Interim Results

RNS Number : 5471E

Atlantis Japan Growth Fund Ld

22 December 2009

 



Atlantis Japan Growth Fund Limited (the "Company")

(a closed-ended investment company incorporated with limited liability under the laws of Guernsey with registered number 30709)

Statement of Interim Results

22 December 2009

The financial information set out in this announcement does not constitute the Company's statutory accounts for the period ending 31st October 2009

The financial information for the period ended 31st October 2009 is derived from the financial statements delivered to the UK Listing Authority.

Interim Management Report and Investment Manager's Report

For the six months ended 31st October 2009

Performance

The Tokyo Market bottomed in March and slowly recovered during the six months ended October, with the Topix up about 14.9% and the Tokyo Second Market (mostly smaller stocks) advancing 23.2%, both in dollar terms. The Fund's NAV, again in dollar terms, was up 37.3%. The factors which most strongly impact our performance, especially over the longer term, are the trend of the market, stock selection and the currency (a stronger Yen helps the dollar value of the Fund and vice versa). However, good stock selection is expected to be the most important element influencing our long term performance.

During the period under review, the increase in the value of the Fund was due in part to the stronger Yen which ended the period at Y91.215 versus an April month-end rate of Y98.150, a gain of 7.6%. The Fund's borrowings were reduced to Y3 billion from Y4.5 billion, which means that the gearing dropped to 12.0% on a net basis as of the end of October. Gearing helped our performance. Borrowings were reduced during the period as loans became repayable and no substitute providers were identified. We hope that conditions will improve, enabling us to borrow again and increase the gearing, assuming perceived market conditions remain favourable.

The Fund has no foreign exchange hedges and none are planned at this time. At present the Fund has no exposure to warrants, convertibles, or any kind of derivatives. 

Market Outlook

In our view, the factors which impact the market's Yen performance most are net money inflows (the flow of funds into and out of equities) and new issues. In turn, these are influenced in part by fundamentals, including GDP growth, but more importantly by the trend of corporate earnings and their perceived outlook. The market will tend to move higher when the economy is expanding, corporate earnings are rising (or are perceived to be about to rise), investors are optimistic resulting in net buying of equities and when the amount of new issues is limited, and vice versa.

Since spring of this year there have been signs that the economy is bottoming and is now in the process of gradually recovering. Positive signs include rising month-on-month industrial production figures, an improving outlook for exports, better trade and current account balances, rising car sales from late summer (October sales were up 12.6%), flat to lower unemployment rates in recent months, a small increase in household spending in some months, and expanding money supply in terms of M2. Business and consumer confidence also seem to be firming.

Although GDP figures are expected to be negative for the current fiscal year ending next March, for the following year ending March 2011 we look for GDP growth in real terms of around 1.5-2% and project continued positive growth for the following year. Corporate earnings hopefully bottomed in the six-month period ended September but will probably still be down to flat at best for the current fiscal year. We hope to see next year characterised by a sharp V-shaped jump in earnings, perhaps by as much as 80-100%, and continued growth for the following year ending March 2012.

Events which might derail our bright scenario include an overly strong Yen, a weaker than expected world economy, a major boost in interest rates, fallout from the flu pandemic, a change in fiscal or monetary policy by the new Government, protectionism and, of course, unforeseen events.  

Until recently, the major buyers of Japanese equities were overseas investors who, on many days, accounted for 50-60% or more of the daily trading volume. Recently however, domestic individuals have also been buyers. At present, domestic individuals and overseas investors combined often account for well over 75% of daily trading with overseas investors usually buying when the market is rising and local individual investors usually buying on weakness. A continuing slow recovery in confidence among local investors and buying by overseas investors could well be the ingredients of a continued rising market. 

Interim Management Report and Investment Manager's Report

For the six months ended 31st October 2009

Our Strategy and the Portfolio

Our basic strategy remains unchanged. We aim to buy undervalued companies that can grow earnings over the medium to longer term. We will also buy cyclical growth companies, especially when we are optimistic on the economy, and have some exposure to recovery situations.

Although we are mostly looking at individual stocks, we also think that the economy, commodity prices, a weak or strong currency, interest rates, etc. can greatly impact our earnings model for any given company and therefore also pay attention to the big picture; the trend of the economy and the market. 

