Perpetual Japanese Investment Trust plc
Unaudited Preliminary Announcement of
Final Results for the Year Ended 31 July 2007
Chairman's Statement
During the financial year ended 31 July 2007, the Japanese stockmarket fell by
4.2 per cent (Tokyo TOPIX Index) expressed in sterling and the net asset value
of the Company's portfolio fell by 7.3 per cent. The mid-market price per
ordinary share fell by 11.4 per cent from 57.25p to 50.75p. Accordingly, the
discount of share price to NAV widened from 5.5 per cent to 9.7 per cent.
The year to July was characterised by sluggish domestic demand in Japan,
ameliorated by buoyant exports. Overall growth rates in GNP and corporate
profits proved a disappointment for many investors. The yen, too, was weak. At
the start of 2006, one pound sterling would buy a little over 200 Yen. At the
low point in July 2007, the same pound would buy 251 Yen. Since then there has
been a recovery in the Yen/� rate, back to 226; some of the recent fall in the
equity market has therefore been cushioned by the recovering value of the
Japanese currency. Beneficial as this is for holders of yen assets, a stronger
yen will do nothing for the long struggle to eradicate deflation in Japan - a
process which in recent months has come to a virtual standstill.
Your Company's portfolio has reflected a cautious strategy preferring
investments in industries that are less likely to be affected by the economic
cycle. With the exception of a brief period of underperformance in the spring
of 2007, this strategy has been successful. (The Fund ranked top in its peer
group in NAV performance over one year as at 19 September 2007.) Investors have
found it difficult to put a value on the earnings of Japanese cyclicals - one
aspect of the wider financial market problem regarding the appropriate pricing
of risk which has been highlighted since the end of the review period by the
sub-prime crisis. The attention to fundamental valuation has been central to
the portfolio construction process. In view of the economic outlook, the
Manager feels that this strategy of avoiding cyclical sectors with unappealing
risk/reward prospects and emphasising value remains appropriate. The
portfolio's high exposure to the pulp and paper sector in which the largest
companies are valued close to their break up value and to companies with above
average yields reflects this search for value.
Within the sluggish overall economic outlook, the technology sector does seem
to offer the prospect of fundamental improvement. Despite ongoing deflation,
the worldwide rise in food commodity prices should be of benefit to some
retailers in Japan. Should the yen strengthen further against sterling, and the
market achieve a more appropriate pricing of risk, shareholders in Perpetual
Japanese Investment Trust may find the current year more rewarding than its
predecessor.
Special Business at the Annual General Meeting
As special business of the Annual General Meeting (AGM) the Board asks again
for Directors' authority to purchase up to 13,815,583 of the Company's own
shares, this being 14.99 per cent of the Company's issued ordinary share
capital, as set out in Special Resolution 6. Companies may hold shares
repurchased as "treasury shares" with a view to possible resale at a future
date, as an alternative to simply having to cancel them. Accordingly, the
Directors might consider holding repurchased shares pursuant to the authority
conferred by Resolution 6 as treasury shares with a view to possible resale.
However, shares will only be repurchased at a price per share below the
prevailing net asset value per share.
Special Resolution 7 seeks again Directors' authority to allot up to an
aggregate nominal amount of �3,072,177 new ordinary shares, or one third of the
Company's issued ordinary share capital. It also seeks authority to allot or
(in the case of treasury shares) sell ordinary shares, either pursuant to a
rights issue up to 5 per cent of the issued ordinary share capital, whilst
disapplying pre-emption rights. To take account of the possibility of treasury
shares, the disapplication of pre-emption rights has been extended to apply to
the resale of treasury shares (if any) in the same way as to the allotment of
new securities. Shares held in treasury will only be reissued on terms which
are in the best interest of shareholders.
During the year ended 31 July 2007, the Company has not undertaken any share
buybacks. However, the Board considers it prudent to have those authorities in
place since they provide valuable means of managing the discount and
maintaining liquidity in the shares.
