Half-year Report

RNS Number : 2792X

Aberdeen Japan Investment Trust PLC

22 November 2017

ABERDEEN JAPAN INVESTMENT TRUST PLC

HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

INVESTMENT OBJECTIVE

The Company's objective is 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.

CHAIRMAN'S STATEMENT

Overview

The outlook at the start of the year was for continuing global political and economic uncertainties including the 'Trump' factor, Brexit, the Middle East, and North Korea. . In contrast, so far conditions in Japan have been relatively good with improving economic performance and continuing strength of the Abe government reinforced by the recent general election win. The third quarter produced the seventh consecutive expansion of gross domestic product, its best run in 11 years. Inflation remained subdued, suggesting that the Bank of Japan is likely to maintain its current accommodative monetary policy in contrast to the pattern of gradual tightening elsewhere.

The Japanese market responded strongly to these favourable conditions with the Topix producing an 11.8% total return although the yen weakened giving a 3.2% return in sterling during the half year under review. Your Company's net asset value increased by 6.4% (total return), outperforming the sterling benchmark largely due to the currency hedge, which returned 3.7%. The underlying portfolio performance of 2.7% was slightly below the 3.2% benchmark reflecting the portfolio's mix of high quality companies with more resilient longer term performance. Further details of the portfolio's performance are set out in the Investment Manager's Report on page 4.

The Ordinary Share price's total return rose by 4.2% as the discount to NAV per Ordinary share widened from 10.5% to 12.4% at 30 September 2017. As at 21 November 2017 the discount was 11.9%. Since the change in the mandate, your Company's net asset value performance has been encouraging, posting a sterling outperformance versus the Topix benchmark of 14.2% in total return terms.

Dividend

A final dividend of 6.0p per ordinary share in respect of the year ended 31 March 2017 (2016 - 4.2p) was paid to shareholders on 14 July 2017. This was the level required to maintain investment company status.

Gearing

The Company continued to make use of its capacity to gear through the Yen 1.3 billion fixed term and Yen 800 million floating rate facilities with ING Bank. The Board considers a gearing level of around 10% to be appropriate, although, with stock market fluctuations, this may range between 5% -15%. Net gearing as at 30 September 2017 reduced from 12.8% at the start of the period to 8.3% partly as a result of short term cash held at the end of September.

Discounts and Share Buybacks

The Board monitors closely the discount level of the Company's shares in relation to the NAV and has in place a mechanism to buy back shares at appropriate levels when to do so will add value for ongoing investors. During the six month period, 105,394 shares were bought back into treasury at a cost of £579k.

Manager

The recent merger between Aberdeen Asset Management PLC and Standard Life plc has produced the new investment arm of the combined Group, Aberdeen Standard Investments.

The Board do not expect any significant change in the investment approach or management of our Investment Manager, Aberdeen Investment Management Kabushiki Kaisha, and believes satisfactory arrangements are in place for the continued effective investment management and successful performance of the Company.

Outlook

Having tracked global stock markets higher throughout 2017, Japanese equities seem well-placed to maintain positive momentum. While sentiment has been upbeat, as a long-term investor, your Investment Manager remains a little more cautious over lingering global political concerns, including simmering Middle-eastern tensions, and an increasingly belligerent North Korea. So far, markets appear to have shrugged off these events, preferring instead to focus on positive macroeconomic drivers. But any escalation of uncertainty could undermine this optimism and trigger a return to safer assets.

Against this background, your Company's holdings are well-placed to make further gains. Higher demand for Japanese exports, along with improving domestic consumption, should keep the economy on its growth trajectory, and improve the outlook for corporate earnings. Prime Minister Abe's successful snap-election gamble, which saw his coalition maintain its two thirds Lower House majority, is also expected to give renewed momentum to the expansionary policies of Abenomics. All of which is further underpinned by the synchronised recovery in the global economy that appears to have taken root. These factors all augur well for Japanese equity markets.

