Half Yearly Report

RNS Number : 3302V

Atlantis Japan Growth Fund Ld

11 December 2013

 



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

11 December 2013

The financial information set out in this announcement does not constitute the Company's statutory accounts for the period ending 31st October 2013

The financial information for the period ended 31st October 2013 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 2013

Performance

	3M	6M	1Y	3Y	5Y	Since launch
AJGF (US$)	10.30%	5.10%	46.30%	70.50%	108.40%	106.61%
TOPIX TR (US$)	5.80%	2.90%	33.10%	29.40%	51.80%	-3.17%
	YTD	2012	2011	2010	2009	2008
AJGF (US$)	35.96%	15.70%	-4.80%	14.50%	8.30%	-41.10%
TOPIX TR (US$)	23.79%	9.00%	-13.00%	14.70%	5.30%	-26.40%

For the six months ended October 2013 the Japanese Market moved sideways to higher with the Topix ending the period up 2.9%  although there were many ups and downs during the period with most indices weaker during the summer and then somewhat higher in September and October.  The Fund also experienced some weakness during the summer but then recovered and ended the period under review up 5.1%. Note all prices are calculated in US dollars and on a total return basis.

At the end of October 2013 borrowings totalled ¥864 million and cash stood at around ¥77 million resulting in a level of net gearing of 8.5%.  The yen ended the period at ¥98.285/$ compared with ¥97.81/$ at the end of April, a loss of 0.5%.  The Fund continues to have no foreign exchange hedges.

The Fund ended the period with 71 equity holdings and no exposure to bonds, or derivatives of any kind and was invested in listed Japanese companies only, excluding cash.

Market Comment

Positives included the strong election results in July giving the ruling Liberal Democratic Party and Prime Minister Abe a solid mandate to move ahead with his economic reform programme aimed at stimulating the Japanese economy.  The Bank of Japan continues to pump money into the system, bond yields remain at or near year lows.  The economy is recovering, corporate earnings are rising and business and consumer confidence are strengthening.  For the current fiscal year ending March 2014 GDP growth in real terms is expected to reach something around 2.5-3% and corporate earnings are projected to climbed 40-50%.  The recovery is expected to continue during next fiscal year and hopefully into the year after that.

On the negative side is a slower than expected recovery in exports, some weakness in consumer spending, a possible slowdown in growth after the hike in the consumption tax next April, and opposition from some members of Mr. Abe's ruling party to certain parts of his reform policy.  However we think the recovery will remain on track and look for continued economic and corporate earnings growth next fiscal year ending March 2015 and hopefully into 2016.

Future stumbling blocks might include: an overly strong yen, unlikely in our opinion, a weaker than expected world economy including dull growth in the US and China, weakness in major world stock markets, a possible shutdown of the US government, runaway commodity prices or some type of negative geopolitical event.

However we believe that the Tokyo Market looks good value in terms of projected PER, PBR, dividend yield versus bond yield, interest rates, money supply and money flows.  Local investors are again becoming interested in investing in Japanese equities and local individuals in several recent months have accounted for over 30% of daily trading, the highest level in some time.  Local corporations have been in general, net buyers & individuals, local investment trusts and some trust banks have been seen as buyers from time to time.  Overseas investors, who account for 60-70% of daily trading, have remained on the buy side in most months.  Daily trading volume has risen over 100% from a year ago and brokers have been reporting outstanding earnings of late.

Despite some risks, as mentioned above, we continue to have a positive view on the market. In fact we may consider raising our gearing from the 9.3% gross (8.50% net) to a range of 12% - 15%.

Our Strategy

Our strategy remains unchanged and we will continue to buy undervalued stocks with above average earnings growth potential.  We are unconstrained by the market capitalisation of our investee companies and we continue to aim for a diversified portfolio and will carry on concentrating on areas/stocks which have above average growth potential including electronics, machine tools, real estate, brokers, specialized trading companies, service, retail and health care.  However, we continue to have little or no exposure to heavy industry, nonferrous metals, shipbuilding, shipping, utilities, airlines, textiles, fishing, and other low growth or negative growth industries.

