means that he is operating within the current stated objective. However, amending the objective to reflect a greater weighting to micro, small and large cap stocks would be a fairer reflection of the approach Nicholas recommends following in the future and would refocus the objective more appropriately. It would also allow him greater flexibility to move between different market capitalisation segments as opportunities arise. Changes to the investment policy are being proposed in order to reflect that greater flexibility and to clarify the policy.
The Board believes that this broader objective and investment policy would also increase the universe of potential investors in the Company and would therefore increase the Company’s marketability and its prospects for growth.
In addition, the Board and Nicholas are of the opinion that increasing the limit on the percentage of the Company’s assets that may be invested in securities which are not listed at the time of acquisition will provide useful additional flexibility to the Portfolio Manager in his initial stock selections. The Board is therefore proposing to increase that limit from 5% to 10%.
The proposed changes to the objective and investment policy are set out in more detail in the Circular to shareholders dated 10 April 2018. A resolution to amend the investment policy will be proposed at the Annual General Meeting (“AGMâ€) on 22 May 2018, as set out in the Circular, which includes the Board’s recommendation to vote in favour.
Summary of the Key Aspects of the Proposed Investment Policy
The proposed investment policy is set out in full in Part II A of the Circular dated 10 April 2018. In light of recent regulatory developments and a drive for greater transparency and clarity in respect of financial products, the key aspects of the proposed investment policy can be summarised as follows:
The Investment Manager will typically focus on those companies primarily listed on Japanese stock exchanges whose growth prospects are not fully recognised by the market (“growth at a reasonable priceâ€). The Investment Manager is not restricted in terms of size or industry of the underlying entities in which it invests. The Company may also hold cash or invest in cash equivalents including money market instruments, and is able to use derivatives for efficient portfolio management, gearing and investment purposes. The Investment Manager must work within the guidelines set out in the investment policy.
Related Changes
As also stated in the Circular to shareholders dated 10 April 2018, the Board has decided that even under the existing objective and investment policy, certain related changes will be made to better reflect the investment focus of the Company. These changes are not subject to shareholder approval and will take place regardless of whether shareholders approve the change in investment policy.
Change of Name
In light of Nicholas’s focus on picking stocks with growth at a reasonable price, the Board believes that the Company’s name should be modified. The Board has therefore determined that the Company’s name be changed to Fidelity Japan Trust PLC to reflect both this and the changes noted above. The Company will, however, retain its existing ticker, SEDOL and ISIN. The change of name will become effective following the requisite statutory filings, which will be completed as soon as practicable following the AGM on 22 May 2018.
Change of Reference Index
The Board has considered a number of reference indices and after discussion has decided that the Company should move from using the Russell Nomura Mid/Small Cap Index to the TOPIX Index (Tokyo Stock Exchange TOPIX Total Return Index). This is the most widely used index representing the Japanese equity market and is also the most inclusive index in terms of constituents. The change of Reference Index will take effect from 22 May 2018.
Change of Peer Group
In light of the proposed change of objective and investment policy the Board has determined that with effect from 22 May 2018, the Company will move from the Association of Investment Companies (“AICâ€) Japan Smaller Companies peer group to the AIC Japan peer group.
The Board believes that these changes will be a better reflection of the opportunities available to the Portfolio Manager, and should improve the marketability of the Company.
Management Fees
The Board would like to inform shareholders that, following Fidelity’s announcement in October last year to offer its clients a variable management fee, the Board has negotiated a new fee agreement with the Manager. The new agreement reduces the headline management fee from 0.85% of gross assets to 0.70% of net assets per annum with a +/- 0.20% variation based on performance relative to the Reference Index. The change from using gross to net assets will lead to a significant reduction in the base fee taking into account the current level of gearing. The maximum fee that the Company will pay will be 0.90% of net assets, but if the Company underperforms against the Reference Index, the overall fee could fall as low as 0.50% of net assets. This new fee arrangement will be effective from 1 July 2018.
Gearing
The Company is permitted to gear through the use of long contracts for difference (“CFDsâ€). Total portfolio exposure at the end of the year was £264.1m, equating to gearing of 18.7% compared with 24.3% at the end of 2016. Further information can be found in the Strategic Report.
The Board continues to be of the view that using CFDs provides more flexibility for the Company’s needs at a much lower cost than traditional bank debt, despite the low level of interest rates.
Ongoing Charges
The ongoing charge for the reporting year is 1.31%. This compares favourably with the previous year’s figure of 1.46%. The AIC Japan Smaller Companies peer group average was 1.22% and the AIC Japan Peer Group was 0.84%. The Board expects that the Company’s ongoing charge should continue to fall in light of the new fee arrangement.
Markets in Financial Instruments Directive (“MiFID IIâ€)
With effect from 3 January 2018, the MiFID II regulation changed the way that external investment research, traditionally provided by “sell-side†brokers, is paid for. Previously this research was paid for on a commission basis as part of the costs of transaction, but this is no longer allowed. Fidelity uses external investment research to access specific technical expertise for the benefit of the portfolio, and the Board is pleased to confirm that Fidelity has agreed to cover these costs under its existing management agreement rather than pass them onto investors. This represents an estimated ongoing saving to the Company of between 0.02% and 0.03% per annum which will be directly reflected in the NAV of the Company.
EU Product Regulation
The European Union’s Packaged Retail and Insurance-based Investment Products (“PRIIPsâ€) regulation, which came into force on 1 January 2018, is aimed at helping retail investors better understand and compare the key features, risks, rewards and costs of different products through a short Key Information Document (“KIDâ€). While the Board welcomes transparency and the spirit in which this regulation was intended, it should be noted that the content of the KID, including methodologies for the calculation and presentation of risks, performance scenarios and costs is laid down by regulation, and does not necessarily reflect the views of the Board.
The forward-looking Performance Scenarios are based on degrees of variation from historic performance, and in our view, are potentially misleading and certainly cannot be guaranteed. The figures in the KID may not reflect the expected returns for the Company and are likely to be higher following periods of strong returns and lower following market falls. It should always be remembered that past performance is not a guide to future performance.
The Board
Further to the announcement made on 1 February 2018, Mami Mizutori has resigned from her position as a non-executive Director of the Company. Mami was appointed as Assistant Secretary-General and Special Representative of the Secretary-General for Disaster Risk Reduction, United Nations Office for Disaster Risk Reduction (UNISDR) on 31 January 2018 and as a result has had to relinquish all external directorships. I would like to take this opportunity to thank Mami for her contribution to the Board and wish her the very best in carrying out her new, important role. The Board has begun the process of recruiting a new non-executive Director to replace her.
In common with our practice in recent years, all current Directors are subject to annual re-election and their biographical details are included in the Annual Report and Accounts to assist shareholders when considering their voting at this year’s AGM.
Share Repurchases and Treasury Shares
During the reporting year, 375,000 ordinary shares were repurchased for holding in Treasury. Since the year end, and as at the date of this report, no further ordinary shares have been repurchased for cancellation or holding in Treasury.
Annual General Meeting
The AGM of the Company will be held at 4.00pm on 22 May 2018 at Fidelity’s offices at 25 Cannon Street, London EC2M 5TA (St Paul’s or Mansion House tube stations). Full details of the meeting are given in the Circular to shareholders dated 10 April 2018 which includes the Notice of Meeting in Part IV.
The AGM is the most important meeting that the Board has with shareholders each year and we encourage all investors to attend. The Board looks forward to the opportunity to speak to shareholders of the Company. The Portfolio Manager will be making a presentation on the past year and the prospects for the coming year.
Outlook
The upbeat global economic outlook, along with the supportive domestic policy environment, should help Japanese companies to post another year of robust profits. The US tax reform legislation enacted in late 2017 could also provide a boost to Japanese companies that are heavily geared to the US market.
However, at this mature stage of the cycle, increases in interest rates may lead to periods of heightened market volatility and share price reversals, as we saw in early 2018. In addition, the market may suffer further setbacks as a result of rising tension on the Korean peninsula, uncertainty over the future of Prime Minister Abe, increasing protectionism instigated by the US and bouts of yen strength.
Nevertheless, such corrections are expected to be short term, assuming that there is no change in the underlying trend of economic and earnings growth.
David Robins
Chairman
29 March 2018
Portfolio Manager’s Review
Nicholas Price has been the Company’s Portfolio Manager since 1 September 2015. He is an experienced investor with over 23 years in the Japanese equity market.
Market review
The Japanese economy continued to grow at a rate well above its long term average. Indicators of manufacturing activity remained at an elevated level. Earnings momentum was exceptionally strong and corporate profits reached a record high in the first half of fiscal 2017 (April to September). While currency factors may have helped export-oriented companies, higher top-line growth and improved profitability were the key drivers supporting corporate earnings. As a result, the number of companies delivering higher returns on equity increased. At the same time, stronger earnings helped to lift business confidence and support growth in investment.
