ATLANTIS JAPAN GROWTH FUND LIMITED
(“AJGF” or the
“Company”)
(a closed-ended
investment company incorporated in Guernsey with registration
number 30709)
LEI
5493004IW0LDG0OPGL69
Interim Results
for the six month financial period ended 31
October 2021
14 December 2021
(Classified Regulated Information,
under DTR 6 Annex 1 section 1.2)
The financial information set out below does not constitute the
Company's statutory accounts for the financial period ended
31 October 2021.
The financial information for the financial period ended
31 October 2021 noted below is
derived from the financial statements delivered to the UK Listing
Authority.
The interim report and financial statements for the financial
period ended 31 October 2021 will
shortly be made available to shareholders on the Company website:
www.atlantisjapangrowthfund.com
INTRODUCTION
INVESTMENT OBJECTIVE
Atlantis Japan Growth Fund Limited (the “Company”) aims to
achieve long term capital growth through investment wholly or
mainly in listed Japanese equities.
INVESTMENT POLICY
The Company may invest up to 100 per cent of its gross assets in
companies quoted on any Japanese stock exchange including, without
limitation, the Tokyo Stock Exchange categorised as First Section,
Second Section, JASDAQ, Mothers and Tokyo PRO, or the regional
stock exchanges of Fukuoka,
Nagoya and Sapporo. The Company’s benchmark index is the
TOPIX Total Return index “benchmark total return index” and the
Company will not be restricted to investing in constituent
companies of the benchmark.
The Company may also invest up to 20 per cent of its Net Asset
Value (the “NAV”) at the time of investment in companies listed or
traded on other stock exchanges but which are either controlled and
managed from Japan or which have a
material exposure to the Japanese economy.
The Company may also invest up to 10 per cent of its NAV at the
time of investment in securities which are neither listed nor
traded on any stock exchange or over-the-counter market.
In general, investment will be through investments in equity
shares in, or debt issued by, investee companies. However, the
Company may also invest up to 20 per cent of its NAV at the time of
investment in equity warrants and convertible debt.
The Company will not invest in more than 10 per cent of any
class of securities of an investee company. The Company will not
invest in derivative instruments save for the purpose of efficient
portfolio management.
The Company may not invest more than 10 per cent in aggregate of
the value of its total assets in other listed closed-ended
investment funds except in the case of investment in closed-ended
investment funds which themselves have published investment
policies to invest no more than 15 per cent of their total assets
in other listed closed-ended investment funds, in which case the
limit is 15 per cent.
The Company may borrow, with a view to enhancing capital
returns, up to a maximum of an amount not exceeding 20 per cent of
NAV at the time of borrowing.
No material change will be made to the investment policy without
the approval of shareholders by ordinary resolution.
INVESTMENT MANAGER AND INVESTMENT
ADVISER
Quaero Capital LLP has been appointed as the Investment Manager
of the Company since 1 August
2014.
Atlantis Investment Research Corporation (“AIRC”) has been
appointed as the Investment Adviser to the Company since
1 August 2014.
AIRC, established in Tokyo,
through Taeko Setaishi, as lead adviser, and her colleagues,
advises the Investment Manager on the day-to-day conduct of the
Company’s investment business, the role it has played since the
launch of the Company in May
1996.
DIVIDEND POLICY
There are regular quarterly dividend payments of 1% of the
Company’s NAV (based on the average daily NAV in the final month of
the financial year). The dividends will be paid out of capital
reserves and will be paid in March, June, September and December
(please see Dividend Policy below for further details).
CHAIRMAN’S STATEMENT
For the six month financial period
ended 31 October 2021
Market and performance
Over the six months ended 31 October
2021, the Japanese market ended up modestly, as stock
markets adjusted to the continued stresses of the pandemic and
political machinations ahead of Yoshihide
Suga stepping down as Prime Minister in September. Our Net
Asset Value total return increased by +5.5% in sterling terms
comparing favourably with the TOPIX Total Return Index in sterling
terms, which rose +3.0% over the same period.
It was encouraging to see a period of steady performance, given
the competing challenges of global inflationary concerns and the
extension of the Japanese government’s state of emergency to
counter the effects of a rise in Covid-19 ahead of the Tokyo
Olympic Games. Whilst the Bank of Japan continued its highly accommodative
monetary policy, markets see-sawed over the prospect of rising
interest rates in the US in response to the rapid rise in
inflation. Meanwhile the Japanese government’s handling of
COVID-19, both in dealing with the Olympics and disappointment over
the implementation of the stimulus measures around progressive
structural reform, claimed the scalp of Mr. Suga, barely a year
after taking office. Our Company’s low exposure to those cyclicals
that performed well through the interim period on the back of the
global recovery in trade and economic recovery weighed on the
portfolio. In such an environment it was a robust effort to see
outperformance being driven by the Company’s chosen thematic
exposure to global leaders in the renewable energy, electronic
components, and biotech spaces.
Discount management and share
buybacks
The Board continues to review the discount on a regular basis,
maintaining a vigilant stance in pursuing a policy of lower
deviation between the share price and NAV and will
opportunistically use the share buyback facility when shares trade
at wider discount levels. During the six months ended 31
October, the discount widened from 9.2% to 11.7% and the Board took
the opportunity to buy shares at a discount.
Outlook
Looking forward, the Japanese market remains supported by
attractive valuations and fundamentals. The new Prime Minister, Mr.
Kishida, appears ready to set his government on a more politically
assertive approach than his predecessor, favouring more proactive
government intervention and regulatory actions. Policy makers are
focused on a likely new ‘Kishidanomics’ stimulus package, which
should continue the focus on Japan’s DX (digital transformation)
Initiative, alongside spending on major domestic infrastructure
projects and aid for the renewable energy sector. Corporate change
continues to gather pace, which should help drive value creation.
The Chair of Toshiba was voted out over events surrounding the 2020
AGM, which has opened up Toshiba to major foreign investor
involvement. Also, Carlyle recently completed the first ever
hostile takeover by a financial buyer in Japan when it bought Japan Asia Group. This
acquisition could well focus corporate management on increasing
valuations to defend against further hostile takeovers, thereby
acting as a catalyst to drive corporate change.
We see these factors serving to concentrate focus on company
valuations and growth, which should continue to benefit the
Company’s performance.
Noel
Lamb
14 December 2021
INVESTMENT ADVISER’S INTERIM
REPORT
For the six month financial period
ended 31 October 2021
PERFORMANCE
Domestic challenges over the six month financial period, ended
31 October, cast a shadow over the Japanese market, causing it to
underperform most global markets. Three issues were of note: first
was the government’s repeated failure to roll out vaccines in a
timely manner; second was their preoccupation with holding the
Tokyo Olympics at all costs, in spite of public concern about a
possible super-spreader event; and finally the steep decline in
public support helping spur Mr Suga’s resignation in September.
This led to a Lower House election at the end of October, ushering
in a new government. Equity investor sentiment improved markedly on
such developments but faded on concerns about the signposted
policies of the new Kishida administration. It was encouraging to
see positive returns in such an environment with the Company
reporting, on a total return NAV basis, a gain of 5.5% in GBP terms
for the financial period, compared to 3.0% for the TOPIX TR Index
in GBP terms. The new Kishida government also walked back from
earlier comments on raising taxes on investment income, the
Olympics having no negative impact, and with over 70% of the
population fully vaccinated, sentiment in the Japanese market
improved at the end of the reporting period. Foreign investors also
turned net buyers of JPY693.4bn in
Japanese equities during the month of October, the first net buying
since April and the largest amount since Nov
2020.
The Company was overweight Information and Communications,
Electric Power & Gas, and Pharmaceuticals sectors, and
underweight in Machinery, Transportation Equipment, and Real Estate
sectors. The overweight in Electric Power & Gas enhanced
performance whilst Information and Communications exposure
detracted from the Company’s performance. Stocks that made positive
contributions included biotech play CellSource (4880), outsourced
software testing pioneer Shift (3697), cashless payments specialist
GMO Financial Gate (4051), and renewable energy provider Renova
(9519). Stocks that contributed negatively included ethical drug
discovery play PeptiDream (4587), HR tech and marketing media
specialist Recruit Holdings (6098), semiconductor materials firm
Tri Chemical Laboratories (4369), and brushless motor leader Nidec
(6594).
