Half Yearly Report

RNS Number : 4762T

Atlantis Japan Growth Fund Ld

13 December 2012

ATLANTIS JAPAN GROWTH FUND LIMITED ("AJGF" or the "Company")

(A closed-ended investment company incorporated in Guernsey with registration number 30709)

Statement of Interim Results

13 December 2012

The financial information set out in this announcement does not constitute the Company's statutory accounts for the period ending 31st October 2012

The financial information for the period ended 31st October 2012 is derived from the financial statements delivered to the UK Listing Authority.

Interim Management Report and Investment Manager's Report

For the six months ended 31st October 2012

PERFORMANCE

After peaking in the spring, the Tokyo Market moved slightly lower and for the six month period ending October the Topix TR was down 6.19%. The Fund also slipped 5.36% for the corresponding period, (note all figures adjusted to US dollars and are on a total return basis).

At the end of October borrowings totalled JPY1,178 million and cash stood at JPY207 million. The yen ended October at JPY79.8 to the US dollar, appreciating by 0.43% from the April closing of JPY80.150. The Fund has no foreign exchange hedges of any kind.

The Fund ended the period with 82 holdings and held no bonds, convertible bonds, or derivatives of any kind.

	3M	6M	1Y	3Y	5Y	2011	2010	2009	2008	2007
AJGF (US$)	0.6%	-5.4%	5.3%	12.9%	-31.1%	-4.8%	14.5%	8.3%	-41.1%	-20.2%
TOPIX TR (US$)	-0.1%	-6.2%	-2.5%	1.3%	-26.5%	-13.0%	14.7%	5.3%	-26.4%	-5.6%

MARKET COMMENT

The weakening world economy (especially in Europe and China), together with falling Japanese industrial production, dull consumer spending, the threat of a stronger yen, ongoing fiscal problems including a delay in passage of the budget, territorial problems with China and political gridlock, have impacted the Japanese economy and investor confidence.

Some economists are now projecting almost flat GDP growth for the current fiscal year ending next March and

in recent months many companies have lowered their earnings estimates.

To counter the impact of the slowing economy, the Bank of Japan has been expanding the money supply and steadily pumping money into the economy. Interest rates remain at, or near, all-time lows. There is no inflation, the banking system is now the strongest it has been for years and bad debts are not a major problem. Heavy industry and manufacturing still seem to be suffering but to date the unemployment rate has remained almost flat at around 4.2%.

The government recently approved a rise in the consumption tax which will slowly increase the current 5% rate to 10% over the next few years, but further tax hikes will probably be necessary to help cover the growing government debt which is now around 200% of GDP. Fortunately this debt is in yen and is mostly in the hands of local investors. Japan also has large foreign exchange reserves, historically high overseas investments, and in most months a net inflow of funds, including a rising tide of profit transfers and dividends from overseas investment by Japanese corporations and individuals.

With the Lower House election and a general election scheduled for 16th December there is currently political gridlock. However we expect several key bills, including the budget, will be passed before then. The expected change in the government seems to be viewed positively since the new government would have stronger leadership and will probably control the Lower and Upper House. It is expected to act aggressively to stimulate the economy. We also believe that government will continue to move to resolve its territorial problems with China or at least calm things down, and that the economy will slowly recover next fiscal year ending March 2014.

The above should help lift GDP growth and result in steadily improving earnings growth for the next several years. Major challenges include the dull world economy, little or no growth in the Eurozone, low economic growth in South East Asia at present (note China and several other countries now seem to be recovering), territorial problems with China, although hopefully things will calm down, and lack of leadership in Japan. However a new Prime Minister could mean stronger government direction in a number of key areas including the economy. A stronger yen would also be a worry but the yen seems fairly stable and might even weaken which of course would be positive for exports.

OUR STRATEGY AND THE PORTFOLIO

As mentioned above the Japanese economy is now slowing and earnings for the six months ended September were disappointing. However there could very well be better than expected earnings growth for the year ending March 2014 and beyond. In any case most of the possible bad news has probably already been discounted.

The Tokyo Market looks cheap in terms of PBR, historic real dividend yield, projected PER, etc. This does not imply that the market is going to roar up imminently but it does mean that we could see a change in sentiment during the first half of next year as economic news improves and investors become more positive on economic and earnings prospects for the next few years.

We are finding companies that have above average medium to longer term earnings growth potential and seem cheap at current price levels. We continue to visit a wide range of companies in many kinds of businesses.

For instance we think many of the electronic components companies involved in supplying parts for the smart phones and tablets will continue to do well for some years and are holding several companies in this sector.