The Bank of Japan (“BoJâ€) continued to support equity markets through the purchase of exchange traded funds (“ETFsâ€), maintaining its annual target of around Â¥6 trillion (£40 billion). Trading activity by overseas investors was relatively volatile over the year, with the bulk of the net buying coming after the decision to hold a snap election was announced in mid-September. While corporates were active buyers through share buybacks, individual investors sold into strength and were the year’s biggest net sellers, resulting in a further decline in the Japanese savings ratio.
Global cyclicals and commodity related stocks led the market advance in 2017, with companies that generate a significant portion of their revenues in Asia, particularly China, delivering the strongest returns. The factory automation, semiconductor and machinery industries accounted for some of the best performing names. Small caps outperformed larger companies, led by those with attractive growth prospects. Conversely, expensive defensive sectors were relative laggards, and large cap value names were out of favour for much of the year.
Performance review
As noted in the Chairman’s Statement, the Company’s NAV per share increased from 122.37p to 164.10p during the year under review, and significantly outperformed the Reference Index. As demonstrated by the attribution analysis in the Annual Report, the strong uptrend in the Japanese equity market made a material contribution of 23.1% to the increase in the Company’s NAV. The Portfolio Manager’s decisions on stock selection and gearing also contributed to the growth in the Company’s NAV. Conversely, the depreciation of the yen against the pound, particularly during the second half of the year, produced a negative exchange rate effect.
Over the year, key holdings in the services, retail and machinery sectors were the principal drivers of the Company’s absolute returns. The large active holdings in services companies Recruit Holdings and M3 made material contributions to returns. Speciality retailers Ryohin Keikaku and Nojima also added significant value, as did high quality and niche manufacturers such as Keyence and Shima Seiki Manufacturing. Meanwhile, the underweight stance in low growth defensive sectors, such as utilities and land transportation, as well as banks, continued to pay off.
Conversely, holdings in consumer related companies that experienced a deceleration in earnings growth detracted most heavily from returns. Yonex and Zojirushi are notable examples. Not holding certain materials and commodity related names that benefited from a pick-up in the global economic cycle also constrained returns.
Principal Contributors
Recruit Holdings is the largest media, classified jobs and staffing agency in Japan, with a growing global presence through the acquisitions of Indeed in the US and USG People in the Netherlands. The holding was added at the start of the year and contributed materially to performance, particularly during the second half of 2017, when its earnings results underscored the strength of its underlying businesses. Indeed sustained very strong growth, supported by rising numbers of users and improved pricing, while Recruit’s domestic staffing operations benefited from the increasingly tight employment conditions in Japan. As the stock continued to appreciate, the Portfolio Manager actively reduced the position in order to bring fresh ideas with more attractive upside into the portfolio.
Kotobuki Spirits is a relatively under-researched confectionery company that produces novelty high quality Japanese sweets and cakes that are distributed across the country for sale as souvenirs to domestic and inbound tourists. The firm’s interim results for the year to March 2017 underscored its ability to maintain earnings growth momentum. Rising demand for its confectionery products drove top-line growth, while price increases and improved capacity utilisation enhanced its profitability. We expect the expansion of the souvenir market in Japan, amid a continued increase in foreign visitors which rose to 28.7 million in 2017 from 8.4 million in 2012, to support the company’s growth over the mid to long term.
Nojima is an under-researched, small cap company that operates a chain of consumer electronics stores predominantly in Kanagawa prefecture. Recent acquisitions have helped it to expand its operations to include cell phone distribution and broadband services. The introduction of support services, including PC and smartphone use for elderly customers, combined with price increases and an enhanced product mix have contributed to a sharp improvement in profitability. The company’s efforts to bring down costs, including office relocation and reduced outsourcing, have also been effective. Given Nojima’s good earnings visibility and relatively cheap valuation, it remains a key holding in the retail sector.
Ryohin Keikaku operates the MUJI brand of general merchandise stores and is one of Japan’s fastest growing speciality retailers. Its strong brand positioning and core product offering support the stability of its domestic business, and are the key factors behind the company’s successful expansion overseas, particularly in East Asia. Its domestic operations continued to perform well, driven by higher sales, especially of high-margin apparel, and cost reductions. This helped to offset the negative effects of unfavourable currency movements on earnings generated overseas. Business remains brisk in Japan and China, and the company’s mid term growth prospects are supported by its brand power and strategic product line up.
Keyence is a leading producer of sensors and measuring instruments used in factory automation (“FAâ€) globally. As increasingly data intensive manufacturing processes drive demand for sensors and vision systems, its highly profitable and consulting-based business model is well placed to deliver sustainable earnings growth. The company delivered very strong numbers in terms of both top-line growth and profitability, and continued to gain market share in Japan and overseas. Moreover, the need for labour intensive industries to introduce robots and FA is a long term driver for the company. With its large net cash balance, the Portfolio Manager sees the potential for the company to make strategic acquisitions and thereby improve shareholder returns.
Principal Detractors
Yonex is a world leader in badminton, tennis and golf equipment. The stock performed well in 2016 and ranked among the top five contributors to the Company’s performance relative to the Reference Index over the year. In 2017, however, the market reacted adversely to a slowdown in its rate of earnings growth, which stemmed from higher marketing costs in China, a key growth market for the company. In October, Yonex lowered its full-year guidance to reflect costs associated with a new manufacturing plant and the disruption from moving to a direct-sales model in China. The holding in the stock was reduced considering the deceleration in earnings growth. However, Yonex remains well positioned to benefit over the mid term from growth in the Asian badminton market and rising demand for midrange products as average income levels increase. As a result, a reduced holding remains in the portfolio.
Zojirushi is a leading manufacturer of high-end rice cookers and thermos flasks. Intensifying competition in the domestic rice cooker industry drove down average sales prices and saw the company lose market share to new, low-cost entrants. Successive earnings results underscored a sharp decline in rice cooker revenues and the holding in the stock was reduced as a result. While its overseas business, centred on China, continued to perform well, the profitability of its domestic rice cooker business remained at risk given the difficult challenge of balancing pricing and market share. As a result, the position in the stock was sold out over the course of the year.
Nissan Chemical Industries is a leading producer of basic and advanced chemical products, as well as agrochemicals and veterinary pharmaceuticals. The stock was the standout contributor to the Company’s performance relative to the Reference Index in 2016. Its shares rallied on high growth expectations for its animal drug operations and the solid performance of its liquid crystal display (“LCDâ€) materials business. However, its shares succumbed to profit taking in early 2017, as the market judged that its growth prospects were fully priced in. Given that further potential upside appeared limited, the holding in the company was sold.
ASICS is a popular Japanese sports brand that is best known for its high-performance running shoes. The company generated weaker than expected top-line growth in its core US and European markets, where increased competition and a shift in consumer preference from performance to casual shoes meant that it lost shelf space at major retailers. ASICS will need time to build up its fashion oriented brand and for recognition to gain traction. At the same time, rising marketing costs associated with a switch to directly operated stores are putting pressure on its margins. Given these factors and the lack of recovery in key markets, the stock was sold.
Shares in Murata Manufacturing, a global leader in the production of ceramic capacitors, faced selling pressure after it downgraded its full-year earnings guidance towards the end of the year. The downward revision reflected higher manufacturing costs related to MetroCirc (mouldable circuit boards used in smartphones) and the ramp-up of new products, as well as weaker than expected sales of smartphones in China. However, the stock offers an attractive risk/reward balance given that the increasing sophistication of smartphones and the secular growth of automobile electrification are expected to drive demand for passive components over the mid to long term. As a result, a reduced holding remains in the portfolio.
The Company continues to invest in attractive opportunities across the market cap spectrum and maintains large positions in the Portfolio Manager’s highest conviction ideas. The top ten concentration accounted for 39.6% of total net assets at the end of the year and the active share remains high, indicating a minimal overlap with the Reference Index.
During the year, positions in globally competitive companies closely tied to secular growth trends, such as automation and med-tech, were purchased. Examples include robotics maker Fanuc, FA sensor manufacturer Keyence and FA component distributor MISUMI Group. The Portfolio Manager also added further weight to holdings in medical related names M3 and Sysmex. Amid the upturn in interest rates, positions in financials, particularly global banks and insurance companies, were selectively increased.
Among smaller companies, a holding was bought in UT Group, one of the largest providers of labour outsourcing services for the industrial sector.
Conversely, positions in consumer related stocks where earnings growth had fallen below the Portfolio Manager’s expectations were sold, such as Zojirushi and ASICS. Holdings in outperformers, such as confectionery company Morinaga & Co and automaker Suzuki Motor, were sold or reduced in order to bring fresh investment ideas into the portfolio.