The Investment Manager's bottom-up stock picking approach and on-the-ground presence remains a key strength, as it provides greater opportunity for unearthing quality and value in the current market, which remains under-researched despite its size. Given the generally positive economic situation, expectations for healthy earnings growth and greater adherence to corporate governance best practices, the case for investing in Japan remains compelling.

Neil Gaskell

Chairman

22 November 2017

INVESTMENT MANAGER'S REPORT

Overview

Japanese equities posted double-digit gains in local currency terms in the half year under review, and 3.2% in sterling as the yen weakened relative to the pound. However, the cheaper yen fuelled a stock market rally that saw it outpace its global peers. Leading the charge was the export sector, which should benefit from improved trade competitiveness and a positive translation effect on overseas earnings.

Meanwhile, the domestic economy has continued to extend its growth streak, its longest in more than a decade albeit at a rather languid pace. Even though the economy was at full employment, both wage growth and inflation stayed subdued for the bulk of the year, with consumers still reluctant to spend. Unsurprisingly, the Bank of Japan held monetary policy steady and maintained its asset purchases. In the broader context, this goes against the grain: other major central banks are either thinking of or already normalising interest rates, and many seem to be approaching an end to their quantitative easing.

Portfolio review

For the six months in review, the portfolio's net asset value (NAV) total return per share rose by 2.7% excluding the hedge effect reflecting the portfolio's underlying holdings, which are made up of high-quality, well-run companies. A key example is Shin-Etsu Chemical, the leading global manufacturer of silicon wafers, the raw material that is used to make semiconductors. With the convergence of several major trends, such as electric and autonomous vehicles, as well as a greater interconnectivity between everyday objects known as The Internet of Things, these wafers are set to become even more ubiquitous. Shin-Etsu's market dominance should allow it to dictate prices. Its PVC and silicone businesses are also being buttressed by solid structural trends.

The recent market rally has rewarded companies rather indiscriminately during the period. In particular, the rise in share prices has lifted the technology sector, and within that, the internet, semiconductor, as well as factory automation segments. Some of your Company's underlying holdings have also been beneficiaries of this incoming tide, including reduction-gear maker Nabtesco and sensor company Keyence. Both companies, however, have robust corporate fundamentals as well, posting excellent results that are driven by rising demand for automation. It must be noted that we do not subscribe to a thematic style to investing. We prefer instead, a bottom-up, buy-and-hold approach. Hence, we are somewhat cautious of current valuations.

Among the portfolio's other holdings, detractors included Japan Tobacco, which saw its shares face pressure from competing novel nicotine products that continued to take market share from its domestic cigarette sales. The company launched its own product in the key Tokyo market in June and aims to expand sales nationwide by year-end. Also costing the portfolio was Seven & i, which reported results that met our expectations. However, its shares were dented by unexpectedly weaker-than-expected food sales at Ito-Yokado, an area that was supposed to have driven the unit's growth.

Key portfolio activity included the sale of auto-components supplier Aisin Seiki after a period of outperformance and even though it retains a robust position in automatic transmissions. We re-invested the proceeds in a handful of new names that offer greater potential. Among these was cosmetics company Shiseido, under the leadership of its new president, Masahiko Uotani. Since his appointment, the company has achieved significant progress in restructuring the business. He has tackled underperforming brands and implemented cost-structure reforms. Notably, he has put in place an incentive-based pay structure that aligns the interests of the executives with that of the firm and its shareholders.

Another new holding was Stanley Electric, one of the world's largest automotive-lighting manufacturers. The company is poised to benefit from an industry-wide structural shift, from halogen to LED headlamps, driven by rising demand for energy-efficiency. Its unique in-house LED manufacturing capabilities enables the company to stay cost efficient which in turn, improves its profitability.

We also introduced leading local furniture and home-furnishings retailer Nitori Holdings. Its vertically-integrated operation allows it to achieve superior profit margins and this enabled the company to chalk up 30 consecutive years of sales and profit growth. And yet, there is still more scope for this largely domestic business to build on the accomplishments. The management aims to accelerate earnings momentum by expanding its stores in urban centres, while trying to replicate its success in key overseas markets such as China.