We believe company visits are an important part of our investment discipline and will continue to visit as many companies as possible and will try to keep an open mind to new companies and new businesses

AFMG Limited

November 2013

Directors' Interim Report and Statement of Directors Responsibilities

For the six months ended 31st October 2013

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 2013.

CAPITAL VALUES

At 31st October 2013 the value of net assets available to shareholders was $94,486,777 (30th April 2013 - $94,917,916) and the Net Asset Value per share was $2.04 (30th April 2013 - $1.95).

These capital values are inclusive of the redemption on 30th September 2013 for $4,788,967 please see note 13.

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. The level of gross borrowing as at 31st October 2013 was 9.3%, and at 30th April 2013 it was 9.3%.

The facility for Yen 863,742,000 was rolled over every two months in accordance with its terms most recently on 13th September 2013.

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  2013 based on the assumption of one third of the volume for the last 3 months average volume, 81.8% of the Company's assets can be realised within two weeks, 13.3% can be realised between two weeks and one month and the remaining 4.9% 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 on going 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, Investment Adviser and Investment Sub- Adviser  is in the interests of the shareholders as a whole.

BOARD COMPOSITION

We are pleased to welcome Philip Ehrmann who was appointed to the Board on 25th October 2013.  There have been no other 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 FCA'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

As at 31st October 2013 the ten largest investments comprise a fair value of $33,493,993 (30th April 2013: $34,593,998) representing 35.4% of Net Asset Value (30th April 2013: 36.6%) with details as below:

Daikin Industries (71,200 shares, cost $1,910,415)

Daikin produces air conditioners for both home and office use and has been steadily increasing overseas sales, especially in Asia and North America.  The company has been involved in major overseas acquisitions and in our opinionwillbe able to maintain a high level of sales and earnings growth in coming years; due in part to fast growing subsidiaries which operate in some of the world's fastest growing economies.

Fair value of $4,064,018 representing 4.3% of the Net Asset Value (30th April 2013: 3.8%)

Nihon M&A Center (48,400 shares, cost $1,223,009)

The company puts together buyers and sellers of small businesses, often smaller family run operations.  Nihon works closely with accounting companies and local banks who help to introduce buyers and sellers.  The Investment Manager looks for steadily expanding sales and earnings as the company opens new offices and hires and trains new consultants.

Fair value of $3,727,812 representing 3.9% of the Net Asset Value (30th April 2013: 3.0%)

Toyota Motor (57,000 shares, cost $2,225,032)

Toyota holds an approximate 50% share of the Japanese auto market and is amongst the top three global auto assemblers.  The company expects to increase unit production by 4%-5% this year with sales in overseas markets boosted by the depreciated Japanese yen and by rebounding demand in the domestic market.  The Manager believes further volume gains fuelled by aggressive new model introductions, currency depreciation, and production cost reductions will result in sustained profit growth for Toyota over the medium to longer term.

Fair value of $3,682,658 representing 3.9% of the Net Asset Value (30th April 2013: 4.0%)

Sumitomo Mitsui Financial Group (75,100 shares, cost $2,368,820)

Sumitomo Mitusi 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 only a small premium to book value, have an above average yield, and also look cheap in terms of PBR and long term projected PER.  The Investment Manager projects above average earnings growth in the medium to longer term.

Fair value of $3,598,932 representing 3.8% of the Net Asset Value (30th April 2013: 4.1%)

Inaba Denki Sangyo (109,300 shares, cost $2,825,073)

Inaba is a specialized independent trading house specializing in construction tools, materials, and housing equipment and acts as both an agent and also has a direct sales' network.  When private capital investments are rising, the construction industry is doing well, and the economy is growing the company tends to expand.  Although in a cyclical business, the Manager projects good sales growth and expanding profit margins for the next few years.

Fair value of $3,283,949 representing 3.5% of the Net Asset Value (30th April 2013: 0.0%)

Toyota Tsusho (118,800 shares, cost $1,260,691)

Toyota Tsusho, 21.5% owned by Toyota Motors, 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 and the company is now expanding its African operations.

