Annual Financial Report

RNS Number : 5533O

Aberdeen Japan Investment Trust PLC

29 May 2015

 

ABERDEEN JAPAN INVESTMENT TRUST PLC

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 MARCH 2015

STRATEGIC REPORT 

1.       COMPANY SUMMARY

Investment Objective

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

Benchmark index

The benchmark index is the TOPIX (in Sterling terms). 

Prior to October 2013 the Company invested in companies across Asia Pacific including Japan.  Performance is measured against the Composite Index which is comprised of:

TOPIX (in Sterling terms) from 8 October 2013. 

MSCI AC Asia Pacific (including Japan) Index (in Sterling terms) to 7 October 2013.

2.       CHAIRMAN'S STATEMENT

Highlights

·           The Company has had an outstanding first full year under its new mandate

·           Japan was one of the best performing markets in Asia Pacific

·           Good stock selection produced strong outperformance

Overview

The Company has had an outstanding first full year since the change to a Japan-only mandate. The Company's NAV returned an excellent 46.6% in sterling terms, compared to the Benchmark index of 26.0%.  The cumulative NAV total return since the change of mandate is 47.9% compared with 21.4% for the Benchmark index which is very encouraging although 18 months is not long enough to form a balanced judgement on this performance.  The share price total return for the year was 58.2% helped by the narrowing discount and compared with 44.4% by its investment trust peer group of Japan only funds.  The total return for the year by the Investment Association's Japan index for open-ended Japan funds was 24.5%.

Japan was among the best performing markets in Asia Pacific over the review period, and, the hedge position also worked in the Trust's favour as the Yen weakened, contributing 2.5% of the total return. The Topix market benchmarks, which rose to multi-year highs during the review period, continued to climb subsequent to the year end and, at the date of this report, have reached levels last seen 15 years ago.  This is in spite of the fragile state of the economy, which in the new year had just emerged from a six-month long recession. The equity market was helped by Japan's initiation of a major quantitative easing policy and given an additional boost by the state pension fund, as it shifted the allocation in favour of stocks. For the most part, however, the market gains were due to the companies that had come through decades of economic malaise in good shape. These companies, having learnt to survive the tough times, blossomed when the government of prime minister Shinzo Abe provided a more supportive environment. Against this background, the Manager's good stock selection, identifying the most dynamic of these survivors, has produced the Company's strong outperformance. An analysis of market and portfolio performance is detailed in the Manager's Report.

Discount

The discount has narrowed significantly from 13.4% at the start of the financial year to 6.7% at 31 March 2015 and the shares briefly traded at a premium in late 2014.  No shares were bought back by the Company over the year and with the discount averaging 4.8% over the last 90 days of the financial year, there is no requirement under the articles for the Company to put forward a continuation vote to shareholders.

Gearing

In January the Board decided to take advantage of favourable borrowing rates and locked in a Yen 1.3 billion facility with ING Bank at 0.8975% per annum for three years to January 2018.  The new facility allowed the Company to increase its borrowing from £5.8 million (Yen 1.0 billion) at 31 March 2014 to £7.3 million at 31 March 2015 to reflect the rise in gross assets.  As gross assets continued to rise after this drawdown, year-end net gearing fell from 9.7% to 8.5% of shareholders' funds.  The Board continues to monitor the level of gearing and considers a gearing level of around 10% to be appropriate, although as highlighted previously, with stock market fluctuations, this may range between 5% - 15%.

Sterling Hedge

Our sterling hedge provides for the underlying Yen net asset exposure to be appropriately protected from changes in the Yen exchange rate. The Board in consultation with the Investment Manager regularly reviews the level of the hedge and determined in March that the initial level of 50% be reduced modestly to 45% having looked at the non-Yen based revenues earned by portfolio companies and adjusting for the Yen denominated gearing.  While currency hedging manages risk, shareholders should be aware that this strategy can at times result in lower returns.

Dividend

The Board aims to maintain a stable dividend paying not less than the amount required to maintain investment trust status. Based on this policy the Board is recommending a final dividend of 2.6p per ordinary share in respect of the year ended 31 March 2015 (2014 - 4.5p).  The reduced dividend compared with last year reflects a full year's income under the lower yielding Japan only investment mandate.

If approved, the dividend will be paid on 16 July 2015 to shareholders on the register as at close of business on 19 June 2015. The ex-dividend date is 18 June 2015.

Outlook

Japan is still in a process of long term transformation which has some way to go. However, there is room for cautious optimism, given the combination of Abenomics, a moderate economic recovery and the gradual evolution of better corporate governance especially in companies with good management and a strong business model.

Given this backdrop and the Manager's distinctive ability to identify well-run businesses, with good franchises and at the right valuations, your Board believes that the outlook is well suited for the company to deliver long term value to our shareholders.

Neil Gaskell

Chairman

28 May 2015

3.       INVESTMENT MANAGER'S REVIEW

Overview

Japanese equities had an impressive run, outpacing the Asian region. This was driven by a double dose of stimulus, rather than improving fundamentals, such as the start of a full-blown recovery. It was tough-going initially, as the consumption tax hike exacted its toll on growth, dampening sentiment. While prime minister Shinzo Abe received cabinet approval of his "third arrow" of structural reforms, palpable change was elusive. Halfway through the period, key policy moves triggered a dramatic shift in sentiment. The central bank ramped up its quantitative easing and the government pension fund doubled its allocation to domestic equities. A sales tax hike was delayed, while a ¥3.5 trillion stimulus package was endorsed. In November, a snap election gave PM Abe a renewed mandate to pursue tougher reforms, such as corporate tax cuts. Momentum continued to build towards the period end, with the market touching 15-year highs. Also bolstering sentiment were the European Central Bank's bigger-than-expected QE and the US Federal Reserve's dovish policy stance in the light of US dollar strength.

Corporate earnings were broadly positive, partly due to a weaker Yen that translated into higher revenue from overseas sales. Also significant was how corporate governance has become part of the national conversation, a welcome change in a country where scant regard for minority shareholders has been the norm. This was the result of fresh government initiatives. A new corporate governance code for listed companies will take effect in June, with firms urged to have at least two external directors on their boards. Another initiative was a stewardship code, aimed at getting investors to engage management more actively; Aberdeen was one of the code's signatories. We are encouraged that standards are rising, albeit from a low base. Among our holdings, robot-maker Fanuc has set up a shareholder relations department, something that management is just starting to focus on and has unveiled a plan to return a larger proportion of capital to shareholders from its ample reserves.

Portfolio review

The portfolio's net asset value total return per share rose by 46.6% in sterling terms, outperforming the composite benchmark index's total return of 26.0%. This was driven mainly by positive stock selection.