The Company started the financial period with 66 holdings and
ended the period with 61 holdings, four more than that of a year
ago. The Company has no exposure to convertible bonds or any other
class of equity derivative; neither does it have any foreign
exchange hedges in place. Turnover during the period did not differ
from average periods, and gearing was at 1.8% at the end of the
period.
MARKET COMMENT AND INVESTMENT
STRATEGY
Earlier in the financial period, there had been a bias towards
value over growth, reflecting rising interest rates, rising raw
material costs, concerns about inflation, component shortages and
possible systemic contagion from the beleaguered Chinese real
estate market. Even though inflationary fears had diminished
slightly, by the end of the financial period, component and
semiconductor shortages continued to be an issue for many firms and
potential production disruption driven by supply chains
dislocation. Rising raw material costs also remain a concern.
Improved vaccination rates, especially in developed countries, are
helping fuel global recovery hopes but are offset, to some extent,
by concerns over strict Covid-19 policies in China and the consequential impact on regional
growth and resumption of tourist travel. The value bias that
we saw in the first half of the financial period is giving way to
the growth bias outperforming, as demonstrated by the TOPIX Growth
TR Index in GBP gaining 4.76% in the second quarter of the
financial period (Aug-Oct 2021). this
contrasts to the TOPIX Value TR Index in GBP only rising 2.91%.
This was a reversal of the first quarter (May-Jul 2021) when value outperformed growth.
The Bank of Japan’s ETF buying policy has also changed during
this financial period. Though continuing to maintain an overall
easy monetary stance, the BOJ is now only buying on particular
volatility. Toward the end of September, the BOJ bought
JPY70bn worth of ETFs for the first
time since June 2021, and then again
in early October, remaining fairly inactive over the rest of the
month.
Although uncertainty remains high around global macro,
inflationary, and supply chain issues, the Investment Adviser notes
that Japan’s domestic concerns have been fading in the past few
months. Japan’s Q2 FY21 earnings reporting season is unfolding and
while there are one-off negatives and many companies will likely
guide cautiously, we believe that the underlying fundamentals and
performance of Japanese companies remain robust. We are cautiously
optimistic and expect sales growth of 6% to 7% and operating profit
to rise approximately 30% for the fiscal year ending in
March 2022. The TOPIX Index is
trading on a PER of 15.8x and a PBR of 1.31x as of the end of
October.
MARKET COMMENT AND INVESTMENT
STRATEGY
The Company’s aim remains to invest in fundamentally undervalued
companies with a competitive advantage and strong medium to
long-term growth potential. The Company favours growth and a
bottom-up approach to stock picking based on fundamental analysis.
The Investment Adviser conducts extensive interviews with company
management teams as an essential part of its process to capture
alpha and identify growth opportunities. The Investment Adviser
believes that the Japanese economy is undergoing significant
structural changes which should produce a wide range of investment
opportunities for the Company.
Atlantis Investment Research
Corporation
14 December 2021
DIRECTORS’ INTERIM REPORT AND
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
For the six month financial period
ended 31 October 2021
The Directors are pleased to present their Condensed Interim
Report and Unaudited Financial Statements of the Company for the
six month financial period ended 31 October
2021.
In the opinion of the Company's Directors, the Condensed
Directors’ Interim Report and Unaudited Financial Statements enable
investors to make an informed assessment of the results and
activities of the Company for the financial period.
The Condensed Interim Report and Unaudited Financial Statements
have not been audited or reviewed by the Company’s auditor.
STATEMENT OF DIRECTORS’
RESPONSIBILITIES
The Directors confirm, to the best of our knowledge, that:
– the Condensed Interim Report and Unaudited
Financial Statements have been prepared in accordance with IAS 34
Interim Financial Reporting;
– as required by DTR 4.2.7R of the FCA’s
Disclosure and Transparency Rules, the Directors’ Interim Report
and Investment Adviser’s Interim Report include a fair review of
important events that have occurred during the first six months of
the financial year and their impact on the Condensed Interim Report
and Unaudited Financial Statements, and a description of the
principal risks and uncertainties for the remaining six months of
the financial year, and;
– the Condensed Interim Report and Unaudited
Financial Statements include a fair review of the information
concerning related party transactions required by DTR 4.2.8R.
CAPITAL VALUES
At 31 October 2021 the value of
net assets available to shareholders was £120,633,551 (30 April 2021: £116,501,330) and the NAV per
share was £2.89 (30 April 2021:
£2.79).
PRINCIPAL RISKS AND UNCERTANTIES
As an investment trust, the Company invests in securities for
the long term. The financial investments held as assets by the
Company comprise equity shares (see the Schedule of Investments
below for a breakdown). As such, the holding of securities,
investing activities and financing associated with the
implementation of the investment policy involve 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.
Principal risks should include, but are not necessarily limited
to, those that could result in events or circumstances that might
threaten the Company’s business model, future performance, solvency
or liquidity and reputation. In deciding which risks are principal
risks companies should consider the potential impact and
probability of the related events or circumstances, and the
timescale over which they may occur. The annual report does not
make references to robust assessment on principal risks relating to
events or circumstances that might threaten the Company’s business
model, future performance, solvency or liquidity and
reputation.
The Board has considered the risks and uncertainties facing the
Company and prepares and reviews regularly a risk matrix which
documents the significant and emerging risks.
The risk matrix document considers the following
information:
• Identifying and reporting changes in the risk environment;
• Identifying and reporting changes in the operational
controls;
• Identifying and reporting on the effectiveness of controls and
remediation of errors arising; and
• Reviewing the risks faced by the Company and the controls in
place to address those risks.
PRINCIPAL RISKS AND UNCERTANTIES
(continued)
Performance
Inappropriate investment policies and processes may result in
under-performance against the prescribed benchmark index and the
Company’s peer group. The Board manages these risks by ensuring a
diversification of investments and regularly reviewing the
portfolio asset allocation and investment process. The Board also
regularly monitors the Company’s investment performance against a
number of indices and the AIC Japanese smaller companies’
sub-sector peer group. In addition, certain investment restrictions
have been set and these are monitored as appropriate.
Discount
A disproportionate widening of the discount relative to the
Company’s peers could result in loss of value for shareholders. The
Board reviews the discount level regularly.
Regulatory
The Company operates in a complex regulatory environment and
faces a number of regulatory risks. Breaches of regulations, such
as Section 1158 of the Corporation Tax Act 2010, The Companies
(Guernsey) Law, 2008, the UKLA Listing Rules and the Disclosure and
Transparency Rules (“DTR”), could lead to a number of detrimental
outcomes and reputational damage. The Company conforms with the
Alternative Investment Fund Managers Regulations 2013, as amended
by the Alternative Investment Fund Managers (Amendment) (EU Exit)
Regulations 2019. The Board relies on the services of the
Administrator, Northern Trust International Fund Administration
Services (Guernsey) Limited, and its professional advisers to
ensure compliance with The Companies (Guernsey) Law, 2008, the
Protection of Investors (Bailiwick of Guernsey) Law, 1987 (the “POI
Law”), the Authorised Closed-Ended Investment Scheme Rules 2008
(the “Authorised Closed-ended Rules”), the UKLA Listing Rules and
Prospectus Rules, the DTR and the rules of the London Stock
Exchange.
Operational
Like most other investment trust companies, the Company has no
employees. The Company therefore relies upon the services provided
by third parties and is dependent on the control systems of the
Investment Manager, Investment Adviser and the Company’s
Administrator. The security, for example, of the Company’s assets,
dealing procedures, accounting records and maintenance of
regulatory and legal requirements depends on the effective
operation of these systems. These are regularly tested, monitored
and are reviewed by the Directors at the quarterly board
meetings.
Financial
The financial risks faced by the Company, including the impact
of changes in Japanese equity market prices on the value of the
Company’s investments, are disclosed in Note 15 of the annual
Financial Statements. The financial risks disclosed in Note 15 of
the annual Financial Statements are detailed for compliance with
IFRS.
COVID-19
Beginning in January 2020, global
financial markets have experienced and may continue to experience
significant volatility resulting from the spread of a novel
coronavirus known as COVID-19. The outbreak of COVID-19 has
resulted in travel and border restrictions, quarantines, supply
chain disruptions, lower consumer demand and general market
uncertainty. COVID-19 has adversely affected the global economy and
this may negatively impact the Company’s performance. In responding
to the risks of COVID-19, the Directors have established business
continuity plans and have inquired and are satisfied that service
providers have a process in place to continue to provide required
services to the Company and maintain compliance with laws and
regulations in the face of the challenges encountered. Furthermore,
the Company invests wholly in Japanese listed equities and,
although the Japanese authorities have been slow to vaccinate the
population, there has in general been good control of the virus in
Japan which reduces the potential
impact on the Company.