Outlook
Labour markets are at the tightest level in several decades and participation rates among women and also seniors over 65 have risen sharply. The number of people in employment is now close to the record high of 65.8 million set in 1997, which is helping to mitigate the impact of changing demographics. Meanwhile, foreign visitors are coming to Japan in record numbers (28.7 million in 2017 versus 8.4 million in 2012 prior to the advent of Abenomics) and are on course to reach the government’s target of 40 million by 2020, the year of the Tokyo Olympics. All of these factors have positive implications for the domestic economy, through higher total employment income, stronger consumer confidence and ultimately consumption.
In terms of corporate fundamentals and valuations, Japanese stocks are relatively cheap globally and the earnings environment is positive. This suggests a reasonable level of upside for the market in 2018. Although Japanese stocks have performed strongly in recent years, the market has been driven predominantly by growth in corporate earnings rather than by an expansion in valuation multiples, as has been the case in other developed markets such as the US. As corporate Japan continues to make progress with governance reforms and enhancing shareholder value, returns on equity could approach similar levels to those seen in Europe.
The key risks are policy missteps by major central banks; the re-emergence of trade protectionism, particularly in the US; a faster than expected slowdown in China; and geopolitical tensions. While inflation remains subdued in Japan, speculation that the BoJ may change its policy could lead to periods of yen appreciation, which would negatively impact the performance of Japanese stocks. However, the Japanese economy is experiencing its longest period of growth in more than a decade and the policy mix remains accommodative. Corporate profits are at record highs and companies are increasing their capital spending. Given this environment and the relatively undemanding valuations in Japan, we believe there are still attractive investment opportunities in the equity market.
Nicholas Price
Portfolio Manager
Fidelity International
29 March 2018
Strategic Report
Principal Risks and Uncertainties and Risk Management
As required by provision C.2.1 of the 2016 UK Corporate Governance Code, the Board has a robust ongoing process for identifying, evaluating and managing the principal risks and uncertainties faced by the Company. The Board, with the assistance of the Alternative Investment Fund Manager (FIL Investment Services (UK) Limited/the “Managerâ€), has developed a risk matrix which, as part of the risk management and internal controls process, identifies the key risks that the Company faces. The risks identified are placed on the Company’s risk matrix and graded appropriately. This process, together with the policies and procedures for the mitigation of risks, is updated and reviewed regularly in the form of comprehensive reports considered by the Audit Committee. The Board determines the nature and extent of any risks it is willing to take in order to achieve its strategic objectives.
The Manager also has responsibility for risk management for the Company. It works with the Board to identify and manage the principal risks and uncertainties and to ensure that the Board can continue to meet its UK corporate governance obligations.
The principal risks and uncertainties faced by the Company and considered by the Board are disclosed below. An additional geopolitical risk has been included this year. There have been no other changes from the prior year.
| Principal Risks | Description and Risk Mitigation |
| Market risk | The Company’s assets consist mainly of listed securities and the principal risks are therefore market related such as market downturn, interest rate movements and exchange rate movements. The Portfolio Manager’s success or failure to protect and increase the Company’s assets against this background is core to the Company’s continued success. Risks to which the Company is exposed and which form part of the market risk category are included in Note 16 to the Financial Statements together with summaries of the policies for managing these risks. |
| Performance risk | The achievement of the Company’s performance objective relative to the market requires the application of risk such as strategy, asset allocation and stock selection of the portfolio and the risk associated with Japan and industry sectors within the parameters of the objective and strategy. The Portfolio Manager is responsible for actively monitoring the portfolio selected in accordance with the asset allocation parameters and seeks to ensure that individual stocks meet an acceptable risk/reward profile. The emphasis is on long term results as the Company risks volatility of performance in the shorter term. As noted in the Chairman’s Statement, the Board is proposing to change the Company’s objective and investment policy, the Company’s name, the Reference Index and the peer group, to be a fairer reflection of the approach the Portfolio Manager recommends following in future and would refocus the objective more appropriately. It will allow the Portfolio Manager greater flexibility to move between the different market capitalisation segments as opportunities arise. |
| Geopolitical risk | The Company may be impacted by geopolitical risks, including the risk of military escalation in relation to North Korea and the re-emergence of trade protectionism. |
| Discount control risk | The Board cannot control the discount at which the Company’s ordinary share price trades in relation to net asset value. However, it can have a modest influence in the market by maintaining the profile of the Company through a marketing campaign and, under certain circumstances, through repurchasing shares. The Company’s share price, NAV and discount volatility are monitored daily by the Manager and considered by the Board regularly. |
| Gearing risk | The Company has the option to make use of loan facilities or to use CFDs to invest in equities. The principal risk is that the Portfolio Manager may fail to use gearing effectively. In a rising market the Company will benefit from gearing, whilst in a falling market the impact would be detrimental. Other risks are that the cost of gearing may be too high or that the term of the gearing is inappropriate in relation to market conditions. The Company currently has no bank loans and gears through the use of long CFDs which provide greater flexibility and are significantly cheaper than bank loans. The Board regularly considers the level of gearing and gearing risk and sets limits within which the Portfolio Manager must operate. |
| Currency risk | Most of the Company’s assets and income are denominated in yen. However, the functional currency of the Company in which it reports its results is sterling. Consequently, it is subject to currency risk on exchange rate movements between yen and sterling. It is the Company’s policy not to hedge against currency risks. Further details can be found in Note 16 to the Financial Statements. |
Other risks facing the Company include:
Cybercrime Risk
The risk posed by cybercrime is rated as significant and the Board receives regular updates from the Manager on cybercrime threats. The Manager’s technology team continues with initiatives to strengthen the control environment in relation to emerging threats.
Tax and Regulatory Risks
A breach of Section 1158 of the Corporation Tax Act 2010 could lead to a loss of investment trust status resulting in the Company being subject to tax on capital gains.
The Company may be impacted by changes in legislation, taxation or regulation. These are monitored at each Board meeting and managed through active engagement with regulators and trade bodies by the Manager.
Operational Risks
The Company relies on a number of third party service providers, principally the Manager, Registrar, Custodian and Depositary. It is dependent on the effective operation of the Manager’s control systems and those of its service providers with regard to the security of the Company’s assets, dealing procedures, accounting records and the maintenance of regulatory and legal requirements. They are all subject to a risk-based programme of internal audits by the Manager. In addition, service providers’ own internal controls reports are received by the Board on an annual basis and any concerns are investigated.
Continuation Vote
A continuation vote takes place every three years. There is a risk that shareholders do not vote in favour of continuation of the Company during periods when performance of the Company’s NAV and share price is poor. At the Company’s AGM held on 24 May 2016, 99.49% of shareholders voted in favour of the continuation of the Company. The next continuation vote will take place at the AGM in 2019.
Viability Statement
In accordance with provision C.2.2 of the 2016 UK Corporate Governance Code, the Directors have assessed the prospects of the Company over a longer period than the twelve month period required by the “Going Concern†basis. The Company is an investment trust with the objective of achieving long term capital growth. The Board considers that three years is an appropriate investment horizon to assess the viability of the Company, although the life of the Company is not intended to be limited to this or any other period. The Company is also subject to a continuation vote every three years and the next vote will take place at the AGM in 2019.
In making an assessment on the viability of the Company, the Board has taken account of the Company’s current position, the principal risks that it faces and their potential impact on its future development and prospects and the Company’s objective and strategy. The Company’s working capital is strong because the portfolio mainly comprises readily realisable securities which can be sold to meet funding requirements if necessary and the ongoing processes for monitoring operating costs and income are modest in comparison to the Company’s total assets. Furthermore, Japanese equities have a long term future and the Manager has a strong track record for delivering positive returns over the long term in this sector. The Directors, therefore, confirm that they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period of assessment.
Going Concern Statement
The Directors have considered the Company’s objective, risk management policies, liquidity risk, credit risk, capital management policies and procedures, the nature of its portfolio (being mainly securities which are readily realisable) and its expenditure and cash flow projections and have concluded that the Company has adequate resources to continue to adopt the going concern basis for at least twelve months from the date of this Annual Report. The prospects of the Company over a period longer than twelve months can be found in the Viability Statement above.
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial period. Under that law they have elected to prepare the Financial Statements in accordance with UK Generally Accepted Accounting Practice, including FRS 102: The Financial Reporting Standard applicable in the UK and Republic of Ireland. The Financial Statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss for the reporting period.
In preparing these Financial Statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements 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 ensuring that adequate accounting records are kept which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations the Directors are also responsible for preparing a Strategic Report, a Directors’ Report, a Corporate Governance Statement and a Directors’ Remuneration Report that comply with that law and those regulations.
The Directors have delegated responsibility for the maintenance and integrity of the corporate and financial information included on the Company’s pages of the Manager’s website at www.fidelityinvestmenttrusts.com to the Manager. Visitors to the website need to be aware that legislation in the UK governing the preparation and dissemination of the Financial Statements may differ from legislation in their own jurisdictions.
