Interim Results

RNS Number : 8454K

Atlantis Japan Growth Fund Ld

29 December 2008

 



ATLANTIS JAPAN GROWTH FUND LIMITED

Registered Office: Trafalgar Court, Les Banques, St Peter Port, Guernsey, Channel Islands

Company Number: 30709

STATEMENT OF INTERIM RESULTS

29th December 2008

The financial information set out in this announcement does not constitute the Company's statutory accounts for the period ended 31st October 2008.

The financial information for the period ended 31st October 2008 is derived from the financial statements delivered to the UK Listing Authority. 

Investment Manager's Report 

For the six months ended 31st October 2008

PERFORMANCE

During the six-month period ending 31st October 2008, the Company's performance was negatively impacted by the falling stock market, exposure to smaller stocks (which generally underperformed the market), portfolio gearing and exposure to REITs (one of the worst performing sectors). As a result, during the period under review, the published Net Asset Value per share fell 37.98%, to $9.83 per share (See Note 10 page 28). During the same period the Topix fell by 31.87%, the Tokyo Second Market index declined 27.2%, and the TSE Mothers Market index fell 52.5% (all figures expressed in US dollar terms). Since inception in May 1996, the NAV is down 0.9% (after deducting issue expenses) versus a 45% decline in the Topix.

At 31st October 2008 the Company had borrowings of Y4.5billion (about US$46 million) dividing this into the net assets of the Company showed a gearing of 23.2%. The Yen appreciated during the period and on 31 October stood at Y97.56/USD, versus Y104.14/USD at the end of April, representing a gain of 6.3%. Since nearly all company assets are denominated in yen, a strong yen has a positive impact on the NAV of the Company.

MARKET OUTLOOK

The Tokyo market saw several failed rally attempts during the period under review but was already trending lower when world stock markets were hit by a tsunami of selling in September and October. These last two months were particularly bad for the Tokyo market and for the Fund, with the much watched Nikkei 225 index dropping to a 26-year low in October. In addition to the sell-off in world markets, Japanese stocks were hurt by concerns about the slowing world economy and growing signs of weakness in the Japanese economy, including the deteriorating outlook for corporate earnings. While selling by overseas investors weighed heavily on Japanese stocks, a general lack of confidence among local investors has meant little support from domestic retail and institutional investors as of yet, though there are signs this could be changing.

Looking at Japanese economic indicators, we now find that on the whole all major indicators are pointing to slowing demand both in Japan and overseas. In addition to weak consumption spending by households, businesses now appear to be cutting back on capital spending. Unemployment is still relatively low but employment income may still decline going forward as more companies appear likely to reduce winter bonuses and cut back on paid overtime. 

Overseas investors, who account for the largest portion of daily trading volume, have been particularly aggressive sellers at times during these past few months. The incidence of large lot selling at prices that seem to bear little relation to the underlying fundamentals seems to indicate that many overseas investors have been forced to liquidate their positions in Japanese stocks to raise cash. On the demand side, we find certain local investors have been net buyers in some weeks and months, especially individual investors and trust banks (pension funds), and more than a few corporations have also decided to continue to use this opportunity to buy back their own shares at low prices. This is encouraging, although like most other markets the Tokyo Market remains highly volatile.

With the Japanese economic outlook having clearly worsened, we now expect only slightly positive real GDP growth in the current fiscal year (ending March 2009) in our best-case scenario. Company earnings forecasts are currently pointing to a 30% plus decline in pre-tax earnings this fiscal year. We anticipate a slow recovery next fiscal year, provided all goes well, but we are more optimistic on prospects for a strong rebound in the economy and corporate earnings in the fiscal year to March 2011. 

The weak growth outlook notwithstanding, there are some positives. Inflation now appears likely to return to near zero by the middle of next year, unemployment is likely to remain relatively low, and the latest move by Japan's central bank means interest rates will remain low. More importantly, most medium sized and larger Japanese corporations are generally in good shape financially, with only limited debt and are otherwise well positioned to weather the worldwide economic slowdown. Japan's financial system is also basically sound, with few credit problems from exposure to subprime-related debt and certainly in no need of government help, as we are seeing in other countries.