Finally, we also started building a position in leading automotive chip-maker Renesas Electronics, which is well-positioned to benefit from the very trends that are buoying Shin-Etsu, including vehicle electrification, self-driving cars, and The Internet of Things. Unlike Shin-Etsu, however, its competitive advantage lies in the cutting-edge technology of miniaturised microcontrollers, which improves energy consumption and enhances memory size, while its analogue semiconductor technology is used across a broad range of applications.

Outlook

Looking ahead, the Japanese stockmarket appears likely to be underpinned by positive global economic growth and firming oil prices. However, we prefer to remain a little more circumspect because investors appear to have ignored a raft of broader worries on the external front. These include a White House in turmoil, rising protectionism, the start of monetary policy normalisation, with the Bank of England the latest to jump on the bandwagon, as well as other geopolitical uncertainties, from the secessionist movement in Spain to the simmering spat between the US and North Korea.

Meanwhile, company fundamentals remain firm. Given a rather benign backdrop, the portfolio's underlying holdings should be able to maintain their lead in their respective markets, surmount any short-term challenges, particularly with the help of able leadership and backed by solid balance sheets, and should continue to prosper.

Aberdeen Investment Management Kabushiki Kaisha

Investment Manager

22 November 2017

FINANCIAL HIGHLIGHTS

	As at	As at
	30 September 2017	31 March 2017	% change
Total assets {A} (£'000)	107,723	104,369	3.2
Total equity shareholders' funds (£'000)	96,466	92,168	4.7
Net asset value per share	644.4p	611.4p	5.4
Share price (mid-market)	564.5p	547.5p	3.1
Share price discount to net asset value	12.4%	10.5%
Dividend paid per share{B}	6.00p	4.20p
Ongoing charges{C}	1.20%	1.24%
{A} Excludes foreign currency bank loans of £11,257,000 (31 March 2017 - £12,201,000)
{B} Dividend for the year ended 31 March 2017 was 6.00p (2016 - 4.20p) per share.
{C} Ongoing charges ratio calculated in accordance with guidance issued by the AIC as the total of the investment management fee and administrative expenses (annualised) divided by the average cum income net asset value throughout the year. The ratio for 30 September 2017 is based on forecast ongoing charges for the year ending 31 March 2018.

PERFORMANCE (TOTAL RETURN){C}
	Six months ended	Year ended
	30 September 2017	31 March 2017
Share price	+4.2%	+58.2%
Net asset value per share	+6.4%	+46.6%
Index	+3.2%	+26.0%
{C} Total return represents capital return plus dividends reinvested.