GOING CONCERN
The Directors believe that the Company has adequate resources to
continue in operational existence for the foreseeable future.
Whilst the Company is obliged to hold a continuation vote every 4
years, the Directors do not believe this should automatically
trigger the adoption of a non-going concern basis. A continuation
vote was held at the annual general meeting on 10 September 2020, whereby the resolution was
passed for the Company to continue in existence. This is in line
with the AIC’s Statement of Recommended Practice (“SORP”) which
states that it is more appropriate to prepare financial statements
on a going concern basis unless a continuation vote has already
been triggered and shareholders have voted against continuation.
Therefore, the Directors believe the use of the going concern basis
is appropriate as there are no material uncertainties relating to
events or conditions that may cast significant doubt about the
ability of the Company to continue to meet its ongoing
obligations.
DIVIDEND POLICY
There is a regular dividend paid to all shareholders on a
quarterly basis set at 1% of net asset value at the close of the
preceding financial year. The June
2021 dividend was made at the rate of 2.17p per share, being
1% of the average daily NAV per share in the final month of our
financial year ended the 30 April
2020. The quarterly dividend will be paid out of capital
resources at the end of each calendar quarter. The September 2021, December
2021 and March 2022 dividend
payments will be made at the rate of 2.88p per share, being the
average daily NAV per share in the final month of our financial
year ended 30 April 2021.
BOARD OF DIRECTORS COMPOSITION
Yuki Soga was appointed as a
Director on 1 July 2021.
There were no other changes to the Board of Directors during the
financial period.
Noel
Lamb
Philip Ehrmann
Chairman
Director
14 December 2021
DETAILS OF TEN LARGEST
INVESTMENTS
As at 31
October 2021
The ten largest investments comprise a fair value of £43,154,802
(30 April 2021: £42,121,255)
representing 35.7% of the Net Asset Value (30 April 2021: 36.2%) with details as below:
Nidec (66,000 shares)
Nidec is the world’s leading manufacturer of electric motors,
from miniature to large sizes with leadership in the production of
brushless motors which reduce noise and vibration and improve
efficiency in electricity usage. Brushless motors, which are more
expensive than traditional motors, were previously used mainly for
high-end products such as PCs, but a shift in focus across all
industries, and product categories, towards efficiency and lower
noise output has significantly increased Nidec’s Total Addressable
Market (TAM). In addition to numerous household appliances, Nidec
motors are used in industrial and machinery applications which
require increasingly high levels of precision and efficiency. They
are also expanding into supplying motors for EVs. The company has
grown both organically and transactionally, with an aggressive
M&A strategy under the leadership of founder and Chairman
Shigenobu Nagamori, who has been
nurturing its next generation of leaders. Jun Seki was recently appointed as President and
CEO following a long career in the auto industry at Nissan Motor.
Nidec has a proven track record for innovation and execution as a
premier low-cost mass producer, and continues to offer high growth
potential.
Fair value of £5,295,861 representing 4.4% of Net Asset Value
(30 April 2021: 4.7%)
CellSource (123,000 shares)
CellSource is a high-growth biotech regenerative medical play,
well known for working on blood products such as PFC-FD
(Platelet-Derived Factor Concentrate Freeze Dry). The company was
founded in 2015 and listed on the TSE Mothers market in 2019. It is
unique among newly listed biotech firms as it has been profitable
since listing (with recent OPMs exceeding 30%). CellSource obtains
blood and fat (adipose) cells from patients with knee pain (knee
osteoarthritis), which it then cultivates (grows) and sends back to
the clinic to inject into the same patients’ knees as replacement
cells. These cushion the knee joint in the form of tailormade
solutions from their own genetic material. This is considered
superior to knee replacement surgery. Knee pain is more prevalent
with an ageing population, usually affects both knees and
represents a large potential growth market. The company is also
expanding into other areas and has tied up with Fuji Pharma, a
specialist in female medical treatments, to extract blood and fat
cells from breast cancer patients to cultivate and use for
breast reconstruction.
Fair value of £5,056,481 representing 4.2% of Net Asset Value
(30 April 2021: 3.2%)
Lasertec (31,000 shares)
Lasertec is a niche player in inspection equipment for the
semiconductor production equipment (SPE) market, and has become
highly regarded as a specialist in extreme ultraviolet lithography
(EUV) mask inspection, which is critical to the manufacturing
process. Because production equipment is very expensive, often
exceeding $100mil for one EUV
stepper, cost per wafer is high and any faults which are
microscopic and difficult to detect are prohibitive. At the leading
edge, such as with their Actis A150 Actinic mask inspection system,
Lasertec holds a 100% global market share. Lasertec is normally
ahead of competitors in development of leading-edge equipment
because of the strength of its long standing highly-skilled sales
engineers, who work closely with clients to help anticipate and
propose solutions for next-generation products. This close
collaboration and innovation has helped Lasertec to continue to
be the first to come to market with the latest equipment. The
barrier to entry is high in this specialized niche market, given
that it is too small to make it worthwhile for larger players and
too expensive for smaller players to enter.
Fair value of £4,953,132 representing 4.1% of Net Asset Value
(30 April 2021: 4.9%)
Tokyo Electron (14,000 shares)
Tokyo Electron (TEL) is a leading global SPE assembler, with
high market share in front-end processes such as coater/developers
(100% market share for EUV), etching including for 3D NAND,
deposition and cleaning systems. Traditionally, semiconductors were
used mainly to store (via DRAM, NAND, etc.) and process (via CPUs,
etc.) data, while humans created and analysed the data. Given the
high speed and real-time requirements of new technologies such as
AI and Big Data, semiconductors are now being used to create,
detect, analyse and act on data (via DPUs, etc.) without human
intervention. Over the next 5 years, global data volume is expected
to increase fourfold with approximately three-quarters created and
used by semiconductors. Global semiconductor revenues in 2020 were
$440bil and are expected to grow two
to three times over the next 5 years. TEL’s high market share in
SPE processes for EUV and 3D NAND stacking, which is essential for
rising data workloads, as well as having launched two new
production facilities in 2020, put it in a strong position to grow
faster than the market.
Fair value of £4,723,135 representing 3.9% of Net Asset Value
(30 April 2021: 5.2%)
Renova (143,000 shares)
Renova is a major supplier of energy generated from renewable
energy sources including photovoltaic, biomass, and offshore wind
farm systems. The company entered the market in 2012 following the
introduction of feed-in-tariffs by the government to promote
renewable energy. The Japanese government recently committed to
aggressive decarbonization targets of reducing greenhouse gases by
46% by 2030 and reaching carbon neutrality by 2050. The company is
developing a major offshore wind power generation project in Akita
prefecture, which should contribute significantly to earnings in
the second half of the 2020s, with other projects planned in other
regions. The shift from fossil fuels to renewable energy is
accelerating and Renova is one of the few listed pure renewable
plays in Japan. The company also
has a proven strong management team, and good ESG metrics such as
on the governance side, with outside directors accounting for a
majority of its board members.
Fair value of £4,564,187 representing 3.8% of Net Asset Value
(30 April 2021: 4.1%)
Shift (27,000 shares)
Shift was founded in 2005 and has grown rapidly to be the
leading outsourced software testing company in Japan. Software testing was traditionally done
internally by software developers who considered software testing
to be lower-level work. Consequently, there has been a lack of
motivation and consistent standards, and so far only about 5% of
software testing has been outsourced. Shortages of engineers in
recent years have exacerbated the situation. The outsourced
software testing market is growing at 20% per year and Shift is
growing faster than the market. The company generates growth
organically as well as through M&A which also helps increase
its pool of engineers. It is establishing software testing
standards and expertise, as well as accumulating data, that has
helped reduce costs for both itself and clients. As such it is able
to increase pay for engineers, and is becoming known as an
attractive place to work which makes it easier to hire. It has a
diversified customer base including gaming companies, retailers,
and financial services, and is rapidly expanding coverage to other
industries.