However, we place stress on stock selection which is based on visiting a large number of companies in a wide range of businesses. In fact, we will visit any company, no matter how big or small, in any business. We want to invest in undervalued companies with above-average growth potential. Given our optimistic view on the economic outlook at present we have a high exposure to cyclical growth names, including electronic parts, auto parts, trucking and logistics, specialised chemical manufacturers, semiconductor manufacturing equipment, services and retail related businesses and many other areas. We have little exposure to heavy industry, shipping, airlines, utilities, fishing or construction. Stress is placed on finding attractive companies, not sector allocation. Thus we are very much bottom-up investors.

Since we are optimistic on the economic and market outlook we are now fully invested and, as mentioned above, have some gearing which we would consider increasing if and when borrowing terms improve, something which could happen in the next 6-12 months.  

We are not hedging the currency since we think the Yen will continue to remain strong against the US dollar, but will monitor the situation carefully.

We are happy to report that we are finding many promising buy candidates at this time and it is very much a matter of trying to pick the most attractive stocks from a long list of candidates, a list based on many company visits including meetings with competing companies in the same business.  

As ever it is difficult to predict the direction of the Japanese market. If it does move higher, we feel that your Fund is well positioned to prosper.

Atlantis Fund Management (Guernsey) Limited

November 2009

Directors' Interim Report and Responsibility Statement

For the six months ended 31st October 2009

The Directors present their Interim Report and the Unaudited Financial Statements of the Company for the six months period ended 31st October 2009.

Capital Values

At 31st October 2009 the value of net assets available to shareholders was $252,354,642 (30th April 2009 - $183,665,544) and the Net Asset Value per share was $12.35 (30th April 2009 - $8.99).

Company's Objectives, Policies and Strategies in Respect of Financial Assets

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

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

Market risk

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

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

Currency risk

The Company's results for the 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.

Borrowing and Interest rate risk

The Company finances its operations mainly through its share capital and retained profits, including realised and unrealised capital profits. Additional bank borrowings may be used with a view to enhancing capital returns. However, the Company's Articles of Association provide that borrowing levels should not exceed 20% of Net Asset Value at the time any borrowing is effected. The level of gross borrowing as at 31st October 2009 was 13.0%, while at 30th April 2009 it was 25.0%. The level of net borrowing as at 31st October 2009 was 12.0% while at 30th April 2009 it was 16.7%.

A facility for Yen 1,500,000,000 was repaid on 16th October 2009 and the facility has not been renewed  to date.

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' Interim Report and Responsibility Statement

For the six months ended 31st October 2009

Director's Responsibility Statement

We confirm, to the best of our knowledge, that:

• the condensed set of interim financial statements have 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 and the Director's report includes a fair review of important events that have occurred during the first six months of the financial year and their impact on the condensed set of interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

• note 9 to the financial statements includes a fair review of the information concerning related party transactions required by DTR 4.2.8R

Approved by the Board

Tim Guinness            Andrew Martin Smith

Chairman                    Director

17th December 2009

Details of Ten Largest Investments

Makita (491,200 shares, cost $14,023,871)

Makita is a major manufacturer of hand-held power tools used in housing, woodwork, construction and metalwork. Distribution is via a world-wide sales network. The company produces most of its products outside of Japan and overseas sales now account for well over 70% of the total. The company is expected to benefit from the world economic recovery now in progress and to continue to gain global market share in coming years.

(Fair value of $16,478,342 representing 6.5% of the Net Asset Value)

Hamakyorex (455,600 shares, cost $9,684,303)

Hamakyorex based in Nagoya, is involved in trucking and logistics. The company has been expanding its operations, adding new customers and has also taken over several other trucking companies. We look for steady growth in coming years and expect a continued increase in market share. 

(Fair value of $10,938,596 representing 4.3% of the Net Asset Value)

Dai-ichi Seiko (221,800 shares, cost $3,977,983)

Dai-ichi Seiko makes coaxial connectors used in a wide range of goods including laptop computers, mobile telephones, digital consumer products, HDDs, autos and other industrial equipment. Business was negatively impacted by the recent worldwide slump but is now recovering and we look for expansion/growth over the coming few years.

