Annual Financial Report
ABERDEEN JAPAN INVESTMENT TRUST PLC
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 MARCH 2014
STRATEGIC REPORT
1. COMPANY SUMMARY
Investment Objective
To achieve long-term capital growth principally through investment in listed Japanese companies which are believed by the Investment Manager to have above average prospects for growth.
Reference Benchmark
The reference benchmark is the Composite Index comprised of:
TOPIX (in Sterling terms) from 8 October 2013.
MSCI AC Asia Pacific (including Japan) Index (in Sterling terms) to 7 October 2013.
2. CHAIRMAN'S STATEMENT
At the Company's General Meeting on 7 October 2013, the shareholders approved the proposal for the Company's investment mandate to change from All Asia, including Japan, to all Japan stocks including smaller listed companies and appropriately hedged into Sterling. The Company was renamed Aberdeen Japan Investment Trust PLC.
The investment objective is now to achieve long-term capital growth mainly by investing in listed Japanese companies deemed by the Manager to have above-average growth prospects. The investment policy provides for the underlying Yen net exposure to be appropriately Sterling hedged at levels to be determined periodically by the Board in consultation with the Manager.
This Report therefore covers performance in Asia as a whole for the period to October 2013 and in Japan thereafter. The outlook section of this statement refers only to Japan. Performance for all periods up to 7 October 2013 is measured against the MSCI All Countries Asia Pacific (including Japan) Index and performance after 7 October is measured against the Japan TOPIX Index (in Sterling terms).
The twelve months to 31 March 2014 was a year of two distinct periods for the Company. The first half, ending on 7 October, under the All Asia investment mandate had a disappointing performance with the total return of -9.6%, falling short of the benchmark by 7.3%. The second half starting from the change of mandate to all Japan showed a modestly encouraging start to performance with a total return of 0.9% exceeding the benchmark in Sterling terms by 4.6% despite a significant strengthening of Sterling against the Yen. Neither of these two periods are long enough to form a balanced judgement on performance and both were periods in which markets declined, albeit by less in Japan after the mandate change than that for the All Asia markets in the same period. Over the last 3 years the performance of your Company has been good with a total return on NAV of 12.8% outperforming the composite index return of 5.0% for the period by 7.8%.
During the year Asian markets generally were hit by the worries over the possible end of US monetary easing, by concerns over China's slackening economy, politics in India and weaker growth in Asia as a whole.
In contrast, in Japan, the stock market had an exceptionally strong 2013, in response to Prime Minister Abe's economic and monetary initiatives although it paused for breath in the first quarter of 2014. It is still too early to judge whether Japan's economy has finally turned the corner after almost 20 years of deflation and weak growth. However there are encouraging signs of change with the green shoots of domestic inflation beginning to emerge and the economy growing more strongly. Japan's companies, having learned to cope with persistent deflation and a strong Yen, are generally prudent and have recapitalised with robust balance sheets. Change will inevitably be patchy and difficult but the companies in your portfolio all have strong performance records and good management with a genuine commitment to their shareholders.
A detailed explanation to this investment result is provided in the Managers' Review and a more detailed analysis of performance given below.
Your Company implemented the change to the new portfolio immediately after shareholder approval and had a portfolio of 39 Japan-listed holdings as at 31 March 2014. The Company's borrowing is now all Yen denominated with the resulting net asset exposure appropriately Sterling hedged based on the proportion of Japan-based revenues in the portfolio, currently estimated at 50-55%. The costs of the mandate change incurred by the Company were approximately £50,000 and are included in expenses and therefore reflected in the performance for the year. Despite this, its total ongoing costs reduced from 1.47% to 1.41% in the year and the Board is committed to keeping tight control of costs.
Discount
The share price discount to net asset value (excluding income) was much reduced from previous years with an average discount of 7.1% over the year. It widened sharply over the last week of the financial year to 13.4% but has since tightened to 10.0%. No shares were bought back by the Company over the year and with the discount averaging 6.8% over the last 90 days of the financial year, there is no requirement under the articles for the Company to put forward a continuation vote to shareholders.
Dividend
The Board aims to maintain a stable dividend and to pay not less than the amount required to maintain investment trust status. Based on this policy, the Board is recommending a final dividend of 4.5p per ordinary share in respect of the year ended 31 March 2014 (2013 - 4.75p). This amount is sufficient to maintain investment trust status and reflects the reduction in income following the change to a Japan only portfolio in the latter part of the year compared with that under the previous investment mandate. If approved, the dividend will be paid to shareholders on 18 July 2014 to those on the register as at close of business on 20 June 2014. The ex-dividend date will be 18 June 2014.
The outlook for the dividend next year is that it will be significantly lower than the dividend this year because it will be based on a full year of income from Japan under the new investment mandate. Thereafter the dividend will again be maintained at a stable level reflecting the net income of the Company and the minimum requirements to maintain investment trust status.
Board
During the year Karen Brade joined the Board with effect from 1 May 2013. Robert Jenkins resigned from the Board with effect from 31 December 2013. On behalf of the Board, I should like to thank him for his valuable contribution, especially during this last year of change for the Company, and wish him well for the future.
Outlook
The outlook for Japan is one of the most significant economic uncertainties in the world today. The direction of the third largest economy is an important component of world growth and the ability of Abe's government to sustain the inflation and growth that they have successfully initiated is the key to the outlook for the economy. For the Company, besides a recovery in the underlying economy, performance boils down to the well-run companies in the portfolio continuing to thrive. Earnings are improving and many of these companies have set their sights on the right areas, such as diversifying abroad, widening their business models and keeping a tight rein on leverage. Many of them also have exposure to expanding Asian economies, several are world class in their fields and all are focused on shareholder returns and good corporate governance.
It is premature to expect a sea change across all Japanese companies but the tide of change is rising and your Board is confident that the Manager's bottom-up investment style of cautious but long-term investment in carefully selected companies is well suited to deliver value from the future development of Japan.
Neil Gaskell
Chairman
23 May 2014
3. MANAGER'S REVIEW
Overview
Asian equities fell amid volatile trading in the first six months under review as the prospect of the US Federal Reserve scaling back its bond purchases triggered a global correction. Fears that China's already moderating growth could stall amid a government-engineered cash crunch to curb informal lending further tested sentiment. The sell-off intensified as 'tapering' concerns grew. Towards the period-end, the Fed's surprise decision to maintain its monetary stimulus provided battered markets a brief reprieve, while a slight pick-up in China's economic growth allayed fears of an acute slowdown.
Following the change in investment objective, the latter six months proved unsettling for Japan. Initially, stocks were supported by the weaker Yen and optimism over Abenomics. That was gradually replaced by disappointment and some doubt over the efficacy of Prime Minister Abe's 'Third arrow' of structural reforms which covered agriculture, labour market, healthcare and female participation in the workplace. Compounding the situation was anxiety over the recently implemented consumption tax hike, while exporters suffered from the Yen's appreciation towards the end of the period. Although some major Japanese companies raised wages for the first time in years, that failed to lift sentiment as the hikes were not commensurate with the rise in consumer prices.
Portfolio review
For the year ended March 2014, the net asset value total return per share declined by 7.5% in Sterling terms, underperforming the composite benchmark index's total return of -5.9%. Owing to the change in the Trust's mandate during the middle of the review period, discussion of the performance has been split accordingly over separate periods.
For the period to 7 October 2013 the portfolio's net asset value total return per share declined by 8.3% in Sterling terms, underperforming the 2.3% fall in the benchmark MSCI AC Asia Pacific Index. Notably, the portfolio's heavy exposure to weaker stock markets across Asia as well as the lack of substantial exposure to Japan hurt performance.
In Hong Kong and China, both stock markets did better than their peers in the region despite concerns of a slowing economy and banking-sector worries. However, holdings such as Jardine Strategic and its subsidiary retailer Dairy Farm, did not fare as well. Jardine Strategic, which has substantial exposure in Indonesia via its conglomerate Astra International, was hurt by a weak Rupiah and macroeconomic concerns there. Dairy Farm's share price fell because its results missed expectations. Hang Lung Group and Swire Pacific also underperformed. The imposition of further cooling measures in the Hong Kong property sector, coupled with poor economic data in the mainland, weighed on their share prices.
On a brighter note, stock selection was positive in Australia. This was partly owed to the lack of exposure to local banks such as Commonwealth Bank of Australia and Westpac, which fell in step with other financials on the back of US fiscal woes and fears of monetary policy tightening there.
For the period 8 October to 31 March 2014, the portfolio's net asset value total return per share rose by 0.9% in Sterling terms, outperforming the 3.7% fall in the benchmark Topix Index. Overall, the hedge position contributed positively to relative performance. During the first half of the period, the 50% hedge worked in the trust's favour as the Yen weakened. However, during the latter half of the period, our hedge position pared gains as Sterling rose against the Yen. While currency hedging manages risk, investors must be aware that this strategy can also potentially result in lower returns.
In stock selection, holdings in the health care sector drove relative performance. Medical device manufacturer Asahi Intecc gained on the back of expectations of a continued strong earnings momentum, fuelled by firm demand for the company's PTCA guidewires. Both Astellas Pharma and Chugai Pharmaceutical benefited from optimism over their drug pipelines and expectations of a more favourable regulatory environment. Astellas Pharma was also lifted by a share buyback.
Other holdings that contributed to relative return included robot manufacturer Fanuc, which was boosted by a pickup in overseas orders as well as improving signs of capital spending. Elsewhere, Mandom and sports shoe maker Asics gained following the release of better-than-expected third-quarter earnings.