Despite the slowing sales of Japanese cars in China, we look for good growth for the Japanese auto industry due to continuing recovery in North America, strong sales in South East Asia, India, and China (note the Chinese have been buying fewer Japanese cars for political reasons but we expect improving sales from sometime next year), and many other overseas markets. Part of the growth is the change in technology and the three leading hybrid electric car manufactures are Japanese companies, including Toyota and Honda. We think electric car sales including hybrid electric car sales will continue to expand their market share in the auto market and selected car manufacturers and parts companies should do very well in coming years. Again we are holding several auto related stocks.

Like most countries there is a revolution going on in the distribution sector. Some logistical and trucking companies are benefiting from the changes now taking place and we have invested in several logistical related companies and we have our eye on several more.

We continue to avoid the smoke stack industries and old Japan companies including such firms as Panasonic, Sharp, Sony, Tokio Marine Holdings, etc. and we are concentrating on companies that are in niche areas, focused, and have the potential to grow their earnings in coming years.

Our basic strategy remains unchanged and we will continue to concentrate on value and earnings growth. The manager will continue to place stress on the longer-term and will try to avoid getting caught up in short term fashions and stocks that seem overvalued and popular. We like good companies that are out of favour and look undervalued, in many cases these are companies that brokers no longer follow.

AFMG Limited

November 2012

Directors' Interim Report and Statement of Directors Responsibility

For the six months ended 31st October 2012

The Directors are pleased to present their interim Report and the Unaudited Financial Statements of the Company for the six month period ended 31st October 2012.

CAPITAL VALUES

At 31st October 2012 the value of net assets available to shareholders was $72,846,190 (30th April 2012 - $129,830,251) and the Net Asset Value per share was $1.41 (30th April 2012 - $1.48).

COMPANY'S OBJECTIVES, POLICIES AND STRATEGIES IN RESPECT OF FINANCIAL ASSETS

As an investment trust, the Company invests in securities for the long term. The financial investments held as assets by the Company comprise of equity shares. As such, the holding of securities, investing activities and financing associated with the implementation of the investment policy involves certain inherent risks. Events may occur that could result in either a reduction in the Company's net assets or a reduction of revenue profits available for distribution.

Set out below are the principal risks inherent in the Company's activities along with the actions taken to manage them. The Board reviews and agrees policies for managing these risks and these policies have remained substantially unchanged since 30th April 2006.

Market risk

Market risk arises mainly from uncertainty about future prices of financial instruments used in the Company's business. It represents the potential loss the Company might suffer through holding market positions in the face of price movements.

The market risk is monitored by the Board on a quarterly basis and on a daily basis by the Investment Manager.

Currency risk

The Company's results for the period and net assets could be significantly affected by currency movements as most of the Company's assets are denominated in Yen. In order to reduce this risk the Company may hedge its exposure to the Japanese currency. The Company did not have any hedging arrangements in place at the period end.

Borrowing and Interest rate risk

The Company finances its operations mainly through its share capital and retained profits, including realised and unrealised capital profits. Additional bank borrowings may be used with a view to enhancing capital returns. However, the Company's Articles of Association provide that borrowing levels should not exceed 20% of Net Asset Value at the time any borrowing is effected. Following the repayment of the loan facility of JPY 1,178,220,000 on 9th November 2012 as a result of the shares accepted for redemption (Note 12), the effective level of gross borrowing as at 31st October 2012 was 14.9%, while at 30th April 2012 it was 14.0%. The level of net borrowing as at 31st October 2012, including the repayment of the loan facility on 9th November 2012 was 11.3% while at 30th April 2012 it was 12.9%.

Liquidity risk and cashflow risk

Assuming a normal market environment, the majority of the Company's assets comprise readily realisable securities, which can be sold to meet funding commitments as necessary. As at 31st October 2012 based on the assumption of one third of the volume for the last 3 months average volume, 76.5% of the Company's assets can be realised within two weeks, 17.3% can be realised between two weeks and one month and the remaining 6.2% in excess of one month.

GOING CONCERN

The Directors believe that the Company has adequate resources to continue in operational existence for the foreseeable future. The Company has introduced a redemption facility and as a result the Company has reduced in size since this was implemented. Because the Company is invested in listed and readily realisable assets these outflows have had no material effect on the Company's ability to meet its ongoing obligations therefore the Directors believe the use of the going concern basis is still appropriate as there are no material uncertainties relating to events or conditions that may cast significant doubt about the ability of the Company to continue as a going concern.

INVESTMENT MANAGER

In the opinion of the Directors, in order to achieve the investment objectives and policies of the Company, and having taken into consideration the performance of the Company, the continuing appointment of the Investment Manager is in the interests of the shareholders as a whole.

BOARD COMPOSITION

There have been no changes to the board during the period.