Since most Japanese institutional and individual investors are underweight in equities, we would expect to see money moving back into Japanese equities at some point, particularly once confidence starts to recover. Overseas investors will also finish their heavy selling eventually, and this too will serve to ease the pressure and improve the demand/supply balance in the market.

The Tokyo First Market is currently trading at 0.98x book value and the Tokyo Second Market at only 0.56x book value. The Tokyo First Market has an estimated dividend yield of around 2.45% and the comparable figure for the Tokyo Second Market is 2.87%. This compares with a yield of about 1.5% on the bellwether ten-year Japanese government bond. Based on our expectation that inflation will drop to near zero by next year, these nominal yield figures should be viewed as very close to the real yield.

Hopefully, the above will combine to provide support for the market and encourage more local investors to invest more of their savings in domestic equities, either directly or via investment trusts. However, we cannot be certain about the timing, as the deteriorating outlook for the economy and corporate earnings means we may not have seen the end of selling by overseas investors.

Markets tend to move in cycles and we believe the Japanese stock market may now be near the bottom of the current down-cycle. Unlike other world markets, we note that the Tokyo market has not really experienced a runaway bull market since the late 1980s, and yet the October sell-off still beat the headline Nikkei 225 down to a 26-year low and has pushed many valuation indicators to their lowest levels since the 1970s.

OUR STRATEGY AND THE PORTFOLIO

We have been closing out or reducing our positions in companies where we do not expect earnings to meet our expectations or where we have otherwise lost confidence in management, particularly in the case of some of the smaller and less-liquid stocks in the portfolio. In contrast, we have been increasing our exposure to companies where earnings are meeting or exceeding our expectations and there is promise for continued earnings growth in the years ahead, particularly when we think the shares have been unnecessarily beaten down by market selling. We have also been making a few new investments, mainly in medium-sized but also in a few bigger companies where we see solid long-term growth prospects and shares that have been driven down to what we consider ridiculously low valuation levels.

We have trimmed the number of individual positions in the portfolio to around 180. We may lower this number further in the coming months since the stocks of many of our new investments and existing holdings where we are increasing exposure are large and liquid enough to allow us to safely establish larger positions. As a result, some of our biggest holdings now account for as much as 4-5% of the total portfolio value.

We are encouraged by the fact that we can now buy many quality companies at bargain prices, particularly in the mid and small cap arena. As always, we continue to stress value and long-term growth. We have no fixed target prices and hope to hold individual investments for years provided the underlying business does well, though stand ready to sell part or all of our holding if earnings disappoint, we lose confidence in management, or the stock rises too quickly. For example, if a stock in the portfolio were to rise by 50-100% over a short period of time even though earnings are expected to grow at only about 15-20% per annum, we would probably sell part or all of our holding. However, if the same stock were to rise at a rate of around 20% per annum for several years, thus closely matching actual earnings growth and expectations, we may keep holding the stock indefinitely. This reflects our basic investment philosophy that seeks to benefit from disciplined, long-term investing rather than short-term trading or speculation.

  Another integral part of our basic investment approach is stock picking rather than sector allocation. In numerical terms, we are approximately 75% bottom-up in our approach. As a result, we have significant exposure to retail and service industries, electronics (including parts and car electronics), REITs and other real estate-related stocks, and wholesalers. The portfolio's overweight exposure to these areas has occurred because this is where we have found many undervalued growth companies. Included among the 180 stocks in the portfolio are many smaller stocks, such as local drug store chains. Despite the attraction of high earnings growth potential, the limited liquidity and market float of many small stocks makes it necessary for us to take smaller positions in a larger number of companies in order to diversify risk. We can comfortably invest more in mid and large cap stocks because liquidity is not a problem and we can invest larger amounts of money without controlling too much of the market float. 

We see the current market weakness offering a chance to buy outstanding companies at extremely attractive prices and are acting accordingly, seeking out the best long-term value and growth. We recognise that current market conditions are terrible and that the Company has underperformed in recent periods. However, we would exhort our shareholders not to become discouraged as markets eventually recover. Often the best time to be buying is not when economies and stock markets are booming but rather when the economy is weak, investors and brokers alike are discouraged, and stocks are hitting new lows. We believe now is just such a time, particularly for long-term investors that have patience and the wherewithal to average down on weakness. 