On the other hand, several consumer goods holdings including baby-care products makers Unicharm and Pigeon Corp, as well as Japan Tobacco detracted from performance. Unicharm's business in China was affected by heightened competition, while Pigeon and Japan Tobacco's stock prices saw a pause in momentum following strong gains in 2013. In industrials, sheet-metal machinery maker Amada's share price declined on fears that the tax hike will slow industrial orders in the coming year. Elsewhere, vehicle parts manufacturer FCC fell on concerns over weak demand for its motorcycle components in emerging markets.
Following the change in the Company's investment mandate, key portfolio transactions included the introduction of two further Japanese companies - Denso, one of the world's largest car parts suppliers, and Aeon Financial Services (AFS), a credit card and consumer financial services provider. Originally a unit of Toyota Motor, Denso has successfully diversified its business and is now a leading supplier of advanced automotive technology and components for major manufacturers. With its scale and solid balance sheet, Denso is well positioned to weather the challenges within the industry. With regards to AFS, it benefits from a firm base to market its products, thanks to its parent company Aeon Co., while its merger with Aeon Bank enables it to lower its funding costs. Additionally, AFS has a good track record of building its businesses across Asia.
Outlook
At the policy level, the Japanese economy faces headwinds from the recently introduced consumption tax rise from 5% to 8%. The government intends to push forward a massive stimulus plan to counter the negative effects of the tax hike, although the longer-term sustainability of these policies is questionable. That said, numerous companies are already diversified, with much of their earnings derived from outside Japan. In addition, the stronger government and weaker Yen, as compared to previous years, have certainly lifted sentiment.
For investors, what is heartening is that Japanese corporates are gradually focusing on shareholder returns, and corporate governance is improving. These changes should enhance Japan's investment story for the longer term. Fundamentals for our portfolio companies are improving while present valuations are fair. We remain confident in the quality of our holdings, which have done well in tougher economic environments and are well-positioned to weather any headwinds ahead.
Aberdeen Asset Management Asia Limited
Manager
23 May 2014
4. OVERVIEW OF STRATEGY
Introduction
The purpose of this report is to provide shareholders with details of the Company's business model and strategy as well as the principal risks and challenges it faces.
The business model of the Company is that of an investment trust which seeks to deliver a competitive return to its shareholders through the investment of its funds in accordance with an investment policy approved by shareholders. The policy is aimed primarily at delivering superior long term capital growth through investment in listed Japanese companies. The Board appoints and oversees an Investment Manager (the "Manager"), decides the appropriate financial policies to manage the assets and liabilities of the Company, ensures compliance with legal and regulatory requirements and reports objectively to shareholders on the Manager's performance. The Directors do not envisage any change in this model in the foreseeable future.
The Board's strategy is represented by its investment policy, financial policies, and risk management policies.
Investment Policy
The Company primarily invests in the shares of companies which are listed in Japan but can include companies listed on other stockmarkets which earn significant revenue from trading in Japan or hold net assets predominantly in Japan. The portfolio is constructed through the identification of individual companies of any market capitalisation size and in any business sector, which offer long-term growth potential.
The portfolio is selected from the 3500 listed stocks in the Japan market and is actively managed to contain between 30 and 70 stocks which, in the Manager's opinion, represent the best basis for producing higher returns than those of the market as a whole in the long term. There will therefore inevitably be periods in which the Company's portfolio both outperforms and also underperforms the market as represented by the Company's reference benchmark which is the Topix index of the Japanese stock market.
The Board does not impose any restrictions on these shorter term performance variations from the benchmark, nor any limits on the concentration of stock or sector weightings within the portfolio, except that, no individual shareholding shall exceed 10% of the Company's portfolio at the time of purchase, although market movements may subsequently increase this percentage.
The Company may use derivatives for the purpose of efficient portfolio management and hedging. The Company's aggregate exposure to derivative instruments will not exceed 50% of its gross assets, excluding any instruments used for the purposes of currency hedging.
The full text of the Company's investment policy is provided on page 57 of the Annual Report.
Investment Approach
The Manager's investment philosophy is that markets are not always efficient. The Manager's approach is therefore that superior investment returns are attainable by identifying good companies cheaply, defined in terms of the fundamentals that in the Manager's opinion drive share prices over the long-term. The Manager follows a bottom-up investment process based on a disciplined evaluation of companies through visits at least twice a year by its fund managers who are based in Japan. The selection of the portfolio of shares is the major source of the good performance of the portfolio and no stock is bought without the fund managers having first met management. The Manager estimates a company's worth in two stages, quality, defined by reference to management, business focus, the balance sheet and corporate governance, and then price calculated by reference to key financial ratios, the market, the peer group and business prospects. Stock selection is key in constructing a diversified portfolio of companies with macroeconomic, political factors and benchmark weightings being secondary.
Given the long-term fundamental investment philosophy, the Manager expects to hold most companies in which the Company invests for extended periods of time and this accounts for the relatively low level of activity within the portfolio.
Financial Policies
The Board's main financial policies cover the management of shareholder capital, risk management of the Company's asset and liabilities, including currency risk, the use of gearing and the reporting to shareholders of the Company's performance and financial position.
Management of shareholder capital
The Board's policy for the management of shareholder capital is primarily to ensure its long term growth. This growth will reflect both the Manager's investment performance and from time to time the issue of shares when sufficient demand exists to do this without diluting the value of existing shareholder capital. The Board also expects a dividend will normally be paid each year. The Board aims to achieve a stable dividend pattern and not less than the minimum required to maintain investment status. The Board will authorise buyback of shares in order to avoid excessive variability in the discount and if, despite this, the average discount exceeds 10% during the last 3 months of its financial year, the Board will offer shareholders the opportunity to wind up the Company at the next AGM.
Risk Management
The policy for risk management is primarily focused on the investment risk in the portfolio which is covered by risk parameters in the Manager's risk management systems and overseen by the Board.
The Company may use derivatives from time to time for the purpose of mitigating risk in its investments, including protection against currency movements. The performance of the portfolio in Sterling terms is subject to fluctuations in the Yen/£ exchange rate although the Company's exposure to Yen fluctuations is moderated by the natural hedge inherent in any borrowing in Yen as well as through investments in Japanese companies which have significant sources of income from exports of goods and from non-Japanese operations.
The Board has currently determined that, approximately 50% of the Company's Yen net assets should be hedged against fluctuations in the Yen/£ exchange rate through the use of rolling forward contracts. The Board monitors the hedging policy and its effects on the Company's performance on a regular basis and, in its absolute discretion, but following consultation with the Manager, will determine what levels of Sterling hedge are appropriate in light of market movements and the composition of the portfolio from time to time. The Company's aggregate exposure to other derivative instruments not used for the purposes of currency hedging will not exceed 50% of its gross assets.
The wider corporate risks, including those arising from the increasingly regulated and competitive market place, are managed directly by the Board at its regular Board meetings. The principal risks are more fully described under the paragraph Principal Risks and Uncertainties.
Use of Gearing
Gearing is the amount of borrowing used to increase the Company's portfolio of investments in order to enhance returns when and to the extent it is considered appropriate to do so or to finance share buybacks when necessary. The level of borrowing is subject to a maximum of 25% of net assets but will normally be set at a stable and lower level than the maximum. The Board has currently established a gearing level of around 10% of net assets although, with stock market fluctuations, this may range between 5-15%.
The Company will normally be substantially fully invested in accordance with its investment policy but, during periods in which changes in economic conditions or other factors (such as political and diplomatic events, natural disasters and changes in laws) so warrant, the Company may reduce its exposure to securities by reducing borrowing and increasing its cash and money market investments.
Shareholder Communication
The Board is committed to its policy of keeping shareholders regularly informed about the Company's performance and in particular giving an objective and transparent report on the underlying investment performance by the Manager. The formal interim and annual reports provide a comprehensive review of the Company's overall position compliant with best practice and corporate governance requirements. The Manager provides Company presentations at the AGM and shareholder meetings.
In addition, the Company's website (www.aberdeenjapan.co.uk) contains a daily update on the latest portfolio performance and a monthly summary of investment performance together with information about the Japanese market and any other significant developments within the Company and, if requested, can also be emailed to shareholders.
Principal Risks and Uncertainties
The Company's risks are regularly monitored at Board meetings and the Board believes that the Company is resilient to most short term operational risks which are effectively mitigated by the internal controls of the Manager and Depositary. Analysis and mitigation of other longer term and more strategic risks are managed by the Board. The following principal risks facing the Company and related mitigation have been identified:
Investment Strategy risk
The Company and its investment objective may become unattractive to investors. The value of Japanese equities may be affected by factors not associated with the UK, including the general health of the Japanese economy and political events in and around Japan, which can affect investor demand. The Board monitors longer term trends in investor demand and, if appropriate, can propose changes to the investment objective to the shareholders. This was the background to the Company's proposal that the investment policy be changed to all Japan in place of All Asia which was approved by shareholders in October 2013.
Reputation
The attractiveness of the Company to investors is based on the good reputation of the Manager as well as of investment trusts generally. Were investments trusts to fall out of favour as a route for investors or Aberdeen's reputation as Manager of the Trust to weaken, it is likely that investor demand would decline. The Board monitors shareholder sentiment regularly and would be able to take remedial action were its reputation to be threatened.