DIRECTORS' RESPONSIBILITY STATEMENT

We confirm, to the best of their knowledge, state that:

- the condensed set of interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting.;

- as required by DTR 4.2.7R of the FSA's Disclosure and Transparency Rules, the interim management report includes a fair review of important events that have occurred during the first six months of the financial year and their impact on the condensed set of interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

- the interim management report includes a fair review of the information concerning related party transactions required by DTR 4.2.8R

Details of Ten Largest Investments

The ten largest investments as at 31st October 2012 comprise a fair value of $34,087,487 (30th April 2012: $50,641,118) representing 46.8% of Net Asset Value (30th April 2012: 39.1%) with details as below:

Toyota Tsusho (218,200 shares, cost $2,145,255)

Toyota Tsusho, part of Toyota Motors Group, is a medium/large scale trader involved in selling steel, autos and auto parts, chemicals, and non-ferrous metals. Overseas sales account for almost 60% of total turnover. The company has been aggressively expanding overseas and has made several acquisitions and we are looking for good earnings growth in coming years from both domestic and overseas operations.

(Fair value of $4,760,479 representing 6.5% of the Net Asset Value (30^th April 2012: 4.1%)

Daikin Industries (136,500 shares, cost $3,662,524)

Daikin Industries is a leading air conditioner manufacturer, has acquired several major overseas manufacturers and is strong in both home and commercial equipment. The company is well run and should benefit by increasing market share in mature markets and from expected strong growth in emerging markets in Asia and elsewhere. The company is also strong in converter technology which makes the company's products very competitive.

(Fair value of $3,775,132 representing 5.2% of the Net Asset Value (30^th April 2012: 0%)

Sumitomo Mitsui Financial (113,600 shares, cost $3,583,194)

Sumitomo Mitsui is one of Japan's leading city banks and after suffering from the after effects of the bubble period for the subsequent 20 years, is now growing again and is focusing on retail banking including home mortgages, expansion into Asia, domestic corporate loans, and the brokerage business. The shares are selling at a discount to book value, have an above average yield, and also look cheap in terms of projected PER. We look for above average earnings growth in the medium to longer term. (Fair value of $3,474,907 representing 4.8% of the Net Asset Value (30th April 2012: 3.5%)

Toyota Motor (90,000 shares, cost $3,513,209)

Toyota is Japan's leading auto manufacturer and has a worldwide sales and production network. Toyota was impacted by parts shortages after the earthquake but is now recovering and we look for above average sales and earnings growth over the medium to longer term.

(Fair value of $3,445,489 representing 4.7% of the Net Asset Value (30^th April 2012: 4.4%)

Endo Lighting (70,000 shares, cost $3,279,233)

Endo produces display lights and related equipment used in stores, shopping centers, etc. The company is now benefiting from the boom in LED technology which is expected to continue for the next several years or longer. At present demand is very strong and sales are rising and profit margins are widening.

(Fair value of $3,166,667 representing 4.3% of the Net Asset Value (30^th April 2012: 0%)

MonotaRO (120,000 shares, cost $338,253)

The company is an Osaka based specialized mail order house and sells a wide range of products to smaller and medium sized companies via the internet/fax including imported products. The company provides quick delivery at low prices and has an outstanding growth record.

(Fair value of $3,151,880 representing 4.3% of the Net Asset Value (30^th April 2012: 5.0%)

Sekisui House (308,000 shares, cost $2,991,889)

The company is one of Japan's leading prefab home builders but also is involved in developing and selling apartments, refurbishing houses and apartments, and acting as a middleman in second hand housing. The company has a nationwide sales network and has small operations in China, Australia, the US and several other countries. Sekisui is benefiting from currently low interest rates, steady population growth in several major cities, strong replacement demand for older houses, and the company's good design and strong name recognition. At present profit margins and improving earnings are rising.

(Fair value of $3,137,895 representing 4.3% of the Net Asset Value (30^th April 2012: 0%)

Hamakyorex (100,000 shares, cost $2,142,709)

Hamakyorex has two major businesses which include trucking and third party logistics services and consulting. The company has been expanding its customer base and has managed to turn around a subsidiary which was acquired a few years ago. The investment manager is looking for expanding sales and earnings growth in coming years.

(Fair value of $3,111,529 representing 4.3% of the Net Asset Value (30^th April 2012: 4.8%)

Mitsui Fudosan (152,000 shares, cost $2,744,961)

The company has good back-up from the Mitsui Group and owns office buildings in Tokyo and other major Japanese cities. The company is also involved in building and selling higher quality houses and apartments. The company also runs a real estate brokerage business and manages REITS. The company is now benefiting from low interest rates and we project good earnings growth in coming years.

(Fair value of $3,070,476 representing 4.2% of the Net Asset Value (30^th April 2012: 0%)

Foster Electric (205,900 shares, cost $3,119,379)

Foster is one of the world's leaders in the production of miniature speakers, mikes, and ear phones used in a wide range of products including smart phones, tablets, PCs, audio and visual equipment, cars, etc. Production is now mostly outside Japan and demand is very strong. We look for good earnings for the next few years or longer.