INVESTMENT PORTFOLIO

As at 30 September 2017

		Valuation	Total assets
Company	Sector	£'000	%
Shin-Etsu Chemical Company	Chemicals	5,723	5.3
Keyence Corporation	Electronic & Electrical Equipment	5,338	5.0
Japan Tobacco Inc	Tobacco	4,831	4.4
Fanuc Corporation	Industrial Engineering	4,294	4.0
Seven & I Holdings Company	General Retailers	4,256	4.0
Nabtesco Corporation	Industrial Engineering	4,158	3.9
Yahoo Japan Corporation	Software & Computer Services	3,910	3.6
KDDI Corporation	Mobile Telecommunications	3,865	3.6
Amada Holdings Company	Industrial Engineering	3,759	3.5
Sysmex Corporation	Health Care Equipment & Services	3,371	3.1
Top ten investments		43,505	40.4
Chugai Pharmaceutical Company	Pharmaceuticals & Biotechnology	2,873	2.6
Pigeon Corporation	Personal Goods	2,810	2.6
Daikin Industries	Industrial Engineering	2,787	2.6
Daito Trust Construction Company	Real Estate Investment & Services	2,781	2.5
Makita Corporation	Household Goods & Home Construction	2,778	2.5
Suruga Bank	Banks	2,569	2.4
East Japan Railway Company	Travel & Leisure	2,539	2.4
Japan Exchange Group Inc	Financial Services	2,235	2.1
Asahi Intecc Company	Health Care Equipment & Services	2,111	2.0
Mandom Corporation	Personal Goods	2,104	2.0
Top twenty investments		69,092	64.1
Honda Motor Company	Automobiles & Parts	2,083	1.9
Denso Corporation	Automobiles & Parts	2,072	1.9
Aeon Financial Service Company	Financial Services	1,944	1.8
San-A Company	Food & Drug Retailers	1,907	1.8
Calbee Inc	Food Producers	1,896	1.8
Kansai Paint Company	Chemicals	1,875	1.8
Nippon Paint Holdings Company	Chemicals	1,859	1.7
SCSK Corporation	Software & Computer Services	1,737	1.6
Daibiru Corporation	Real Estate Investment & Services	1,661	1.6
Shionogi & Company	Pharmaceuticals & Biotechnology	1,628	1.5
Top thirty investments		87,754	81.5
Resorttrust Inc	Travel & Leisure	1,613	1.5
Renesas Electronics Corporation	Technology Hardware & Equipment	1,579	1.5
USS Company	General Retailers	1,562	1.4
Stanley Electric Company	Automobiles & Parts	1,544	1.4
Shiseido Company	Chemicals	1,468	1.4
Shimano Inc	Leisure Goods	1,437	1.3
Toyota Motor Corpoaration	Automobiles & Parts	1,422	1.3
Nitori Holdings Company	General Retailers	1,384	1.3
Asics Corporation	Personal Goods	1,276	1.2
Astellas Pharma Inc	Pharmaceuticals & Biotechnology	1,251	1.2
Top forty investments		102,290	95.0
Concordia Financial Group	Banks	1,141	1.0
Mani	Health Care Equipment & Services	1,080	1.0
Mitsubishi Estate Company	Real Estate Investment & Services	971	0.9
Total investments		105,482	97.9
Net current assets{A}		2,241	2.1
Total assets		107,723	100.0
{A} Excludes bank loans of £11,257,000
Unless otherwise stated, Japanese stock is held and all investments are equity holdings.

BOARD REPORT

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 principal risks and uncertainties facing the Company have been identified as follows:

· Investment strategy risk

· Investment risk

· Reputation

· Regulatory compliance risk

· Performance risk

· Share price and discount risk

The principal risks have not changed since the publication of the 2017 Annual Report and Accounts. Further details of the remaining risks are provided on pages 9 to 10 of that Report which is available on the Company's website www.aberdeenjapan.co.uk.

RELATED PARTY TRANSACTIONS

Any related party transactions during the period are disclosed in the Notes to the Financial Statements. There have been no related party transactions that have had a material effect on the financial position of the Company during the period.

GOING CONCERN

The Company's assets consist of equity shares in companies listed on the Tokyo Stock Exchange and in most circumstances are realisable within a short timescale. The Board has set limits for borrowing, foreign exchange contract positions with regards to hedging and regularly reviews actual exposures, cash flow projections and compliance with banking covenants. The Board believe that the Company has adequate resources to continue its operational existence for the foreseeable future. Accordingly, we continue to adopt the going concern basis in preparing the accounts.

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors are responsible for preparing the Half Yearly Financial Report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:

· the condensed set of Financial Statements has been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting);

· the Half Yearly Financial Report includes a fair review of the information required by rule 4.2.7R of the Disclosure and Transparency Rules (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of Financial Statements and a description of the principal risks and uncertainties for the remaining six months of the financial year); and

· the Half Yearly Financial Report includes a fair review of the information required by 4.2.8R (being related party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could do so).

The Half Yearly Financial Report for the six months ended 30 September 2017 comprises the Chairman's Statement, Investment Manager's Review, the Directors' Responsibility Statement and the condensed set of Financial Statements.