Regulatory compliance risk
The Company operates under a set of UK, European and international laws and regulations. Most are designed to allow favourable tax status or enhance protection for the shareholders' investment in the Company such as the AIFMD which is being implemented this year. Others have wider social objectives such as the recent UK Bribery Act or the US 'FATCA' rules for identifying funds invested by US investors. The Board is active in ensuring that it fully complies with all applicable laws and regulation and is assisted by the Manager and other advisers in doing this. The Board believes that, while the consequences of non compliance can be severe, the control arrangements it has put in place reduce the likelihood of this happening. The Board regularly monitors prospective changes in laws and regulations that may affect the Company.
Market and investment risk
Market risk arises from the Company's exposure to variations of share prices within its portfolio in response to individual company and to wider Japanese or international factors. Investment in a focussed portfolio of shares can lead to greater short term changes in the portfolio's value than in a larger portfolio of stocks and these variations will be amplified by the use of gearing. The Board regularly monitors the investment performance of the portfolio and the performance of the Manager in operating the investment policy against the long term objectives of the Company and, where appropriate, has in place mitigation measures such as the currency hedging policy.
Further details on risks relating to the Company's investment activities, including market price, interest rate, liquidity and foreign currency risks, are disclosed in Note 17 to the Financial Statements.
Performance risk
Inappropriate investment decisions may result in the Company's underperformance against the reference benchmark and peer group and a widening of the Company's discount. The Board regularly reviews performance data and attribution analysis and other relevant factors and, were an underperformance likely to be sustained, would be able to take remedial measures.
Share price and Discount risk
The principal risks described above each can affect the movement of the Company's share price and in some cases have the potential to increase the discount in the market value of the Company compared with NAV. The Board actively monitors the discount and believes that the combined effect of good investment performance, the risk mitigation arrangements described above and its ability to authorise buyback of shares when necessary, will both reduce discount and limit its variability.
Key Performance Indicators (KPIs)
The key performance indicators (KPIs) which the Board uses to monitor the Company's performance are established industry measures, and are as follows:
- net asset value (total return) relative to the Company's benchmark;
- share price (total return) vs peers; and
- discount or premium of the share price to net asset value vs sector average on an annual basis.
Performance is compared against the Company's benchmark and selected peer companies but, in view of the Manager's style of investing, there can be, in the short-term, considerable divergence from both comparators. Therefore the Board uses 3 year rolling performance for KPI measurement for NAV and share price total return.
Board Diversity
The Board recognises the importance of having a diverse group of Directors with the right mix of competencies to allow the Board to fulfil its obligations. At 31 March 2014 there were three male Directors and one female Director, all of whom bring different experience and skills and contribute distinctively to the Board's performance. The Board's statement on diversity is set out in the Statement of Corporate Governance in the Annual Report.
Employee, Environmental, Social and Human Rights Issues
The Company has no employees as it has delegated operational management to Aberdeen Asset Managers Limited. There are therefore no disclosures to be made in respect of employees. The Company's approach to corporate responsible investment is outlined in the Statement of Corporate Governance in the Annual Report.
The Strategic Report was approved by the Board of Directors and signed on its behalf by:
for Aberdeen Japan Investment Trust PLC
Neil Gaskell
Chairman
23 May 2014
5. RESULTS
Financial Highlights
|
|
31 March 2014 |
31 March 2013 |
% |
|
Total assets |
£60,972,000 |
£66,447,000 |
-8.2 |
|
Total equity shareholders' funds (net assets) |
£55,148,000 |
£60,352,000 |
-8.6 |
|
Market capitalisation |
£47,750,919 |
£56,104,594 |
-14.9 |
|
Share price (mid market) |
327.25p |
384.50p |
-14.9 |
|
Net asset value per share |
377.94p |
413.61p |
-8.6 |
|
Discount to net asset value |
13.4% |
7.0% |
|
|
Net gearing{A} |
9.7% |
9.2% |
|
|
|
|
|
|
|
Operating costs |
|
|
|
|
Ongoing charges ratio - excluding performance fee{B} |
1.41% |
1.39% |
|
|
Ongoing charges ratio - including performance fee{B} |
1.41% |
1.47% |
|
|
|
|
|
|
|
Earnings |
|
|
|
|
Total return per share |
(30.91p) |
58.98p |
|
|
Revenue return per share |
6.00p |
5.13p |
|
|
Proposed final dividend per share |
4.50p |
4.75p |
|
|
Revenue reserves (prior to payment of proposed final dividend) |
£1,671,000 |
£1,489,000 |
|
|
|
|
|
|
|
Definitions are disclosed in the Annual Report. |
|
|
|
|
{A} Calculated in accordance with AIC guidance "Gearing Disclosures post RDR". |
|||
|
{B} Ongoing charges ratio calculated in accordance with guidance issued by the AIC as the total of the investment management fee and administrative expenses divided by the average cum income net asset value throughout the year. |
|||
Performance (total return) {A}
|
|
|
|
|
|
|
Since AAM takeover |
|
|
31 Mar 2014 |
7 Oct 2013 |
1 year |
3 year |
5 year |
9 Nov 2006 |
|
|
% return |
% return |
% return |
% return |
% return |
% return |
|
Share price |
-4.5% |
-9.6% |
-13.7% |
+12.2% |
+109.2% |
+62.4% |
|
Net asset value |
+0.9% |
-8.3% |
-7.5% |
+12.8% |
+106.5% |
+72.0% |
|
Composite Index{B} |
-3.7% |
-2.4% |
-5.9% |
+5.0% |
+65.5% |
+43.1% |
|
|
||||||
|
Source: Aberdeen Asset Management, Factset & Morningstar. |
||||||
|
{A} Total return represents capital return plus dividends reinvested. |
||||||
|
{B} Composite Index represents the MSCI AC Asia Pacific (including Japan) Index (in Sterling terms) up to 7 October 2013 and the TOPIX (in Sterling terms) from 8 October 2013. |
||||||
Dividends
|
|
Rate |
Ex-dividend date |
Record date |
Payment date |
|
Proposed final dividend 2014 |
4.50p |
18 June 2014 |
20 June 2014 |
18 July 2014 |
|
Final dividend 2013 |
4.75p |
26 June 2013 |
28 June 2013 |
26 July 2013 |
INVESTMENT PORTFOLIO
Top Ten Investments
As at 31 March 2014
|
|
|
Valuation |
Total |
Valuation |
|
|
|
2014 |
assets |
2013 |
|
Company |
Sector |
£'000 |
% |
£'000 |
|
Shin-Etsu Chemical Company |
|
|
|
|
|
Despite the challenging environment, the Japanese maker of specialised chemicals remains a leader in its industry, due to its technological edge and a greater focus on profits than most rivals. |
Chemicals |
3,450 |
5.7 |
2,295 |
|
Fanuc Corporation |
|
|
|
|
|
A leading manufacturer of factory automation systems, equipment and robots that has an excellent track record of being able to maintain margins with robust cash flow and a strong net cash position. |
Industrial Engineering |
2,863 |
4.7 |
1,287 |
|
Keyence Corporation |
|
|
|
|
|
The leading maker of sensors has a cash generative business and is backed by a strong balance sheet and technological expertise. |
Electronic & Electrical Equipment |
2,775 |
4.5 |
- |
|
Canon Inc |
|
|
|
|
|
A world leader in imaging products, printers and cameras and one of the best-performing companies in Japan. Canon has benefited from strong digital camera sales, particularly in the high-end SLR segment. Its prospects are strong, and valuations attractive. |
Technology Hardware & Equipment |
2,545 |
4.2 |
2,120 |
|
Japan Tobacco Inc |
|
|
|
|
|
The world's third-largest cigarette company with a dominant domestic market share, Japan Tobacco has made good overseas acquisitions and is positioned to gain from exposure to emerging markets. |
Tobacco |
2,538 |
4.2 |
897 |
|
Seven & I Holdings Company |
|
|
|
|
|
A Japanese retail conglomerate with interests in a wide range of domestic businesses including convenience stores, discount stores, supermarkets, department stores and food services, which gives its earnings a defensive edge. |
General Retailers |
2,463 |
4.0 |
1,416 |
|
Chugai Pharmaceutical Company |
|
|
|
|
|
Roche's subsidiary in Japan, Chugai has a strong pipeline of drugs and is able to leverage its parent's portfolio and research. |
Pharmaceuticals & Biotechnology |
2,358 |
3.9 |
926 |
|
Nabtesco Corporation |
|
|
|
|
|
The hydraulic equipment maker has a high market share in its businesses thanks to its technological edge in niche areas. It also has healthy finances and a good track record on cost controls. |
Industrial Engineering |
2,336 |
3.8 |
- |
|
Mandom Corporation |
|
|
|
|
|
The well-managed beauty care products company delivers growth through effective product innovation and cost controls. Encouragingly, its overseas operations are witnessing healthy growth and business prospects are sound. |
Personal Goods |
2,074 |
3.4 |
- |
|
Toyota Motor Corporation |
|
|
|
|
|
Japan's largest car manufacturer, it also operates financing services through its subsidiaries. We like it for its global presence and solid overseas growth prospects. |
Automobiles & Parts |
2,066 |
3.4 |
1,629 |
|
Top ten investments |
|
25,468 |
41.8 |
|
Investment Portfolio - Other Investments
As at 31 March 2014
|
|
|
Valuation |
Total |
Valuation |
|
|
|
2014 |
assets |
2013 |
|
Company |
Sector |
£'000 |
% |
£'000 |
|
East Japan Railway Company |
Travel & Leisure |
2,051 |
3.4 |
- |
|
Bank Of Yokohama |
Banks |
1,947 |
3.3 |
- |
|
Honda Motor Company |
Automobiles & Parts |
1,888 |
3.1 |
1,701 |
|
Astellas Pharma Inc |
Pharmaceuticals & Biotechnology |
1,854 |
3.0 |
- |
|
Unicharm Corporation |
Personal Goods |
1,752 |
2.9 |
- |
|
KDDI Corporation |