(Fair value of $2,993,033 representing 4.1% of the Net Asset Value (30^th April 2012: 0%)

31st October 2012
			Fair	Percentage
Investment	Shares	Cost $	Value $	of NAV
Toyota Tsusho	218,200	2,145,255	4,760,479	6.5
Daikin Indutries	136,500	3,662,524	3,775,132	5.2
Sumitomo Mitsui Financial Group	113,600	3,583,194	3,474,907	4.8
Toyota Motor	90,000	3,513,209	3,445,489	4.7
Endo Lighting	70,000	3,279,233	3,166,667	4.3
MonotaRO	120,000	338,253	3,151,880	4.3
Sekisui House	308,000	2,991,889	3,137,895	4.3
Hamakyorex	100,000	2,142,709	3,111,529	4.3
Mitsui Fudosan	152,000	2,744,961	3,070,476	4.2
Foster Electric	205,900	3,119,379	2,993,033	4.1

30th April 2012
			Fair	Percentage
Investment	Shares	Cost $	Value $	of NAV
MonotaRO	364,400	1,027,162	6,496,913	5.0
Hamakyorex	176,700	3,786,167	6,243,474	4.8
JSR	299,700	5,593,984	5,919,215	4.6
Toyota Motor	138,700	5,414,246	5,711,668	4.4
Toyota Tsusho	269,100	2,645,683	5,338,353	4.1
Kintetsu World Express	135,400	3,320,833	4,841,627	3.7
Sumitomo Mitsui Financial Group	140,100	4,419,063	4,515,013	3.5
Bit-isle Inc	369,700	1,994,863	4,252,819	3.3
Kohnan Shoji	258,000	4,469,466	3,733,999	2.9
Hikari Tsushin	110,100	2,768,566	3,588,037	2.8

31st October 2011
			Fair	Percentage
Investment	Shares	Cost $	Value $	of NAV
Makita	200,000	5,710,046	7,598,823	5.1
JSR	380,000	7,092,805	7,389,024	5.0
Hamakyorex	250,800	5,373,914	7,218,882	4.9
Toyota Motor	175,900	6,866,372	5,947,342	4.0
Kintetsu World Express	171,600	4,208,678	5,288,274	3.6
Toyota Tsusho	323,500	3,038,155	5,206,128	3.5
Bit-Isle Inc	2,837	2,813,501	5,088,236	3.4
Keyence	19,600	4,221,441	5,059,844	3.4
Sumitomo Mitsui Financial	177,600	5,601,896	5,034,689	3.4
MonotaRO	500,000	1,409,388	4,957,145	3.3

Unaudited Statement of Comprehensive Income

For the Six Months Ended 31st October 2012

		(Unaudited)				(Unaudited)
		01-May-12 to 31-Oct-12				01-May-11 to 31-Oct-11

		Revenue	Capital	Total	Revenue	Capital	Total
Notes		$'000	$'000	$'000	$'000	$'000	$'000
	Income
	Exchange gain	-	(120)	(120)	-	369	369
	Dividend income	1,342	-	1,342	2,111	-	2,111

		1,342	(120)	1,222	2,111	369	2,480
	Expenses
3	Losses on investments held at fair value	-	6,894	6,894	-	2,678	2,678
4	Investment management fee	558	-	558	968	-	968
5	Custodian fees	44	-	44	79	-	79
6	Administration fees	85	-	85	119	-	119
	Redemption facility expenses	-	-	-	(240)	-	(240)
	Registrar and transfer agent fees	18	-	18	3	-	3
7	Directors' fees and expenses	107	-	107	140	-	140
	Insurance fees	12	-	12	16	-	16
	Audit fee	22	-	22	23	-	23
	Printing and advertising fees	11	-	11	21	-	21
	Legal and professional fees	119	-	119	100	-	100
	Listing fees	10	-	10	19	-	19
	Miscellaneous expenses	27	-	27	22	-	22

		1,013	6,894	7,907	1,270	2,678	3,948
	Finance cost
	Interest expense and bank charges	129	-	129	281	-	281

	Profit/(Loss) before tax	200	(7,014)	(6,814)	560	(2,309)	(1,749)

	Taxation	(94)	-	(94)	(147)	-	(147)
	Profit/(loss) and total
	comprehensive income for the period	106	(7,014)	(6,908)	413	(2,309)	(1,896)

9	Earnings/(deficit) per ordinary share	$0.001	$(0.092)	$(0.091)	$0.003	$(0.018)	$(0.015)

All of the Company's income and expenses are included in the profit/loss for the period and therefore the profit for the period is also the Company's comprehensive income for the period, as defined by IAS 1(revised). In arriving at the result for the period, all amounts above relate to continuing activities.