Neil Gaskell

Chairman

22 November 2017

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (unaudited)

	Six months ended
	30 September 2017
	Revenue	Capital	Total
	£'000	£'000	£'000
Gains on investments	-	952	952
Income (note 2)	878	-	878
Investment management fee (note 11)	(163)	(244)	(407)
Administrative expenses	(166)	(6)	(172)
Exchange gains/(losses)	-	4,667	4,667
	_________	_________	_________
Net return before finance costs and taxation	549	5,369	5,918

Finance costs	(20)	(30)	(50)
	_________	_________	_________
Net return before taxation	529	5,339	5,868

Taxation (note 4)	(88)	-	(88)
	_________	_________	_________
Net return after taxation	441	5,339	5,780
	_________	_________	_________

Return per Ordinary share (pence) (note 6)	2.94	35.59	38.53
	_________	_________	_________

The total column of this statement represents the profit and loss account of the Company.
A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses have been reflected in the Condensed Statement of Comprehensive Income.
All revenue and capital items in the above statement derive from continuing operations.
The accompanying notes are an integral part of the financial statements.

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (Cont'd)

	Six months ended
	30 September 2016
	Revenue	Capital	Total
	£'000	£'000	£'000
Gains on investments	-	20,031	20,031
Income (note 2)	968	-	968
Investment management fee (note 11)	(148)	(222)	(370)
Administrative expenses	(170)	(3)	(173)
Exchange gains/(losses)	-	(9,959)	(9,959)
	_________	_________	_________
Net return before finance costs and taxation	650	9,847	10,497

Finance costs	(24)	(36)	(60)
	_________	_________	_________
Net return before taxation	626	9,811	10,437

Taxation (note 4)	(97)	-	(97)
	_________	_________	_________
Net return after taxation	529	9,811	10,340
	_________	_________	_________

Return per Ordinary share (pence) (note 6)	3.39	62.96	66.35
	_________	_________	_________

CONDENSED STATEMENT OF FINANCIAL POSITION (unaudited)

		As at	As at
		30 September 2017	31 March 2017
	Note	£'000	£'000
Fixed assets
Investments at fair value through profit or loss		105,482	102,793
		_________	_________
Current assets
Debtors		615	865
Cash at bank and in hand		3,222	1,007
		_________	_________
		3,837	1,872
		_________	_________

Creditors: amounts falling due within one year
Foreign currency bank loans	7	(11,257)	(12,201)
Other creditors		(1,596)	(296)
		_________	_________
		(12,853)	(12,497)
		_________	_________
Net current liabilities		(9,016)	(10,625)
		_________	_________
Net assets		96,466	92,168
		_________	_________

Share capital and reserves
Called-up share capital		1,582	1,582
Share premium		6,656	6,656
Capital redemption reserve		2,273	2,273
Capital reserve	8	83,894	79,137
Revenue reserve		2,061	2,520
		_________	_________
Equity shareholders' funds		96,466	92,168
		_________	_________

Net asset value per Ordinary share (pence)	9	644.43	611.41
		_________	_________

CONDENSED STATEMENT OF CHANGES IN EQUITY (unaudited)

Six months ended 30 September 2017
			Capital
	Share	Share	redemption	Capital	Revenue
	capital	premium	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 March 2017	1,582	6,656	2,273	79,137	2,520	92,168
Purchase of Ordinary shares to be held in treasury	-	-	-	(582)	-	(582)
Return after taxation	-	-	-	5,339	441	5,780
Dividend paid (note 5)	-	-	-	-	(900)	(900)
	_______	________	_______	_______	_______	_______
Balance at 30 September 2017	1,582	6,656	2,273	83,894	2,061	96,466
	_______	________	_______	_______	_______	_______

Six months ended 30 September 2016
			Capital
	Share	Share	redemption	Capital	Revenue
	capital	premium	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 March 2016	1,582	6,656	2,273	67,162	2,050	79,723
Purchase of Ordinary shares to be held in treasury	-	-	-	(64)	-	(64)
Return after taxation	-	-	-	9,811	529	10,340
Dividend paid (note 5)	-	-	-	-	(655)	(655)
	_______	________	_______	_______	_______	_______
Balance at 30 September 2016	1,582	6,656	2,273	76,909	1,924	89,344
	_______	________	_______	_______	_______	_______