Mobile Telecommunications |
1,653 |
2.7 |
- |
|
Daito Trust Construction Company |
Construction & Materials |
1,639 |
2.7 |
- |
|
Kansai Paint Company |
Chemicals |
1,630 |
2.7 |
- |
|
Asics Corporation |
Personal Goods |
1,476 |
2.4 |
- |
|
Amada Company |
Industrial Engineering |
1,438 |
2.3 |
- |
|
Top twenty investments |
|
42,796 |
70.3 |
|
|
Asahi Intecc Company |
Health Care Equipment & Services |
1,354 |
2.2 |
- |
|
Pigeon Corp |
Personal Goods |
1,327 |
2.2 |
- |
|
Yahoo Japan Corp |
Software & Computer Services |
1,244 |
2.0 |
- |
|
Mitsubishi Estate Company |
Real Estate Investment Services |
1,223 |
2.0 |
- |
|
Nippon Paint Company |
Chemicals |
1,092 |
1.8 |
- |
|
Daibiru Corporation |
Real Estate Investment Services |
1,077 |
1.8 |
- |
|
Shimano Inc |
Leisure Goods |
1,025 |
1.7 |
- |
|
Makita Corporation |
Household Goods & Home Construction |
989 |
1.6 |
- |
|
USS Company |
General Retailers |
947 |
1.6 |
- |
|
FCC Company |
Automobiles & Parts |
940 |
1.5 |
- |
|
Top thirty investments |
|
54,014 |
88.7 |
|
|
Calbee Inc |
Food Producers |
928 |
1.5 |
- |
|
San-A Company |
Food & Drug Retailers |
904 |
1.5 |
- |
|
Sysmex Corp |
Health Care Equipment & Services |
881 |
1.4 |
- |
|
Resorttrust Inc |
Travel & Leisure |
780 |
1.3 |
- |
|
Aisin Seiki Company |
Automobiles & Parts |
759 |
1.2 |
- |
|
Takeda Pharmaceutical Company |
Pharmaceuticals & Biotechnology |
581 |
1.0 |
1,494 |
|
Denso Corp |
Automobiles & Parts |
556 |
0.9 |
- |
|
Aeon Financial Service Company |
Financial Services |
393 |
0.6 |
- |
|
Total investments |
|
59,796 |
98.1 |
|
|
Net current assets{A} |
|
1,176 |
1.9 |
|
|
Total assets |
|
60,972 |
100.0 |
|
|
|
|
|
|
|
|
{A} Excludes bank loans of £5,824,000. |
||||
|
Unless otherwise stated, foreign stock is held and all investments are equity holdings. |
||||
|
In the 2013 valuation column "-" denotes stock not held at last year end. |
||||
GOING CONCERN
The Company's assets consist of equity shares in companies listed on recognised stock exchanges and in most circumstances are realisable within a short timescale.
The Board has set limits for borrowing and regularly reviews the gearing level, cash flow projections and compliance with banking covenants. In January 2014, the Company agreed the extension, by one year, of its £10 million existing multi-currency loan facility with Standard Chartered Bank. The Company will open renewal negotiations with its bankers in due course, but at this stage has not sought any commitment that the revolving facility will be renewed. If acceptable terms were to be available from the existing bankers, or any alternative, the Company would expect to continue to be able to access a similar facility; if, however, acceptable terms are not forthcoming, any outstanding amount will be repaid through proceeds of equity sales.
The Directors have calculated that, in the 90 days ended 31 March 2014, the Ordinary shares traded at an average discount of 6.8% to the underlying net asset value. The independent auditor has reviewed the accuracy of the calculation. Accordingly, no resolution on the continuation of the Company will be put to the Company's shareholders at the Annual General Meeting.
After making enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. This takes account of the liquidity of the Company's investments, and that the earliest date that the Company may be subject to a continuation vote is at the Annual General Meeting of the Company to be held in 2015. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the financial statements, in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with UK Accounting Standards.
The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these financial statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgments and estimates that are reasonable and prudent;
- state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Statement of Corporate Governance that comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
We confirm that to the best of our knowledge:
- the financial statements, prepared in accordance with the applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
- that in the opinion of the Directors, the Annual Report and Accounts taken as a whole, is fair, balanced and understandable and it provides the information necessary to assess the Company's performance, business model and strategy; and
- the Strategic Report and Directors' Report include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces.
For and on behalf of Aberdeen Japan Investment Trust PLC
Neil Gaskell
Chairman
23 May 2014
FINANCIAL STATEMENTS
INCOME STATEMENT (audited)
|
|
|
Year ended 31 March 2014 |
Year ended 31 March 2013 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
(Losses)/gains on investments |
9 |
- |
(8,876) |
(8,876) |
- |
8,072 |
8,072 |
|
Income |
2 |
1,710 |
- |
1,710 |
1,604 |
- |
1,604 |
|
Exchange gains/(losses) |
13 |
- |
3,698 |
3,698 |
- |
(161) |
(161) |
|
Investment management fee |
3 |
(227) |
(162) |
(389) |
(446) |
- |
(446) |
|
Performance fee |
3 |
- |
- |
- |
- |
(43) |
(43) |
|
Administrative expenses |
4 |
(466) |
(19) |
(485) |
(292) |
(10) |
(302) |
|
|
|
_____ |
_____ |
_______ |
______ |
______ |
_____ |
|
Net return before finance costs and taxation |
|
1,017 |
(5,359) |
(4,342) |
866 |
7,858 |
8,724 |
|
|
|
|
|
|
|
|
|
|
Finance costs |
5 |
(55) |
(27) |
(82) |
(109) |
- |
(109) |
|
|
|
_____ |
_____ |
_______ |
______ |
______ |
_____ |
|
Net return on ordinary activities before taxation |
|
962 |
(5,386) |
(4,424) |
757 |
7,858 |
8,615 |
|
|
|
|
|
|
|
|
|
|
Taxation on ordinary activities |
6 |
(87) |
- |
(87) |
(9) |
- |
(9) |
|
|
|
_____ |
_____ |
_______ |
______ |
______ |
_____ |
|
Net return on ordinary activities after taxation |
|
875 |
(5,386) |
(4,511) |
748 |
7,858 |
8,606 |
|
|
|
_____ |
_____ |
_______ |
______ |
______ |
_____ |
|
|
|
|
|
|
|
|
|
|
Return per ordinary share (pence) |
8 |
6.00 |
(36.91) |
(30.91) |
5.13 |
53.85 |
58.98 |
|
|
|
_____ |
_____ |
_______ |
______ |
______ |
_____ |
|
|
|
|
|
|
|
|
|
|
The total column of this statement represents the profit and loss account of the Company. |
|||||||
|
No Statement of Total Recognised Gains and Losses has been prepared as all gains and losses have been reflected in the Income Statement. |
|||||||
|
All revenue and capital items in the above statement derive from continuing operations. |
|||||||
|
The accompanying notes are an integral part of the financial statements. |
|||||||
BALANCE SHEET (audited)
|
|
|
As at |
As at |
|
|
|
31 March |
31 March 2013 |
|
|
Notes |
£'000 |
£'000 |
|
Fixed assets |
|
|
|
|
Investments designated at fair value through profit or loss |
9 |
59,796 |
65,800 |
|
|
|
___________ |
___________ |
|
Current assets |
|
|
|
|
Debtors |
10 |
840 |
363 |
|
Cash at bank and in hand |
|
473 |
513 |
|
|
|
___________ |
___________ |
|
|
|
1,313 |
876 |
|
|
|
___________ |
___________ |
|
|
|
|
|
|
Creditors: amounts falling due within one year |
11 |
|
|
|
Foreign currency bank loans |
|
(5,824) |
(6,095) |
|
Other creditors |
|
(137) |
(229) |
|
|
|
___________ |
___________ |
|
|
|
(5,961) |
(6,324) |
|
|
|
___________ |
___________ |
|
Net current liabilities |
|
(4,648) |
(5,448) |
|
|
|
___________ |
___________ |
|
Net assets |
|
55,148 |
60,352 |
|
|
|
___________ |
___________ |
|
|
|
|
|
|
Share capital and reserves |
|
|
|
|
Called-up share capital |
12 |
1,459 |
1,459 |
|
Capital redemption reserve |
|
2,273 |
2,273 |
|
Capital reserve |
13 |
49,745 |
55,131 |
|
Revenue reserve |
|
1,671 |
1,489 |
|
|
|
|
|
|
Equity shareholders' funds |
|
___________ |
___________ |
|
|
|
55,148 |
60,352 |
|
|
|
___________ |
___________ |
|
|
|
|
|
|
Net asset value per ordinary share (pence) |
14 |
377.94 |
413.61 |
|
|
|
___________ |
___________ |
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (audited)
|
For the year ended 31 March 2014 |
|
|
|
|
|
|
|
|
Capital |
|
|
|
|
|
Share |
redemption |
Capital |
Revenue |
|
|
|
capital |
reserve |
reserve |
reserve |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 31 March 2013 |
1,459 |
2,273 |
55,131 |
1,489 |
60,352 |
|
Return on ordinary activities after taxation |
- |
- |
(5,386) |
875 |
(4,511) |
|
Dividend paid (note 7) |
- |
- |
- |
(693) |
(693) |
|
|
_____ |
_______ |
______ |
______ |
______ |
|
Balance at 31 March 2014 |
1,459 |
2,273 |
49,745 |
1,671 |
55,148 |
|
|
_____ |
_______ |
______ |
______ |
______ |
|
|
|
|
|
|
|
|
For the year ended 31 March 2013 |
|
|
|
|
|
|
|
|
Capital |
|
|
|
|
|
Share |
redemption |
Capital |
Revenue |
|
|
|
capital |
reserve |
reserve |
reserve |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 31 March 2012 |
1,529 |
2,203 |
47,273 |
1,434 |
52,439 |
|
Treasury shares cancelled |
(70) |
70 |
- |
- |
- |
|
Return on ordinary activities after taxation |
- |
- |
7,858 |
748 |
8,606 |
|
Dividend paid (note 7) |
- |
- |
- |
(693) |
(693) |
|
|
_____ |
_______ |
______ |
______ |
______ |
|
Balance at 31 March 2013 |
1,459 |
2,273 |
55,131 |
1,489 |
60,352 |
|
|
_____ |
_______ |
______ |
______ |
______ |
CASHFLOW STATEMENT (audited)
|
|
|
Year ended |
Year ended |
||
|
|
|
31 March 2014 |
31 March 2013 |
||
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
|
Net cash inflow from operating activities |
15 |
|
524 |
|
474 |
|
|
|
|
|
|
|
|
Servicing of finance |
|
|
|
|
|
|
Bank and loan interest paid |
|
|
(82) |
|
(109) |
|
|
|
|
|
|
|
|
Financial investment |
|
|
|
|
|
|
Purchases of investments |
|
(50,910) |
|
(3,552) |
|
|
Sales of investments |
|
48,055 |
|
3,804 |
|
|
Expenses allocated to capital |
|
(5) |
|
(2) |
|
|
|
|
______ |
|
______ |
|
|
Net cash (outflow)/inflow from financial investment |
|
|
(2,860) |
|
250 |
|
|
|
|
|
|
|
|
Equity dividends paid |
|
|
(693) |
|
(693) |
|
|
|
|
______ |
|
______ |
|
Net cash outflow before financing |
|
|
(3,111) |
|
(78) |
|
|
|
|
|
|
|
|
Financing |
|
|
|
|
|
|
Loan repaid |
|
(571) |
|
(302) |
|
|
|
|
______ |
|
______ |
|
|
Net cash outflow from financing |
|
|
(571) |
|
(302) |
|
|
|
|
______ |
|
______ |
|
Decrease in cash |
16 |
|
(3,682) |
|