The total column in this statement represents the Company's Statement of Comprehensive Income, prepared in accordance with IFRS. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies.

Unaudited Statement of Changes In Equity

For the Six Months Ended 31st October 2012

						Capital	Capital	Capital Reserve/
		Ordinary Share	Share		Revenue	Reserve/	Reserve/	Exchange
		Capital	Premium		Reserve	Realised	Unrealised	Differences	Total
Notes		$'000	$'000		$'000	$'000	$'000	$'000	$'000
	Balances at 1st May 2012	-	36,739		(22,061)	108,936	20,065	(13,849)	129,830

	Movements during the period
	Redemptions	-	(48,923)		-	-	-	-	(48,923)
	Shares bought into treasury	-	-		(1,072)	-	-	-	(1,072)
	proceeds from reissue of treasury shares				96				96
	transfer from capital reserve		12,184						12,184
	transfer to share premium					(12,184)			(12,184)
3	Gain on investments sold	-	-		(4,276)	4,276	-	-	-
3	Movement on loss on valuation of investments	-	-		11,170	-	(11,170)	-	-
	Gain on foreign exchange	-	-		120	-	-	(120)	-
	Distribution (Note 14)	-	-		(177)	-	-	-	(177)
	Total comprehensive income	-	-		(6,908)	-	-	-	(6,908)

	Balances at 31st October 2012	-		-	(23,108)	101,028	8,895	(13,969)	72,846

						Capital	Capital	Capital Reserve/
		Ordinary Share	Share		Revenue	Reserve/	Reserve/	Exchange
		Capital	Premium		Reserve	Realised	Unrealised	Differences	Total
		$'000	$'000		$'000	$'000	$'000	$'000	$'000
	Balances at 1st May 2011	-	126,804		(21,795)	87,649	32,767	(14,788)	210,637
									-
	Movements during the period								-
	Redemptions	-	(75,738)		-	-	-	-	(75,738)
3	Gain on investments sold	-	-		(13,695)	13,695	-	-	-
3	Movement on loss on valuation of investments	-	-		16,051	-	(16,051)	-	-
	Loss on foreign exchange	-	-		(369)	-	-	369	-
	Total comprehensive income	-	-		(1,896)	-	-	-	(1,896)

	Balances at 31st October 2011	-		51,066	(21,704)	101,344	16,716	(14,419)	133,003

Unaudited Statement of Financial Position

As at 31st October 2012

		(Unaudited)	(Audited)
		31st October 2012	30th April 2012
Notes		$'000	$'000
	Non Current Assets
2(g)	Financial assets at fair value
	through profit or loss	110,063	145,240


	Current Assets
	Due from brokers	-	746
2(e)	Dividends and other receivables	1,022	1,524
2(h)	Cash and cash equivalents	2,591	920

		3,613	3,190
	Current Liabilities
	Due to brokers	-	(148)
	Due to shareholders	(25,875)	-
	Payables and accrued expenses	(190)	(322)
2(i)	Loans payable	(14,765)	(18,130)

		(40,830)	(18,600)
	Net Current Liabilities	(37,217)	(15,410)


	Net Assets	72,846	129,830

	Equity
8	Ordinary share capital	-	-
8	Share premium	-	36,739
	Revenue reserve	(23,108)	(22,061)
2(m)	Capital reserve	95,954	115,152

11	Net Assets Attributable to Equity Shareholders	72,846	129,830

	Net Asset Value per Ordinary Share*	$1.41	$1.48

*Based on the Net Asset Value at the period end divided by the number of shares in issue:51,793,308 (30th April 2012 - 87,948,865)

Approved by the Board of Directors on 10th December 2012

Unaudited Statement of Cash Flows

For the Six Months Ended 31st October 2012

		31st October 2012	31st October 2011
Notes		$'000	$'000
	Reconciliation of profit for the period to net cash flow
	from operating activities
	Loss before taxation	(6,814)	(1,749)
3	Loss on investments held at fair value	6,894	2,355
	Exchange loss	120	(369)
	Interest expense	129	281
	Decrease in debtors and accrued income	502	1,042
	Decrease in creditors	(132)	(123)
	Taxation paid	(94)	(147)

	Net cash flows from operating activities	605	1,290

	Investing Activities
	Purchase of investments	(36,872)	(110,814)
	Sale of investments	65,864	174,014

	Net cash inflow from investing activities	28,992	63,200

	Net cash inflow before financing	29,597	64,490

	Cash flows from financing activities
	Interest paid	(158)	(258)
	Redemptions	(24,120)	(69,708)
	Net loans repaid	(3,429)	(6,393)


	Net cash outflow from financing activities	(27,707)	(76,359)

	Net increase/(decrease) in cash and cash equivalents	1,890	(11,869)

	Exchange movements	(315)	(157)

	Movement in cash and cash equivalents in the period	1,575	(12,026)

	Cash and cash equivalents at beginning of period	920	17,499

	Cash and cash equivalents at end of period	2,495	5,473

Notes to the Unaudited Financial Statements

For the Six Months Ended 31st October 2012

1. GENERAL

Atlantis Japan Growth Fund Limited (the "Company") was incorporated in Guernsey on
13th March 1996. The Company commenced activities on 10th May 1996. The Company has a premium listing on the London Stock Exchange.