The Directors confirm that to the best of our knowledge:
• The Financial Statements, prepared in accordance with FRS 102, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and
• The Annual Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties it faces.
The Directors consider that the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company’s performance, business model and strategy.
Approved by the Board on 29 March 2018 and signed on its behalf by:
David Robins
Chairman
Income Statement
for the year ended 31 December 2017
| Year ended 31 December 2017 | Year ended 31 December 2016 | ||||||
| revenue | capital | total | revenue | capital | total | ||
| Notes | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| Gains on investments | 9 | – | 44,049 | 44,049 | – | 30,593 | 30,593 |
| Gains on derivative instruments | 10 | – | 13,084 | 13,084 | – | 675 | 675 |
| Income | 3 | 2,568 | – | 2,568 | 2,471 | – | 2,471 |
| Investment management fees | 4 | (2,016) | – | (2,016) | (1,597) | – | (1,597) |
| Other expenses | 5 | (461) | – | (461) | (489) | – | (489) |
| Foreign exchange (losses)/gains | – | (304) | (304) | – | 247 | 247 | |
| ------------------- | ------------------- | ------------------- | ------------------- | ------------------- | ------------------- | ||
| Net return on ordinary activities before finance costs and taxation | 91 | 56,829 | 56,920 | 385 | 31,515 | 31,900 | |
| Finance costs | 6 | (175) | – | (175) | (91) | – | (91) |
| ------------------- | ------------------- | ------------------- | ------------------- | ------------------- | ------------------- | ||
| Net (loss)/return on ordinary activities before taxation | (84) | 56,829 | 56,745 | 294 | 31,515 | 31,809 | |
| Taxation on (loss)/return on ordinary activities | 7 | (211) | – | (211) | (202) | – | (202) |
| ------------------- | ------------------- | ------------------- | ------------------- | ------------------- | ------------------- | ||
| Net (loss)/return on ordinary activities after taxation for the year | (295) | 56,829 | 56,534 | 92 | 31,515 | 31,607 | |
| ------------------- | ------------------- | ------------------- | ------------------- | ------------------- | ------------------- | ||
| (Loss)/return per ordinary share | 8 | (0.22p) | 41.88p | 41.66p | 0.07p | 24.56p | 24.63p |
| ------------------- | ------------------- | ------------------- | ------------------- | ------------------- | ------------------- | ||
The Company does not have any other comprehensive income. Accordingly the net (loss)/return on ordinary activities after taxation for the year is also the total comprehensive income for the year and no separate Statement of Other Comprehensive Income has been presented.
The total column of this statement represents the Income Statement of the Company. The revenue and capital columns are supplementary and presented for information purposes as recommended by the Statement of Recommended Practice issued by the AIC.
No operations were acquired or discontinued in the year and all items in the above statement derive from continuing operations.
The Notes form an integral part of the Financial Statements.
Statement of Changes in Equity
for the year ended 31 December 2017
| share | capital | |||||||
| share | premium | redemption | other | capital | revenue | total | ||
| capital | account | reserve | reserve | reserve | reserve | equity | ||
| Notes | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| Total shareholders' funds at 31 December 2016 | 34,041 | 20,722 | 2,767 | 56,886 | 66,368 | (14,379) | 166,405 | |
| Ordinary Shares repurchased and held in Treasury | 13,14 | – | – | – | (412) | – | – | (412) |
| Net return/(loss) on ordinary activities after taxation for the year | – | – | – | – | 56,829 | (295) | 56,534 | |
| ------------------ | ------------------ | ------------------ | ------------------ | ------------------ | ------------------ | ------------------ | ||
| Total shareholders' funds at 31 December 2017 | 34,041 | 20,722 | 2,767 | 56,474 | 123,197 | (14,674) | 222,527 | |
| ========== | ========== | ========== | ========== | ========== | ========== | ========== | ||
| Total shareholders’ funds at 31 December 2015 | 28,555 | 6,874 | 2,621 | 57,568 | 34,853 | (14,471) | 116,000 | |
| Issue of ordinary shares on the exercise of rights attached to subscription shares | 13,14 | 5,632 | 13,848 | – | – | – | – | 19,480 |
| Ordinary Shares repurchased for cancellation | 13,14 | (146) | – | 146 | (498) | – | – | (498) |
| Ordinary Shares repurchased and held in Treasury | 13,14 | – | – | – | (184) | – | – | (184) |
| Net return on ordinary activities after taxation for the year | – | – | – | – | 31,515 | 92 | 31,607 | |
| ------------------ | ------------------ | ------------------ | ------------------ | ------------------ | ------------------ | ------------------ | ||
| Total shareholders' funds at 31 December 2016 | 34,041 | 20,722 | 2,767 | 56,886 | 66,368 | (14,379) | 166,405 | |
| ========== | ========== | ========== | ========== | ========== | ========== | ========== |
The Notes form an integral part of the Financial Statements.
Balance Sheet
as at 31 December 2017
Company number 2885584
| 2017 | 2016 | ||
| Notes | £’000 | £’000 | |
| Fixed assets | |||
| Investments | 9 | 221,792 | 161,777 |
| ------------------ | ------------------ | ||
| Current assets | |||
| Derivative instruments | 10 | 1,123 | 4,619 |
| Debtors | 11 | 652 | 534 |
| Cash at bank | 908 | 620 | |
| ------------------ | ------------------ | ||
| 2,683 | 5,773 | ||
| ========== | ========== | ||
| Creditors | |||
| Derivative instruments | 10 | (456) | (424) |
| Other creditors | 12 | (1,492) | (721) |
| ------------------ | ------------------ | ||
| (1,948) | (1,145) | ||
| ========== | ========== | ||
| Net current assets | 735 | 4,628 | |
| ------------------ | ------------------ | ||
| Net assets | 222,527 | 166,405 | |
| ------------------ | ------------------ | ||
| Capital and reserves | |||
| Share capital | 13 | 34,041 | 34,041 |
| Share premium account | 14 | 20,722 | 20,722 |
| Capital redemption reserve | 14 | 2,767 | 2,767 |
| Other reserve | 14 | 56,474 | 56,886 |
| Capital reserve | 14 | 123,197 | 66,368 |
| Revenue reserve | 14 | (14,674) | (14,379) |
| ------------------ | ------------------ | ||
| Total shareholders' funds | 222,527 | 166,405 | |
| ========== | ========== | ||
| Net asset value per ordinary share | 15 | 164.10p | 122.37p |
| ========== | ========== |
The Financial Statements were approved by the Board of Directors on 29 March 2018 and were signed on its behalf by:
David Robins
Chairman
The Notes form an integral part of the Financial Statements.
Notes to the Financial Statements
1 Principal Activity
Fidelity Japanese Values PLC is an Investment Company incorporated in England and Wales with a premium listing on the London Stock Exchange. The Company’s registration number is 2885584, and its registered office is Beech Gate, Millfield Lane, Lower Kingswood, Tadworth, Surrey, KT20 6RP. The Company has been approved by HM Revenue & Customs as an Investment Trust under Section 1158 of the Corporation Tax Act 2010 and intends to conduct its affairs so as to continue to be approved.
2 Accounting Policies
The Company has prepared its Financial Statements in accordance with UK Generally Accepted Accounting Practice (“UK GAAPâ€), including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Irelandâ€, issued by the Financial Reporting Council (“FRCâ€). The Financial Statements have also been prepared in accordance with the Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture Capital Trusts (“SORPâ€) issued by the Association of Investment Companies (“AICâ€), in November 2014 and updated in January 2017 with consequential amendments. The Company is exempt from presenting a Cash Flow Statement as a Statement of Changes in Equity is presented and substantially all of the Company’s investments are highly liquid and are carried at market value.
a) Basis of accounting – The Financial Statements have been prepared on a going concern basis and under the historical cost convention, except for the measurement at fair value of investments and derivative instruments.
b) Significant accounting estimates and judgements – The Directors make judgements and estimates concerning the future. Estimates and judgements are continually evaluated and are based on historical experience and other factors, such as expectations of future events, and are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The judgements required in order to determine the appropriate valuation methodology of level 3 financial instruments have a risk of causing an adjustment to the carrying amounts of assets. These judgements include making assessments of the possible valuations in the event of a listing or other marketability related risks.
c) Segmental reporting – The Company is engaged in a single segment business and, therefore, no segmental reporting is provided.
d) Presentation of the Income Statement – In order to reflect better the activities of an investment company and in accordance with guidance issued by the AIC, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been prepared alongside the Income Statement. The net revenue loss after taxation for the year is the measure the Directors believe appropriate in assessing the Company’s compliance with certain requirements set out in Section 1159 of the Corporation Tax Act 2010.
e) Income – Income from equity investments is accounted for on the date on which the right to receive the payment is established, normally the ex–dividend date. Overseas dividends are accounted for gross of any tax deducted at source. Amounts are credited to the revenue column of the Income Statement. Where the Company has elected to receive its dividends in the form of additional shares rather than cash, the amount of the cash dividend foregone is recognised in the revenue column of the Income Statement. Any excess in the value of the shares received over the amount of the cash dividend is recognised in the capital column of the Income Statement. Special dividends are treated as a revenue receipt or a capital receipt depending on the facts and circumstances of each particular case.