Fair value of £4,507,055 representing 3.7% of Net Asset Value
(30 April 2021: 2.5%)
Nihon M&A Center (190,000
shares)
Nihon M&A Center is Japan’s largest M&A consulting and
advisory specialist for SMEs. The firm works with growth-oriented
companies seeking to expand market share as well as firms facing
succession or structural issues. A unique feature is that it works
with both buyers and sellers, charging fees to both sides of
transactions. The company has a wide network of accountants, tax
advisors, and various financial institutions - from regional banks
and cooperatives to major investment banks - as a pipeline for
potential buyers and sellers. It conducts seminars to educate SME
owners on growth, succession strategy and M&A. Over the next 10
years, more than 600,000 profitable Japanese SMEs, whose owners
average 69 years in age, are at risk of going out of business
because of a lack of a successor. The firm has added a professional
structure with specialists in all aspects of M&A advisory,
including post-acquisition support services, compliance and
governance. Sales compensation is based largely on performance, and
annual transactions have recently exceeded 900 deals. The company
is expected to show double digit growth for the next several years
and is also expanding overseas with an office in Singapore to develop cross-border
capabilities, increasingly in demand by SMEs.
Fair value of £4,226,820 representing 3.5% of Net Asset Value
(30 April 2021: 3.3%)
GMO Financial Gate (20,000 shares)
GMO Financial Gate (GMO FG) is a new company in the cashless
payments processing business, founded in 1999, and listed in 2020.
It is a consolidated subsidiary of GMO Payment Gateway (GMO PG).
GMO PG focuses on on-line cashless payments with top market share,
while GMO FG was set up to focus on face-to-face (F2F) cashless
payments, where it has a 1% and growing share of the much larger
F2F cashless processing market. The company’s mission is to offer
an omnichannel platform for merchants to manage their combined
on-line and off-line cashless payments from one interface in
real-time through multi-payment “Stera terminals” This was
difficult for them to do previously. Cashless payments have been
accelerating during Covid-19, but overall penetration in
Japan remains low at 29.7% in
2020, up from 26.8% in 2019. The company is expected to show double
digit earnings growth for several years, and also benefits from a
tie up with Sumitomo Mitsui Financial Group. An attractive feature
for merchants is that the Stera terminals make it easier for
on-line and cashless payments which will help expand their overall
business.
Fair value of £3,764,975 representing 3.1% of Net Asset Value
(30 April 2021: 2.1%)
Keyence Corporation (7,000 shares)
Keyence is Japan’s largest maker of sensors used for factory
automation. In addition to sensors, products include a range of
measuring and control instruments, image processing and R&D
equipment, business information equipment, optical micrometers,
digital microscopes, and 3-D printers. The company operates an
asset-light fabless model and is known for having pioneered a
“sales-engineer” approach, working directly with customers (without
intermediary vendors) to help design solutions and products. Direct
sales and marketing based on analysis of data and an extensive
portfolio of standardized solutions from past experience lowers
costs and enables consistent gross margins in excess of 80% and
OPMs above 50%. The company has over 300,000 customers across 110
countries in automotive and transportation, electronics and
precision, semiconductors and LCD, metals and machine tools, food
and pharmaceuticals among other industries. Automation is seeing a
rapid growth trend expanding to all sectors and Keyence is expected
to maintain significant and sustainable growth for the next several
years.
Fair value of £3,061,325 representing 2.5% of Net Asset Value
(30 April 2021: 2.7%)
Daifuku (45,000 shares)
Daifuku is the leading global supplier of distribution and
material handling systems used in warehouses, airport baggage
handling, automated factory assembly lines, and semiconductor/flat
panel fabrication lines. The company is known for high quality
products and services that optimize efficiency. Daifuku has been
growing sharply with the growth of factory automation in the
automotive, e-commerce and fast fashion apparel, and semiconductor
industries across the world, and has a large orderbook with long
lead times and good sales visibility. It offers a full line-up of
material handling systems and services from consulting through
engineering, design, manufacture, and installation. Growth of
services is adding stable recurring revenue, raising margins, and
includes regular inspections, troubleshooting, remote maintenance,
safety instruction, early warning systems, maintenance, on-site
services, repairs and upgrades. Daifuku’s clients include blue-chip
companies such as Toyota and Fast Retailing, and while the
automotive, e-commerce, semiconductor and airport sectors are
cyclical in nature they are also undergoing major secular and
structural growth with regards to the automation of their logistics
and manufacturing processes. Organic expansion has been
complemented with an active overseas M&A strategy.
Fair value of £3,001,831 representing 2.5% of Net Asset Value
(30 April 2021: 3.1%)
UNAUDITED SCHEDULE OF INVESTMENTS
As at 31
October 2021
|
|
|
|
|
|
|
|
Fair
value |
|
|
Holdings |
|
Financial assets at fair value through profit or loss |
|
£
'000 |
|
% of NAV |
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemicals: 4.15% (30 April 2021: 4.51%) |
|
|
|
|
|
100,000 |
|
Nihon
Tokushu Toryo |
|
|
|
636 |
|
0.53 |
17,000 |
|
Shin-Etsu
Chemical |
|
|
|
|
2,198 |
|
1.82 |
100,000 |
|
Tri
Chemical Laboratories |
|
|
|
2,174 |
|
1.80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction: 2.36% (30 April 2021: 0.68%) |
|
|
|
|
170,000 |
|
Besterra |
|
|
|
|
1,606 |
|
1.33 |
75,000 |
|
Phil |
|
|
|
|
|
1,245 |
|
1.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Electric Appliances: 21.80% (30 April 2021: 26.03%) |
|
|
|
|
140,000 |
|
Chino |
|
|
|
|
|
1,255 |
|
1.04 |
20,000 |
|
Iriso
Electronics |
|
|
|
|
664 |
|
0.55 |
7,000 |
|
Keyence
Corporation |
|
|
|
|
3,061 |
|
2.54 |
31,000 |
|
Lasertec |
|
|
|
|
4,953 |
|
4.11 |
66,000 |
|
Nidec |
|
|
|
|
|
5,296 |
|
4.39 |
48,000 |
|
Oxide |
|
|
|
|
|
2,316 |
|
1.92 |
30,000 |
|
Sony |
|
|
|
|
|
2,516 |
|
2.09 |
14,000 |
|
Tokyo
Electron |
|
|
|
|
4,723 |
|
3.92 |
320,000 |
|
Wacom |
|
|
|
|
1,499 |
|
1.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Electric Power & Gas: 3.78% (30 April 2021: 0.00%) |
|
|
|
|
143,000 |
|
Renova |
|
|
|
|
4,564 |
|
3.78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Glass
and Ceramics Products: 0.75% (30 April 2021: 0.00%) |