(Fair value of $10,869,351 representing 4.31% of the Net Asset Value)

Toyota Tsusho (675,800 shares, cost $6,112,523) 

Toyota Tsusho, part of the Toyota Group, is a trading company which both imports and exports a wide range of products including raw materials used in auto production. The company is also involved in marketing Toyota cars in Russia, Africa, and several other regions. Business is now recovering and we look for steady expansion over the next few years.

(Fair value of $9,838,978 representing 3.9% of the Net Asset Value)

Ain Pharmaciez (266,900 shares, cost $4,627,088)

Ain Pharmaciez runs a nationwide chain of prescription drug stores, mostly located near major hospitals. The company has been aggressively expanding the number of new units and is now one of the major names in the sector. It continues to steadily increase its market share in a very fragmented market.

(Fair value of $7,724,782 representing 3.1% of the Net Asset Value)

Seven Bank (3,159 shares, cost $7,073,587)

Seven Bank is a subsidiary of the Seven & I Group and specialises in operating ATMs which are placed in convenience stores, stations, supermarkets, airports, hospitals, post offices and even in broker offices. The company is steadily expanding the number of machines it operates, introducing new services and plans to soon begin offering short term loans to it clients. Seven has one of the strongest balance sheets among the Japanese banks and also has an outstanding growth record.

(Fair value of $7,653,774 representing 3.0% of the Net Asset Value)

Shin-Etsu Chemical (120,000 shares, cost $5,921,527)

Shin-Etsu Chemical is the world's largest manufacturer of PVC, semiconductor silicon and photomask substrates. The company also produces a wide range of other products including organic and inorganic chemicals, electronic materials and functional materials. Business is now recovering in most of the above areas and we look for good earnings growth over the long term.

(Fair value of $6,406,841 representing 2.5% of the Net Asset Value)

Sakai Moving (271,700 shares, cost $5,639,604)

Sakai Moving is one of the leading removals companies for individuals who are changing residence. The company operates in all major Japanese population centres, has been gaining market share and has an outstanding long term growth record. Although at present business is being negatively impacted by the weak economy, we expect continued growth over the longer terms and project a recovery in earnings growth from next year.

(Fair value of $6,016,927 representing 2.4% of the Net Asset Value)

Nippon Electric Glass (505,000 shares, cost $4,234,381)

Nippon Electric Glass is one of the world's three major producers of the glass used in making LCD TV panels, and one of only two companies producing glass for plasma TV panels. The company is benefiting from steadily increasing demand for glass for LCD panels which should remain strong for the next several years, if not longer, as LCD TV sales continue to grow with the replacement of CRT TVs.

(Fair value of $5,536,370 representing 2.2% of the Net Asset Value)

Mitsubishi UFJ Lease (179,370 shares, cost $6,341,283)

Mitsubishi UFJ Lease, backed up by the Mitsubishi UFJ Banking Group, is Japan's leading leasing company and tends to do well when industrial production is increasing and private capital investments are strong. The expected economic recovery and continuing low interest rates should help pull up earnings in coming years.

(Fair value of $5,427,410 representing 2.2% of the Net Asset Value)

Comparisons as at 31st October 2008 are as follows:-

			Fair	Percentage
Investment	Shares	Cost	Value	of NAV
Seven Bank	4,802	9,954,935	13,747,000	6.9
Nissha Printing	215,100	7,395,256	11,730,000	5.9
Maxvalu Tokai	476,000	9,828,344	5,962,000	3.0
Hamakyorex	296,900	7,221,890	5,362,000	2.7
Sakai Moving Service	271,700	6,771,523	5,046,000	2.5
Ajis	252,790	5,308,601	4,768,000	2.4
Makita	258,200	9,730,273	4,552,000	2.3
Sumitomo Rubber Industries	450,000	5,839,370	3,935,000	1.9
Mitsubishi UFJ Lease & Finance	157,510	6,938,889	3,681,000	1.9
Toyo Tanso	105,000	7,328,927	3,584,000	1.8