2. ACCOUNTING POLICIES

a) Statement of Compliance

The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards ("IFRS"), which comprise standards and interpretations approved by the European Union and International Accounting Standards, and Standing Interpretations Committee interpretations approved by the IASC that remain in effect.

The condensed interim financial statements for the half year ended 31st October 2012 have been prepared in accordance with IAS 34, 'Interim Financial Reporting' and the Disclosures and Transparency Rules ("DTRs") of the UK's Financial Services Authority.

The condensed interim financial statements do not include all of the information required for full financial statements, and should be read in conjunction with the financial statements for the Company as at and for the year ended 30th April 2012. The financial statements of the Company as at and for the year ended 30th April 2012 were prepared in accordance with International Financial Reporting Standards ("IFRS").

Except as described below, the accounting policies applied by the Company in these condensed interim financial statements are the same as those applied by the Company in its financial statements as at and for the year ended 30th April 2012.

b) Basis of Preparation

The financial statements have been prepared on a historical cost basis, except for the measurement at fair value of investments.

The preparation of the Financial Statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expense. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates.

All financial assets and financial liabilities are recognised (or derecognised) on the date of the transaction by the use of 'trade date accounting'.

c) Going Concern

d) Presentation of Statement of Comprehensive Income

In order to better reflect the activities of an investment trust company supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income.

e) Income Recognition

Dividends arising on the Company's investments are accounted for on an ex-dividend basis. Investment income is accounted for gross of withholding tax.

f) Expenses

All expenses are recognised on an accruals basis and have been charged against revenue, with the exception of transaction costs, which have been charged against capital.

g) Investments

The Company's business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment strategy, and information about the portfolio is provided internally on that basis to the Company's Board of Directors.

Accordingly, upon initial recognition the investments are designated by the Company as 'at fair value through profit or loss'. They are included initially at fair value, which is taken to be their cost (excluding expenses incidental to the acquisition which are written off in the Statement of Comprehensive Income, and allocated to the capital column of the Statement of Comprehensive Income at the time of acquisition). Subsequently, the investments listed overseas are valued at 'fair value', which is bid price (where a bid price is available) or otherwise at fair value based on published price quotations.

Gains and losses on non-current asset investments are included in the Statement of Comprehensive Income as capital.

h) Cash and Cash Equivalents

Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less.

For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents, as defined above, net of outstanding bank overdrafts.

i) Loans Payable

All loans are initially recognised at cost, being the fair value of the consideration received, less issue costs where applicable. After initial recognition, all interest bearing loans and borrowings are subsequently measured at amortised cost. Amortised cost is calculated by taking into account discount or premium on settlement. Any costs of arranging any interest-bearing loans are capitalised and amortised over the life of the loan.

j) Foreign Currencies

The Company's investments are predominately denominated in Japanese yen. The Company's obligation to shareholders is denominated in US dollars and when appropriate, the Company may hedge the exchange rate risk from yen to US dollars. Therefore, the functional currency is US dollars, which is also the presentational currency of the Company. Transactions involving currencies other than US dollars, are recorded at the exchange rate ruling on the transaction date. At each Statement of Financial Position date, monetary items and non-monetary assets and liabilities that are fair valued, which are denominated in foreign currencies, are retranslated at the closing rates of exchange.

Exchange differences arising from retranslating at the Statement of Financial Position date:

- investments and other financial instruments measured at fair value through profit or loss; and

- other monetary items;

and arising on settlement of monetary items, are included in the Statement of Comprehensive Income and allocated as capital if they are of a capital nature, or as revenue if they are of a revenue nature.

k) Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that were applicable at the Statement of Financial Position date.

In line with the recommendations of the AIC SORP, the allocation method used to calculate tax relief on expenses presented against capital returns in the supplementary information in the Statement of Comprehensive Income is the "marginal basis". Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue return column of the Statement of Comprehensive Income, then no tax relief is transferred to the capital return column.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. A deferred tax liability is recognised in full for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Investment trusts which have approval as such under section 1158 of the Corporation Tax Act 2010 are not liable for taxation on capital gains.