|
|
|
25,000 |
|
AGC |
|
|
|
|
|
905 |
|
0.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Information & Communication: 17.98% (30 April 2021:
16.33%) |
|
|
|
65,000 |
|
Giftee |
|
|
|
|
|
1,591 |
|
1.32 |
20,000 |
|
GMO
Financial Gate |
|
|
|
|
3,765 |
|
3.12 |
90,000 |
|
GMO
Internet |
|
|
|
|
1,801 |
|
1.49 |
16,000 |
|
Hikari
Tsushin |
|
|
|
|
1,792 |
|
1.49 |
12,000 |
|
JMDC |
|
|
|
|
|
654 |
|
0.54 |
45,000 |
|
Plus Alpha
Consulting |
|
|
|
862 |
|
0.71 |
100,000 |
|
PR
TIMES |
|
|
|
|
2,330 |
|
1.93 |
100,000 |
|
SB
Technology |
|
|
|
|
1,995 |
|
1.65 |
27,000 |
|
Shift |
|
|
|
|
|
4,507 |
|
3.74 |
60,000 |
|
VisasQ |
|
|
|
|
2,394 |
|
1.99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Machinery: 8.79% (30 April 2021: 11.60%) |
|
|
|
|
45,000 |
|
Daifuku |
|
|
|
|
3,002 |
|
2.49 |
11,000 |
|
Disco |
|
|
|
|
|
2,149 |
|
1.78 |
45,000 |
|
Giken |
|
|
|
|
|
1,247 |
|
1.03 |
150,000 |
|
Okada
Aiyon |
|
|
|
|
1,247 |
|
1.03 |
55,000 |
|
Nittoku
Engineering |
|
|
|
|
1,385 |
|
1.15 |
360,000 |
|
Yamashin-Filter |
|
|
|
|
1,579 |
|
1.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Metal
Products: 0.80% (30 April 2021: 0.56%) |
|
|
|
|
70,000 |
|
SUMCO |
|
|
|
|
967 |
|
0.80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others:
4.53% (30 April 2021: 4.62%) |
|
|
|
|
|
|
2,050 |
|
Industrial
& Infrastructure Fund Investment Reits |
|
2,728 |
|
2.26 |
|
620 |
|
Japan
Logistics Fund Reits |
|
|
|
1,348 |
|
1.12 |
|
2,000 |
|
Renewable
Japan Energy Infrastructure Fund Reits |
|
1,386 |
|
1.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Financing Business: 1.97% (30 April 2021: 1.74%) |
|
|
|
|
120,000 |
|
Premium |
|
|
|
|
2,378 |
|
1.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceutical: 5.46% (30 April 2021: 7.49%) |
|
|
|
|
|
123,000 |
|
CellSource |
|
|
|
|
5,056 |
|
4.19 |
|
50,000 |
|
Mizuho
Medy |
|
|
|
|
837 |
|
0.69 |
|
40,000 |
|
PeptiDream |
|
|
|
|
703 |
|
0.58 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Precision Instruments: 4.55% (30 April 2021: 3.73%) |
|
|
|
|
|
300,000 |
|
3-D
Matrix |
|
|
|
|
555 |
|
0.46 |
|
140,000 |
|
Asahi
Intecc |
|
|
|
|
2,680 |
|
2.22 |
|
110,000 |
|
Hirayama |
|
|
|
|
955 |
|
0.79 |
|
100,000 |
|
Topcon |
|
|
|
|
1,296 |
|
1.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
Estate: 1.87% (30 April 2021: 0.96%) |
|
|
|
|
|
|
140,000 |
|
House Do
Reits |
|
|
|
|
844 |
|
0.70 |
|
120,000 |
|
TKP |
|
|
|
|
|
1,409 |
|
1.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rubber
Products: 0.55% (30 April 2021: 0.51%) |
|
|
|
|
|
55,000 |
|
Toyo
Tires |
|
|
|
|
663 |
|
0.55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services: 21.33% (30 April 2021: 21.62%) |
|
|
|
|
|
|
45,000 |
|
Amvis
Holdings |
|
|
|
|
2,367 |
|
1.96 |
|
200,000 |
|
Bell
System24 Holdings |
|
|
|
1,864 |
|
1.55 |
|
37,000 |
|
Bengo4.com |
|
|
|
|
1,616 |
|
1.34 |
|
40,000 |
|
Funai
Soken |
|
|
|
|
806 |
|
0.67 |
|
28,000 |
|
IR Japan
Holdings |
|
|
|
|
1,879 |
|
1.56 |
|
100,000 |
|
Japan
Elevator Service Holdings |
|
|
1,574 |
|
1.31 |
|
250,000 |
|
Japan
Material |
|
|
|
|
2,525 |
|
2.09 |
|
70,000 |
|
Kanamoto |
|
|
|
|
1,088 |
|
0.90 |
|
31,000 |
|
M3 |
|
|
|
|
|
1,327 |
|
1.10 |
|
190,000 |
|
Nihon
M&A Center |
|
|
|
|
4,227 |
|
3.50 |
|
270,000 |
|
S-Pool |
|
|
|
|
|
2,192 |
|
1.82 |
|
40,000 |
|
Recruit
Holdings |
|
|
|
|
1,933 |
|
1.60 |
|
90,000 |
|
Writeup |
|
|
|
|
2,330 |
|
1.93 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale Trade: 0.62% (30 April 2021: 0.00%) |
|
|
|
|
|
100,000 |
|
Bike O |
|
|
|
|
|
748 |
|
0.62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Japan (30 April 2021: 100.38%) |
|
|
122,192 |
|
101.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
listed equities (30 April 2021: 100.38%) |
|
122,192 |
|
101.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
investments held at fair value through profit or loss |
|
122,192 |
|
101.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
overdraft (30 April 2021: (0.56%)) |
|
|
(1,663) |
|
(1.38) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
net assets (30 April 2021: 0.18%) |
|
|
105 |
|
0.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets attributable to equity shareholders |
|
120,634 |
|
100.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
UNAUDITED CONDENSED STATEMENT OF
COMPREHENSIVE INCOME
For the six month financial period
ended 31 October 2021
|
|
31 October 2021 |
|
31 October 2020 |
|
|
Revenue |
Capital |
Total |
|
Revenue |
Capital |
Total |
Notes |
|
£'000 |
£'000 |
£'000 |
|
£'000 |
£'000 |
£'000 |
|
Income |
|
|
|
|
|
|
|
3 |
Net gains on
investments held at fair value through profit or loss |
- |
6,784 |
6,784 |
|
- |
27,058 |
27,058 |
|
Net gains/(losses) on
foreign exchange |
- |
24 |
24 |
|
- |
(117) |
(117) |
|
Dividend income |
563 |
- |
563 |
|
506 |
- |
506 |
|
|
|
|
|
|
|
|
|
|
|
563 |
6,808 |
7,371 |
|
506 |
26,941 |
27,447 |
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
5 |
Investment management
fees |
(585) |
- |
(585) |
|
(574) |
- |
(574) |
6 |
Depositary fees |
(49) |
- |
(49) |
|
(51) |
- |
(51) |
7 |
Administration
fees |
(72) |
- |
(72) |
|
(74) |
- |
(74) |
8 |
Directors' fees and
expenses |
(57) |
- |
(57) |
|
(62) |
- |
(62) |
|
Insurance fees |
(3) |
- |
(3) |
|
- |
- |
- |
|
Audit fees |
(21) |
- |
(21) |
|
(19) |
- |
(19) |
|
Printing and
advertising fees |
(6) |
- |
(6) |
|
(4) |
- |
(4) |
|
Legal and professional
fees |
(48) |
- |
(48) |
|
(44) |
- |
(44) |
9 |
Research costs |
(47) |
- |
(47) |
|
(49) |
- |
(49) |
|
Miscellaneous
expenses |
(47) |
- |
(47) |
|
(23) |
- |
(23) |
|
|
|
|
|
|
|
|
|
|
|
(935) |
- |
(935) |
|
(900) |
- |
(900) |
|
|
|
|
|
|
|
|
|
|
Finance
cost |
|
|
|
|
|
|
|
|
Interest expense and
bank charges |
(7) |
- |
(7) |
|
(6) |
- |
(6) |
|
|
|
|
|
|
|
|
|
|
(Loss)/profit
before taxation |
(379) |
6,808 |
6,429 |
|
(400) |
26,941 |
26,541 |
|
|
|
|
|
|
|
|
|
10 |
Taxation |
(86) |
- |
(86) |
|
(77) |
- |
(77) |
|
(Loss)/profit for the financial period |
|
|
|
|
|
|
|
|
(465) |
6,808 |
6,343 |
|
(477) |
26,941 |
26,464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive
(loss)/income for the financial period |
(465) |
6,808 |
6,343 |
|
(477) |
26,941 |
26,464 |
|
|
|
|
|
|
|
|
|
11 |
(Deficit)/earnings
per ordinary share |
£(0.011) |
£0.163 |
£0.152 |
|
£(0.011) |
£0.645 |
£0.634 |
|
|
|
|
|
|
|
|
|
In arriving at the result for the financial period, all amounts
above relate to continuing activities.
The total column in this statement represents the Company’s
Unaudited Condensed Statement of Comprehensive Income, prepared in
accordance with IAS 34. The supplementary revenue and capital
columns are both prepared under guidance published by the
Association of Investment Companies.
The notes on below form an integral
part of these financial statements.