Atlantis Fund Management (Guernsey) Limited

November 2008

Directors' Interim Report

For the six months ended 31st October 2008

The Directors present their Interim Report and the Unaudited Financial Statements of the Company for the six months period ended 31st October 2008.

CAPITAL VALUES

At 31st October 2008 the value of net assets available to shareholders was $198,520,090 (30 April 2008 - $321,761,590) and the Net Asset Value per share was $9.71 (30 April 2008 - $15.75).

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 2008.

A detailed commentary of important events that have occurred during the period and their impact on these Financial Statements and uncertainties for the remaining six months of the financial year is contained in the Investment Manager's Report.

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 year 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.

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. Although at the time of taking out the borrowing, this limit was not breached, the level of borrowing as at 31st October 2008 was 23.2% of Net Asset Value, while at 30th April 2008 it was 22.4%.

Liquidity risk, and cashflow risk

The majority of the Company's assets comprise readily realisable securities, which can be sold to meet funding commitments as necessary.

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.

DIRECTORS' RESPONSIBILITY STATEMENT

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

• the condensed set of Financial Statements has been prepared in accordance with IAS 34 Interim Financial Reporting.;

• as required by DTR 4.27R 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 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

Approved by the Board

Tim Guinness            

Chairman

Christopher Jones

Director

24th December 2008

  Unaudited Income Statement

For the six months ended 31st October 2008

		01-May-08 to 31-Oct-08				01-May-07 to 31-Oct-07
		Revenue	Capital	Total		Revenue	Capital	Total
Notes		$'000	$'000	$'000		$'000	$'000	$'000
	Income
3	Losses on investments held at fair value	-	(123,426)	(123,426)		-	(47,767)	(47,767)
	Exchange gain/(loss)	-	294	294		(63)	(2,181)	(2,244)
	Dividend income	3,741	-	3,741		3,281	-	3,281
		3,741	(123,132)	(119,391)		3,218	(49,948)	(46,730)
	Expenses
4	Investment management fee	2,146	-	2,146		3,333	-	3,333
5	Custodian fees	177	-	177		111	-	111
6	Administration fees	122	-	122		133	-	133
6	Registrar and transfer agent fees	14	-	14		14	-	14
7	Directors' fees and expenses	85	-	85		106	-	106
	Transaction costs	-	367	367		-	473	473
	Insurance fees	31	-	31		31	-	31
	Audit fee	37	-	37		17	-	17
	Printing and advertising fees	21	-	21		25	-	25
	Legal and professional fees	23	-	23		28	-	28
	Listing fees	29	-	29		25	-	25
	Miscellaneous expenses	(17)	-	(17)		18	-	18
		2,668	367	3,035		3,841	473	4,314
	Finance cost
	Interest expense and bank charges	542	-	542		492	-	492
	Profit/(Loss) before tax	531	(123,499)	(122,968)		(1,115)	(50,421)	(51,536)
	Taxation	(274)	-	(274)		(230)	-	(230)
	Profit/(Loss) for the period	257	(123,499)	(123,242)		(1,345)	(50,421)	(51,766)
8	Deficit per ordinary share			$(6.031)				$(2.533)

There are no recognised gains or losses arising in the period other than those dealt with in the Income Statement. In arriving at the result for the year, all amounts above relate to continuing activities.

The total column in this statement represents the Company's Income Statement, 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 2008

		Ordinary Share		Share		Revenue		Capital Reserve/		Capital Reserve/		Capital Reserve/Exchange
		Capital		Premium		Reserve		Realised		Unrealised		Differences		Total
		$'000		$'000		$'000		$'000		$'000		$'000		$'000
Balances at 30th April 2008		204		192,650		(20,658)		305,885		(150,655)		(5,664)		321,762
Movements during the period
Realised loss on investments sold		-		-		41,951		(41,951)		-		-		-
Movement on unrealised loss on
revaluation of investments		-		-		81,475		-		(81,475)		-		-
Gains on foreign exchange		-		-		294		-		-		(294)		-
Deficit on ordinary activities		-		-		(123,242)		-		-		-		(123,242)
Balances at 31st October 2008		204		192,650		(20,180)		263,934		(232,130)		(5,958)		198,520
								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 2007		204		192,650		(20,788)		218,438		72,037		2,440		464,981
Movements during the period
Realised gains on investments sold		-		-		(5,715)		5,715		-		-		-
Movement on unrealised loss
on revaluation of investments		-		-		53,955		-		(53,955)		-		-
Gains on foreign exchange		-		-		2,181		-		-		(2,181)		-
Deficit on ordinary activities		-		-		(51,766)		-		-		-		(51,766)
Balances at 31st October 2007		204		192,650		(22,133)		224,153		18,082		259		413,215