Derivative instrument income received from dividends on long contracts for difference (“CFDsâ€) is accounted for on the date on which the right to receive the income is established, normally the ex–dividend date. The net amount is credited to the revenue column of the Income Statement.
f) Management fees and other expenses – Management fees and other expenses are accounted for on an accruals basis and are charged in full to the revenue column of the Income Statement.
g) Functional currency and foreign exchange – The Directors, having regard to the Company’s share capital and the predominant currency in which its investors operate, have determined its functional currency to be sterling. Sterling is also the currency in which the Financial Statements are presented. Transactions denominated in foreign currencies are reported in sterling at the rate of exchange ruling at the date of the transaction. Assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the Balance Sheet date. Foreign exchange gains and losses arising on translation are recognised in the Income Statement as a revenue or a capital item depending on the nature of the underlying item to which they relate.
h) Finance costs – Finance costs represent interest paid on long CFDs and are accounted for on an accruals basis using the effective interest method. They are charged in full to the revenue column of the Income Statement.
i) Taxation – The taxation charge represents the sum of current taxation and deferred taxation.
Current taxation is taxation suffered at source on overseas income less amounts recoverable under taxation treaties. Taxation is charged or credited to the revenue column of the Income Statement, except where it relates to items of a capital nature, in which case it is charged or credited to the capital column of the Income Statement.
Deferred taxation is the taxation expected to be payable or recoverable on timing differences between the treatment of certain items for accounting purposes and their treatment for the purposes of computing taxable profits. Deferred taxation is based on tax rates that have been enacted or substantially enacted when the taxation is expected to be payable or recoverable. Deferred taxation assets are only recognised if it is considered more likely than not that there will be sufficient future taxable profits to utilise them.
j) Investments – The Company’s business is investing in financial instruments with a view to profiting from their total return in the form of income and capital growth. This portfolio of investments 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 on that basis to the Company’s Board of Directors. Investments are measured at fair value with changes in fair value recognised in profit or loss, in accordance with the provisions of both Section 11 and Section 12 of FRS 102. The fair value of investments is initially taken to be their cost and is subsequently measured as follows:
· Listed investments are valued at bid prices, or last market prices, depending on the convention of the exchange on which they are listed, or otherwise, at fair value based on published price quotations; and
· Unlisted investments are investments which are not quoted, or are not frequently traded, and are stated at the Directors best estimate of fair value. The Manager’s Fair Value Committee, which is independent of the Portfolio Manager’s team, provides a recommendation of fair values to the Directors based on recognised valuation techniques that take account of the cost of the investment, and recent transactions in the same or similar investments and financial performance of the investment since acquisition.
In accordance with the AIC SORP, the Company includes transaction costs, incidental to the purchase or sale of investments, within gains on investments in the capital column of the Income Statement and has disclosed these costs in Note 9.
k) Derivative instruments – When appropriate, permitted transactions in derivative instruments are used. Some of the Company’s portfolio exposure to Japanese equities is achieved by investment in long CFDs. Long CFDs are classified as other financial instruments and are initially accounted and measured at fair value on the date the derivative contract is entered into and subsequently measured at fair value as follows:
· Long CFDs are valued at the difference between the strike price and the value of the underlying shares in the contract.
l) Debtors – Debtors include securities sold for future settlement, accrued income and other debtors and pre–payments incurred in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business, if longer) they are classified as current assets. If not, they are presented as non–current assets. They are recognised initially at fair value and, where applicable, subsequently measured at amortised cost using the effective interest rate method.
m) Cash at bank – Cash at bank is subject to an insignificant risk of changes in value.
n) Other creditors – Other creditors include securities purchased for future settlement and other creditors and expenses accrued in the ordinary course of business. If payment is due within one year or less (or in the normal operating cycle of the business, if longer) they are classified as current liabilities. If not, they are presented as non–current liabilities. They are recognised initially at fair value and, where applicable, subsequently measured at amortised cost using the effective interest rate method.
o) Capital reserve – The following are accounted for in the capital reserve:
· Gains and losses on the disposal of investments and derivative instruments;
· Changes in the fair value of investments and derivative instruments held at the year end;
· Foreign exchange gains and losses of a capital nature;
· Dividends receivable which are capital in nature.
As a result of technical guidance issued by the Institute of Chartered Accountants in England and Wales in TECH 02/10: Guidance on the determination of realised profits and losses in the context of distributions under the Companies Act 2006, changes in the fair value of investments which are readily convertible to cash, without accepting adverse terms at the Balance Sheet date, can be treated as realised. Capital reserves realised and unrealised are shown in aggregate as capital reserve in the Statement of Changes in Equity and the Balance Sheet. At the Balance Sheet date, with the exception of unlisted investments with a fair value of £906,000 (2016: £958,000), the portfolio of the Company consisted of investments listed on a recognised stock exchange and derivative instruments contracted with counterparties having an adequate credit rating, and the portfolio was considered to be readily convertible to cash.
3 Income
| Year ended | Year ended | |
| 31.12.17 | 31.12.16 | |
| £’000 | £’000 | |
| Investment income | ||
| Overseas dividends | 2,111 | 2,022 |
| Derivative income | ||
| Dividends on long CFDs | 457 | 449 |
| ----------------- | ----------------- | |
| Total income | 2,568 | 2,471 |
| ========== | ========== | |
| 4 Investment Management Fees | ||
| Year ended | Year ended | |
| 31.12.17 | 31.12.16 | |
| £’000 | £’000 | |
| Investment management fees | 2,016 | 1,597 |
| ----------------- | ----------------- |
FIL Investment Services (UK) Limited is the Company’s Alternative Investment Fund Manager and has delegated portfolio management to FIL Investments International (“FIIâ€), the Investment Manager. Both companies are Fidelity group companies. FII charges portfolio management services fees at an annual rate of 0.85% of the value of gross assets under management. Fees are payable quarterly in arrears and are calculated on the last business day of March, June, September and December. Further details of the terms of the Management Agreement are given in the Directors’ Report.
5 Other Expenses
| Year ended | Year ended | |
| 31.12.17 | 31.12.16 | |
| £’000 | £’000 | |
| AIC fees | 10 | 9 |
| Administration and secretarial fees payable to the Investment Manager | 47 | 46 |
| Custody fees | 18 | 14 |
| Depositary fees | 16 | 17 |
| Directors’ expenses | 28 | 31 |
| Directors’ fees1 | 113 | 121 |
| Legal and professional fees | 50 | 48 |
| Marketing expenses | 67 | 88 |
| Printing and publication expenses | 53 | 51 |
| Registrars’ fees | 21 | 29 |
| Sundry other expenses | 14 | 11 |
| Fees payable to the Company’s Independent Auditor for the audit of the annual financial statements | 24 | 24 |
| ----------------- | ----------------- | |
| 461 | 489 | |
| ========== | ========== |
1 Details of the breakdown of Directors’ fees are provided in the Directors’ Remuneration Report
6 Finance Costs
| Year ended | Year ended | |
| 31.12.17 | 31.12.16 | |
| £’000 | £’000 | |
| Interest paid on long CFDs | 175 | 91 |
| ----------------- | ----------------- | |
| 7 Taxation on Return on Ordinary Activities | ||
| Year ended | Year ended | |
| 31.12.17 | 31.12.16 | |
| £’000 | £’000 | |
| a) Analysis of taxation charge for the year | ||
| Overseas taxation (Note 7b) | 211 | 202 |
| ----------------- | ----------------- |
b) Factors affecting the taxation charge for the year
The taxation charge for the year is lower than the standard rate of UK corporation tax for an investment trust company of 19.25% (2016: 20%). A reconciliation of tax at the standard rate of UK corporation tax to the taxation charge for the year is shown below:
| Year ended | Year ended | |
| 31.12.17 | 31.12.16 | |
| £’000 | £’000 | |
| Net return on ordinary activities before taxation | 56,745 | 31,809 |
| ----------------- | ----------------- | |
| Net return on ordinary activities before taxation multiplied by the standard rate of UK corporation tax of 19.25% (2016: 20%) | 10,923 | 6,362 |
| Effects of: | ||
| Gains on investments not taxable1 | (10,940) | (6,303) |
| Income not taxable | (406) | (404) |
| Excess management expenses not utilised | 423 | 345 |
| Overseas taxation | 211 | 202 |
| ----------------- | ----------------- | |
| Taxation charge for the year (Note 7a) | 211 | 202 |
| =========== | =========== |
1 The Company is exempt from UK taxation on capital gains as it meets the HM Revenue & Customs criteria for an investment company set out in Section 1159 of the Corporation Tax Act 2010
c) Deferred taxation
A deferred tax asset of £4,038,000 (2016: £3,665,000), in respect of excess expenses of £23,756,000 (2016: £21,560,000), has not been recognised as it is unlikely that there will be sufficient future taxable profits to utilise these expenses.