(380) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net cash flow to movements in net debt |
|
|
|
|
|
|
Decrease in cash as above |
|
|
(3,682) |
|
(380) |
|
Decrease in borrowings |
|
|
571 |
|
302 |
|
|
|
|
______ |
|
______ |
|
Change in net debt resulting from cash flows |
|
|
(3,111) |
|
(78) |
|
Exchange movements |
|
|
3,342 |
|
(161) |
|
|
|
|
______ |
|
______ |
|
Movement in net debt in the year |
|
|
231 |
|
(239) |
|
Opening net debt |
|
|
(5,582) |
|
(5,343) |
|
|
|
|
______ |
|
______ |
|
Closing net debt |
16 |
|
(5,351) |
|
(5,582) |
|
|
|
|
______ |
|
______ |
NOTES:
|
Notes to the Financial Statements |
||
|
1. |
Accounting policies |
|
|
|
(a) |
Basis of accounting and going concern |
|
|
|
The financial statements have been prepared under the historical cost convention, except for the measurement at fair value of investments and in accordance with the applicable UK Accounting Standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued by the Association of Investment Companies in January 2009. They have also been prepared on the assumption that approval as an investment trust will continue to be granted. The financial statements have been prepared on a going concern basis. The Directors believe this is appropriate for the reasons outlined in the Directors' Report. |
|
|
|
|
|
|
(b) |
Valuation of 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 Company designates the investments 'at fair value through profit or loss'. Fair value is taken to be the investment's cost at the trade date (excluding expenses incidental to the acquisition which are written off in the Income Statement, and allocated to 'capital' at the time of acquisition). |
|
|
|
|
|
|
|
Subsequent to initial recognition, investments continue to be designated at fair value through profit or loss, which is deemed to be bid prices, where the bid price is available, or otherwise at fair value based on published price quotations. |
|
|
|
|
|
|
(c) |
Income |
|
|
|
Dividends (other than special dividends), including taxes deducted at source, are included in revenue by reference to the date on which the investment is quoted ex-dividend. Special dividends are reviewed on a case-by-case basis and may be credited to capital, if circumstances dictate. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Company's right to receive payment is established. Where the Company has elected to receive its dividends in the form of additional shares rather than cash, the amount of the cash dividend is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital reserves. Interest receivable on bank balances is dealt with on an accruals basis. |
|
|
|
|
|
|
|
Where applicable the dividend income is disclosed net of irrecoverable taxes deducted at source. UK dividend income is recorded net of tax credits. |
|
|
|
|
|
|
(d) |
Expenses |
|
|
|
All expenses are accounted for on an accruals basis. Expenses are allocated to revenue in the Income Statement except as follows: |
|
|
|
expenses which are incidental to the acquisition or disposal of an investment are allocated to capital in the Income Statement and separately identified and disclosed in note 9; and |
|
|
|
expenses are allocated and borne by capital where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect, the investment management fee (with effect from 7 October 2013) is allocated 40% to revenue and 60% to realised capital reserves to reflect the Company's investment policy and prospective income and capital growth. Previously the investment management fee was charged 100% to revenue. The performance fee, which is no longer payable, was charged 100% to capital. |
|
|
|
|
|
|
(e) |
Taxation |
|
|
|
The charge for taxation is based on the revenue return for the financial period. |
|
|
|
|
|
|
|
Deferred taxation |
|
|
|
Deferred taxation is provided on all timing differences, that have originated but not reversed at the Balance Sheet date, where transactions or events that result in an obligation to pay more or a right to pay less tax in future have occurred at the Balance Sheet date, measured on an undiscounted basis and based on tax rates expected to apply in the period that the timing differences reverse. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the accounts which are capable of reversal in one or more subsequent periods. Due to the Company's status as an investment trust company, and the intention to continue to meet the conditions required to obtain approval for the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments. |
|
|
|
|
|
|
(f) |
Capital reserve |
|
|
|
Gains and losses on realisation of investments and changes in fair values of investments are transferred to the capital reserve. |
|
|
|
|
|
|
(g) |
Foreign currencies |
|
|
|
Transactions involving foreign currencies are converted at the rate ruling at the date of the transaction. |
|
|
|
|
|
|
|
Foreign currency asset and liability balances are translated to Sterling at the middle rate of exchange at the year end. Differences arising from translation are treated as capital gain or loss to capital or revenue within the Income Statement depending upon the nature of the gain or loss. |
|
|
|
|
|
|
(h) |
Dividends payable |
|
|
|
Final dividends are recognised in the financial statements in the period in which they are paid. |
|
|
|
|
|
|
(i) |
Borrowings |
|
|
|
All secured borrowings are initially recognised at cost, being the fair value of the consideration received, less issue costs where applicable, after initial recognition, all interest bearing borrowings are subsequently measured at amortised cost. The finance costs of such borrowings are accounted for on an accruals basis using the effective interest rate method and (with effect from 7 October 2013) are charged 40% to revenue and 60% to realised capital reserves to reflect the Company's investment policy and prospective income and capital growth. Previously the finance costs were charged 100% to revenue. |
|
|
|
2014 |
2013 |
|
2. |
Income |
£'000 |
£'000 |
|
|
From investments designated at fair value through profit and loss: |
|
|
|
|
UK dividend income |
97 |
253 |
|
|
Overseas dividends |
1,582 |
1,351 |
|
|
Scrip dividends |
31 |
- |
|
|
|
_______ |
_______ |
|
|
Total income |
1,710 |
1,604 |
|
|
|
_______ |
_______ |
|
|
|
2014 |
2013 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
3. |
Investment management fee |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Investment management fee |
227 |
162 |
389 |
446 |
- |
446 |
|
|
Performance fee |
- |
- |
- |
- |
43 |
43 |
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
|
|
Total |
227 |
162 |
389 |
446 |
43 |
489 |
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
|
|
|
||||||
|
|
As of 7 October 2013, the management fee is payable at a rate of 0.95% per annum of the value of the Company's Total Assets up to £50 million decreasing to 0.75% of the value of the Company's assets over and above £50 million, and is payable monthly in arrears. Previously, the management fee was payable monthly in arrears and was based on an annual amount of 0.75% of Total Assets of the Company valued monthly. The agreement is terminable on six months' notice. The balance due to AAM Asia at the year end was £46,000 (2013 - £83,000). The Manager waived management fees amounting to £127,000 during the year as part of an agreement with the Company in relation to costs associated with the change in investment mandate. |
||||||
|
|
|
||||||
|
|
As of 7 October 2013, the performance fee will no longer be payable. Previously, AAM Asia was entitled to a performance related fee of up to 15% of the portfolio's outperformance of the MSCI AC Asia Pacific (including Japan) Index (in Sterling terms) for the year in question. |
||||||
|
|
|
||||||
|
|
In the event that the Company outperformed this benchmark, but the year end net asset value per ordinary share was less than at the previous year end, the performance fee was capped at 0.3% of year end net asset value. The performance fee was only payable where the final net asset value on which the fee was calculated exceeded the net asset value (adjusted by any change in the benchmark index over the period) on which the last performance fee was paid. |
||||||
|
|
|
||||||
|
|
There was no performance fee due to AAM Asia for the year ended 31 March 2014 (2013 - £43,000). |
||||||
|
|
|
2014 |
2013 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
4. |
Administrative expenses |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Investor relations/Marketing initiative |
42 |
- |
42 |
40 |
- |
40 |
|
|
Directors' fees |
85 |
- |
85 |
70 |
- |
70 |
|
|
Safe custody fees |
16 |
5 |
21 |
23 |
2 |
25 |
|
|
Transaction costs on investment purchases |
- |
14 |
14 |
- |
8 |
8 |
|
|
Auditors' remuneration: |
|
|
|
|
|
|
|
|
audit of the financial statements{A} |
23 |
- |
23 |
20 |
- |
20 |
|
|
non-audit services{B} |
28 |
- |
28 |
- |
- |
- |
|
|
Other{C} |
272 |
- |
272 |
139 |
- |
139 |
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
|
|
|
466 |
19 |
485 |
292 |
10 |
302 |
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
|
|
{A} Includes work carried out on the Strategic Report, Directors' Remuneration Report, Statement of Corporate Governance and Directors' Report. |
||||||
|
|
{B} Work performed as Reporting Accountant relating to the change in investment mandate. |
||||||
|
|
{C} Includes £177,000 of costs relating to the change in investment mandate. The Manager waived management fees amounting to £127,000 during the year as part of an agreement with the Company in relation to these costs (see note 3). |
||||||
|
|
|
||||||
|
|
The Company has an agreement with Aberdeen Asset Managers Limited ("AAM") for the provision of marketing services in relation to the Company's participation in the Aberdeen Investment Trust Share Plan and ISA. The total fees paid and payable under the agreement were £42,000 (2013 - £40,000) and the accrual to AAM at the year end was £11,000 (2013 - £10,000). |
||||||
|
|
|
||||||
|
|
No pension contributions were made in respect of any of the Directors. |
||||||
|
|
|
||||||
|
|
The Company does not have any employees.