CONDENSED STATEMENT OF CASH FLOWS (unaudited)

	Six months ended	Six months ended
	30 September 2017	30 September 2016
	£'000	£'000
Net return before finance costs and taxation	5,918	10,497
Adjustments for:
Gains on investments	(952)	(20,031)
Realised (gains)/losses on foreign exchange transactions	(749)	1,920
Decrease in other creditors	(5)	(9)
Expenses taken to capital reserve	6	3
Overseas withholding tax	(88)	(97)
Decrease/(increase) in accrued income	179	(24)
Decrease in other debtors	11	5
	_________	_________
Net cash inflow/(outflow) from operating activities	4,320	(7,736)

Investing activities
Purchase of Investments	(11,700)	(3,091)
Sales of investments	11,264	11,974
Expenses allocated to capital	(6)	(3)
	_________	_________
Net cash (outflow)/inflow before financing	(442)	8,880

Financing activities
Bank and loan interest paid	(51)	(51)
Equity dividends paid	(900)	(655)
Proceeds from issue of Ordinary shares	-	-
Purchase of own shares to treasury	(582)	(64)
Movement in bank loans outstanding	-	-
	_________	_________
Net cash outflow from financing	(1,533)	(770)
	_________	_________
Increase in cash	2,345	374
	_________	_________

Analysis of changes in cash during the year
Opening balance	1,007	897
Effect of exchange rate fluctuations on cash held	(130)	191
Increase in cash as above	2,345	374
	_________	_________
Closing balance	3,222	1,462
	_________	_________

NOTES TO THE ACCOUNTS (unaudited)

1.	Accounting policies - Basis of accounting
	The condensed financial statements have been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting) and with the Statement of Recommended Practice for 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'. They have also been prepared on a going concern basis and on the assumption that approval as an investment trust will continue to be granted.

	The interim financial statements have been prepared using the same accounting policies as the preceding annual financial statements.

		Six months ended	Six months ended
		30 September 2017	30 September 2016
2.	Income	£'000	£'000
	Income from investments
	Overseas dividends	878	968
		_________	_________
	Total income	878	968
		_________	_________

3.	Transaction costs
	During the period expenses were incurred in acquiring or disposing of investments classified 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 Condensed Statement of Comprehensive Income, whilst expenses incurred in disposing of investments have been expensed through capital and are included within gains on investments in the Condensed Statement of Comprehensive Income. The total costs were as follows:

		Six months ended	Six months ended
		30 September 2017	30 September 2016
		£'000	£'000
	Purchases	6	2
	Sales	3	4
		_________	_________
		9	6
		_________	_________

4.	Taxation
	The taxation charge for the period represents withholding tax suffered on overseas dividend income.

		Six months ended	Six months ended
		30 September 2017	30 September 2016
5.	Dividends	£'000	£'000
	2016 final dividend - 4.20p	-	655
	2017 final dividend - 6.00p	900	-
		_________	_________
		900	655
		_________	_________

		Six months ended	Six months ended
		30 September 2017	30 September 2016
6.	Return per Ordinary share	£'000	£'000
	Based on the following figures:
	Revenue return	441	529
	Capital return	5,339	9,811
		_________	_________
	Total net return	5,780	10,340
		_________	_________
	Weighted average number of Ordinary shares in issue	15,002,929	15,584,722
	Total net return per share (p)	38.53	66.35
		_________	_________

			As at	As at
			30 September 2017	31 March 2017
7.	Foreign currency bank loan		£'000	£'000
	Falling due within one year		11,257	12,201
	Falling due after more than one year		0	0
			_________	_________
			11,257	12,201
			_________	_________

	Short term Japanese Yen loans	Amount £'000	2,649	2,871
		JPY'000	400,000	400,000
		Interest rate (%)	0.7500	0.7603

		Amount £'000	8,608	9,330
		JPY'000	1,300,000	1,300,000
		Interest rate (%)	0.8975	0.8975

	The short term loan is made up of the drawn down amount from the JPY800,000,000 one year rolling credit facility with ING Bank originally entered into in August 2015 and the JPY1,300,000,000 three year facility with ING Bank entered into in January 2015.