Special Resolution 8 seeks to adopt revised Articles of Association for the
Company. The Resolution concerns amendments to the Articles of Association of
the Company, following the introduction of certain provisions of the Companies
Act 2006, which came into force on 1 January, 20 January and 6 April 2007, as
well as the implementation of the Transparency Directive on 20 January 2007.
Broadly, the proposed changes to the Articles of Association allow the Company
to communicate with shareholders electronically via its website if it so
chooses respectively, unless a shareholder wishes to continue receiving
information in hard copy; to remove the maximum age for Directors; and to
change a number of references to statutory provisions in the Companies Act 1985
which have now been replaced by corresponding provisions in the Companies Act
2006. Further details are given in the Report of the Directors in the Annual
Report.
Finally, pursuant to changes in UK Listing Rules, listed investment companies
are now subject to additional requirements in respect of their published
investment policies. To comply with the new standards, the Directors are
proposing a restated investment policy to be formally adopted, subject to
shareholders' approval of Ordinary Resolution 9 at the Annual General Meeting.
The new, restated policy will be set out in the Report of the Directors in the
Annual Report and Accounts. It is not expected, or intended, that this will
give rise to significant changes in the way the Company's assets are managed.
Your Directors have carefully considered all the resolutions proposed in the
Notice to the AGM and consider them all to be in the best interest of
shareholders. The Directors therefore recommend that Shareholders vote in
favour of each resolution.
I look forward to seeing investors at the AGM of the Company on 15 November
2007, where there will be an opportunity to meet members of the Board and the
Fund Manager.
Christopher Mitchinson
Chairman
2 October 2007
Income Statement
2007 2006
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
(Loss)/gain on
investments at
fair value through profit - (4,274) (4,274) - 10,858 10,858
or loss
Exchange losses - (3) (3) - (13) (13)
Income 923 - 923 738 - 738
Investment management fee (443) - (443) (460) - (460)
Other expenses (187) (4) (191) (258) (8) (266)
Net return before finance
-costs and taxation 293 (4,281) (3,988) 20 10,837 10,857
Interest payable and
similar
-charges (36) - (36) (65) - (65)
Return on ordinary
-activities before 257 (4,281) (4,024) (45) 10,837 10,792
taxation
Tax return on ordinary (66) - (66) (51) - (51)
activities
Return on ordinary
activities
-after tax for the
financial
period 191 (4,281) (4,090) (96) 10,837 10,741
Return per ordinary share
:
Basic 0.2p (4.6)p (4.4)p (0.1)p 11.8p 11.7p
The total column of this statement represents the Company's profit and loss
account, prepared in accordance with UK Accounting Standards. The supplementary
revenue and capital columns are both prepared under guidance published by the
Association of Investment Companies. All items in the above statements derive
from continuing operations and the Company has no other gains or losses and
therefore no statement of recognised gains and losses is presented. No
operations were acquired or discontinued in the period.
Reconciliation of Movements in Shareholders' Funds
For the year ended 31 July 2007
Share Share Capital Special Capital Capital Revenue Total
Capital Premium Redemption Reserve Reserve Reserve - Reserve �'000
-
�'000 Account Reserve �'000 Unrealised �'000
Realised
�'000 �'000 �'000
�'000
At 1 August 9,217 5,927 28,025 16,915 (14,495) 923 (1,396) 45,116
2005
Return from - - - - 11,905 (1,068) (96) 10,741
the
Income
Statement
for the
year
At 31 July 9,217 5,927 28,025 16,915 (2,590) (145) (1,492) 55,857
2006
Return from - - - - 555 (4,836) 191 (4,090)
the
Income
Statement
for the
year
At 31 July 9,217 5,927 28,025 16,915 (2,035) (4,981) (1,301) 51,767
2007
Balance Sheet
2007 2006
�'000 �'000
Non-current assets
Investments at fair value through profit 53,650 56,152
or loss
Current assets
Debtors 79 460
Cash at bank - 914
79
1,374
Creditors: amounts falling due within one (1,962) (1,669)
year
Net current liabilities (1,883) (295)
Total assets less current liabilities 51,767 55,857
Capital and Reserves
Called-up share capital 9,217 9,217
Share premium account 5,927 5,927
Other reserves
Capital redemption reserve 28,025 28,025
Special reserve 16,915 16,915
Capital reserve - realised (2,035) (2,590)
Capital reserve - unrealised (4,981) (145)
Revenue reserve (1,301) (1,492)
Total Shareholders' Funds 51,767 55,857
Net asset value per ordinary share:
Basic 56.2p 60.6p
Cash Flow Statement
2007 2006
�'000 �'000
Net cash inflow/(outflow) from operating 248 (117)
activities
Servicing of finance (26) (65)
Capital expenditure and financial investment (1,417) (1,682)
Net cash outflow before management of
liquid resources and financing (1,195) (1,864)
Decrease in cash in the year (1,195) (1,864)
Reconciliation of net cash flow to movement
in net debt
Decrease in cash in the year (1,195) (1,864)
Exchange difference (5) (13)
Movement in net debt in the year (1,200) (1,877)
Net (debt)/funds at beginning of the year (588) 1,289
Net debt at end of the year (1,788) (588)
Notes
1. Accounting Policies
The accounting policies adopted at 31 July 2006 have been applied consistently
throughout the year.