|
||||||
|
|
|
2014 |
2013 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
5. |
Finance costs |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Bank loans and overdrafts |
55 |
27 |
82 |
109 |
- |
109 |
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
|
|
|
2014 |
2013 |
|||||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|||
|
6. |
Taxation on ordinary activities |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|||
|
|
(a) |
Analysis of charge for the year |
|
|
|
|
|
|
||
|
|
|
Irrecoverable overseas taxation |
107 |
- |
107 |
74 |
- |
74 |
||
|
|
|
Overseas withholding tax reclaimable |
(20) |
- |
(20) |
(65) |
- |
(65) |
||
|
|
|
Current taxation |
87 |
- |
87 |
9 |
- |
9 |
||
|
|
|
|
|
|
|
|
|
|
||
|
|
(b) |
Factors affecting current tax charge for the year |
||||||||
|
|
|
The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The differences can be explained below: |
||||||||
|
|
|
|
||||||||
|
|
|
|
2014 |
2013 |
||||||
|
|
|
|
£'000 |
£'000 |
||||||
|
|
|
Net return on ordinary activities before taxation |
(4,424) |
8,615 |
||||||
|
|
|
|
|
|
||||||
|
|
|
Net return on ordinary activities multiplied by standard rate of corporation tax in the UK of 23% (2013 - 24%) |
(1,018) |
2,068 |
||||||
|
|
|
Effects of: |
|
|
||||||
|
|
|
UK dividend income |
(22) |
(61) |
||||||
|
|
|
Losses/(gains) on investments not taxable |
2,041 |
(1,937) |
||||||
|
|
|
Currency (gains)/losses not taxable |
(850) |
39 |
||||||
|
|
|
Tax on capital expenses |
48 |
13 |
||||||
|
|
|
Irrecoverable overseas withholding tax suffered |
107 |
74 |
||||||
|
|
|
Overseas withholding tax reclaimable |
(20) |
(65) |
||||||
|
|
|
Excess management expenses and loan relationship deficits not utilised in period |
148 |
202 |
||||||
|
|
|
Non-taxable overseas dividends |
(371) |
(324) |
||||||
|
|
|
Expenses not deductible for tax purposes |
24 |
- |
||||||
|
|
|
|
|
|
||||||
|
|
|
Current tax charge for the year |
87 |
9 |
||||||
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
|
|
(c) |
Provision for deferred taxation |
||||||||
|
|
|
At 31 March 2014 the Company had surplus management expenses and loan relationship debits with a tax value of £1,304,000 (2013 - £1,307,000) in respect of which a deferred tax asset has not been recognised. This is because the Company is not expected to generate taxable income in the future in excess of deductible expenses of that future period, and accordingly, it is unlikely that the Company will be able to reduce future tax liabilities through the use of existing surplus expenses. |
||||||||
|
|
|
2014 |
2013 |
|
7. |
Dividends |
£'000 |
£'000 |
|
|
Amounts recognised as distributions to equity holders in the year: |
|
|
|
|
Final dividend 2013 - 4.75p (2012 - 4.75p) |
693 |
693 |
|
|
|
_______ |
______ |
|
|
|
|
|
|
|
In order to comply with the requirements of Sections 1158-1159 of the Corporation Tax Act 2010 the Company is required to make a final dividend distribution. |
||
|
|
|
||
|
|
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability. |
||
|
|
|
||
|
|
The table below sets out the total dividends proposed in respect of the financial year, which is the basis on which the requirements of Sections 1158 -1159 are considered. The revenue available for distribution by way of dividend for the year is £1,671,000 (2013 - £1,489,000). Presently, only the revenue reserve can be used for the distribution of dividends. |
||
|
|
|
|
|
|
|
|
2014 |
2013 |
|
|
|
£'000 |
£'000 |
|
|
Proposed final dividend for 2014 - 4.50p per ordinary share (2013 - 4.75p) |
657 |
693 |
|
|
|
_______ |
______ |
|
|
|
|
|
|
|
The proposed final dividend will be paid, subject to approval at the Annual General Meeting, on 18 July 2014 to shareholders on the register at the close of business on 20 June 2014. |
||
|
|
|
2014 |
2014 |
2013 |
2013 |
|
8. |
Return per ordinary share |
p |
£'000 |
p |
£'000 |
|
|
Returns per share are based on the following figures: |
|
|
|
|
|
|
Revenue return |
6.00 |
875 |
5.13 |
748 |
|
|
Capital return |
(36.91) |
(5,386) |
53.85 |
7,858 |
|
|
|
_______ |
______ |
______ |
_______ |
|
|
Total return |
(30.91) |
(4,511) |
58.98 |
8,606 |
|
|
|
_______ |
______ |
______ |
_______ |
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares in issue |
|
14,591,572 |
|
14,591,572 |
|
|
|
|
_________ |
|
_________ |
|
|
|
Listed |
Listed |
|
|
|
|
overseas |
in UK |
Total |
|
9. |
Investments designated at fair value through profit or loss |
£'000 |
£'000 |
£'000 |
|
|
Opening book cost |
38,192 |
4,319 |
42,511 |
|
|
Opening investment holding gains |
22,324 |
965 |
23,289 |
|
|
|
______ |
______ |
______ |
|
|
Opening fair value |
60,516 |
5,284 |
65,800 |
|
|
Movements in the year: |
|
|
|
|
|
Purchases at cost (excluding transaction costs) |
50,797 |
130 |
50,927 |
|
|
Sales - proceeds (net of transaction costs) |
(43,153) |
(4,902) |
(48,055) |
|
|
Sales - gains on sales |
14,678 |
453 |
15,131 |
|
|
Decrease in investment holding gains |
(23,042) |
(965) |
(24,007) |
|
|
|
______ |
______ |
______ |
|
|
Closing fair value |
59,796 |
- |
59,796 |
|
|
|
______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
Listed |
Listed |
|
|
|
|
overseas |
in UK |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
|
|
Closing book cost |
60,514 |
- |
60,514 |
|
|
Closing investment holding losses |
(718) |
- |
(718) |
|
|
|
______ |
______ |
______ |
|
|
|
59,796 |
- |
59,796 |
|
|
|
______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
|
2014 |
2013 |
|
|
|
|
£'000 |
£'000 |
|
|
Investments listed on a recognised investment exchange |
|
59,796 |
65,800 |
|
|
|
|
______ |
______ |
|
|
|
|
|
|
|
|
|
|
2014 |
2013 |
|
|
(Losses)/gains on investments |
|
£'000 |
£'000 |
|
|
Gains on sales |
|
15,131 |
1,317 |
|
|
(Decrease)/increase in investment holding gains |
|
(24,007) |
6,755 |
|
|
|
|
______ |
______ |
|
|
|
|
(8,876) |
8,072 |
|
|
|
|
______ |
______ |
|
|
|
|
|
|
|
|
Transaction costs |
|
|
|
|
|
During the year expenses were incurred in acquiring or disposing of investments designated as fair value through profit or loss. Expenses incurred in acquiring investments have been expensed through capital and are included within administration expenses in the Income Statement, whilst expenses incurred in disposing of investments have been expensed through capital and are included within gains on investments in the Income Statement. The total costs were as follows: |
|||
|
|
|
|||
|
|
|
|
2014 |
2013 |
|
|
|
|
£'000 |
£'000 |
|
|
Purchases |
|
14 |
8 |
|
|
Sales |
|
60 |
11 |
|
|
|
|
______ |
______ |
|
|
|
|
74 |
19 |
|
|
|
|
______ |
______ |
|
|
|
2014 |
2013 |
|
10. |
Debtors: amounts falling due within one year |
£'000 |
£'000 |
|
|
Forward contracts |
356 |
- |
|
|
Prepayments and accrued income |
433 |
295 |
|
|
Withholding tax debtor |
49 |
66 |
|
|
Other loans and receivables |
2 |
2 |
|
|
|
______ |
______ |
|
|
|
840 |
363 |
|
|
|
______ |
______ |
|
|
|
|
|
|
|
All financial assets are included at amortised cost or at fair value for forward contracts. |
||
|
|
|
2014 |
2013 |
|
|
11. |
Creditors: amounts falling due within one year |
£'000 |
£'000 |
|
|
|
(a) |
Foreign currency bank loans |
5,824 |
6,095 |
|
|
|
|
______ |
______ |
|
|
|
|
|
|
|
|
|
In January 2011, the Company entered into a two year £10,000,000 multi-currency revolving credit facility with Standard Chartered Bank, which was extended in January 2014 until 25 January 2015. At the year end, JPY1,000,000,000 (2013 - JPY170,622,000; USD7,440,000) equivalent to £5,824,000 (2013 - £1,195,000; £4,900,000) had been drawn down from Standard Chartered Bank at an all-in interest rate of 1.10214% (2013 - 1.12429%; 1.20420%) which matured on 24 April 2014. |
||
|
|
|
|
||
|
|
|
On 24 April 2014, the principal amount of the loan was rolled forward into a loan of JPY1,000,000,000 at an all-in interest rate of 1.10143%, until maturity on 26 May 2014. |
||
|
|
|
|
||
|
|
|
The terms of the loan facility with Standard Chartered Bank contain a covenant that total borrowings should not exceed 25% of the net asset value of the Company at any time and that the net asset value should not fall below £30,000,000 at any time. The Company met this covenant throughout the period. |
||
|
|
|
|
|
|
|
|
|
|
2014 |
2013 |
|
|
(b) |
Other creditors and accrued expenses |
£'000 |
£'000 |
|
|
|
Performance fee |
- |
43 |
|
|
|
Other creditors |
137 |
186 |
|
|
|
|
______ |
______ |
|
|
|
|
137 |
229 |
|
|
|
|
______ |
______ |
|
|
|
2014 |
2013 |
||
|
12. |
Called-up share capital |
Number |
£'000 |
Number |
£'000 |
|
|