Our consumer-related holdings were among the top contributors. Pigeon Corp, a maker of baby bottles, benefited from robust demand in China. It is also making inroads into other Asian markets, while maintaining steady growth in Europe and the US. Similarly, for diaper-maker Unicharm, signs of a turnaround in its Chinese business increased optimism over its prospects.  Snacks manufacturer Calbee's share price rose on expectations of continued solid sales in the US and gains from other overseas markets. Membership-based resorts operator Resorttrust was buoyed by healthy sales from the launch of premium condominiums and medical resorts.

In the health care sector, Asahi Intecc's positive results underlined good sales for its mainstay guidewires and market-share gains for other peripheral devices. Sysmex also did well, supported by its core hematology business. Its launch of a cell-analysis product in the US also fuelled expectations of further gains in its market share.

Elsewhere, Nippon Paint Holdings' shares outperformed the benchmark after the company consolidated its Asian joint ventures. It was also expected to benefit from lower input costs, thanks to cheaper oil prices. Machine-tool maker Amada Holdings was boosted by a share buyback, higher year-end dividends, as well as a near-tripling of profits owing to higher capital spending both domestically and in the US. Another good performer was sensor maker Keyence, which gained from steady auto-related demand in the US and its announcement to improve shareholder returns by raising year-end dividends for the first time in seven years.

Conversely, Yahoo Japan was the biggest detractor at the stock level, owing to worries that its PC-based advertising business would deteriorate faster than gains in its mobile division. Some other holdings had positive absolute returns but underperformed in relative terms. While auto-parts maker FCC's earnings met our expectations, its share price was dampened by its lower profit forecast due to weaker four-wheel clutch sales to Honda Motor. Personal goods company Mandom lagged, although its results met our expectations, while the sluggish housing market in Osaka hurt the share price of property developer Daibiru. Both Japan Tobacco and power-tool maker Makita Corp were weighed down by concerns over their exposure to the Russian market.

With regard to portfolio activity, as mentioned in the interim report, we introduced air-conditioning equipment maker Daikin Industries and regional lender Suruga Bank owing to their quality attributes. Against that, we sold Takeda Pharmaceutical on account of its deteriorating prospects. Thereafter, we initiated a position in USS, the leading domestic used-car auction site operator. The company has grown its market share steadily through acquiring and expanding auction sites. It has also been progressive in returning excess cash to shareholders.

Outlook

Japanese equities have continued to rise, as recent policy provides further support to the market over the short term; for a sustained rally, however, fundamentals need to improve. Meanwhile, the Abe government has been working towards further reforms, but progress has been limited to lower-hanging fruit, such as trade liberalisation, rather than politically sensitive areas, including addressing structural short-comings. The central bank has indicated that the economy is on a moderate recovery track. We are more cautious and would await more concrete signs of growth.

Despite the weak macro conditions, earnings revisions are trending upwards when the reverse is true for most of the world. Encouragingly, this is driven by not just Yen weakness. Companies are using their cash more efficiently by increasing buybacks and acquisitions, whilst a lower corporate tax rate is also helping. In addition, the growing focus on generating shareholder value as part of efforts to improve corporate governance is a step in the right direction.

With this backdrop, we believe that picking long-term winners works only if we understand the nuts and bolts of companies. We continue to look for well-run businesses with solid balance sheets and sustainable cash flows, and which are trading at sensible valuations, and we actively engage with the companies' management teams. In doing so, we have the confidence that our holdings have what it takes to thrive over the long term.

Aberdeen Asset Managers Kabushiki Kaisha

Investment Manager

28 May 2015

4.       OVERVIEW OF STRATEGY

Introduction

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

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

The Board appoints and oversees an alternative investment fund manager, decides the appropriate financial policies to manage the assets and liabilities of the Company, ensures compliance with legal and regulatory requirements and reports objectively to shareholders on performance. The Directors do not envisage any change in this model in the foreseeable future.

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

Investment Policy

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

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

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

The full text of the Company's investment policy is provided on page 62 of the 2015 Annual Report.

Investment Approach

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

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

Financial Policies

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

Management of shareholder capital

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

Risk Management

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

Sterling Hedging

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

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

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

Use of Gearing

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

Shareholder Communication

The Board is committed to its policy of keeping shareholders regularly informed about the Company's performance and in particular giving an objective and transparent report on the underlying investment performance. The formal half yearly and annual reports provide a comprehensive review of the Company's overall position compliant with best practice and corporate governance requirements.  The Manager provides Company presentations at the AGM and shareholder meetings.

In addition, the Company's website (www.aberdeenjapan.co.uk) contains a daily update on the latest portfolio performance and a monthly summary of investment performance together with information about the Japanese market and any other significant developments within the Company and, if requested, can also be emailed to shareholders.   

Principal Risks and Uncertainties

The Company's risks are regularly monitored at Board meetings and the Board believes that the Company is

resilient to most short term operational risks which are effectively mitigated by the internal controls of the Manager and Depositary. Analysis and mitigation of other longer term and more strategic risks are managed by the Board. The following principal risks facing the Company and related mitigation have been identified:

Investment Strategy risk

The Company and its investment objective may become unattractive to investors. The value of Japanese equities may be affected by factors not associated with the UK, including the general health of the Japanese economy and political

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

Reputation

The attractiveness of the Company to investors is based on the good reputation of the Manager as well as of investment trusts generally. Were investments trusts to fall out of favour as a route for investors or Aberdeen's reputation as Manager of the Company to weaken, it is likely that investor demand would decline. The Board monitors shareholder sentiment regularly and would be able to take remedial action were its reputation to be threatened.

Regulatory compliance risk

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

Market and investment risk

Market risk arises from the Company's exposure to variations of share prices within its portfolio in response to individual company and to wider Japanese or international factors. Investment in a focussed portfolio of shares can lead to greater short term changes in the portfolio's value than in a larger portfolio of stocks and these variations will be amplified by the use of gearing. The Board regularly monitors the investment performance of the portfolio and the performance of the Manager in operating the investment policy against the long term objectives of the Company and, where appropriate, has in place mitigation measures such as the currency hedging policy.

Further details on risks relating to the Company's investment activities, including market price, interest rate, liquidity and foreign currency risks, are disclosed in Note 17 to the Financial Statements.

Performance risk

Inappropriate investment decisions may result in the Company's underperformance against the reference benchmark and peer group and a widening of the Company's discount. The Board regularly reviews performance data and attribution analysis and other relevant factors and, were an underperformance likely to be sustained, would be able to take remedial measures.

Share price and Discount risk

The principal risks described above each can affect the movement of the Company's share price and in some cases have the potential to increase the discount in the market value of the Company compared with the NAV. The Board actively monitors the discount and believes that the combined effect of good investment performance, the risk mitigation arrangements described above and its ability to authorise buyback of shares when necessary, will both reduce discount and limit its variability.   