UNAUDITED
CONDENSED STATEMENT OF CHANGES IN EQUITY
For the six month financial period
ended 31 October 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
Capital |
|
Capital |
|
Capital |
|
other |
|
|
|
|
|
Ordinary Share |
|
Share |
|
Revenue |
|
reserve/ |
|
reserve/ |
|
reserve/ |
|
comprehensive |
|
|
|
|
|
capital |
|
premium |
|
reserve |
|
realised |
|
unrealised |
|
exchange |
|
income |
|
Total |
Notes |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Balances at 1 May
2021 |
|
- |
|
- |
|
(25,337) |
|
89,356 |
|
60,776 |
|
(14,437) |
|
6,143 |
|
116,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Movements during
the financial period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 |
Shares bought into
treasury |
|
- |
|
- |
|
(99) |
|
- |
|
- |
|
- |
|
- |
|
(99) |
3 |
Net realised gain on
investments held at fair value through profit or loss |
|
- |
|
- |
|
(3,939) |
|
3,939 |
|
- |
|
- |
|
- |
|
- |
3 |
Net unrealised gain on
investments held at fair value through profit or loss |
|
- |
|
- |
|
(2,845) |
|
- |
|
2,845 |
|
- |
|
- |
|
- |
|
Net gain on foreign
exchange |
|
- |
|
- |
|
(24) |
|
- |
|
- |
|
24 |
|
- |
|
- |
17 |
Distributions to
shareholders |
|
- |
|
- |
|
- |
|
(2,111) |
|
- |
|
- |
|
- |
|
(2,111) |
|
Total comprehensive
income |
|
- |
|
- |
|
6,343 |
|
- |
|
- |
|
- |
|
- |
|
6,343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at 31
October 2021 |
|
- |
|
- |
|
(25,901) |
|
91,184 |
|
63,621 |
|
(14,413) |
|
6,143 |
|
120,634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes on below form an integral
part of these financial statements.
For the six month financial period
ended 31 October 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
Capital |
|
Capital |
|
Capital |
|
other |
|
|
|
|
|
Ordinary Share |
|
Share |
|
Revenue |
|
reserve/ |
|
reserve/ |
|
reserve/ |
|
comprehensive |
|
|
|
|
|
capital |
|
premium |
|
reserve |
|
realised |
|
unrealised |
|
exchange |
|
income |
|
Total |
Notes |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Balances at 1 May
2020 |
|
- |
|
- |
|
(24,474) |
|
75,176 |
|
55,244 |
|
(14,176) |
|
6,143 |
|
97,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Movements during
the financial period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriptions |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
3 |
Net realised gains on
investments held at fair value through profit or loss |
|
- |
|
- |
|
(10,180) |
|
10,180 |
|
- |
|
- |
|
- |
|
- |
3 |
Net unrealised gains
on investments held at fair value through profit or loss |
|
- |
|
- |
|
(16,878) |
|
- |
|
16,878 |
|
- |
|
- |
|
- |
|
Net loss on foreign
exchange |
|
- |
|
- |
|
117 |
|
- |
|
- |
|
(117) |
|
- |
|
- |
17 |
Distributions to
shareholders |
|
- |
|
- |
|
(1,897) |
|
- |
|
- |
|
- |
|
- |
|
(1,897) |
|
Total comprehensive
income |
|
- |
|
- |
|
26,464 |
|
- |
|
- |
|
- |
|
- |
|
26,464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at 31
October 2020 |
|
- |
|
- |
|
(26,848) |
|
85,356 |
|
72,122 |
|
(14,293) |
|
6,143 |
|
122,480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes below form an integral part
of these financial statements.
UNAUDITED CONDENSED STATEMENT OF
FINANCIAL POSITION
As at 31
October 2021
|
|
|
31
October 2021 |
|
30
April
2021 |
Notes |
|
|
£'000 |
|
£'000 |
|
Non-current
assets |
|
|
|
|
14 |
Investments held at
fair value through profit or loss |
|
122,192 |
|
116,946 |
|
|
|
|
|
|
|
Current
assets |
|
|
|
|
|
Cash and cash
equivalents |
|
14 |
|
12 |
|
Due from brokers |
|
79 |
|
322 |
|
Dividends
receivable |
|
240 |
|
398 |
|
Prepaid expenses and
other receivables |
|
3 |
|
25 |
|
|
|
336 |
|
757 |
|
|
|
|
|
|
|
Current
liabilities |
|
|
|
|
|
Bank overdraft |
|
(1,677) |
|
(667) |
|
Due to brokers |
|
- |
|
(291) |
|
Payables and accrued
expenses |
|
(217) |
|
(244) |
|
|
|
|
|
|
|
|
|
(1,894) |
|
(1,202) |
|
|
|
|
|
|
|
Net current
liabilities |
|
(1,558) |
|
(445) |
|
|
|
|
|
|
|
Non-current
liabilities |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
16 |
Net assets |
|
120,634 |
|
116,501 |
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
Ordinary share
capital |
|
- |
|
- |
|
Share premium |
|
- |
|
- |
|
Revenue reserve |
|
(25,901) |
|
(29,048) |
|
Capital reserve |
|
140,392 |
|
139,406 |
|
Accumulated other
comprehensive income |
|
6,143 |
|
6,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets
attributable to equity shareholders |
|
120,634 |
|
116,501 |
|
|
|
|
|
|
|
Net asset value per
ordinary share* |
|
£2.89 |
|
£2.79 |
|
|
|
|
|
|
*Based on the Net Asset Value at the financial period/year end
divided by the number of shares in issue: 41,754,570 (30 April 2021: 41,794,570) (See Note 16).
Approved by the Board of Directors on 14
December 2021.
The notes below form an integral part
of these financial statements.
UNAUDITED CONDENSED STATEMENT OF CASH
FLOWS
For the six month financial period
ended 31 October 2021
|
|
|
31
October 2021 |
|
31
October 2020 |
|
|
|
£'000 |
|
£'000 |
Notes |
|
|
|
|
|
|
Cash flows from
operating activities |
|
|
|
|
|
Profit before
taxation |
|
6,429 |
|
26,541 |
|
Adjustments to reconcile profit before taxation to net cash
flows from |
|
|
|
|
operating
activities |
|
|
|
|
|
Net
realised gains on investments held at fair value through profit or
loss |
(3,939) |
|
- |
|
Net unrealised gains
on investments held at fair value through profit or loss |
|
(2,845) |
|
(27,058) |
|
Net exchange losses on
cash and cash equivalents |
|
(7) |
|
- |
|
Interest expense and
bank charges |
|
7 |
|
6 |
|
Decrease/(increase) in
due from brokers |
|
243 |
|
(754) |
|
Decrease in dividends
receivable |
|
158 |
|
186 |
|
Decrease in prepaid
expenses and other receivables |
|
22 |
|
13 |
|
(Decrease)/increase in
due to brokers |
|
(291) |
|
38 |
|
Decrease in payables
and accrued expenses |
|
(27) |
|
(11) |
|
Taxation paid |
|
(86) |
|
(77) |
|
|
|
(336) |
|
(1,116) |
|
|
|
|
|
|
|
Purchase of
investments |
|
(27,947) |
|
(28,026) |
|
Sale of
investments |
|
29,484 |
|
28,885 |
|
|
|
1,537 |
|
859 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash
inflow/(outflow) from operating activities |
|
1,201 |
|
(257) |
|
|
|
|
|
|
|
Cash flows from
financing activities |
|
|
|
|
|
Interest paid |
|
(6) |
|
(7) |
17 |
Distributions paid to
shareholders |
|
(2,111) |
|
(1,897) |
13 |
Shares bought into
treasury |
|
(99) |
|
- |
|
Net cash outflow
from financing activities |
|
(2,216) |
|
(1,904) |
|
|
|
|
|
|
|
Net decrease in
cash and cash equivalents |
|
(1,015) |
|
(2,161) |
|
|
|
|
|
|
|
Net exchange gains on
cash and cash equivalents |
|
7 |
|
- |
|
(Bank
overdraft)/cash and cash equivalents at beginning of |
|
|
|
|
financial period |
|
(655) |
|
3,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Bank
overdraft)/cash and cash equivalents at end of financial
period |
(1,663) |
|
1,023 |
|
|
|
|
|
|
The notes below form an integral part
of these financial statements.
NOTES TO THE UNAUDITED CONDENSED
FINANCIAL STATEMENTS
For the six month financial period
ended 31 October 2021
1. GENERAL
INFORMATION
Atlantis Japan Growth Fund Limited (the “Company”) was
incorporated in Guernsey on 13 March
1996. The Company commenced activities on 10 May 1996. The Company is an authorised
closed-ended investment scheme registered and domiciled in P.O. Box
255, Trafalgar Court, Les Banques, St Peter Port, Guernsey, GY1
3QL, Channel Islands. The Company’s equity shares are traded on the
London Stock Exchange.
As an investment trust, the Company is not regulated as a
collective investment scheme by the Financial Conduct Authority.