Unaudited Statement of Comprehensive Income 

For the six months ended 31st October 2009

			(Unaudited)				(Unaudited)
		01-May-09 to 31-Oct-09				01-May-08 to 31-Oct-08
		Revenue	Capital	Total		Revenue	Capital	Total
Notes		$'000	$'000	$'000		$'000	$'000	$'000
	Income
3	Gains/(losses) on investments held at fair value	-	69,687	69,687		-	(123,426)	(123,426)
	Exchange gain	-	679	679		-	294	294
	Dividend income	2,485	-	2,485		3,741	-	3,741
		2,485	70,366	72,851		3,741	(123,132)	(119,391)
	Expenses
4	Investment management fee	1,795	-	1,795		2,146	-	2,146
5	Custodian fees	114	-	114		177	-	177
6	Administration fees	125	-	125		122	-	122
6	Registrar and transfer agent fees	13	-	13		14	-	14
7	Directors' fees and expenses	75	-	75		85	-	85
	Transaction costs	-	315	315		-	367	367
	Insurance fees	13	-	13		31	-	31
	Audit fee	21	-	21		37	-	37
	Printing and advertising fees	23	-	23		21	-	21
	Legal and professional fees	28	-	28		23	-	23
	Listing fees	20	-	20		29	-	29
	Miscellaneous expenses	10	-	10		(17)	-	(17)
		2,237	315	2,552		2,668	367	3,035
	Finance cost
	Interest expense and bank charges	414	-	414		542	-	542
	Profit/(Loss) before tax	(166)	70,051	69,885		531	(123,499)	(122,968)
	Taxation	(174)	-	(174)		(274)	-	(274)
	Profit/(Loss) for the period	(340)	70,051	69,711		257	(123,499)	(123,242)
8	Gain/(Deficit) per ordinary share			$3.411				$(6.031)

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

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

Unaudited Statement of Changes In Equity

For the six months ended 31st October 2009

		Ordinary Share		Share		Revenue
		Capital		Premium		Reserve
		$'000		$'000		$'000
Balances at 1st May 2009		204		192,650		(19,092)
Movements during the period
Realised loss on investments sold		-		-		16,471
Movement on unrealised loss on revaluation of investments		-		-		(86,158)
Loss on foreign exchange		-		-		(679)
Distribution (Note 12)						(1,022)
Deficit on ordinary activities		-		-		69,711
Balances at 31st October 2009		204		192,650		(20,769)
		Ordinary Share		Share		Revenue
		Capital		Premium		Reserve
		$'000		$'000		$'000
Balances at 1st May 2008		204		192,650		(20,658)
Movements during the period
Realised gains on investments sold		-		-		41,951
Movement on unrealised loss on revaluation of investments		-		-		81,475
Loss on foreign exchange		-		-		294
Deficit on ordinary activities		-		-		(123,242)
Balances at 31st October 2008		204		192,650		(20,180)

Capital		Capital		Capital Reserve/
Reserve/		Reserve/		Exchange
Realised		Unrealised		Differences		Total
$'000		$'000		$'000		$'000
202,155		(182,204)		(10,047)		183,666
(16,471)		-		-		-
-		86,158		-		-
-		-		679		-
						(1,022)
-		-		-		69,711
185,684		(96,046)		(9,368)		252,355
Capital		Capital		Capital Reserve/
Reserve/		Reserve/		Exchange
Realised		Unrealised		Differences		Total
$'000		$'000		$'000		$'000
305,885		(150,655)		(5,664)		321,762
(41,951)		-		-		-
-		(81,475)		-		-
-		-		(294)		-
-		-		-		(123,242)
263,934		(232,130)		(5,958)		198,520

Statement of Financial Position

As at 31st October 2009

		(Unaudited)		(Audited)
		31-Oct-09		30-Apr-09
Notes		$'000		$'000
	Non Current Assets
2(f)	Financial assets at fair value
	through profit or loss	280,138		212,124
	Current Assets
	Due from brokers	2,457		4,289
2(d)	Dividends and other receivables	1,821		2,660
2(g)	Cash and cash equivalents	2,686		17,056
		6,964		24,005
	Current Liabilities
	Due to brokers	(1,401)		(6,106)
	Payables and accrued expenses	(457)		(509)
2(h)	Loans payable	(21,926)		(15,283)
		(23,784)		(21,898)
	Net Current (Liabilities)/Assets	(16,820)		2,107
	Non Current Liabilities
2(h)	Loans payable	(10,963)		(30,565)
	Net Assets	252,355		183,666
	Equity
	Ordinary share capital	204		204
	Share premium	192,650		192,650
	Revenue reserve	(20,769)		(19,092)
2(l)	Capital reserve	80,270		9,904
	Net Assets Attributable to Equity Shareholders	252,355		183,666
10	Net Asset Value per Ordinary Share*	$12.35		$8.99