Fair value of $3,284,119 representing 3.5% of the Net Asset Value (30th April 2013: 5.0%)

Tanseisha (477,000 shares, cost $3,340,382)

Tanseisha is one of the leading Japanese interior designers of exhibitions, displays, trade shows, interior design for shops, etc.  There are three or four major design houses in Japan and Tanseisha is one of the leaders and should benefit from expected increase in public and private spending and the Investment Manager looks for steady expansion over the next few years or longer.

Fair value of $3,207,987 representing 3.4% of the Net Asset Value (30th April 2013: 0.0%)

Details of Ten Largest Investments

(continued)

Hito Communications (204,100 shares, cost $1,879,577)

Hito is an outsourcing company specializing in providing well trained staff for stores selling electronics goods, mostly electronic discount stores.  The company is also now supplying staff to several clothing chains.  The economy is recovering and some of Hito's customers should do well as consumer spending climbs which in turn will help lift the company's sales and earnings.

Fair value of $2,998,631 representing 3.2% of the Net Asset Value (30^th April 2013: 2.4%)

Mitsui Fudosan (86,000 shares, cost $1,553,070)

Mitsui Fudosan is one of Japan's leading real estate companies. It owns office buildings, commercial buildings and is involved in developing and selling apartments, detached houses. The company also manages properties.  Mitsui is now benefiting from low interest rates and the recovery in the housing and office markets.  The Manager forecasts good earnings growth over the next several years.

Fair value of $2,830,646 representing 3.0% of the Net Asset Value (30^th April 2013: 4.0%)

Saint Marc Holdings (54,900 shares, cost $2,071,442)

The company has a nationwide chain of restaurants, mostly directly run, offering different types of food at reasonable prices.  The company also operates a chain of coffee shops and is quickly opening new units. The Investment Manager projects steady sales and earnings expansion over the coming few years.

Fair value of $2,815,241 representing 3.0% of the Net Asset Value (30^th April 2013: 3.1%)

31st October 2013
			Fair	Percentage
Investment	Shares	Cost $	Value $	of NAV
Daikin Industries	71,200	1,910,415	4,064,018	4.3
Nihon M&A Center Inc	48,400	1,223,009	3,727,812	3.9
Toyota Motor	57,000	2,225,032	3,682,658	3.9
Sumitomo Mitsui Financial Group	75,100	2,368,820	3,598,932	3.8
Inaba Denki Sangyo	109,300	2,825,073	3,283,949	3.5
Toyota Tsusho	118,800	1,260,691	3,284,119	3.5
Tanseisha	477,000	3,340,382	3,207,987	3.4
Hito Communications	204,100	1,879,577	2,998,631	3.2
Mitsui Fudosan	86,000	1,553,070	2,830,646	3.0
Saint Marc Holdings	54,900	2,071,442	2,815,241	3.0
30th April 2013
			Fair	Percentage
Investment	Shares	Cost $	Value $	of NAV
Toyota Tsusho	170,000	1,706,097	4,710,152	5.0
Sumitomo Mitsui Financial Group	83,300	2,205,212	3,917,595	4.1
Toyota Motor	66,000	2,088,800	3,805,746	4.0
Mitsui Fudosan	111,000	1,679,300	3,750,690	4.0
Daikin Industries	90,000	1,960,275	3,597,792	3.8
Sekisui House	226,000	1,839,693	3,375,790	3.6
Bit-Isle	210,000	1,996,437	2,986,504	3.2
Saint Marc Holdings	60,800	2,011,408	2,968,204	3.1
Nihon M&A Center Inc	53,600	1,114,657	2,811,246	3.0
Anritsu	180,000	1,865,080	2,670,279	2.8