8 (Loss)/return per Ordinary Share
| Year ended 31 December 2017 | Year ended 31 December 2016 | |||||
| revenue | capital | total | revenue | capital | total | |
| (Loss)/return per ordinary share – basic and diluted | (0.22p) | 41.88p | 41.66p | 0.07p | 24.56p | 24.63p |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | |
The returns per ordinary share are based on, respectively; the net revenue loss on ordinary activities after taxation for the year of £295,000 (2016: net return £92,000), the net capital return on ordinary activities after taxation for the year of £56,829,000 (2016: £31,515,000) and the net total return on ordinary activities after taxation for the year of £56,534,000 (2016: £31,607,000), and on 135,684,503 ordinary shares (2016: 128,319,344), being the weighted average number of ordinary shares held outside Treasury in issue during the year.
9 Investments
| 2017 | 2016 | |
| £’000 | £’000 | |
| Investments held at fair value through profit or loss | ||
| Listed overseas investments | 220,886 | 160,819 |
| Unlisted overseas investments | 906 | 958 |
| ------------------- | ------------------- | |
| Total investments | 221,792 | 161,777 |
| =========== | =========== | |
| Opening book cost | 128,765 | 100,256 |
| Opening investment holding gains | 33,012 | 15,276 |
| ------------------- | ------------------- | |
| Opening fair value | 161,777 | 115,532 |
| Movements in the year | ||
| Purchases at cost | 156,427 | 120,492 |
| Sales – proceeds | (140,461) | (104,840) |
| Gains on sales of investments | 22,828 | 12,857 |
| Movement in investment holding gains | 21,221 | 17,736 |
| ------------------- | ------------------- | |
| Closing fair value | 221,792 | 161,777 |
| =========== | =========== | |
| Closing book cost | 167,559 | 128,765 |
| Closing investment holding gains | 54,233 | 33,012 |
| ------------------- | ------------------- | |
| Closing fair value | 221,792 | 161,777 |
| =========== | =========== | |
| Year ended | Year ended | |
| 31.12.17 | 31.12.16 | |
| £’000 | £’000 | |
| Gains on investments held at fair value through profit or loss | ||
| Gains on sales of investments | 22,828 | 12,857 |
| Movement in investment holding gains | 21,221 | 17,736 |
| ------------------- | ------------------- | |
| 44,049 | 30,593 | |
| =========== | =========== | |
| Costs of investment transactions | ||
| Transaction costs incurred in the acquisition and disposal of investments, which are included in the gains | ||
| on sales of investments above, were as follows: | ||
| Purchase transaction costs | 144 | 108 |
| Sales transaction costs | 126 | 84 |
| ------------------- | ------------------- | |
| 270 | 192 | |
| =========== | =========== |
The portfolio turnover rate for the year ended 31 December 2017 was 80.1% (2016: 78.1%).
10 Derivative Instruments
| Year ended | Year ended | |||
| 31.12.17 | 31.12.16 | |||
| Gains on derivative instruments | £’000 | £’000 | ||
| Gains/(losses) on long CFD positions closed | 16,612 | (3,581) | ||
| Movement in investment holding (losses)/gains on long CFDs | (3,528) | 4,256 | ||
| ------------------- | ------------------- | |||
| 13,084 | 675 | |||
| =========== | =========== | |||
| 2017 | 2016 | |||
| portfolio | portfolio | |||
| fair value | exposure | fair value | exposure | |
| Derivative instruments recognised on the Balance Sheet | £’000 | £’000 | £’000 | £’000 |
| Derivative assets at fair value through profit or loss | 1,123 | 31,628 | 4,619 | 37,358 |
| Derivative liabilities at fair value through profit or loss | (456) | 10,697 | (424) | 7,765 |
| ------------------- | ------------------- | ------------------- | ------------------- | |
| 667 | 42,325 | 4,195 | 45,123 | |
| =========== | =========== | =========== | =========== | |
| 11 Debtors | ||||
| 2017 | 2016 | |||
| £’000 | £’000 | |||
| Securities sold for future settlement | 353 | 65 | ||
| Accrued income | 216 | 405 | ||
| Other debtors | 83 | 64 | ||
| ------------------- | ------------------- | |||
| 652 | 534 | |||
| =========== | =========== | |||
| The Directors consider that the carrying amount of debtors approximates to their fair value. | ||||
| 12 Other Creditors | ||||
| 2017 | 2016 | |||
| £’000 | £’000 | |||
| Securities purchased for future settlement | 714 | 97 | ||
| Creditors and accruals | 778 | 624 | ||
| ------------------- | ------------------- | |||
| 1,492 | 721 | |||
| =========== | =========== | |||
13 Share Capital
| 2017 | 2016 | |||
| number of | number of | |||
| shares | £’000 | shares | £’000 | |
| Issued, allotted and fully paid | ||||
| Ordinary shares of 25 pence each held outside Treasury | ||||
| Beginning of the year | 135,981,695 | 33,996 | 114,218,356 | 28,555 |
| Issue of ordinary shares on the exercise of rights attached to subscription shares | – | – | 22,527,339 | 5,632 |
| Ordinary shares repurchased for cancellation | – | – | (584,000) | (146) |
| Ordinary shares repurchased into Treasury | (375,000) | (94) | (180,000) | (45) |
| ------------------- | ------------------- | ------------------- | ------------------- | |
| End of the year | 135,606,695 | 33,902 | 135,981,695 | 33,996 |
| =========== | =========== | =========== | =========== | |
| Ordinary shares of 25 pence each held in Treasury* | ||||
| Beginning of the year | 180,000 | 45 | – | – |
| Ordinary shares repurchased into Treasury | 375,000 | 94 | 180,000 | 45 |
| ------------------- | ------------------- | ------------------- | ------------------- | |
| End of the year | 555,000 | 139 | 180,000 | 45 |
| =========== | =========== | =========== | =========== | |
| Issued, allotted and fully paid | ||||
| Subscription shares of 0.001 pence each | ||||
| Beginning of the year | – | – | 22,527,339 | – |
| Cancellation of subscription shares on the exercise of rights | – | – | (22,527,339) | – |
| ------------------- | ------------------- | ------------------- | ------------------- | |
| End of the year | – | – | – | – |
| =========== | =========== | =========== | =========== | |
| Total share capital | 34,041 | 34,041 | ||
| =========== | =========== | |||
* Ordinary shares held in Treasury carry no rights to vote, to receive a dividend or to participate in a winding up of the Company
A bonus issue of subscription shares to ordinary shareholders on the basis of one subscription share for every five ordinary shares held took place on 27 August 2014. Each subscription share gave the holder the right, but not the obligation, on the last business day of each month to subscribe for one ordinary share upon payment of the subscription price of 86.50 pence. The final date to exercise those rights was 29 April 2016. After 29 April 2016, the Company appointed a trustee who exercised all the remaining rights attached to the subscription shares that had not been exercised by shareholders. The resulting ordinary shares issued were sold in the market and the profits of that sale, being the net proceeds less the 86.50 pence per share cost of exercising the rights and after deduction of expenses and fees, were paid to the holders of those outstanding subscription shares.
During the prior year the Company issued 22,527,339 ordinary shares on the exercise of rights attached to subscription shares. The subscription share price of 86.50 pence per ordinary share issued, represented a premium of 61.50 pence per share over the 25 pence nominal value of each share. The total premium received in the year on the issue of ordinary shares of £13,848,000 was credited to the share premium account.
The Company repurchased 375,000 ordinary shares (2016:180,000 shares) and held them in Treasury. The £412,000 (2016: £184,000) cost of repurchase was charged to the other reserve.
During the prior year the Company repurchased and cancelled 584,000 ordinary shares. The £146,000 nominal value of those cancelled shares was credited to the capital redemption reserve and the £498,000 cost of repurchase was charged to the other reserve.