Unaudited Balance Sheet

As at 31st October 2008

		(Unaudited)		(Audited)
		31-Oct-08		30-Apr-08
Notes		$'000		$'000
	Non Current Assets
2(f)	Financial assets at fair value
	through profit or loss	238,169		384,396
	Current Assets
	Due from brokers	702		3,808
2(d)	Dividends and other receivable	2,974		3,976
2(g)	Cash and cash equivalents	9,287		5,548
		12,963		13,332
	Current Liabilities
	Due to brokers	(5,699)		(3,213)
	Payables and accrued expenses	(788)		(735)
2(h)	Loans payable	-		(14,404)
		(6,487)		(18,352)
	Net Current Assets/(Liabilities)	6,476		(5,020)
	Non Current Liabilities
2(h)	Loans payable	(46,125)		(57,614)
	Net Assets	198,520		321,762
11	Equity
	Ordinary share capital	204		204
	Share premium	192,650		192,650
	Revenue reserve	(20,180)		(20,658)
2(I)	Capital reserve	25,846		149,566
	Net Assets Attributable to Equity Shareholders	198,520		321,762
	Net Asset Value per Ordinary Share*	$9.71		$15.75

*Based on the Net Asset Value at the year end divided by the number of shares in issue:

20,435,627 (30th April 2007 - 20,435,627)

The interim results were approved at a Board Meeting at Atlantis Japan Growth Fund Limited on 24th December 2008 and signed on its behalf by:

Tim Guinness            

Chairman

Christopher Jones

Director

  Unaudited Cash Flow Statement

For the six months ended 31st October 2008

			(Unaudited)		(Unaudited)
			31-Oct-08		31-Oct-07
			$'000		$'000
Cash outflow from operating activities			1,606		(152)
Investing Activities
Purchase of investments			(77,550)		(106,673)
Sale of investments			106,655		101,941
Net cash inflow/outflow) from
investing activities			29,105		(4,732)
Net cash inflow/(outflow) before financing			30,711		(4,884)
Cash flows from financing activities
Interest paid			(661)		(431)
Net loans (repaid)/drawn-down			(25,893)		8,395
Net cash (outflow)/inflow from financing activities			(26,554)		7,964
Net increase in cash and cash equivalents			4,157		3,080
Exchange movements			(418)		103
Movement in cash and cash equivalents in the period			3,739		3,183
Cash and cash equivalents at beginning of period			5,548		2,813
Cash and cash equivalents at end of period			9,287		5,996
Reconciliation of loss for period to net cash outflow
from operating activities
Net loss before taxation			(122,968)		(51,536)
Loss on investments held at fair value			123,426		47,767
Exchange loss/(gain)			(294)		2,244
Interest expense			542		492
Increase in debtors and accrued income			1,002		1,068
Decrease in creditors			172		43
Taxation			(274)		(230)
			1,606		(152)

  Notes to the Financial Statements

For the six months ended 31st October 2008

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.

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 IASB, and International Accounting Standards, and Standing Interpretations Committee interpretations approved by the IASC that remain in effect.

    b) Basis of Preparation

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

    Where presentational recommendations set out in the Statement of Recommended Practice ('SORP') 'Financial Statements of Investment Companies', issued by the Association of Investment Companies in December 2005 do not conflict with the requirements of IFRS, the Directors have prepared the financial statements on a basis consistent with the recommendations in the SORP.

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

    c) Presentation of Income Statement

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

    d) 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. 

    e) 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.

    f) 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 and other key management personnel.

    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 Income Statement, and allocated to the capital column of the Income Statement 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 Income Statement as capital.

      g) 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 Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents, as defined above, net of outstanding bank overdrafts.

    h) 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.

    i) 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 balance sheet 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 balance sheet 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 Income Statement and allocated as capital if they are of a capital nature, or as revenue if they are of a revenue nature. 