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

Unaudited Statement of Comprehensive Income

For the six months ended 31st October 2013

		(Unaudited)				(Unaudited)
		01-May-13 to 31-Oct-13				01-May-12 to 31-Oct-12
		Revenue	Capital	Total		Revenue	Capital	Total
Notes		$'000	$'000	$'000		$'000	$'000	$'000
	Income
3	Gains on investments held at fair value	-	4,413	4,413		-	-	-
	Exchange gain	-	28	28		-	(120)	(120)
	Dividend income	876	-	876		1,342	-	1,342
		876	4,441	5,317		1,342	(120)	1,222
	Expenses
3	Losses on investments held at fair value	-	-	-		-	6,894	6,894
4	Investment management fee	472	-	472		558	-	558
5	Custodian fees	38	-	38		44	-	44
6	Administration fees	75	-	75		85	-	85
	Registrar and transfer agent fees	18	-	18		18	-	18
7	Directors' fees and expenses	96	-	96		107	-	107
	Insurance fees	8	-	8		12	-	12
	Audit fee	21	-	21		22	-	22
	Printing and advertising fees	5	-	5		11	-	11
	Legal and professional fees	37	-	37		119	-	119
	Listing fees	8	-	8		10	-	10
	Miscellaneous expenses	2	-	2		27	-	27
		780	-	780		1,013	6,894	7,907
	Finance cost
	Interest expense and bank charges	66	-	66		129	-	129
	Profit(loss) before tax	30	4,441	4,471		200	(7,014)	(6,814)
9	Taxation	(64)	-	(64)		(94)	-	(94)
	Profit/(loss) and total
	comprehensive income for the period	(34)	4,441	4,407		106	(7,014)	(6,908)
10	Earnings/(deficit) per ordinary share	$(0.001)	$0.092	$0.091		$0.001	$(0.092)	$(0.091)

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 2013

									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 2013		-		-		(23,951)		100,365		30,472		(11,968)		94,918
	Movements during the period
17	Redemptions		-		(4,789)		-		-		-		-		(4,789)
	Shares bought into treasury		-		-		(49)		-		-		-		(49)
	Proceeds from reissue of treasury shares		-		-		-		-		-		-		-
	Transfer from capital reserve		-		4,789		-		-		-		-		4,789
	Transfer to share premium		-		-		-		(4,789)		-		-		(4,789)
4	Gain on investments sold		-		-		(8,857)		8,857		-		-		-
4	Movement on loss on valuation of investments		-		-		4,444		-		(4,444)		-		-
	Gain on foreign exchange		-		-		(28)		-		-		28		-
18	Distribution		-		-		-		-		-		-		-
	Total comprehensive income		-		-		4,407		-		-		-		4,407
	Balances at 31st October 2013		-		-		(24,034)		104,433		26,028		(11,940)		94,487

									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 year
17	Redemptions		-		(54,183)		-		-		-		-		(54,183)
	Shares bought into treasury		-		-		(1,793)		-		-		-		(1,793)
	Proceeds from reissue of treasury shares		-		-		96		-		-		-		96
	Transfer from capital reserve		-		17,444		-		-		-		-		17,444
	Transfer to share premium		-		-		-		(17,444)		-		-		(17,444)
4	Gain on investments sold		-		-		(8,873)		8,873		-		-		-
4	Movement on gain on valuation of investments		-		-		(10,407)		-		10,407		-		-
	Gain on foreign exchange		-		-		(1,881)		-		-		1,881		-
18	Distribution		-		-		(177)		-		-		-		(177)
	Total comprehensive income		-		-		21,145		-		-		-		21,145
	Balances at 30th April 2013		-		-		(23,951)		100,365		30,472		(11,968)		94,918