Key Performance Indicators (KPIs)

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

·           net asset value (total return) relative to the Company's Benchmark index;

·           share price (total return) vs Peer Group; and 

·           discount or premium of the share price to net asset value vs Peer Group on an annual basis.

An analysis of the KPIs is provided below.

Performance is compared against the Company's Benchmark index and its Peer Group.  In view of the Manager's style of investing, there can be, in the short-term, considerable divergence from both comparators.  The Board uses a three year rolling performance for both the KPI measuring NAV total return against the Benchmark index and also that for the share price total return compared with the Peer Group, but since the change of mandate also changed the Peer Group, the latter KPI is currently calculated from October 2013. The KPI for the average discount is compared with that for its Peer Group and is measured as an annual average.

Board Diversity

The Board recognises the importance of having a diverse group of Directors with the right mix of competencies to allow the Board to fulfil its obligations. At 31 March 2015 there were three male Directors and one female Director, all of whom bring different experience and skills and contribute distinctively to the Board's performance.

Employee, Environmental, Social and Human Rights Issues

The Company has no employees as it has delegated operational management to the Manager. There are therefore no disclosures to be made in respect of employees.

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

for Aberdeen Japan Investment Trust PLC

Neil Gaskell

Chairman

28 May 2015

5.       RESULTS

Financial Highlights

	31 March 2015	31 March 2014	% change
Total assets	£87,251,000	£60,972,000	+43.1
Total equity shareholders' funds (net assets)	£79,949,000	£55,148,000	+45.0
Market capitalisation	£74,562,933	£47,750,919	+56.1
Share price (mid market)	511.00p	327.25p	+56.1
Net asset value per share	547.91p	377.94p	+45.0
Discount to net asset value	6.7%	13.4%
Net gearing{A}	8.5%	9.7%
Operating costs
Ongoing charges ratio{B}	1.37%	1.41%
Earnings
Total return per share	174.47p	(30.91p)
Revenue return per share	3.70p	6.00p
Proposed final dividend per share	2.60p	4.50p
Revenue reserves (prior to payment of proposed final dividend)	£1,554,000	£1,671,000
{A} Calculated in accordance with AIC guidance "Gearing Disclosures post RDR".
{B} Ongoing charges ratio calculated in accordance with guidance issued by the AIC as the total of the investment management fee and administrative expenses divided by the average cum income net asset value throughout the year.

Performance (total return)

				Return since
	1 year	3 year	5 year	8 October 2013
	return	return	return	(change of mandate)
Net asset value	+46.6%	+58.3%	+82.4%	+47.9%
Index	+26.0%	+37.5%	+39.5%	+21.4%
Share price	+58.2%	+67.8%	+91.6%	+51.1%
Peer Group share price	+44.4%	N/A	N/A	N/A
Average discount - Company	-8.5%	N/A	N/A	N/A
Average discount - Peer Group	-7.2%	N/A	N/A	N/A
Source: Aberdeen Asset Managers Limited, Lipper & Morningstar.
Total return represents capital return plus dividends reinvested.
Dividend calculations are based on reinvestment at the ex-dividend date. NAV returns are based on cum-income NAV with debt at fair value.
Based on share price and NAV per Morningstar (ie as available in the market, not including unreleased R&A NAVs).
Peer Group is the Japan sector of the Association of Investment Companies.
Index represents the MSCI AC Asia Pacific (including Japan) Index (in Sterling terms) up to 7 October 2013 and the TOPIX (in Sterling terms) from 8 October 2013.

Dividends

	Rate	Ex-dividend date	Record date	Payment date
Proposed final dividend 2015	2.60p	18 June 2015	19 June 2015	16 July 2015
Final dividend 2014	4.50p	18 June 2014	20 June 2014	18 July 2014

INVESTMENT PORTFOLIO

Top Ten Investments

As at 31 March 2015

		Valuation	Total	Valuation
		2015	assets	2014
Company	Sector	£'000	%	£'000
Shin-Etsu Chemical Company
Despite the challenging environment, the Japanese maker of specialised chemicals remains a leader in its industry, due to its technological edge and a greater focus on profits than most rivals.	Chemicals	4,251	4.9	3,450
Keyence Corporation
The leading maker of sensors has a cash generative business and is backed by a strong balance sheet and technological expertise.	Electronic & Electrical Equipment	4,127	4.7	2,775
Fanuc Corporation
A leading manufacturer of factory automation systems, equipment and robots that has an excellent track record of being able to maintain margins with robust cash flow and a strong net cash position.	Industrial Engineering	4,084	4.7	2,863
Japan Tobacco Inc
The world's third-largest cigarette company with a dominant domestic market share, Japan Tobacco has made good overseas acquisitions and is positioned to gain from exposure to emerging markets.	Tobacco	3,791	4.3	2,538
Nabtesco Corporation
The industrial equipment maker has a high market share in its businesses thanks to its technological edge in niche areas. It also has healthy finances and a good track record on cost controls.	Industrial Engineering	3,747	4.3	2,336
Seven & I Holdings Company
A Japanese retail conglomerate with interests in  a wide range of domestic businesses including convenience stores, discount stores, supermarkets, department stores and food services, which gives its earnings a defensive edge.	General Retailers	3,647	4.2	2,463
Canon Inc
A world leader in imaging products, printers and cameras, Canon also has a strong balance sheet and has consistently returned excess capital to shareholders.	Technology Hardware & Equipment	3,267	3.7	2,545
Chugai Pharmaceutical Company
Roche's subsidiary in Japan, Chugai has a strong pipeline of drugs and is able to leverage its parent's portfolio and research.	Pharmaceuticals & Biotechnology	2,947	3.4	2,358
Toyota Motor Corporation
Japan's largest car manufacturer, it also operates financing services through its subsidiaries. We like it for its global presence and solid overseas growth prospects.	Automobiles & Parts	2,867	3.3	2,066
East Japan Railway Company
Provider of rail transportation services including the shinkansen (bullet train) network in the Kanto & Tohoku regions.	Travel & Leisure	2,859	3.3	2,051
Top ten investments		35,587	40.8