Foreign currency transactions

Foreign currency assets and liabilities, including investments at valuation, are translated into U.S. Dollars at the rate of exchange ruling at the balance sheet date. Investment transactions and income and expenditure items are translated at the rate of exchange ruling at the date of the transactions. Gains and losses on foreign exchange are included in the Income Statement.

    j) 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 Income Statement 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 balance sheet date.

    In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented against capital returns in the supplementary information in the Income Statement 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 Income Statement, 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 842 of the Income and Corporation Taxes Act 1988 are not liable for taxation on capital gains.

    The carrying amount of deferred tax assets is reviewed at each balance sheet 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 Income Statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

    k) Financial Liabilities

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

    l) Capital and Reserves

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.

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

		31-Oct-08		31-Oct-07
		$'000		$'000
Proceeds from sales of investments		102,146		101,382
Original cost of investments sold		(144,097)		(95,667)
(Losses)/gains realised on investments sold during the period		(41,951)		5,715
Net unrealised depreciation for the period		(81,475)		(53,955)
		(123,426)		(47,767)

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 1.5 per cent of the weekly Net Asset Value of the Company. For the six months ended 31st October 2008, total investment management fees were $2,146,410 (2007 - $3,332,610) of which $259,337 (30 April 2008 - $389,430) is due and payable as at that date.

    Under the terms of the Investment Management Agreement dated 18th March 1996, the Investment Manager, Atlantis Fund Managers (Guernsey) 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 twelve 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 subject to an annual minimum of US$20,000) of the assets held by the Custodian or Sub-Custodian, together with transactions charges. For the six months ended 31st October 2008, total custodian fees were $176,674 (2007 - $111,330) of which $ 17,721 (30 April 2008 - $12,625) is due and payable as at that date.

6.     ADMINISTRATION AND REGISTRAR FEES

    The Company pays to the Administrator a fee accrued weekly and paid monthly in arrears at the annual rate of 0.10 per cent between $50 million and $100 million, 0.05 per cent between $100 million and $200 million and 0.025 per cent above $200 million, subject to an annual minimum of $125,000. In addition, an annual minimum retainer of $1,000 is payable in respect of maintaining the principal register of shareholders. For the six months ended 31st October 2008, total administration and registrar fees were $121,694 (2007 - $146,599) of which $230,396 (30 April 2008 - $108,703) 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 £20,000 per annum for the Chairman and £15,000 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 six months ended 31st October 2008, total directors' fees and expenses were $84,981 (2007 - $106,252) of which $Nil (30 April 2008 - $Nil) is due and payable as at that date.

8.    (DEFICIT)/EARNINGS PER ORDINARY SHARE

    The deficit per ordinary share figure is based on the net deficit for the period of $123,283,500 (2007 $51,765,588) and on 20,435,627 ordinary shares for each year, being the weighted average number of ordinary shares in issue during the period.

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

		31-Oct-08		31-Oct-07
		$'000		$'000
Net revenue profit/(loss)		257		(1,345)
Net capital loss		(123,499)		(50,421)
Net total loss		(123,242)		(51,766)
Weighted average number of ordinary shares
in issue during the period		20,435,627		20,435,627
		$		$
Revenue earning/(deficit) per ordinary share		0.013		(0.066)
Capital deficit per ordinary share		(6.044)		(2.467)
Total deficit per ordinary share		(6.031)		(2.533)

9.          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 2008 are as follows:

					Ordinary Shares
T. Guinness					10,000
A. Martin Smith					2,500
C. Jones					1,000

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.

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

					31-Oct-08		Per Share
					$'000		$
Published Net Asset Value					200,941		9.84
Excess tax on directors fees receivable from the UK Revenue (Note 7)					42		-
Unrealised loss on revaluation of securities at bid prices					(2,463)		(0.12)
					198,520		9.72
					30-Apr-08		Per Share
					$'000		$
Published Net Asset Value					323,824		15.85
Unrealised loss on revaluation of securities at bid prices					(2,062)		(0.10)
					321,762		15.75

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 monthly net asset value per share the investments are valued at mid prices.

11.    LOAN REPAYMENTS

Yen 1,500,000,000 was repaid on 31st July 2008 and Yen 1,500,000,000 which was due to be repaid on the 16th October 2009 was repaid on 16th October 2008.

 

END

 

 

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