(a) Basis of preparation
The financial statements have been prepared in accordance with applicable
United Kingdom Accounting Standards and with the Statement of Recommended
Practice (`SORP') "Financial Statements of Investment Trust Companies", issued
by the Association of Investment Companies in 2005.
2. Income
2007 2006
�'000 �'000
Income from listed
investments
Overseas dividends 912 728
Other income
Deposit interest 11 10
Total income 923 738
3. Investment management fee
2007 2006
�'000 �'000
Investment management fee 443 460
443 460
INVESCO Asset Management Limited provide investment and administrative services
to the Company under an agreement dated 27 December 2001. The agreement is
terminable by either party giving not less than one year's notice in writing
expiring on 31 July in any year. Under the agreement, the Manager receives a
management fee of 0.8% per annum of the Company's funds under management as
defined in the agreement. At 31 July 2007, �115,000 (2006: �112,000) was owed
in respect of investment management fees.
The Manager also receives a performance-related fee, payable annually in
arrears, if the Company's performance exceeds the FTSE World Japan Index by a
margin of 2% or more. The performance-related fee shall be equal to 5% of the
value of outperformance, but may not exceed 1% of the value of the Company's
funds under management at the relevant performance fee calculation date (which
is the Company's Balance Sheet date). Any such performance-related fee is based
on the outperformance over the benchmark after taking into account any previous
underperformance. No performance fee is payable for the year (2006: none).
4. Net asset value
The net asset per ordinary share and the net assets attributable at the
year-end were as follows:
Net asset value Net assets attributable
per share
2007 2006 2007 2006
pence pence �'000 �'000
Ordinary shares
- Basic 56.2 60.6 51,767 55,857
The basic net asset value per ordinary share is based on net assets at the year
end and on 92,165,333 (2006: 92,165,333) ordinary shares, being the number of
ordinary shares in issue at the year end.
5. Return per ordinary share
Basic revenue, capital and total return per ordinary share is based on each of
the returns on ordinary activities after taxation and on 92,165,333 (2006:
92,165,333) ordinary shares, being the number of ordinary shares in issue
during the year.
6. The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31 July 2007 or 2006. The financial
information for 2006 is derived from the statutory accounts for 2006 which have
been delivered to the Registrar of Companies. The Auditors have reported on the
2006 statutory accounts and their report was unqualified and did not contain a
statement under s237(2) or (3) of the Companies Act 1985. The statutory
accounts for 2007 will be finalised on the basis of the information presented
by the Directors in this preliminary announcement and will be delivered to the
Registrar of Companies following the Company's Annual General Meeting.
7. The Annual General Meeting of the Company will be held at 2.30pm on 15
November 2007 at 30 Finsbury Square, London, EC2A 1AG.
8. The Annual Report and Accounts for the year ended 31 July 2007 will be
available from the Registered Office shortly.
By order of the Board
INVESCO Asset Management Limited
Secretaries
2 October 2007
END
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