Investment Portfolio - Other Investments

As at 31 March 2015

		Valuation	Total	Valuation
		2015	assets	2014
Company	Sector	£'000	%	£'000
Amada Company	Industrial Engineering	2,717	3.1	1,438
Unicharm Corporation	Personal Goods	2,687	3.1	1,752
Pigeon Corp	Personal Goods	2,553	2.9	1,327
Astellas Pharma Inc	Pharmaceuticals & Biotechnology	2,520	2.9	1,854
KDDI Corporation	Mobile Telecommunications	2,480	2.8	1,653
Kansai Paint Company	Chemicals	2,219	2.6	1,630
Mandom Corporation	Personal Goods	2,089	2.4	2,074
Daito Trust Construction Company	Construction & Materials	2,020	2.3	1,639
Honda Motor Company	Automobiles & Parts	1,955	2.2	1,888
Daikin Industries	Industrial Engineering	1,930	2.2	-
Top twenty investments		58,757	67.3
Nippon Paint Company	Chemicals	1,926	2.2	1,092
Calbee Inc	Food Producers	1,923	2.2	928
Bank Of Yokohama	Banks	1,890	2.2	1,947
Asics Corporation	Personal Goods	1,794	2.0	1,476
Asahi Intecc Company	Health Care Equipment & Services	1,774	2.0	1,354
Yahoo Japan Corp	Software & Computer Services	1,716	2.0	1,244
Daibiru Corporation	Real Estate Investment Services	1,637	1.9	1,077
Sysmex Corp	Health Care Equipment & Services	1,571	1.8	881
Makita Corporation	Household Goods & Home Construction	1,480	1.7	989
Resorttrust Inc	Travel & Leisure	1,474	1.7	780
Top thirty investments		75,942	87.0
Aeon Financial Service Company	Financial Services	1,399	1.6	393
Mitsubishi Estate Company	Real Estate Investment Services	1,346	1.5	1,223
USS Company	General Retailers	1,334	1.5	947
Shimano Inc	Leisure Goods	1,316	1.5	1,025
San-A Company	Food & Drug Retailers	1,309	1.5	904
Denso Corp	Automobiles & Parts	1,072	1.3	556
FCC Company	Automobiles & Parts	927	1.1	940
Aisin Seiki Company	Automobiles & Parts	855	1.0	759
Suruga Bank	Banks	812	0.9	-
Total investments		86,312	98.9
Net current assets{A}		938	1.1
Total assets		87,250	100.0
{A} Excludes bank loans of £7,302,000.
Unless otherwise stated, foreign stock is held and all investments are equity holdings.
In the 2014 valuation column "-" denotes stock not held at last year end.

GOING CONCERN

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

The Company does not have a fixed life. However, under the articles of association, if, in the 90 days preceding the Company's financial year-end (31 March), the ordinary shares have been trading, on average, at a discount in excess of 10% to the underlying net asset value over the same period, notice will be given of an ordinary resolution to be proposed at the following AGM to approve the continuation of the Company. In the 90 days to 31 March 2015, the ordinary shares traded at an average discount of 4.8% to the underlying net asset value.  Accordingly, no resolution on the continuation of the Company will be put to the Company's shareholders at the Annual General Meeting.

After making enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. This takes account of the liquidity of the Company's investments, and that the earliest date that the Company may be subject to a continuation vote is at the Annual General Meeting of the Company to be held in 2016. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

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

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with UK Accounting Standards. 

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 of the Company for that period. 

In preparing these financial statements, the Directors are required to: 

·      select suitable accounting policies and then apply them consistently; 

·      make judgments and estimates that are reasonable and prudent;

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

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

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

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

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

The Directors consider that the Annual Report, and Accounts taken as a whole, is fair, balanced and understandable and it provides the information necessary to assess the Company's performance, business model and strategy.

We confirm that to the best of our knowledge:

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

·         the Strategic Report and Directors' Report include 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 that the Company faces.

For and on behalf of Aberdeen Japan Investment Trust PLC

Neil Gaskell

Chairman

28 May 2015

FINANCIAL STATEMENTS

INCOME STATEMENT (audited)

		Year ended 31 March 2015			Year ended 31 March 2014
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Gains/(losses) on investments	9	-	23,988	23,988	-	(8,876)	(8,876)
Income	2	1,222	-	1,222	1,710	-	1,710
Exchange gains	13	-	1,338	1,338	-	3,698	3,698
Investment management fee	3	(238)	(357)	(595)	(227)	(162)	(389)
Administrative expenses	4	(293)	(7)	(300)	(466)	(19)	(485)
		_____	_____	_______	______	______	_____
Net return before finance costs and taxation		691	24,962	25,653	1,017	(5,359)	(4,342)
Finance costs	5	(29)	(44)	(73)	(55)	(27)	(82)
		_____	_____	_______	______	______	_____
Net return on ordinary activities before taxation		662	24,918	25,580	962	(5,386)	(4,424)
Taxation on ordinary activities	6	(122)	-	(122)	(87)	-	(87)
		_____	_____	_______	______	______	_____
Net return on ordinary activities after taxation		540	24,918	25,458	875	(5,386)	(4,511)
		_____	_____	_______	______	______	_____
Return per ordinary share (pence)	8	3.70	170.77	174.47	6.00	(36.91)	(30.91)
		_____	_____	_______	______	______	_____
The total column of this statement represents the profit and loss account of the Company.
No Statement of Total Recognised Gains and Losses has been prepared as all gains and losses have been reflected in the Income Statement.
All revenue and capital items in the above statement derive from continuing operations.
The accompanying notes are an integral part of the financial statements.

BALANCE SHEET (audited)

		As at	As at
		31 March 2015	31 March 2014
	Notes	£'000	£'000
Fixed assets
Investments designated at fair value through profit or loss	9	86,312	59,796
		___________	___________
Current assets
Debtors	10	597	840
Cash at bank and in hand		490	473
		___________	___________
		1,087	1,313
		___________	___________
Creditors: amounts falling due within one year
Foreign currency bank loans	11	-	(5,824)
Other creditors		(148)	(137)
		___________	___________
		(148)	(5,961)
		___________	___________
Net current assets/(liabilities)		939	(4,648)
		___________	___________
Total assets less current liabilities		87,251	55,148
Creditors: amounts falling due after more than one year
Foreign currency bank loans	11	(7,302)	-
		___________	___________
Net assets		79,949	55,148
		___________	___________
Share capital and reserves
Called-up share capital	12	1,459	1,459
Capital redemption reserve		2,273	2,273
Capital reserve	13	74,663	49,745
Revenue reserve		1,554	1,671
		___________	___________
Equity shareholders' funds		79,949	55,148
		___________	___________
Net asset value per ordinary share (pence)	14	547.91	377.94
		___________	___________

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (audited)

For the year ended 31 March 2015
		Capital
	Share	redemption	Capital	Revenue
	capital	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000
Balance at 31 March 2014	1,459	2,273	49,745	1,671	55,148
Return on ordinary activities after taxation	-	-	24,918	540	25,458
Dividend paid (note 7)	-	-	-	(657)	(657)
	_______	_______	______	______	______
Balance at 31 March 2015	1,459	2,273	74,663	1,554	79,949
	_______	_______	______	______	______
For the year ended 31 March 2014
		Capital
	Share	redemption	Capital	Revenue
	capital	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000
Balance at 31 March 2013	1,459	2,273	55,131	1,489	60,352
Return on ordinary activities after taxation	-	-	(5,386)	875	(4,511)
Dividend paid (note 7)	-	-	-	(693)	(693)
	_______	_______	______	______	______
Balance at 31 March 2014	1,459	2,273	49,745	1,671	55,148
	_______	_______	______	______	______