8.	Capital reserve
	The capital reserve figure reflected in the Consolidated Statement of Financial Position includes investment holdings gains of £29,283,000 (31 March 2017 - £31,894,000).

		As at	As at
9.	Net asset value per Ordinary share	30 September 2017	31 March 2017
	Attributable net assets (£'000)	96,466	92,168
	Number of Ordinary shares in issue	14,969,203	15,074,597
	Net asset value per Ordinary share (p)	644.43	611.41

10.	Fair value hierarchy
	FRS 102 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy shall have the following classifications:

	Level 1: unadjusted quoted prices in an active market for identical assets or liablilities that the entity can access at the measurement date.
	Level 2: inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly or indirectly.
	Level 3: inputs are unobservable (ie for which market data is unavailable) for the asset or liablilty.

	The financial assets and liabilities measured at fair value in the Condensed Statement of Financial Position are grouped into the fair value hierarchy at the reporting date as follows:



				Level 1	Level 2	Level 3	Total
	As at 30 September 2017		Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities		a)	105,482	-	-	105,482
	Foreign exchange forward contracts		b)	-	42	-	42
				______	______	______	______
	Net fair value			105,482	42	-	105,524
				______	______	______	______


				Level 1	Level 2	Level 3	Total
	As at 31 March 2017		Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities		a)	102,793	-	-	102,793
	Foreign exchange forward contracts		b)	-	119	-	119
				______	______	______	______
	Net fair value			102,793	119	-	102,912
				______	______	______	______

	a)	Quoted equities and preference shares
		The fair value of the Company's investments in quoted equities has been determined by reference to their quoted bid prices at the reporting date. Quoted equities included in Level 1 are actively traded on recognised stock exchanges.
	b)	Foreign exchange forward contracts
		The fair value of the Company's investment in foreign exchange forward contracts has been determined in relation to models using observable market inputs and hence are categorised in Level 2.

11.	Transactions with the Manager
	The Company has agreements with Aberdeen Fund Managers Limited ("AFML" or the "Manager") for the provision of investment management, secretarial, accounting and administration and promotional activity services.

	The management fee is payable monthly in arrears at a rate of 0.95% per annum of the value of the Company's net assets up to £50 million decreasing to 0.75% of the value of the Company's net assets over and above £50 million. The investment management fee is chargeable 40% to revenue and 60% to capital. During the period £407,000 (30 September 2016 - £370,000) of investment management fees were earned by the Manager, with a balance of £69,000 (30 September 2016 - £64,000) being payable to AFML at the period end.

	The promotional activities fee is based on a current annual amount of £72,000 (30 September 2016 - £62,000 per annum), payable quarterly in arrears. During the period £34,000 (30 September 2016 - £29,000) of fees were earned, with a balance of £18,000 (30 September 2016 - £16,000) being payable to AFML at the period end.

12.	Segmental information
	The company is engaged in a single segment of business, which is to invest in equity securities and debt instruments. All of the Company's activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based on the Company as one segment.

13.	Subsequent events
	Following the period end, the Company purchased a further 20,000 Ordinary shares at a cost of £119,000. As at the date of this report there were 14,949,203 Ordinary shares in issue and 872,369 Ordinary shares held in treasury.

14.	The financial information contained in this Half-Yearly Financial Report does not constitute statutory accounts as defined in Sections 434 - 436 of the Companies Act 2006. The financial information for the six months ended 30 September 2017 and 30 September 2016 has not been reviewed or audited by the Company's independent auditor.

	The information for the year ended 31 March 2017 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the independent auditor on those accounts contained no qualification or statement under Section 498 (2), (3) or (4) of the Companies Act 2006.