14 Share Premium Account and Reserves
| 2017 | |||||
| share | capital | ||||
| premium | redemption | other | capital | revenue | |
| account | reserve | reserve | reserve | reserve | |
| £’000 | £’000 | £’000 | £’000 | £’000 | |
| Beginning of the year | 20,722 | 2,767 | 56,886 | 66,368 | (14,379) |
| Cost of ordinary shares repurchased and held in Treasury | – | – | (412) | – | – |
| Net return/(loss) on ordinary activities after taxation for the year | – | – | – | 56,829 | (295) |
| ------------------ | ------------------ | ------------------ | ------------------ | ------------------ | |
| End of the year | 20,722 | 2,767 | 56,474 | 123,197 | (14,674) |
| ========== | ========== | ========== | ========== | ========== | |
| 2016 | |||||
| share | capital | ||||
| premium | redemption | other | capital | revenue | |
| account | reserve | reserve | reserve | reserve | |
| £’000 | £’000 | £’000 | £’000 | £’000 | |
| Beginning of the year | 6,874 | 2,621 | 57,568 | 34,853 | (14,471) |
| Premium received from the issue of ordinary shares on the exercise of rights attached to subscription shares | 13,848 | – | – | – | – |
| Transfer from share capital of the nominal value of ordinary shares repurchased for cancellation | – | 146 | – | – | – |
| Cost of ordinary shares repurchased for cancellation | – | – | (498) | – | – |
| Cost of ordinary shares repurchased and held in Treasury | – | – | (184) | – | – |
| Net return on ordinary activities after taxation for the year | – | – | – | 31,515 | 92 |
| ------------------ | ------------------ | ------------------ | ------------------ | ------------------ | |
| End of the year | 20,722 | 2,767 | 56,886 | 66,368 | (14,379) |
| ========== | ========== | ========== | ========== | ========== |
The share premium account represents the amount by which the proceeds from the issue of ordinary shares, on the exercise of rights attached to subscription shares, exceeds the nominal value of those ordinary shares. It cannot be used to fund share repurchases and it is not distributable by way of dividend.
The capital redemption reserve maintains the equity share capital of the Company and represents the nominal value of shares repurchased and cancelled. It cannot be used to fund share repurchases and it is not distributable by way of dividend.
The other reserve was created in 1999 when the share premium account at that time was cancelled. It can be used to fund share repurchases.
The capital reserve represents realised gains and losses on investments and derivatives sold, unrealised increases and decreases in the fair value of investments and derivatives held and other income and costs as recognised in the capital column of the Income Statement. Refer to Notes 9 and 10 for information on investment holding gains/(losses) included in this reserve. It can be used to fund share repurchases and it is distributable by way of dividend.
The revenue reserve represents the retained revenue losses recognised in the revenue column of the Income Statement. It could be distributed by way of dividend if it were not in deficit.
15 Net Asset Value per Ordinary Share
The net asset value per ordinary share is based on net assets of £222,527,000 (2016: £166,405,000) and on 135,606,695 (2016: 135,981,695) ordinary shares, being the number of ordinary shares in issue that are held outside Treasury at the year end. It is the Company’s policy that shares held in Treasury will only be reissued at NAV per share or at a premium to net asset value per share and, therefore, shares held in Treasury have no dilutive effect.
16 Financial Instruments
Management of risk
The Company’s investing activities in pursuit of its objective involve certain inherent risks. The Board confirms that there is an ongoing process for identifying, evaluating and managing the risks faced by the Company. The Board, with the assistance of the Manager, has developed a risk matrix which, as part of the internal control process, identifies the risks that the Company faces. Principal risks identified are market, performance, discount control, gearing and currency risks. Other risks identified are tax and regulatory and operational risks, including those relating to third party service providers covering investment management, marketing and business development, company secretarial, fund administration and operations and support functions. Risks are identified and graded in this process, together with steps taken in mitigation, and are updated and reviewed on an ongoing basis. These risks and how they are identified, evaluated and managed are shown in the Strategic Report.
This note refers to the identification, measurement and management of risks potentially affecting the value of financial instruments.
The Company’s financial instruments comprise:
· Equity shares held in accordance with the Company’s objective and policies,
· Derivative instruments which comprise long CFDs, and
· Cash, liquid resources and short term debtors and creditors that arise from its operations.
The risks identified arising from the Company’s financial instruments are market price risk (which comprises interest rate risk, foreign currency risk and other price risk), liquidity risk, counterparty risk, credit risk and derivative instrument risk. The Board reviews and agrees policies for managing each of these risks, which are summarised below. These policies are consistent with those followed last year.
Market price risk
Interest rate risk
The Company finances its operations through its share capital and reserves. In addition, the Company has a geared exposure to Japanese equities through the use of long CFDs which incur funding costs and provide collateral in yen. The Company is exposed to a financial risk arising as a result of increases in yen interest rates associated with the funding of the long CFDs.
Interest rate risk exposure
The values of the Company’s financial instruments that are exposed to movements in interest rates are shown below:
| 2017 | 2016 | |
| Exposure to financial instruments that bear interest | £’000 | £’000 |
| Long CFDs – portfolio exposure less fair value | 41,658 | 40,928 |
| Exposure to financial instruments that earn interest | ||
| Cash at bank | 908 | 620 |
| ------------------ | ------------------ | |
| Net exposure to financial instruments that bear interest | 40,750 | 40,308 |
| ========== | ========== |
Foreign currency risk
The Company’s net return on ordinary activities after taxation for the year and its net assets may be affected by foreign exchange movements because the Company has income and assets which are denominated in yen, whereas, the Company’s functional currency is sterling. The Company may also be subject to short term exposure from exchange rate movements, for example, between the date when an investment is purchased or sold and the date when settlement of the transaction occurs. The Company does not hedge the sterling value of investments or other net assets priced in yen by the use of derivative instruments.
Three significant areas have been identified where foreign currency risk may impact the Company:
· Movements in exchange rates affecting the value of investments and long CFDs,
· Movements in exchange rates affecting short term timing differences, and
· Movements in exchange rates affecting income received.
Currency exposure of financial assets
The currency exposure profile of the Company’s financial assets is shown below:
| 2017 | |||||
| investments | portfolio | ||||
| held at fair | exposure to | cash | |||
| value | long CFDs | debtors | at bank | total | |
| £’000 | £’000 | £’000 | £’000 | £’000 | |
| Financial assets held in yen | 221,792 | 42,325 | 569 | 908 | 265,594 |
| -------------------- | -------------------- | -------------------- | -------------------- | -------------------- | |
| 2016 | |||||
| investments | portfolio | ||||
| held at fair | exposure to | cash | |||
| value | long CFDs | debtors | at bank | total | |
| £’000 | £’000 | £’000 | £’000 | £’000 | |
| Financial assets held in yen | 161,777 | 45,123 | 470 | 617 | 207,987 |
| -------------------- | -------------------- | -------------------- | -------------------- | -------------------- |
Currency exposure of financial liabilities
The currency exposure profile of the Company’s financial liabilities is shown below:
| 2017 | ||
| other | ||
| creditors | total | |
| £’000 | £’000 | |
| Financial liabilities held in yen | 714 | 714 |
| -------------------- | -------------------- |
| 2016 | ||
| other | ||
| creditors | total | |
| £’000 | £’000 | |
| Financial liabilities held in yen | 111 | 111 |
| -------------------- | -------------------- |
Other price risk
Other price 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 Board meets at least quarterly to consider the asset allocation of the portfolio and the risk associated with particular industry sectors within the parameters of the objective. The Portfolio Manager is responsible for actively monitoring the existing portfolio selected in accordance with the overall asset allocation parameters described above and seeks to ensure that individual stocks also meet an acceptable risk/reward profile. Other price risks arising from derivative positions, mainly due to the underlying exposures, are estimated using the Value at Risk and Stress Tests as set out in the Company’s internal Derivative Risk Measurement and Management Document.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulties in meeting obligations associated with financial liabilities. The Company’s assets mainly comprise readily realisable securities and derivative instruments which can be sold easily to meet funding commitments if necessary. Short term flexibility can be achieved by the use of a bank overdraft, if required.
Liquidity risk exposure
At 31 December 2017 the undiscounted gross cash outflows of the financial liabilities were all repayable within one year and consisted of derivative instrument liabilities of £456,000 (2016: £424,000) and other creditors of £1,492,000 (2016: £721,000).
Counterparty risk
The long CFDs in which the Company invests are not traded on an exchange but instead are traded between counterparties based on contractual relationships, under the terms outlined in the International Swaps Dealers Association’s (“ISDAâ€) market standard derivative legal documentation. As a result the Company is subject to the risk that a counterparty may not perform its obligations under the related contract. In accordance with the risk management process which the Manager employs, the Manager will seek to minimise such risk by only entering into transactions with counterparties which it believes to have an adequate credit rating at the time the transaction is entered into, by ensuring that formal legal agreements covering the terms of the contract are entered into in advance, and through adopting a counterparty risk framework which measures, monitors and manages counterparty risk, by the use of internal and external credit agency ratings, and evaluates derivative instrument credit risk exposure.