CASHFLOW STATEMENT (audited)

		Year ended		Year ended
		31 March 2015		31 March 2014
	Notes	£'000	£'000	£'000	£'000
Net cash inflow from operating activities	15		183		524
Servicing of finance
Bank and loan interest paid			(71)		(82)
Financial investment
Purchases of investments		(9,493)		(50,910)
Sales of investments		6,959		48,055
Expenses allocated to capital		(1)		(5)
		______		______
Net cash outflow from financial investment			(2,535)		(2,860)
Equity dividends paid			(657)		(693)
			______		______
Net cash outflow before financing			(3,080)		(3,111)
Financing
Loan repaid		(5,635)		(5,251)
Loan drawn down		7,325		4,680
		______		______
Net cash inflow/(outflow) from financing			1,690		(571)
			______		______
Decrease in cash	16		(1,390)		(3,682)
			______		______
Reconciliation of net cash flow to movements in net debt
Decrease in cash as above			(1,390)		(3,682)
(Increase)/decrease in borrowings			(1,690)		571
			______		______
Change in net debt resulting from cash flows			(3,080)		(3,111)
Exchange movements			1,619		3,342
			______		______
Movement in net debt in the year			(1,461)		231
Opening net debt			(5,351)		(5,582)
			______		______
Closing net debt	16		(6,812)		(5,351)
			______		______

Notes to the Financial Statements
For the year ended 31 March 2015
1.	Accounting policies
	(a)	Basis of accounting and going concern
		The financial statements have been prepared under the historical cost convention, except for the measurement at fair value of investments and in accordance with the applicable UK Accounting Standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued by the Association of Investment Companies in January 2009.  They have also been prepared on the assumption that approval as an investment trust will continue to be granted. The financial statements have been prepared on a going concern basis. The Directors believe this is appropriate for the reasons outlined in the Directors' Report on page 18 of the 2015 Annual Report.
	(b)	Valuation of investments
		The Company's business is investing in financial assets with a view to profiting from their capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment strategy, and information about the portfolio is provided internally on that basis to the Company's Board of Directors. Accordingly, upon initial recognition the Company designates the investments 'at fair value through profit or loss'. Fair value is taken to be the investment's cost at the trade date (excluding expenses incidental to the acquisition which are written off in the Income Statement, and allocated to 'capital' at the time of acquisition).
		Subsequent to initial recognition, investments continue to be designated at fair value through profit or loss, which is deemed to be bid prices, where the bid price is available, or otherwise at fair value based on published price quotations.
	(c)	Income
		Dividends (other than special dividends), including taxes deducted at source, are included in revenue by reference to the date on which the investment is quoted ex-dividend. Special dividends are reviewed on a case-by-case basis and may be credited to capital, if circumstances dictate. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Company's right to receive payment is established. Where the Company has elected to receive its dividends in the form of additional shares rather than cash, the amount of the cash dividend is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital reserves. Interest receivable on bank balances is dealt with on an accruals basis.
		Where applicable, the dividend income is disclosed net of irrecoverable taxes deducted at source. UK dividend income is recorded net of tax credits.
	(d)	Expenses
		All expenses are accounted for on an accruals basis. Expenses are allocated to revenue in the Income Statement except as follows:
		·    expenses which are incidental to the acquisition or disposal of an investment are allocated to capital in the Income Statement and separately identified and disclosed in note 9; and
		·    expenses are allocated and borne by capital where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect, the investment management fee (with effect from 7 October 2013) is allocated 40% to revenue and 60% to realised capital reserves to reflect the Company's investment policy and prospective income and capital growth.  Previously the investment management fee was charged 100% to revenue.
	(e)	Taxation
		The charge for taxation is based on the revenue return for the financial period.
		Deferred taxation is provided on all timing differences, that have originated but not reversed at the Balance Sheet date, where transactions or events that result in an obligation to pay more or a right to pay less tax in future have occurred at the Balance Sheet date, measured on an undiscounted basis and based on tax rates expected to apply in the period that the timing differences reverse. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the accounts which are capable of reversal in one or more subsequent periods. Due to the Company's status as an investment trust company, and the intention to continue to meet the conditions required to obtain approval for the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.
	(f)	Capital reserve
		Gains and losses on realisation of investments and changes in fair values of investments are transferred to the capital reserve.
	(g)	Foreign currencies
		Transactions involving foreign currencies are converted at the rate ruling at the date of the transaction.
		Foreign currency asset and liability balances are translated to Sterling at the middle rate of exchange at the year end. Differences arising from translation are treated as a gain or loss to capital or revenue within the Income Statement depending upon the nature of the gain or loss.
	(h)	Dividends payable
		Final dividends are recognised in the financial statements in the period in which they are paid.
	(i)	Borrowings
		All unsecured borrowings are initially recognised at cost, being the fair value of the consideration received, less issue costs where applicable, after initial recognition, all interest bearing borrowings are subsequently measured at amortised cost.  The finance costs of such borrowings are accounted for on an accruals basis using the effective interest rate method and (with effect from 7 October 2013) are charged 40% to revenue and 60% to realised capital reserves to reflect the Company's investment policy and prospective income and capital growth.  Previously the finance costs were charged 100% to revenue.

		2015	2014
2.	Income	£'000	£'000
	From investments designated at fair value through profit and loss:
	UK dividend income	-	97
	Overseas dividends	1,216	1,582
	Scrip dividends	-	31
		______	______
		1,216	1,710
		______	______
	Other income
	Deposit interest	6	-
		______	______
	Total income	1,222	1,710
		______	______

		2015			2014
		Revenue	Capital	Total	Revenue	Capital	Total
3.	Management fee	£'000	£'000	£'000	£'000	£'000	£'000
	Management fee	238	357	595	227	162	389
		______	______	______	______	______	_____
	For the year ended 31 March 2015 management and secretarial services were provided by Aberdeen Asset Managers Asia Limited ("AAMAL") until 16 July 2014 and thereafter by Aberdeen Fund Managers Limited ("AFML"). There were no changes to the commercial arrangements. Under the terms of an agreement effective from 17 July 2014 (which replaced the existing arrangements with AAMAL), the Company has appointed AFML to provide management, accounting, administrative and secretarial duties. The agreement for provision of management services has been delegated to Aberdeen Investment Management Kabushiki Kaisha.
	As of 7 October 2013, the management fee is payable at a rate of 0.95% per annum of the value of the Company's Total Assets up to £50 million decreasing to 0.75% of the value of the Company's assets over and above £50 million, and is payable monthly in arrears. Previously, the management fee was payable monthly in arrears and was based on an annual amount of 0.75% of Total Assets of the Company valued monthly. The agreement is terminable on six months' notice. The balance due to AFML at the year end was £58,000 (2014 - £46,000). During the year to 31 March 2014, the Manager waived management fees amounting to £127,000 during 2014 as part of an agreement with the Company in relation to costs associated with the change in investment mandate.