Allotted, called-up and fully paid |
|
|
|
|
|
|
Ordinary shares of 10p each |
14,591,572 |
1,459 |
14,591,572 |
1,459 |
|
|
|
__________ |
______ |
__________ |
______ |
|
|
|
2014 |
2013 |
|
13. |
Capital reserve |
£'000 |
£'000 |
|
|
At 1 April 2013 |
55,131 |
47,273 |
|
|
Gains over cost arising on movement in investment holdings |
(24,007) |
6,755 |
|
|
Gains on realisation of investments at fair value |
15,131 |
1,317 |
|
|
Exchange gains/(losses) |
3,698 |
(161) |
|
|
Performance fee |
- |
(43) |
|
|
Administrative expenses |
(19) |
(10) |
|
|
Management fee |
(162) |
- |
|
|
Finance costs |
(27) |
- |
|
|
|
______ |
______ |
|
|
At 31 March 2014 |
49,745 |
55,131 |
|
|
|
______ |
______ |
|
|
|
|
|
|
|
The capital reserve includes investment holding losses amounting to £718,000 (2013 - gains of £23,289,000) as disclosed in note 9. |
||
|
14. |
Net asset value per share |
||||
|
|
The net asset value per share and the net asset values attributable to ordinary shareholders at the year end calculated in accordance with the articles of Association were as follows: |
||||
|
|
|
||||
|
|
|
Net asset value per share |
Net asset values attributable |
||
|
|
|
2014 |
2013 |
2014 |
2013 |
|
|
|
p |
p |
£'000 |
£'000 |
|
|
Ordinary shares |
377.94 |
413.61 |
55,148 |
60,352 |
|
|
|
______ |
______ |
______ |
______ |
|
|
|
||||
|
|
The movements during the year of the assets attributable to the ordinary shares were as follows: |
||||
|
|
|
||||
|
|
|
2014 |
2013 |
||
|
|
|
£'000 |
£'000 |
||
|
|
Net assets attributable at 1 April |
60,352 |
52,439 |
||
|
|
Capital return for the year |
(5,386) |
7,858 |
||
|
|
Revenue on ordinary activities after taxation |
875 |
748 |
||
|
|
Dividend paid |
(693) |
(693) |
||
|
|
|
______ |
______ |
||
|
|
Net assets attributable at 31 March |
55,148 |
60,352 |
||
|
|
|
______ |
______ |
||
|
|
|
|
|
||
|
|
The net asset value per ordinary share is based on net assets, and on 14,591,572 (2013 - 14,591,572) ordinary shares, being the number of ordinary shares in issue at the year end. |
||||
|
15. |
Reconciliation of net return before finance costs and taxation |
2014 |
2013 |
|
|
to net cash inflow from operating activities |
£'000 |
£'000 |
|
|
Return on ordinary activities before finance costs and taxation |
(4,342) |
8,724 |
|
|
Adjustments for: |
|
|
|
|
Losses/(gains) on investments |
8,876 |
(8,072) |
|
|
Expenses taken to capital reserve |
19 |
10 |
|
|
Foreign exchange movements |
(3,698) |
161 |
|
|
(Increase)/decrease in accrued income |
(138) |
11 |
|
|
Decrease/(increase) in other debtors |
17 |
(64) |
|
|
(Decrease)/increase in other creditors |
(49) |
96 |
|
|
Decrease in performance fee creditor |
(43) |
(383) |
|
|
Overseas withholding tax suffered |
(87) |
(9) |
|
|
Scrip dividends included in investment income |
(31) |
- |
|
|
|
______ |
______ |
|
|
Net cash inflow from operating activities |
524 |
474 |
|
|
|
______ |
______ |
|
|
|
1 April |
Cash |
Exchange |
31 March |
|
|
|
2013 |
flow |
movements |
2014 |
|
16. |
Analysis of changes in net debt |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Cash at bank |
513 |
(3,682) |
3,642 |
473 |
|
|
Debts falling due within one year |
(6,095) |
571 |
(300) |
(5,824) |
|
|
|
______ |
______ |
______ |
______ |
|
|
Net debt |
(5,582) |
(3,111) |
3,342 |
(5,351) |
|
|
|
______ |
______ |
______ |
______ |
|
17. |
Financial instruments |
||||||||||
|
|
Risk management |
||||||||||
|
|
The Company's financial instruments comprise securities and other investments, cash balances, loans, forward exchange contracts and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income. |
||||||||||
|
|
|
||||||||||
|
|
The main financial risks that the Company faces from its financial instruments are market price risk, interest rate risk, liquidity risk and credit risk. |
||||||||||
|
|
|
||||||||||
|
|
The Board has established policies for managing each of these risks and reviews regularly their implementation by the Manager. The Company's policies for managing these risks are summarised below and have been applied throughout the year. |
||||||||||
|
|
|
||||||||||
|
|
Market price risk |
||||||||||
|
|
The fair value of, or future cash flows from, a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises two elements - security price risk and currency risk. |
||||||||||
|
|
|
||||||||||
|
|
Security price risk |
||||||||||
|
|
Changes in market prices for the Company's portfolio of securities directly affect their reported value in the Balance Sheet. |
||||||||||
|
|
|
||||||||||
|
|
It is the Board's investment policy for the Company's assets to be invested in a selected portfolio of securities in quoted companies. The Manager has a dedicated investment management process, which ensures that the risk inherent in this investment policy is controlled. Underlying the process is the belief that risk is not that individual stock prices fluctuate in the short term, or that movement in the value of the portfolio deviates from the benchmark but that risk is investment in poorly managed expensive companies which the Manager does not understand. In-depth research and stock selection procedures are in place based on this risk control philosophy. The portfolio is reviewed on a periodic basis by the Manager's Investment Committee and by the Board. |
||||||||||
|
|
|
||||||||||
|
|
Security price sensitivity |
||||||||||
|
|
If market prices at the Balance Sheet date had been 10% higher or lower while all other variables remained constant, the return attributable to ordinary shareholders for the year ended 31 March 2014 would have increased/(decreased) by £5,980,000 (2013 increased/(decreased) by £6,580,000) and equity reserves would have increased/(decreased) by the same amount. |
||||||||||
|
|
|
||||||||||
|
|
Foreign currency risk |
||||||||||
|
|
The Company primarily invests in the shares of companies which are listed in Japan but can include companies listed on other stockmarkets which earn significant revenue from trading in Japan or hold net assets predominantly in Japan. The Balance Sheet, therefore, can be significantly affected by movements in foreign exchange rates. The Company may, from time to time, match specific overseas investment with foreign currency borrowings. The Company's borrowings, as detailed in note 11, are also in foreign currency. |
||||||||||
|
|
|
||||||||||
|
|
The Company seeks to ensure that the Company's Yen net exposure is appropriately Sterling-hedged through the use of rolling forward currency contracts. At 31 March 2014 the Company had a foreign currency contract, details of which are disclosed below. During the year a net gain of £2,271,000 (2013 - £nil) was realised from the use of such contracts. |
||||||||||
|
|
|
||||||||||
|
|
The revenue account is subject to currency fluctuation arising on dividends paid in foreign currencies. The Company does not hedge this currency risk. |
||||||||||
|
|
|
||||||||||
|
|
Foreign currency risk exposure by currency of denomination: |
||||||||||
|
|
|
||||||||||
|
|
|
31 March 2014 |
31 March 2013 |
||||||||
|
|
|
|
Net |
Total |
|
Net |
Total |
||||
|
|
|
Overseas |
monetary |
currency |
Overseas |
monetary |
currency |
||||
|
|
|
investments |
assets |
exposure |
investments |
assets |
exposure |
||||
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||||
|
|
Australian Dollar |
- |
- |
- |
3,071 |
9 |
3,080 |
||||
|
|
Hong Kong Dollar |
- |
- |
- |
11,191 |
- |
11,191 |
||||
|
|
Indian Rupee |
- |
- |
- |
4,895 |
- |
4,895 |
||||
|
|
Indonesian Rupiah |
- |
- |
- |
496 |
1 |
497 |
||||
|
|
Japanese Yen |
59,796 |
(5,532) |
54,264 |
15,207 |
(1,195) |
14,012 |
||||
|
|
Korean Won |
- |
- |
- |
2,377 |
- |
2,377 |
||||
|
|
Malaysian Ringgit |
- |
- |
- |
1,061 |
- |
1,061 |
||||
|
|
Philippine Peso |
- |
- |
- |
2,025 |
- |
2,025 |
||||
|
|
Singapore Dollar |
- |
- |
- |
10,828 |
- |
10,828 |
||||
|
|
Sri Lanka Rupee |
- |
- |
- |
834 |
- |
834 |
||||
|
|
Taiwan Dollar |
- |
49 |
49 |
2,799 |
72 |
2,871 |
||||
|
|
Thailand Baht |
- |
- |
- |
2,349 |
- |
2,349 |
||||
|
|
US Dollar |
- |
- |
- |
3,383 |
(4,894) |
(1,511) |
||||
|
|
Total |
59,796 |
(5,483) |
54,313 |
60,516 |
(6,007) |
54,509 |
||||
|
|
|
||||||||||
|
|
Foreign currency sensitivity |
||||||||||
|
|
The following table details the Company's sensitivity to a 10% increase and decrease in Sterling against the major foreign currencies in which the Company has exposure (based on exposure >5% of total exposure and excludes foreign exchange contracts). The sensitivity analysis includes foreign currency denominated monetary items and adjusts their translation at the year end for a 10% change in foreign currency rates. |