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

20,435,627 (30th April 2009 - 20,435,627)

Approved by the Board of Directors on 17th December 2009 and signed on its behalf by:

Timothy Guinness    

Chairman

Andrew Martin Smith

Director

Unaudited Cash Flow Statement

For the six months ended 31st October 2009

			(Unaudited)		(Unaudited)
			31-Oct-09		31-Oct-08
			$'000		$'000
Cash flows from operating activities			546		1,606
Investing Activities
Purchase of investments			(83,469)		(77,550)
Sale of investments			85,655		106,655
Net cash inflow from
investing activities			2,186		29,105
Net cash inflow before financing			2,732		30,711
Cash flows from financing activities
Interest paid			(419)		(661)
Distribution			(1,022)		-
Net loans (repaid)/drawn-down			(12,959)		(25,893)
Net cash outflow from financing activities			(14,400)		(26,554)
Net (decrease)/increase in cash and cash equivalents			(11,668)		4,157
Exchange movements			(2,702)		(418)
Movement in cash and cash equivalents in the period			(14,370)		3,739
Cash and cash equivalents at beginning of period			17,056		5,548
Cash and cash equivalents at end of period			2,686		9,287
Reconciliation of gain(loss)/ for period to net cash outflow
from operating activities
Net gain/(loss) before taxation			69,885		(122,968)
Gain/(loss) on investments held at fair value			(69,687)		123,426
Exchange gain			(679)		(294)
Interest expense			414		542
Decrease in debtors and accrued income			839		1,002
Decrease in creditors			(52)		172
Taxation			(174)		(274)
			546		1,606

Notes to the Unaudited Financial Statements

For the six months ended 31st October 2009

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.

The condensed interim financial statements for the half year ended 31st October 2009 have been prepared in accordance with IAS 34, 'Interim Financial Reporting' and the Disclosures and Transparency Rules ("DTRs") of the UK's Financial Services Authority.

The condensed interim financial statements do not include all of the information required for full financial statements, and should be read in conjunction with the financial statements for the Company as at and for the year ended 30th April 2009. The financial statements of the Company as at and for the year ended 30th April 2009 were prepared in accordance with International Financial Reporting Standards ("IFRS").

Except as described below, the accounting policies applied by the Company in these condensed interim financial statements are the same as those applied by the Company in its financial statements as at and for the year ended 30th April 2009.

    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 derecognised) on the date of the transaction by the use of 'trade date accounting'.

c) Presentation of Statement of Comprehensive Income

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

    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 Statement of Comprehensive Income, and allocated to the capital column of the Statement of Comprehensive Income at the time of acquisition). Subsequently, the investments listed overseas are valued at 'fair value', which is bid price (where a bid price is available) or otherwise at fair value based on published price quotations.

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

    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 Statement of Comprehensive Income and allocated as capital if they are of a capital nature, or as revenue if they are of a revenue nature. 

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 Statement of Comprehensive Income.

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 Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that were applicable at the 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 Statement of Comprehensive Income is the "marginal basis". Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue return column of the Statement of Comprehensive Income, then no tax relief is transferred to the capital return column.

    Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. A deferred tax liability is recognised in full for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Investment trusts which have approval as such under section 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 Statement of Comprehensive Income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

    k) Financial Liabilities

Financial liabilities are recognised when the Company becomes a party to the contractual agreements of the instrument. Trade and other payables are initially recognised at their nominal value and subsequently measured at amortized cost less settlement payments. Financial liabilities are derecognised from the 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.    GAINS/(LOSSES) ON INVESTMENTS HELD AT FAIR VALUE

		31 October 2009		31 October 2008
		$'000		$'000
Proceeds from sales of investments		83,765		102,146
Original cost of investments sold		(100,236)		(144,097)
Losses realised on investments sold during the period		(16,471)		(41,951)
Net unrealised gain/(depreciation) for the period		86,158		(81,475)
		69,687		(123,426)