		2015			2014
		Revenue	Capital	Total	Revenue	Capital	Total
4.	Administrative expenses	£'000	£'000	£'000	£'000	£'000	£'000
	Promotional fees	46	-	46	42	-	42
	Directors' fees	78	-	78	85	-	85
	Safe custody fees	8	1	9	16	5	21
	Transaction costs on investment purchases	-	6	6	-	14	14
	Auditor's remuneration:
	audit of the financial statements	23	-	23	23	-	23
	non-audit services{A}	-	-	-	28	-	28
	Other{B}	138	-	138	272	-	272
		______	______	______	______	______	_____
		293	7	300	466	19	485
		______	______	______	______	______	_____
	{A} Work performed as Reporting Accountant relating to the change in investment mandate in the year ended 31 March 2014.
	{B} Expenses during the year ended 31 March 2014 included £177,000 of costs relating to the change in investment mandate. The Manager waived management fees amounting to £127,000 during the year ended 31 March 2014 as part of an agreement with the Company in relation to these costs (see note 3).
	The Company has an agreement with AFML for the provision of promotional activities in relation to the Company's participation in the Aberdeen Investment Trust Share Plan and ISA. The total fees paid and payable under the agreement were £46,000 (2014 - £42,000) and the accrual to AFML at the year end was £12,000 (2014 - £11,000).

		2015			2014
		Revenue	Capital	Total	Revenue	Capital	Total
5.	Finance costs	£'000	£'000	£'000	£'000	£'000	£'000
	Bank loans and overdrafts	29	44	73	55	27	82
		______	______	______	______	______	______

			2015			2014
			Revenue	Capital	Total	Revenue	Capital	Total
6.	Taxation on ordinary activities		£'000	£'000	£'000	£'000	£'000	£'000
	(a)	Analysis of charge for the year
		Irrecoverable overseas taxation	122	-	122	107	-	107
		Overseas withholding tax reclaimable	-	-	-	(20)	-	(20)
			______	______	______	______	______	______
		Current taxation	122	-	122	87	-	87
			______	______	______	______	______	______
	(b)	Factors affecting current tax charge for the year
		The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The differences can be explained below:
							2015	2014
							£'000	£'000
		Net return on ordinary activities before taxation					25,580	(4,424)
		Net return on ordinary activities multiplied by standard rate of corporation tax in the UK of 21% (2014 - 23%)					5,372	(1,018)
							______	______
		Effects of:
		UK dividend income					-	(22)
		(Gains)/losses on investments not taxable					(5,038)	2,041
		Currency gains not taxable					(281)	(850)
		Tax on capital expenses					86	48
		Irrecoverable overseas withholding tax suffered					122	107
		Overseas withholding tax reclaimable					-	(20)
		Excess management expenses and loan relationship deficits not utilised in period					116	148
		Non-taxable overseas dividends					(255)	(371)
		Expenses not deductible for tax purposes					-	24
							______	______
		Current tax charge for the year					122	87
							______	______
	(c)	Provision for deferred taxation
		At 31 March 2015 the Company had surplus management expenses and loan relationship debits with a tax value of £1,495,000 (2014 - £1,304,000) in respect of which a deferred tax asset has not been recognised. This is because the Company is not expected to generate taxable income in the future in excess of deductible expenses of that future period, and accordingly, it is unlikely that the Company will generate taxable revenue in the future and therefore will be unable to utilise the existing surplus expenses.

		2015	2014
7.	Dividends	£'000	£'000
	Amounts recognised as distributions to equity holders in the year:
	Final dividend 2014 - 4.50p (2013 - 4.75p)	657	693
		______	______
	In order to comply with the requirements of Sections 1158-1159 of the Corporation Tax Act 2010 the Company is required to make a dividend distribution.
	The proposed final dividend which is subject to approval by shareholders at the Annual General Meeting, has not been included as a liability and will be paid on 16 July 2015 to shareholders on the register at the close of business on 19 June 2015..
	The table below sets out the total dividends proposed in respect of the financial year, which is the basis on which the requirements of Sections 1158 -1159 are considered. The revenue available for distribution by way of dividend for the year is £1,554,000 (2014 - £1,671,000). Presently, only the revenue reserve can be used for the distribution of dividends.
		2015	2014
		£'000	£'000
	Proposed final dividend for 2015 - 2.60p per ordinary share (2014 -  4.50p)	379	693
		______	______

		2015	2015	2014	2014
8.	Return per ordinary share	p	£'000	p	£'000
	Returns per share are based on the following figures:
	Revenue return	3.70	540	6.00	875
	Capital return	170.77	24,918	(36.91)	(5,386)
		______	______	______	______
	Total return	174.47	25,458	(30.91)	(4,511)
		______	______	______	______
	Weighted average number of ordinary shares in issue		14,591,572		14,591,572
			_________	______	_________

		2015	2014
9.	Investments designated at fair value through profit or loss	£'000	£'000
	Opening book cost	60,514	42,511
	Opening investment holding (losses)/gains	(718)	23,289
		______	______
	Opening fair value	59,796	65,800
	Movements in the year:
	Purchases at cost (excluding transaction costs)	9,487	50,927
	Sales - proceeds (net of transaction costs)	(6,959)	(48,055)
	Sales - gains on sales	1,438	15,131
	Increase/(decrease) in investment holding gains	22,550	(24,007)
		______	______
	Closing fair value	86,312	59,796
		______	______
		2015	2014
		£'000	£'000
	Closing book cost	64,480	60,514
	Closing investment holding gains/(losses)	21,832	(718)
		86,312	59,796
		______	______
		2015	2014
		£'000	£'000
	Investments listed on a recognised investment exchange	86,312	59,796
		______	______
		2015	2014
	Gains/(losses) on investments	£'000	£'000
	Gains on sales	1,438	15,131
	Increase/(decrease) in investment holding gains	22,550	(24,007)
		______	______
		23,988	(8,876)
		______	______
	Transaction costs
	During the year expenses were incurred in acquiring or disposing of investments designated as fair value through profit or loss. Expenses incurred in acquiring investments have been expensed through capital and are included within administration expenses in the Income Statement, whilst expenses incurred in disposing of investments have been expensed through capital and are included within gains/(losses) on investments in the Income Statement. The total costs were as follows:
		2015	2014
		£'000	£'000
	Purchases	6	14
	Sales	7	60
		______	______
		13	74
		______	______

		2015	2014
10.	Debtors: amounts falling due within one year	£'000	£'000
	Forward foreign exchange contracts	73	356
	Prepayments and accrued income	467	433
	Withholding tax debtor	53	49
	Other loans and receivables	4	2
		______	______
		597	840
		______	______
	All financial assets are included at amortised cost or at fair value for forward foreign exchange contracts.