The carrying amount of deferred tax assets is reviewed at each Statement of Financial Position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the Statement of Comprehensive Income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

l) Financial Liabilities

Financial liabilities are recognised when the Company becomes a party to the contractual agreements of the instrument. Trade and other payables are initially recognised at their nominal value and subsequently measured at amortized cost less settlement payments. Financial liabilities are derecognised from the Statement of Financial Position only when the obligations are extinguished either through discharge, cancellation or expiration.

m) Capital Reserve

The capital reserve distinguishes between gains/(losses) on sale or disposals and valuation gains/(losses) on investments. The capital reserve consists of realised gains/(losses) on investments, movement in valuation gains/(losses) on investments and gains/(losses) relating to foreign exchange.

n) Treasury Shares

Where the Company purchases its own share capital (whether into treasury or cancellation), the consideration paid, which includes any directly attributable costs (net of income taxes) is recognised as a deduction from equity shareholders' funds through the revenue reserve, which is a distributable reserve.

When such shares are subsequently sold or reissued, and consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is recognised as an increase in equity and proceeds from the reissue of treasury shares are transferred to/from the revenue reserve.

Shares held in treasury are not taken into account in determining NAV per share detailed In Note 8 and earnings per share detailed in Note 9.

3. LOSSES ON INVESTMENTS HELD AT FAIR VALUE

	31st October 2012	31st October 2011
	$'000	$'000

Proceeds from sales of investments	89,365	173,604
Original cost of investments sold	(85,089)	(159,585)

Gains on investments sold during the period	4,276	14,019

Net valuation loss for the period	(11,170)	(16,374)

Losses on investments held at fair value	(6,894)	(2,355)

4. INVESTMENT MANAGEMENT FEE

The Company pays to the Investment Manager a fee accrued weekly and paid monthly in arrears at the annual rate of 1 per cent of the weekly Net Asset Value of the Company. For the period ended 31st October 2012, total investment management fees were $558,342 (2011 - $968,040) of which $88,962 (2011 - $127,988) is due and payable as at that date.

Under the terms of the Investment Management Agreement dated 27th February 2012, the Investment Manager, AFMG Limited, will continue in office until a resignation is tendered or the contract is terminated. In both circumstances, a resignation or termination must be given with a notice period which must not be less than three months, and be in accordance with the Investment Management Agreement. Fees payable to the Investment Adviser are met by the Investment Manager.

5. CUSTODIAN FEES

The Company pays to the Custodian a fee accrued weekly at a rate of 0.03 per cent of the total weekly Net Asset Value of the assets held by the Custodian or Sub-Custodian, together with transaction charges.

Redemption Pool Fees

The Custodian shall also be entitled to receive a fee from the Company of 0.03 per cent per annum of the Net Asset Value of any redemption pool together with transaction charges.

For the period ended 31st October 2012, total ad valorem custodian fees charged through the unaudited statement of comprehensive income were $43,562 (2011 - $79,074) of which $11,612 (2011- $22,909) is due and payable as at that date. Transaction charges in respect of the purchase and sale of investments of $203,565 (2011: $323,352) were paid to the Custodian and capitalised against the cost of investments.

6. ADMINISTRATION FEES

The Company pays to the Administrator a fee accrued weekly and paid monthly in arrears at the annual rate of:

Market Value Annual Rate

Up to US$50,000,000 0.18%

US$50,000,001 to US$100,000,000 0.135%

US$100,000,001 to US$200,000,000 0.0675%

Thereafter 0.02%

Redemption Pool Administration Fees

At each redemption date a charge in respect of the preparatory work for the set-up and calculation of investment and redemption prices at £7,500 will be payable.

An additional fee will be payable on the market value of the assets of that redemption pool of:

Market Value Annual Rate

Up to US$25,000,000 0.18%

US$25,000,001 to US$50,000,000 0.135%

Thereafter 0.0675%

For the period ended 31st October 2012, total administration and registrar fees were $102,850 (2011 - $119,536) of which $47,611 (2011 - $74,244) is due and payable as at that date.

7. DIRECTORS' FEES AND EXPENSES

Each of the Directors is entitled to receive a fee from the Company, being £30,000 per annum for the Chairman, £27,500 per annum for the Chairman of the audit committee and £25,000 per annum for each of the other Directors. In addition, the Company reimburses all reasonably incurred out-of-pocket expenses of the Directors. For the period ended 31st October 2012, total directors' fees and expenses were $106,732 (2011 - $140,359) of which $14,927 (2011 -$67,172) is due and payable as at that date.

8. SHARE CAPITAL AND SHARE PREMIUM

The Company is authorised to issue an unlimited number of Ordinary shares of nil par value and an unlimited number of C Shares of nil par value.

The Company may also issue C shares being a convertible share in the capital of the company of no par value. C shares shall not have the right to attend or vote at any general meeting of the Company. The holders of C shares of the relevant class shall be entitled, in that capacity to receive a special dividend such amount as the directors may resolve to pay out of the net assets attributable to the relevant C share class and from income received and accrued attributable to the relevant C share class for the period up to the conversion date payable on a date falling before, on or after the conversion date as the Directors may determine. There are no C shares currently in issue.