However, it is subject to the UKLA Listing Rules, Prospectus Rules,
Disclosure Guidance and Transparency Rules and the rules of the
London Stock Exchange.
The Company’s investment objective is to achieve long term
capital growth through investing wholly or mainly in listed
Japanese equities.
The Company’s investment activities are managed by Quaero
Capital LLP (“Investment Manager”) with the administration
delegated to Northern Trust International Fund Administration
Services (Guernsey) Limited.
2. SIGNIFICANT
ACCOUNTING POLICIES
Basis of preparation
The Condensed Interim Report and Unaudited Financial Statements
for the six month financial period ended 31
October 2021 have been prepared in accordance with IAS 34
Interim Financial Reporting and the Association of
Investment Companies (“AIC”) Statement of Recommended Practice
(“SORP”) for Investment Trust Companies and Venture Capital Trusts
to the extent it is not in conflict with IAS 34 and the Principal
Documents.
The Condensed Interim Report and Unaudited Financial Statements
do not include all of the information required for annual financial
statements, and should be read in conjunction with the Company’s
Financial Statements as at and for the financial year ended
30 April 2021 which were prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union ("IFRS"). These Condensed Interim
Report and Unaudited Financial Statements have not been audited or
have not been reviewed by the Company’s auditors pursuant to the
Auditing Practices Board guidance on Review of Condensed Interim
Financial Information.
The significant accounting policies adopted in these Unaudited
Condensed Financial Statements are consistent with those applied by
the Company in its Financial Statements as at and for the financial
year ended 30 April 2021.
New standards not yet adopted
There are no applicable new standards that have not been adopted
by the Company.
3.
NET GAINS ON INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR
LOSS
|
|
|
31 October 2021 |
|
31 October 2020 |
|
|
|
£'000 |
|
£'000 |
|
Realised
gains on investments held at fair value through profit or loss |
8,904 |
|
11,253 |
|
Realised
losses on investments held at fair value through profit or
loss |
|
(4,965) |
|
(1,073) |
|
Net
realised gains on investments held at fair value through profit or
loss |
3,939 |
|
10,180 |
|
|
|
|
|
|
|
Unrealised
gains on investments held at fair value through profit or loss |
14,321 |
|
4,371 |
|
Unrealised
losses on investments held at fair value through profit or
loss |
(11,476) |
|
(7,493) |
|
Net
unrealised gains on investments held at fair value through profit
or loss |
2,845 |
|
16,878 |
|
|
|
|
|
|
|
Net gains
on investments held at fair value through profit or loss |
|
6,784 |
|
27,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4. RELATED PARTY
DISCLOSURES
The Investment Manager, Depositary, Administrator and Directors
are considered related parties to the Company under IAS 24 as they
have the ability to control, or exercise significant influence
over, the Company in making financial or operational decisions. See
Notes 5 to 8 for details of transactions with these related parties
during the financial period ended 31 October
2021.
The Company has a credit facility with the Depositary, Northern
Trust Guernsey (limited). Please see Note 12 for details.
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 as at 31
October 2021 and 30 April 2021
are as follows:
|
|
Ordinary Shares |
|
Ordinary Shares |
|
|
31 October 2021 |
|
30 April 2021 |
|
Philip
Ehrmann |
|
50,000 |
|
50,000 |
|
|
Noel
Lamb |
|
26,000 |
|
23,250 |
|
|
Richard
Pavry |
|
40,000 |
|
40,000 |
|
|
Michael
Moule |
|
40,000 |
|
40,000 |
|
|
Yuki
Soga |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The above interests of the Directors were unchanged as at the
date of this report.
As at 31 October 2021, a family
member of the President of the Investment Adviser held 900,800
(30 April 2021: 900,800) ordinary
shares of the Company.
5. INVESTMENT
MANAGEMENT AND INVESTMENT ADVISER FEES
Under the terms of the Investment Management Agreement, the
Investment Manager, Quaero Capital LLP, will continue in office
until a resignation is tendered or the contract is terminated. In
both circumstances, a resignation or termination must be given with
a notice period which must not be less than three months, and be in
accordance with the Investment Management Agreement.
The Company pays to the Investment Manager a fee accrued daily
and paid monthly in arrears at the annual rate of 1% of the daily
NAV of the Company on the first £125m of net assets, 0.85% on net
assets between £125m and £175m and 0.70% on net assets above
£175m.
The Investment Adviser Fees are 75% of the total Investment
Management Fees and are paid by the Investment Manager.
For the six month financial period ended 31 October 2021, total investment management fees
were £584,886 (31 October 2020:
£574,373) of which £94,932 (30 April
2021: £100,170) is due and payable as at that date.
Investment Manager fees were £146,222 (31
October 2020: £140,455), with £23,733 (30 April 2021: £25,043) payable as at
31 October 2021.
Investment adviser fees were £438,665 (31
October 2020: £421,364), with £71,199 (30 April 2021: £75,127) payable as at
31 October 2021.
6. DEPOSITARY
FEES
Under the terms of the Depositary Agreement, fees are payable to
the Depositary, Northern Trust (Guernsey) Limited, monthly in
arrears, on the Gross Asset Value (Net Asset Value before
investment management fees) of the Company as at the last business
day of the month at an annual rate below:
Gross Asset
Value
Annual Rate
Up to $50,000,000
0.035%
$50,000,001 to $100,000,000
0.025%
Thereafter
0.015%
The Depositary is also entitled to a global custody fee of 0.03%
per annum of the NAV of the Company, subject to a minimum fee of
$20,000, and transaction fees as per
the Depositary Agreement.
For the six month financial period ended 31 October 2021, total depositary fees were
£48,923 (31 October 2020: £50,755),
of which £14,750 (30 April 2021:
£23,251) was due and payable as at that date.
7. ADMINISTRATION
FEES
Under the terms of the Administration Agreement, the Company
pays to the Administrator, Northern Trust International Fund
Administration Services (Guernsey) Limited, a fee accrued weekly
and paid monthly in arrears at the annual rate of:
Net Asset
Value
Annual Rate
Up to $50,000,000
0.18%
$50,000,001 to $100,000,000
0.135%
$100,000,001 to $200,000,000
0.0675%
Thereafter
0.02%
For the six month financial period ended 31 October 2021, total administration fees were
£71,835 (31 October 2020: £73,817),
of which £24,457 (30 April 2021:
£12,406) was due and payable as at that date.
8. DIRECTORS’ FEES
AND EXPENSES
Each of the Directors is entitled to receive a fee from the
Company, being £33,000 per annum for the Chairman, £28,500 per
annum for the Chairman of the Audit Committee and £26,000 per annum
for each of the other Directors. In addition, the Company
reimburses all reasonably incurred out-of-pocket expenses of the
Directors.
For the six month financial period ended 31 October 2021, total directors’ fees and
expenses were £57,463 (31 October
2020: £62,064), of which £817 (30
April 2021: £7,589) was due and payable as at that date.
9. RESEARCH
COSTS
In line with the introduction of revised rules in respect of the
use of dealing commission as part of the implementation of the
Directive 2014/65/EU on Markets in Financial Instruments and
amending Directive 2004/39/EC (“MiFID II”), effective from
3 January 2018, the Investment
Manager no longer pays for its investment research via dealing
commission.
The Investment Manager has established a research budget and
will pay for research services independently of trade execution.
All transactions are placed and executed on the basis that best
execution is achieved. Research costs incurred for the six month
financial period ended 31 October
2021 amounted to £47,423 (31 October
2020: £49,308).
10.