			2015	2014
11.	Creditors		£'000	£'000
	(a)	Foreign currency bank loans
		Falling due within one year	-	5,824
		Falling due after more than one year	7,302	-
			______	______
		In January 2015, the Company entered into a three year credit facility with ING Bank.  At the year end, JPY1,300,000,000 (2014 - JPY1,000,000,000) equivalent to £7,302,000 (2014 - £5,824,000) had been drawn down from ING Bank at an all-in interest rate of 0.8975% (2014 - 1.10214%) which will mature on 23 January 2018.
		The terms of the loan facility with ING Bank contain a covenant that total borrowings should not exceed 35% of the adjusted net asset value of the Company at any time and that the net asset value should not fall below £25,000,000 at any time. The Company met this covenant throughout the period.
			2015	2014
	(b)	Other creditors falling due within one year	£'000	£'000
		Management fee	58	46
		Sundry creditors	90	91
			______	______
			148	137
			______	______

		2015		2014
12.	Called-up share capital	Number	£'000	Number	£'000
	Allotted, called-up and fully paid
	Ordinary shares of 10p each	14,591,572	1,459	14,591,572	1,459
		_________	______	_________	______

		2015	2014
13.	Capital reserve	£'000	£'000
	At 1 April 2014	49,745	55,131
	Gains/(losses) over cost arising on movement in investment holdings	22,550	(24,007)
	Gains on realisation of investments at fair value	1,438	15,131
	Exchange gains	1,338	3,698
	Administrative expenses	(7)	(19)
	Management fee	(357)	(162)
	Finance costs	(44)	(27)
		______	______
	At 31 March 2015	74,663	49,745
		______	______
	The capital reserve includes investment holding gains amounting to £21,832,000 (2014 - losses of £718,000) as disclosed in note 9.

14.	Net asset value per share
	The net asset value per share and the net asset values attributable to ordinary shareholders at the year end calculated in accordance with the articles of Association were as follows:
		Net asset value per share		Net asset values attributable
		2015	2014	2015	2014
		p	p	£'000	£'000
	Ordinary shares	547.91	377.94	79,949	55,148
		______	______	______	______
	The movements during the year of the assets attributable to the ordinary shares were as follows:
				2015	2014
				£'000	£'000
	Net assets attributable at 1 April			55,148	60,352
	Capital return for the year			24,918	(5,386)
	Revenue on ordinary activities after taxation			540	875
	Dividend paid			(657)	(693)
				______	______
	Net assets attributable at 31 March			79,949	55,148
				______	______
	The net asset value per ordinary share is based on net assets, and on 14,591,572 (2014 - 14,591,572) ordinary shares, being the number of ordinary shares in issue at the year end.

15.	Reconciliation of net return before finance costs and taxation	2015	2014
	to net cash inflow from operating activities	£'000	£'000
	Return on ordinary activities before finance costs and taxation	25,653	(4,342)
	Adjustments for:
	(Gains)/losses on investments	(23,988)	8,876
	Expenses taken to capital reserve	7	19
	Foreign exchange movements	(1,338)	(3,698)
	Increase in accrued income	(34)	(138)
	(Increase)/decrease in other debtors	(6)	17
	Increase/(decrease) in other creditors	11	(49)
	Decrease in performance fee creditor	-	(43)
	Overseas withholding tax suffered	(122)	(87)
	Scrip dividends included in investment income	-	(31)
		______	______
	Net cash inflow from operating activities	183	524
		______	______

		1 April	Cash	Exchange	31 March
		2014	flow	movements	2015
16.	Analysis of changes in net debt	£'000	£'000	£'000	£'000
	Cash at bank	473	(1,390)	1,407	490
	Debts falling due within one year	(5,824)	5,653	171	-
	Debts due greater than one year but less than five years	-	(7,343)	41	(7,302)
		______	______	______	______
	Net debt	(5,351)	(3,080)	1,619	(6,812)
		______	______	______	______

17.

Financial instruments

Risk management

The Company's investment activities expose it to various types of financial risk associated with the financial instruments and markets in which it invests. The Company's financial instruments comprise securities and other investments, cash balances, loans, forward exchange contracts and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income.

The Company also has the ability to enter into derivative transactions, in the form of forward foreign exchange contracts, to ensure that foreign currency exposure is appropriately hedged.

Certain risk management functions have been delegated to Aberdeen Fund Managers Limited ("AFML" or "Manager") under the terms of the management agreement (further details of which are included under note 3). The Board regularly reviews and agrees policies for managing each of the following key financial risks identified with the Manager. The types of risk and the Manager's approach to the management of each type of risk, are summarised below. This approach has been applied throughout the year within the Manager's risk management framework has not changed since the previous accounting period.

The main risks the Company faces from its financial instruments are (i) market risk (comprising interest rate risk, currency risk and price risk), (ii) liquidity risk and (iii) credit risk.

Market risk

The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, price risk and currency risk.

Interest rate risk

Interest rate movements may affect:

·        the fair value of the investments in fixed interest rate securities;

·        the level of income receivable on cash deposits; and

·        interest payable on the Company's variable rate borrowings.

Management of the risk

The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions.

Interest rate sensitivity

Movements in interest rates would not significantly affect net assets attributable to the Company's shareholders and total profit due to there being no investments in fixed interest securities during the year and a relatively low level of bank borrowings.

Price risk

Price risks (ie changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments.

Management of the risk

It is the Board's investment policy for the Company's assets to be invested in a selected portfolio of securities in quoted companies as explained in the Strategy Report. The Manager has a dedicated investment management process, which ensures that the risk inherent in this investment policy is controlled. Underlying the process is the belief that risk is not that individual stock prices fluctuate in the short term, or that movement in the value of the portfolio deviates from the benchmark but that risk is investment in poorly managed expensive companies which the Manager does not understand. In-depth research and stock selection procedures are in place based on this risk control philosophy. The portfolio is reviewed on a periodic basis by the Manager's Investment Committee and by the Board.

Price sensitivity

If market prices at the Balance Sheet date had been 10% higher or lower while all other variables remained constant, the return attributable to ordinary shareholders for the year ended 31 March 2015 would have increased/(decreased) by £8,631,000 (2014 increased/(decreased) by £5,980,000) and equity reserves would have increased/(decreased) by the same amount.