For the long CFDs, collateral is used to reduce the risk of both parties to the contract. Collateral is managed on a daily basis for all relevant transactions. At 31 December 2017, £1,250,000 (2016: £5,349,000) was held by brokers, in yen in a segregated collateral account on behalf of the Company, to reduce the credit risk exposure of the Company.
Credit risk
Financial instruments may be adversely affected if any of the institutions with which money is deposited suffer insolvency or other financial difficulties. All transactions are carried out with brokers that have been approved by the Manager and are settled on a delivery versus payment basis. Limits are set on the amount that may be due from any one broker and are kept under review by the Manager. Exposure to credit risk arises on unsettled security transactions, long CFD contracts and cash at bank.
Derivative instruments risk
The risks and risk management processes which result from the use of long CFDs are included within the risk categories disclosed above. Long CFDs are used by the Manager to gain unfunded long exposure to equity markets, sectors or single stocks. “Unfunded†exposure is exposure gained without an initial outflow of capital. The risk and performance contribution of long CFDs held in the Company’s portfolio is overseen by the Manager’s experienced, specialist derivative instruments team that uses portfolio risk assessment and construction tools to manage risk and investment performance.
RISK SENSITIVITY ANALYSIS
Interest rate risk sensitivity analysis
Based on the financial instruments held and interest rates at 31 December 2017, an increase of 0.25% in interest rates throughout the year, with all other variables held constant, would have decreased the return on ordinary activities after taxation for the year and decreased the net assets of the Company by £102,000 (2016: £101,000). A decrease of 0.25% in interest rates throughout the year would have had an equal but opposite effect.
Foreign currency risk sensitivity analysis
Based on the financial instruments held and currency exchange rates at 31 December 2017, a 10% strengthening of the sterling exchange rate against the yen, with all other variables held constant, would have decreased the Company’s net return on ordinary activities after taxation for the year and decreased the Company’s net assets by £24,079,000 (2016: £18,897,000). A 10% weakening of the sterling exchange rate against the yen would have increased the Company’s net return on ordinary activities after taxation for the year and increased the Company’s net assets by £29,431,000 (2016: £23,097,000).
Other price risk – exposure to investments risk sensitivity analysis
Based on the investments held and share prices at 31 December 2017, an increase of 10% in share prices, with all other variables held constant, would have increased the Company’s net return on ordinary activities after taxation for the year and increased the net assets of the Company by £22,179,000 (2016: £16,178,000). A decrease of 10% in share prices would have had an equal and opposite effect.
Other price risk – exposure to derivative instruments risk sensitivity analysis
Based on the long CFDs held and share prices at 31 December 2017, an increase of 10% in the share prices underlying the long CFDs, with all other variables held constant, would have increased the Company’s net return on ordinary activities after taxation for the year and increased the net assets of the Company by £4,233,000 (2016: £4,512,000). A decrease of 10% in share prices would have had an equal and opposite effect.
Fair Value of Financial Assets and Liabilities
Financial assets and liabilities are stated in the Balance Sheet at values which are not materially different to their fair values. As explained in Note 2 (j) and (k) above, investments and derivative instruments are shown at fair value. In the case of cash and cash equivalents, book value approximates to fair value due to the short maturity of the instruments.
Fair Value Hierarchy
The Company is required to disclose the fair value hierarchy that classifies its financial instruments measured at fair value at one of three levels, according to the relative reliability of the inputs used to estimate the fair values.
| Classification | Input |
| Level 1 | Valued using quoted prices in active markets for identical assets |
| 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 |
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. The valuation techniques used by the Company are explained in Note 2 (j) and (k). The table below sets out the Company’s fair value hierarchy:
| 2017 | ||||
| Level 1 | Level 2 | Level 3 | Total | |
| £’000 | £’000 | £’000 | £’000 | |
| Financial assets at fair value through profit or loss | ||||
| Investments | 220,886 | – | 906 | 221,792 |
| Derivative instrument assets | – | 1,123 | – | 1,123 |
| ----------------- | ----------------- | ----------------- | ----------------- | |
| 220,886 | 1,123 | 906 | 222,915 | |
| ========== | ========== | ========== | ========== | |
| Financial liabilities at fair value through profit or loss | ||||
| Derivative instrument liabilities | – | (456) | – | (456) |
| ========== | ========== | ========== | ========== | |
| 2016 | ||||
| Level 1 | Level 2 | Level 3 | Total | |
| £’000 | £’000 | £’000 | £’000 | |
| Financial assets at fair value through profit or loss | ||||
| Investments | 160,819 | – | 958 | 161,777 |
| Derivative instrument assets | – | 4,619 | – | 4,619 |
| ----------------- | ----------------- | ----------------- | ----------------- | |
| 160,819 | 4,619 | 958 | 166,396 | |
| ========== | ========== | ========== | ========== | |
| Financial liabilities at fair value through profit or loss | ||||
| Derivative instrument liabilities | – | (424) | – | (424) |
| ========== | ========== | ========== | ========== | |
| The table below sets out the movements in level 3 financial instruments during the year: | ||||
| Year ended | Year ended | |||
| 31.12.17 | 31.12.16 | |||
| level 3 | level 3 | |||
| £’000 | £’000 | |||
| Beginning of the year | 958 | – | ||
| Purchases at cost | – | 958 | ||
| Foreign exchange movement | (52) | – | ||
| ----------------- | ----------------- | |||
| End of the year | 906 | 958 | ||
| ========== | ========== | |||
17 Capital Resources and Gearing
The Company does not have any externally imposed capital requirements. The capital of the Company comprises its share capital and reserves, as disclosed on the Balance Sheet above, and its gearing which is managed through the use of long CFDs. Financial resources are managed in accordance with the Company’s investment policy and in pursuit of its objective, both of which are detailed in the Strategic Report. The principal risks and their management are disclosed in the Strategic Report and in Note 16.
The Company’s gearing at the end of the year is shown below:
| 2017 | 2016 | |
| portfolio | portfolio | |
| exposure | exposure | |
| £’000 | £’000 | |
| Investments | 221,792 | 161,777 |
| Long CFDs | 42,325 | 45,123 |
| ----------------- | ----------------- | |
| Total Portfolio Exposure | 264,117 | 206,900 |
| ========== | ========== | |
| Shareholders’ Funds | 222,527 | 166,405 |
| ========== | ========== | |
| Gearing1 | 18.7% | 24.3% |
| ========== | ========== |
1 Gearing is the amount by which the Portfolio Exposure exceeds Shareholders’ Funds expressed as a percentage of Shareholders’ Funds
18 Transactions with the Manager and Related Parties
FIL Investment Services (UK) Limited is the Company’s Alternative Investment Fund Manager and has delegated portfolio management and the role of company secretary to FIL Investments International (“FIIâ€). Both companies are Fidelity group companies. Details of the fee arrangements are given in the Directors’ Report and in Note 4. During the year fees for portfolio management services of £2,016,000 (2016: £1,597,000) and fees for secretarial and administration services of £47,000 (2016: £46,000) were payable to FII. At the Balance Sheet date, fees for portfolio management services of £562,000 (2016: £441,000) and fees for secretarial and administration services of £12,000 (2016: £12,000) were accrued and included in other creditors. FII also provides the Company with marketing services. The total amount payable for these services during the year was £67,000 (2016: £88,000). At the Balance Sheet date £6,000 (2016: £32,000) was accrued and included in other creditors.
Disclosures of the Directors’ interests in the ordinary shares of the Company and Directors’ fees and taxable benefits relating to reasonable travel expenses payable to the Directors are given in the Directors’ Remuneration Report . The Directors received compensation of £123,000 (2016: £132,000). In addition to the fees and taxable benefits disclosed in the Directors’ Remuneration Report, this amount includes £10,000 (2016: £10,000) of employers’ National Insurance Contributions paid by the Company.
The Annual Financial Report Announcement is not the Company's statutory accounts. The above results for the year ended 31 December 2017 are an abridged version of the Company's full Annual Report and Financial Statements, which have been approved and audited with an unqualified report. The 2016 and 2017 statutory accounts received unqualified reports from the Company's Auditor and did not include any reference to matters to which the Auditor drew attention by way of emphasis without qualifying the reports, and did not contain a statement under s.498 of the Companies Act 2006. The financial information for 2016 is derived from the statutory accounts for 2016 which have been delivered to the Registrar of Companies. The 2017 Financial Statements will be filed with the Registrar of Companies in due course.
A copy of the Annual Report will shortly be submitted to the National Storage Mechanism and will be available for inspection at: www.morningstar.co.uk/uk/NSM
The Annual Report will be posted to shareholders later this month and additional copies will be available from the registered office of the Company and on the Company's website: where up to date information on the Company, including daily NAV and share prices, factsheets and other information can also be found.
The Annual General Meeting will be held at 4:00pm on 22 May 2018 at 25 Cannon Street, London EC4M 5TA.
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.
ENDS
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