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|
|
|
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|
|
|
2014 |
2014 |
2013 |
2013 |
||||||
|
|
|
Revenue |
Equity{A} |
Revenue |
Equity{A} |
||||||
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
||||||
|
|
Japanese Yen |
72 |
2,526 |
31 |
1,401 |
||||||
|
|
|
______ |
______ |
______ |
______ |
||||||
|
|
|
||||||||||
|
|
{A}Represents equity exposure to relevant currencies. |
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|
|
|
||||||||||
|
|
Foreign exchange contracts |
||||||||||
|
|
The following Japanese Yen forward contracts were outstanding at the Balance Sheet date: |
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|
|
|
||||||||||
|
|
Date of contract |
Settlement date |
Amount JPY '000 |
Contracted rate |
Unrealised gain at 31 March 2014 £'000 |
||||||
|
|
14 February 2014 |
19 May 2014 |
2,457,605 |
169.49 |
177 |
||||||
|
|
14 February 2014 |
21 May 2014 |
2,457,141 |
169.46 |
179 |
||||||
|
|
17 February 2014 |
21 May 2014 |
2,471,960 |
170.48 |
93 |
||||||
|
|
17 February 2014 |
19 May 2014 |
(2,471,982) |
170.48 |
(93) |
||||||
|
|
|
|
|
|
______ |
||||||
|
|
|
|
|
|
356 |
||||||
|
|
|
|
|
|
______ |
||||||
|
|
|
|
|
|
|
||||||
|
|
The Sterling equivalent of the above contracts is £29,000,000 based on the net amount of JPY 4,914,724,000 at the contracted rates applicable. |
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|
|
|
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|
|
Interest rate risk |
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|
|
Interest rate movements may affect the level of income receivable on cash deposits and interest payable on the Company's variable rate borrowings. |
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|
|
|
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|
|
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions. |
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|
|
|
||||||||||
|
|
Interest rate sensitivity |
||||||||||
|
|
Movements in interest rates would not significantly affect net assets attributable to the Company's shareholders and total profit. |
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|
|
|
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|
|
Liquidity risk |
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|
|
This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. Liquidity risk is not considered to be significant as the Company's assets mainly comprise readily realisable securities which can be sold to meet funding requirements if necessary and short-term flexibility is achieved through the use of loan facilities, details of which may be found in note 11. |
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|
|
|
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|
|
Liquidity risk exposure |
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|
|
At 31 March 2014 and 31 March 2013 the Company's bank loans, amounting to £5,824,000 and £6,095,000, respectively, were both due for repayment or roll-over within six months along with interest due on the amount of the principal at the same time. |
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|
|
|
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|
|
Credit risk |
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|
|
This is the risk of failure of the counterparty to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss. |
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|
|
|
||||||||||
|
|
The risk is not significant given the relatively small amounts involved, and is managed as follows: |
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|
|
investment transactions are carried out with a large number of brokers of good quality credit standing; and |
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|
|
cash is held only with reputable banks with high quality external credit enhancements. |
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|
|
|
||||||||||
|
|
In addition, both stock and cash reconciliations to the Custodians' records are performed on a daily basis to ensure discrepancies are investigated on a timely basis. |
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|
|
|
||||||||||
|
|
None of the Company's financial assets is secured by collateral or other credit enhancements and none are past due or impaired. |
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|
|
|
||||||||||
|
|
Credit risk exposure |
||||||||||
|
|
The amount of cash at bank and in hand of £473,000 (2013 - £513,000) and debtors of £840,000 (2013 - £363,000) in the Balance Sheet represent the maximum exposure to credit risk at 31 March. |
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|
|
|
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|
|
Fair values of financial assets and financial liabilities |
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|
|
All financial assets and financial liabilities of the Company are included in the Balance Sheet at fair value. |
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|
18. |
Capital management policies and procedures |
|
|
The Company's capital management objectives are: |
|
|
to ensure that the Company will be able to continue as a going concern; and |
|
|
to maximise the income and capital return to its equity shareholders through an appropriate balance of equity capital and debt. The Board normally seeks to limit gearing to 15% of net assets. |
|
|
|
|
|
The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes the nature and planned level of gearing, which takes account of the Manager's views on the market and the extent to which revenue in excess of that which is required to be distributed should be retained. |
|
|
|
|
|
The Company's objectives, policies and processes for managing capital are unchanged from the preceding accounting period and year end positions are presented in the Balance Sheet. |
|
19. |
Fair value hierarchy |
|
|
|
FRS 29 'Financial Instruments: Disclosures' requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: |
|
|
|
|
|
|
|
Level 1: |
quoted prices (unadjusted) in active markets for identical assets or liabilities; |
|
|
Level 2: |
inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (ie as prices) or indirectly (ie derived from prices); and |
|
|
Level 3: |
inputs for the asset or liability that are not based on observable market data (unobservable inputs). |
|
|
|
|
|
|
All of the Company's investments are in quoted equities (2013 - same) actively traded on a recognised stock exchange, with their fair value being determined by reference to their quoted bid prices at the reporting date. The total value of the investments (2014 - £59,796,000; 2013 - £65,800,000) have therefore been deemed as Level 1. |
|
20. Additional notes for Annual Financial Report:
The final dividend, subject to shareholder approval, will be paid on 18 July 2014 to shareholders on the register at the close of business on 20 June 2014. The ex-dividend date is 18 June 2014.
This Annual Financial Report announcement is not the Company's statutory accounts. The statutory accounts for the year ended 31 March 2013 have been delivered to the Registrar of Companies. The statutory accounts for the years ended 31 March 2014 and 31 March 2013 received an audit report which was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not include a statement under section 498(2) or (3) of the Companies Act 2006. The statutory accounts for the financial year ended 31 March 2014 have been approved by the Board and audited but will not be filed with the Registrar of Companies until after the Company's Annual General Meeting which will be held at 10.30am on 15 July 2014 at Bow Bells House, One Bread Street, London EC4M 9HH.
The Annual Report will be posted to shareholders in June 2014 and copies will be available from the Manager or from the Company's website (www.aberdeen-japan.co.uk*).
Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise and may be affected by exchange rate movements. Investors may not get back the amount they originally invested.
*Neither the Company's website nor the content of any website accessible from hyperlinks on that website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.
For Aberdeen Japan Investment Trust PLC
Aberdeen Asset Management PLC, Secretary
END
This information is provided by RNS
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