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 period ended 31st October 2009, total investment management fees were $1,794,883 (2008 - $2,146,410) of which $314,478 (2009 - $202,725) 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 period ended 31st October 2009, total custodian fees were $114,263 (2008 - $176,674) of which $16,934 (2009- $35,042) 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 0.18 per cent of the weekly Net Asset Value up to $50 million and 0.135 per cent between $50 million and $100 million, 0.0675 per cent between $100 million and $200 million and 0.02 per cent above $200 million, subject to an annual minimum of $100,000. In addition, an annual minimum retainer of $1,000 is payable in respect of maintaining the principal register of shareholders. For the period ended 31st October 2009, total administration and registrar fees were $138,847 (2008 - $135,694) which $20,597 (2009 - $83,116) 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 period ended 31st October 2009, total directors' fees and expenses were $75,248 (2008 - $85,000) of which $11,013 (2009 - $16,669) is due and payable as at that date.

8.    PROFIT/(DEFICIT) PER ORDINARY SHARE

    The surplus per ordinary share figure is based on the net deficit for the period of $68,069,098 (2008 $123,283,500) 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 per ordinary share figure detailed above can be further analysed between revenue and capital, as below.

		31 October 2009		31 October 2008
		$'000		$'000
Net (loss)/revenue profit		(340)		257
Net capital profit/(loss)		70,051		(123,499)
Net total profit/(loss)		69,711		(123,242)
Weighted average number of ordinary shares
in issue during the period		20,435,627		20,435,627
		$		$
Revenue (loss)/profit per ordinary share		(0.017)		0.013
Capital profit/(deficit) per ordinary share		3.428		(6.044)
Total profit/(deficit) per ordinary share		3.411		(6.031)

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 2009 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 October 2009		Per Share
					$'000		$
Published Net Asset Value					253,535		12.41
Unrealised loss on revaluation of securities at bid prices					(1,180)		(0.06)
					252,355		12.35
					30 April 2009		Per Share
					$'000		$
Published Net Asset Value					184,722		9.04
Unrealised loss on revaluation of securities at bid prices					(1,056)		(0.05)
					183,666		8.99

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 16th October 2009.

12.     DISTRIBUTION

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

Distribution	Date			Date	Amount
per unit	declared	Ex-date	Record Date	paid	US$	Relevant period
$0.05	17th July 2009	12th August 2009	14th August 2009	4th September 2009	1,021,781	1st May 2008 - 30th April 2009

13.     SUBSEQUENT EVENTS

There have been no events subsequent to the period ended 31st October 2009. 

Administration

Directors

Timothy Guinness (Chairman)

Christopher Jones

Eric Boyle

Andrew Martin Smith

Takeshi Murakami

Registered Office

Trafalgar Court, Les Banques, St Peter Port, Guernsey, GY1 3QL, Channel Islands

Investment Manager

Atlantis Fund Management (Guernsey) Limited

P.O. Box 255, Trafalgar Court, Les Banques, Guernsey, GY1 3QL, Channel Islands

Global Custodian

Northern Trust (Guernsey) Limited 

Trafalgar Court, Les Banques, St Peter Port, Guernsey, GY1 3DA, Channel Islands

Investment Adviser

Atlantis Investment Management Limited (regulated by UK FSA)

4th Floor, 30-34 Moorgate, London EC2R 6DN

(Telephone no. 00 44 (0) 20-7638-9192)

Administrator, Secretary and Principal Registrar

Northern Trust International Fund Administration Services (Guernsey) Limited 

Trafalgar Court, Les Banques, St Peter Port, Guernsey, GY1 3QL, Channel Islands

Jersey Registrar

Computershare Investor Services

P.O. Box 83, Ordnance House, 31 Pier Road, St. Helier, Jersey JE4 8PW,

Channel Islands

 Stock Brokers

J.P. Morgan Cazenove Limited

20 Moorgate, London EC2R 6DA

Auditors

Grant Thornton Limited

P.O. Box 313, Island house, Grand Rue, St. Martin, Guernsey GY1 3TF

Legal Advisers

Ogier

Ogier House, St. Julian's Avenue, St Peter Port GY1 1WA

 

END

 

 

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