Unaudited Statement of Financial Position

As at 31st October 2013

		31st October 2013		30th April 2013
Notes		$'000		$'000
	Non Current Assets
2(g)	Financial assets at fair value
	through profit or loss	101,799		107,440
	Current Assets
	Due from brokers	1,187		-
2(e)	Dividends and other receivables	852		821
2(h)	Cash and cash equivalents	495		603
		2,534		1,424
	Current Liabilities
	Due to brokers	(915)		-
	Due to shareholders	-		(4,880)
	Payables and accrued expenses	(143)		(235)
2(i)	Loans payable	(8,788)		(8,831)
		(9,846)		(13,946)
	Net Current Liabilities	(7,312)		(12,522)
	Net Assets	94,487		94,918
	Equity
8	Ordinary share capital	-		-
8	Share premium	-		-
	Revenue reserve	(24,034)		(23,951)
2(m)	Capital reserve	118,521		118,869
11	Net Assets Attributable to Equity Shareholders	94,487		94,918
	Net Asset Value per Ordinary Share*	$2.04		$1.95
	*Based on the Net Asset Value at the period end divided by the number of shares in issue: 46,233,376  (30th April 2013 - 48,693,711)

*Based on the Net Asset Value at the period end divided by the number of shares in issue: 46,233,376 (30th April 2013 - 48,693,711) (See Note 8.)

Approved by the Board of Directors on 10th December 2013 and signed on its behalf by:

Unaudited Statement of Cash Flows

For the six months ended 31st October 2013

			31st October 2013		30th April 2013
Notes			$'000		$'000
	Reconciliation of profit for the period/year to net cash flows
	from operating activities
	Profit before taxation		4,471		21,316
4	Gain on investments held at fair value		(4,413)		(19,280)
	Exchange gain		(28)		(1,881)
	Interest expense and bank charges		66		258
	(Increase) /decrease in dividends and other receivables		(31)		703
	Decrease in payables and accrued expenses		(92)		(87)
9	Taxation paid		(64)		(171)
	Net cash flows from operating activities		(91)		858
	Investing Activities
	Purchase of investments		(36,099)		(68,954)
	Sale of investments		45,858		126,554
	Net cash inflow from investing activities		9,759		57,600
	Net cash inflow before financing		9,668		58,458
	Cash flows from financing activities
	Interest paid		(78)		(281)
	Redemptions		(9,669)		(49,303)
	Treasury shares		(49)		(1,793)
	Net loans repaid		-		(7,354)
	Net cash outflow from financing activities		(9,796)		(58,731)
	Net decrease in cash and cash equivalents		(128)		(273)
	Exchange movements		20		(44)
	Movement in cash and cash equivalents in the period/year		(108)		(317)
	Cash and cash equivalents at beginning of period/year		603		920
	Cash and cash equivalents at end of period/year		495		603

Notes to the Unaudited Financial Statements

For the six months ended 31st October 2013

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 2013 have been prepared in accordance with IAS 34, 'Interim Financial Reporting' and the Disclosures and Transparency Rules ("DTRs") of the UK's Financial Conduct 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 2013. The financial statements of the Company as at and for the year ended 30th April 2013 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 2013.

             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

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 on going 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.

             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.

The Company has Guernsey tax status of Cat B Tax Exempt and pays an annual fee of £600 renewable on 31 March 2014.

             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 period. 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.      GAINS/(LOSSES) ON INVESTMENTS HELD AT FAIR VALUE

		31st October 2013		31st October 2012
		$'000		$'000
Proceeds from sales of investments		47,067		89,365
Original cost of investments sold		(38,210)		(85,089)
Gains on investments sold during the period		8,857		4,276
Net valuation loss for the period		(4,444)		(11,170)
Gains/(losses) on investments held at fair value		4,413		(6,894)

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 six months ended 31st October 2013, total investment management fees were $471,897 (2012 - $558,342) of which $79,860 (2012 - $88,962) 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.  (Please refer to note 12 for details of the redemption pool facility).

For the period ended 31st October 2013, total ad valorem custodian fees charged through the unaudited statement of comprehensive income were $37,576 (2012 - $43,562) of which $12,827 (2012- $11,612) is due and payable as at that date.  Transaction charges in respect of the purchase and sale of investments of $168,161 (2011: $203,565) 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:

Fair 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.  (Please refer to note 12 for details of the redemption pool facility).