The rights which the ordinary shares convey upon the holders thereof are as follows:

Voting Rights

(i) on a show of hands, every Member who is present shall have one vote; and ii) on a poll a Member present in person or by proxy shall be entitled to one vote per ordinary share held.

Entitlement to Dividends

The Company may declare dividends in respect of the ordinary shares.

Rights in a Winding-up

The holders of ordinary shares will be entitled to share in the Net Asset Value of the Company as determined by the Liquidator

b) Issued
Ordinary Shares	Number of Shares	Share Capital	Share Premium
		$'000	$'000

In issue at 31st October 2012	51,793,308	-	-

In issue at 30th April 2012	87,948,865	-	36,739

Reconciliation of number of shares	Number of Shares	Number of Shares
	31st October 2012	30th April 2012
Shares of no par value
Issued shares at the start of the period	87,948,865	156,182,220
Sale of shares out of Treasury	75,000	-
Redemption of shares	(35,393,901)	(67,485,171)
Purchase of shares into Treasury	(836,656)	(748,184)
Number of shares at the end of the period	51,793,308	87,948,865

Shares held in Treasury
Opening balance at the start of the period	748,184	-
Shares bought in to Treasury during the period	836,656	748,184
Shares sold out of Treasury	(75,000)	-
Number of shares at the end of the period	1,509,840	748,184

9. DEFICIT PER ORDINARY SHARE

The deficit per ordinary share figure is based on the net deficit for the period of ($6,908,217) (2011 - ($1,896,046)) and on 105,402,417 being the weighted average number of shares in issue at 31st October 2012 (2011 126,502,407).

The deficit per ordinary share figure can be further analysed between revenue and capital, as below.

	31st October 2012	31st October 2011
	$'000	$'000

Net revenue gain	106	413
Net capital loss	(7,014)	(2,309)
Net total loss	(6,908)	(1,896)

Weighted average number of ordinary shares
in issue during the period	76,250,636	126,502,407

	$	$
Revenue gain per ordinary share	0.001	0.003
Capital loss per ordinary share	(0.092)	(0.018)
Total loss per ordinary share	(0.091)	(0.015)

10. RELATED PARTY TRANSACTIONS

Certain Directors had a beneficial interest in the Company by way of their investment in the ordinary shares of the Company. The details of these interests at 31st October 2012 are as follows:

	Ordinary Shares	Ordinary Shares
	31st October 2012	31st October 2011
T. Guinness	100,000	100,000
A. Martin Smith	25,000	25,000
N. Lamb	10,000	10,000

There were no relevant contracts in force during or at the end of the period in which any Director had an interest. There are no service contracts in issue in respect of the Company's Directors. No Directors had a non-beneficial interest in the Company during the period under review.

11. RECONCILIATION OF NET ASSET VALUE TO PUBLISHED NET ASSET VALUE

	31st October 2012	Per Share
	$'000	$

Published Net Asset Value	73,127	1.41
Loss on revaluation of securities at bid prices	(281)	-
	72,846	1.41

	30th April 2012	Per Share
	$'000	$

Published Net Asset Value	130,225	1.48
Loss on revaluation of securities at bid prices	(395)	-
	129,830	1.48

In accordance with IFRS the Company's investments have been valued at bid price. However, in accordance with the Company's prospectus for the purposes of determining the daily net asset value per share the investments are valued at mid prices.

12. REDEMPTION FACILITY

Shareholders have the opportunity to make redemptions of part or all of their shareholding on a four monthly basis with the Board's discretion in declining any redemption requests. The following redemptions were made during the period:-

Redemption date	Shares redeemed	US$'000
	31st October 2012	2012

30/06/2012	16,536,591	(23,048)
31/10/2012	18,857,310	(25,875)
	35,393,901	(48,923)

Redemption date	Shares redeemed	US$'000
	31st October 2011	2011

30/06/2011	43,877,672	(60,195)
31/10/2011	11,674,105	(15,543)
	55,551,777	(75,738)

13. LOAN REPAYMENTS

Yen 1,453,000,000 was repaid on 7th June 2012 and Yen 1,178,220,000 was repaid on 9th October 2012. The current loan for Yen 1,178,220,000 was repaid on 9th November 2012 and a new loan for Yen 863,742,000 was drawn on the same date.

14. DISTRIBUTION

The following interim distribution was declared by the Board of Directors:-

Distribution	Date			Date	Amount
per unit	declared	Ex-date	Record Date	paid	US$	Relevant period

$0.0025	2nd August 2012	8th August 2012	10th August 2012	31st August 2012	177,181	1st May 2011 - 30th
						April 2012