Foreign currency risk

The Company primarily invests in the shares of companies which are listed in Japan but can include companies listed on other stockmarkets which earn significant revenue from trading in Japan or hold net assets predominantly in Japan. The Balance Sheet, therefore, can be significantly affected by movements in foreign exchange rates.

Management of the risk

The Company may, from time to time, match specific overseas investment with foreign currency borrowings. The Company's borrowings, as detailed in note 11, are also in foreign currency.  In addition, the Company seeks to ensure that the Company's Yen net exposure is appropriately Sterling-hedged through the use of rolling forward currency contracts. At 31 March 2015 the Company had a foreign currency contract, details of which are disclosed below.  During the year a net gain of £1,327,000 (2014 - £2,271,000) was realised from the use of such contracts.

The revenue account is subject to currency fluctuation arising on dividends paid in foreign currencies. The Company does not hedge this currency risk.

Foreign currency risk exposure by currency of denomination:

31 March 2015

31 March 2014

Overseas

Net

Total

Overseas

Net

Total

investments{A}

monetary assets

currency exposure

investments{A}

monetary assets

currency exposure

£'000

£'000

£'000

£'000

£'000

£'000

Japanese Yen

49,312

346

49,658

30,796

(5,532)

25,264

Taiwan Dollar

-

54

54

-

49

49

______

______

______

______

______

______

Total

49,312

400

49,712

30,796

(5,483)

25,313

______

______

______

______

______

______

{A} Overseas investment is stated net of forward currency contracts with a net Sterling equivalent amount of £37,000,000 (2014 - £29,000,000)

Foreign currency sensitivity

The following table details the Company's sensitivity to a 10% increase and decrease in Sterling against the major foreign currencies in which the Company has exposure (based on exposure >5% of total exposure including foreign exchange contracts). The sensitivity analysis includes foreign currency denominated monetary items and adjusts their translation at the year end for a 10% change in foreign currency rates.

2015

2015

2014

2014

Revenue

Equity{A}

Revenue

Equity{A}

£'000

£'000

£'000

£'000

Japanese Yen

122

7,936

72

2,526

______

______

______

______

{A} Represents equity exposure to relevant currencies.

Foreign exchange contracts

The following Japanese Yen forward contracts were outstanding at the Balance Sheet date:

Date of contract

Settlement date

Amount JPY '000

Contracted rate

Unrealised gain at 31 March 2015 £'000

26 March 2015

30 June 2015

3,280,771

177.34

36

26 March 2015

30 June 2015

3,280,733

177.34

37

______

73

______

The Sterling equivalent of the above contracts is £37,000,000 based on the net amount of JPY 6,561,504,000 at the contracted rates applicable.

Liquidity risk

This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.

Management of the risk

Liquidity risk is not considered to be significant as the Company's assets mainly comprise readily realisable securities which can be sold to meet funding requirements if necessary and flexibility is achieved through the use of loan facilities, details of which may be found in note 11.

Liquidity risk exposure

At 31 March 2015, the Company's bank loans of £7,302,000 were due to mature on 23 January 2018 with interest due on the principal every six months. As at 31 March 2014, the Company's bank loans of £5,824,000 were due for repayment within six months along with interest due on the principal at the same time.

Credit risk

This is the risk of failure of the counterparty to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss.

Management of the risk

·        investment transactions are carried out with a large number of brokers of good quality credit standing; and

·        cash is held only with reputable banks with high quality external credit enhancements.

In addition, both stock and cash reconciliations to the Custodians' records are performed on a daily basis to ensure discrepancies are investigated on a timely basis.

None of the Company's financial assets is secured by collateral or other credit enhancements and none are past due or impaired.

Credit risk exposure

The amount of cash at bank and in hand of £490,000 (2014 - £473,000) and debtors of £525,000 (2014 - £780,000) in the Balance Sheet represent the maximum exposure to credit risk at 31 March.

Fair values of financial assets and financial liabilities

All financial assets and financial liabilities of the Company are included in the Balance Sheet at fair value or at amortised cost that approximates to fair value.

18.	Capital management policies and procedures
	The Company's capital management objectives are:
	·        to ensure that the Company will be able to continue as a going concern; and
	·        to maximise the income and capital return to its equity shareholders through an appropriate balance of equity capital and debt. The Board normally seeks to limit gearing to 15% of net assets.
	The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes the nature and planned level of gearing, which takes account of the Manager's views on the market and the extent to which revenue in excess of that which is required to be distributed should be retained.
	The Company's objectives, policies and processes for managing capital are unchanged from the preceding accounting period and year end positions are presented in the Balance Sheet.

19.	Fair value hierarchy
	FRS 29 'Financial Instruments: Disclosures' requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
	Level 1:	quoted prices (unadjusted) in active markets for identical assets or liabilities;
	Level 2:	inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (ie as prices) or indirectly (ie derived from prices); and
	Level 3:	inputs for the asset or liability that are not based on observable market data (unobservable inputs).
	All of the Company's investments are in quoted equities (2014 - same) actively traded on a recognised stock exchange, with their fair value being determined by reference to their quoted bid prices at the reporting date. The total value of the investments (2015 - £86,312,000; 2014 - £59,796,000) have therefore been deemed as Level 1. Forward foreign currency contracts as detailed in note 17 as categorised as Level 2.

20.	Related party transactions and transactions with the Manager
	Fees payable during the year to the Directors and their interests in shares of the Company are considered to be related party transactions and are disclosed within the Directors' Remuneration Report.
	The Company has agreements with Aberdeen Fund Managers Limited for the provision of management, secretarial, accounting and administration services and an agreement with Aberdeen Asset Managers Limited for the provision of promotional activities. Details of transactions during the year and balances outstanding at the year end disclosed in notes 3 and 4.

21.     Additional notes for Annual Financial Report:

The final dividend, subject to shareholder approval, will be paid on 16 July 2015 to shareholders on the register at the close of business on 19 June 2015. The ex-dividend date is 18 June 2015.

This Annual Financial Report announcement is not the Company's statutory accounts.  The statutory accounts for the year ended 31 March 2014 have been delivered to the Registrar of Companies.  The statutory accounts for the years ended 31 March 2015 and 31 March 2014 received an audit report which was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not include a statement under section 498(2) or (3) of the Companies Act 2006.  The statutory accounts for the financial year ended 31 March 2015 have been approved by the Board and audited but will not be filed with the Registrar of Companies until after the Company's Annual General Meeting which will be held at 10.30am on 14 July 2015 at Bow Bells House, One Bread Street, London EC4M 9HH.

The Annual Report will be posted to shareholders in June 2015 and copies will be available from the Manager or from the Company's website (www.aberdeen-japan.co.uk*).

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

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

For Aberdeen Japan Investment Trust PLC

Aberdeen Asset Management PLC, Secretary

END

 

END

 

 

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