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

Fair 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 2013, total administration and registrar fees were $93,230 (2012 - $102,850) of which $13,117 (2012 - $47,611) 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 2013, total directors' fees and expenses were $96,624 (2012 - $106,732) of which $17,868 (2012 - $14,927) 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 no 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.

	Ordinary Shares		Number of Shares				Share Capital					Share Premium
							$'000					$'000
	In issue at 31st October 2013		46,233,376				-					-
	In issue at 30th April 2013		48,693,711				-					-
								31st October 2013					30th April 2013
	Reconciliation of number of shares							Number of Shares					Number of Shares
								2013					2012
	Shares of no par value
	Issued shares at the start of the period/year							48,693,711					87,948,865
	Re-issue of treasury shares							-					75,000
	Redemption of shares							(2,433,335)					(37,956,727)
	Purchase of shares into Treasury							(27,000)					(1,373,427)
	Number of shares at the end of the period/year							46,233,376					48,693,711
	Shares held in Treasury
	Opening balance							2,046,611					748,184
	Shares bought in to Treasury during the period/year							27,000					1,373,427
	Treasury shares cancelled							-					(75,000)
	Number of shares at the end of the period/year							2,073,611					2,046,611

Shareholders are entitled to receive any dividends or other distributions out of profits lawfully available for distribution and on winding up they are entitled to the surplus assets remaining after payment of all the creditors of the Company.

The shares redeemed in the current period were cancelled immediately.

9.         EARNINGS/(DEFICIT) PER ORDINARY SHARE

             The earnings per ordinary share figure is based on the net earnings for the period of $4,406,739 (2012 $6,908,217) and on 48,256,142 being the weighted average number of shares in issue at 31st October 2013 (2012 76,250,636).

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

		31st October 2013		31st October 2012
		$'000
Net revenue (loss)/gain		(34)		106
Net capital profit/(loss)		4,441		(7,014)
Net total profit/(loss)		4,407		(6,908)
Weighted average number of ordinary shares
in issue during the period		48,256,142		76,250,636
		$		$
Revenue loss/(gain) per ordinary share		(0.001)		0.001
Capital profit/(loss) per ordinary share		0.092		(0.092)
Total profit/(loss) per ordinary share		0.091		(0.091)

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 2013 are as follows:

				Ordinary Shares		Ordinary Shares
				31st October 2013		31st October 2012
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 2013		Per Share
			$'000		$
Published Net Asset Value			94,753		2.04
Loss on revaluation of securities at bid prices			(266)		-
			94,487		2.04
			30th April 2013		Per Share
			$'000		$
Published Net Asset Value			95,117		1.95
Loss on revaluation of securities at bid prices			(199)		-
			94,918		1.95

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

Until 12th March 2013 shareholders had 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. At the Extraordinary General Meeting on the same date the terms were amended to operate the redemption facility at six-monthly intervals. The following redemptions were made during the period:-

Redemption date		Shares redeemed		US$'000
		31st October 2013		2013
30/09/2013		2,433,335		(4,789)
		2,433,335		(4,789)
Redemption date		Shares redeemed		US$'000
		31st October 2012		2012
29/06/2012		16,536,591		(23,048)
31/10/2012		18,857,310		(25,875)
		35,393,901		(48,923)

13.       LOAN REPAYMENTS

Yen 863,742,000 was repaid on 10th May 2013 and a new facility for Yen 863,742,000 was drawn on 10th May 2013.  Yen 863,742,000 was repaid on 12th July 2013 and a new facility for Yen 863,742,000 was drawn on 12th July 2013.  Yen 863,742,000 was repaid on 13th September 2013 and a new facility for Yen 863,742,000 was drawn on 13th September 2013.

14.       DIVIDENDS

There were no distributions declared during the period.

15.       SUBSEQUENT EVENTS

             The following shares have been bought back in to treasury since 31st October 2013:-

5th November 2013 Buy-back   (19,000)

5th November 2013 Buy-back   (10,000)

Following the above transactions the total number of shares bought back in to treasury is 2,102,611.

There have been no other events subsequent to the period ended 31st October 2013.

 

END

 

 

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