TAXATION
The Company is exempt from taxation in Guernsey under the
provisions of The Income Tax (Exempt Bodies) (Guernsey) Ordinance,
1989 and has paid an annual exemption fee of £1,200, however the
Company is subject to UK tax as a UK tax resident and must comply
with the Section 1158 of the Corporation Tax Act 2010. The main
rate of corporation tax in the UK was 19% effective from
1 April 2017 and effective
1 April 2023 the rate will increase
to 25%.
|
|
31 October 2021 |
|
31 October 2020 |
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
Irrecoverable overseas tax |
|
86 |
|
77 |
|
|
Tax
charge in respect of the current financial period |
|
86 |
|
77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current taxation
The current taxation charge for the financial period is
different from the standard rate of corporation tax in the UK. The
differences are explained in the following table:
|
|
|
31 October 2021 |
|
31 October 2020 |
|
|
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
|
Profit
before tax |
|
6,429 |
|
26,541 |
|
|
Capital
loss for the financial period |
|
(6,808) |
|
(26,941) |
|
|
Revenue
loss for the financial period |
|
(379) |
|
(400) |
|
|
|
|
|
|
|
|
|
|
|
31 October 2021 |
|
31 October 2020 |
|
|
|
|
£'000 |
|
£'000 |
|
|
Theoretical tax at UK corporation tax rate of 19%
(31 October 2020 - 19%) |
|
(72) |
|
(76) |
|
|
|
|
|
|
|
|
|
Effects
of: |
|
|
|
|
|
|
Excess
management expenses |
|
88 |
|
91 |
|
|
Notional
relief for overseas tax suffered |
|
(16) |
|
(15) |
|
|
Overseas
tax written off |
|
86 |
|
77 |
|
|
Actual
current tax charge |
|
86 |
|
77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company is an investment trust and therefore is not taxable
on capital gains.
Factors that may affect future tax
charges
As at 31 October 2021, the Company
has excess management expenses of £43,845,760 that are available to
offset future taxable revenue. Whilst this represents management’s
best estimate based on the carried forward balance in the previous
financial year ended 30 April 2021 of
£39,614,339 the estimated value could differ from actual amounts.
However, the potential impact is not expected to be
significant.
A deferred tax asset has not been recognised in respect of these
amounts as they will be recoverable only to the extent that there
is sufficient future taxable revenue.
11.
EARNINGS/(DEFICIT) PER ORDINARY SHARE
The earnings/(deficit) per ordinary share figure is based on the
profit for the financial period of £6,343,047 (31 October 2020: £26,464,217) divided by the
weighted average number of shares in issue during the six month
financial period ended 31 October
2021, being 41,792,179 (31 October
2020: 41,794,570).
The earnings/(deficit) per ordinary share figure can be further
analysed between revenue and capital, as below:
|
|
|
31 October 2021 |
|
31 October 2020 |
|
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
Net
loss |
|
(465) |
|
(477) |
|
Net
capital profit |
|
6,808 |
|
26,941 |
|
Net
total profit |
|
6,343 |
|
26,464 |
|
|
|
|
|
|
|
Weighted
average number of ordinary shares |
|
|
|
|
|
in issue
during the financial period |
|
41,792,179 |
|
41,794,570 |
|
|
|
|
|
|
|
|
|
£ |
|
£ |
|
Loss per
ordinary share |
|
(0.011) |
|
(0.011) |
|
Capital
profit per ordinary share |
|
0.163 |
|
0.645 |
|
Total
profit per ordinary share |
|
0.152 |
|
0.634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.
LOANS PAYABLE
As at 30 October 2021, the Company
has not drawn down on the credit facility (30 April 2021: not drawn down). ¥1,500,000,000
(£9,911,569) is borrowable under the terms of the facility
agreement.
Under the terms of the facility agreement with NTGL, the Company
is required to comply with the following financial covenant:
Borrowings on the accounts in the name of the Company may not
exceed at any time the lesser of (a) 20 per cent of the value of
unencumbered, listed and daily priced assets held in custody by the
Depositary for the Company or (b) 100 per cent of any borrowing
limit set out in the constitutional documents of the Company.
The Company complied with all of the above financial covenants
during the six month financial period ended 31 October 2021 and the financial year ended
30 April 2021.
13.
SHARE CAPITAL AND SHARE PREMIUM
Authorised
The Company is authorised to issue an unlimited number of
ordinary shares of no par value. The Company has issued two
subscriber shares for the purposes of incorporation of the Company.
The subscriber shares do not participate in the profits of the
Company.
The Company may also issue C shares being a convertible share in
the capital of the Company of no par value. C shares shall not have
the right to attend or vote at any general meeting of the Company.
The holders of C shares of the relevant class shall be entitled, in
that capacity to receive a special dividend of such amount as the
Directors may resolve to pay out of the net assets attributable to
the relevant C share class and from income received and accrued
attributable to the relevant C share class for the period up to the
conversion date payable on a date falling before, on or after the
conversion date as the Directors may determine. There are no C
shares currently in issue.
The rights which the ordinary shares confer upon the holders
thereof are as follows:
Voting rights
On a show of hands, every member who is present shall have one
vote; and on a poll, a member present in person or by proxy shall
be entitled to one vote per ordinary share held.
Entitlement to dividends
The Company may declare dividends in respect of the ordinary
shares which are paid out of capital reserves. Treasury shares do
not confer an entitlement to any dividends declared.
Rights in a winding-up
The holders of ordinary shares will be entitled to share in the
Net Asset Value of the Company as determined by the Liquidator.
Issued Ordinary
Shares |
|
|
|
|
|
|
Number of Shares |
|
Share
Capital |
|
Share
Premium |
|
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
In issue at 31 October
2021 |
41,754,570 |
|
- |
|
- |
|
|
|
|
|
|
In issue at 30 April
2021 |
41,794,570 |
|
- |
|
- |
|
|
|
|
|
|
|
|
Number of Shares |
|
Number of Shares |
|
|
|
31 October 2021 |
|
30 April 2021 |
|
|
Shares
of no par value |
|
|
|
|
|
|
Issued
shares at the start of the financial period |
|
41,794,570 |
|
41,794,570 |
|
|
Purchase
of shares into treasury |
|
(40,000) |
|
- |
|
|
Number
of shares at the end of the financial period |
|
41,754,570 |
|
41,794,570 |
|
|
|
|
|
|
|
|
|
Shares
held in treasury |
|
|
|
|
|
|
Opening
balance |
|
4,687,186 |
|
4,687,186 |
|
|
Shares
bought in to treasury during the financial period |
|
40,000 |
|
- |
|
|
Number
of shares at the end of the financial period |
|
4,727,186 |
|
4,687,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the financial period ended 31
October 2021, 40,000 shares were purchased into treasury at
a total cost of £99,300 (30 April
2021: £nil).
Shareholders are entitled to receive any dividends or other
distributions out of profits lawfully available for distribution
and on winding up they are entitled to the surplus assets remaining
after payment of all the creditors of the Company.
14. FAIR
VALUE HIERARCHY
The fair value of investments traded in active markets (such as
publicly traded derivatives and trading securities) are based on
quoted market prices at the close of trading on the Statement of
Financial Position date. The quoted market price used for
investments held by the Company is the last traded price; the
appropriate quoted market price for financial liabilities is the
current asking price.
A financial instrument is regarded as quoted in an active market
if quoted prices are readily and regularly available from an
exchange, dealer, broker, industry group, pricing service, or
regulatory agency and those prices represent actual and regularly
occurring market transactions on an arm’s length basis.
The fair value of investments that are not traded in an active
market is determined by using valuation techniques.
For instruments for which there is no active market, the Company
may use internally developed models, which are usually based on
valuation methods and techniques generally recognised as standard
within the industry. Valuation models may be used primarily to
value unlisted equity, debt securities and other debt instruments
for which markets were or have been inactive during the financial
period. Some of the inputs to these models may not be market
observable and are therefore estimated based on assumptions.
The following table sets out fair value measurements using the
IFRS 13 fair value hierarchies:
At 31 October
2021 |
|
|
|
|
|
|
|
Investments at fair
value through profit or loss |
|
|
|
|
|
|
|
|
Level
1 |
|
Level
2 |
|
Level
3 |
|
Total |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
Equity
investments |
122,192 |
|
- |
|
- |
|
122,192 |
|
122,192 |
|
- |
|
- |
|
122,192 |
|
|
|
|
|
|
|
|
At 30 April
2021 |
|
|
|
|
|
|
|
Investments at fair
value through profit or loss |
|
|
|
|
|
|
|
|
Level
1 |
|
Level
2 |
|
Level
3 |
|
Total |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
Equity
investments |
116,946 |
|
- |
|
- |
|
116,946 |
|
116,946 |
|
- |
|
- |
|
116,946 |
|
|
|
|
|
|
|
|
Categorisation within the hierarchy has been determined on the
basis of the lowest level input that is significant to the fair
value measurement of the relevant asset as follows:
· Level 1 - valued using quoted prices in
active markets for identical assets or liabilities.
· Level 2 - valued by reference to valuation
techniques using observable inputs other than quoted prices
included within level 1.
· Level 3 - valued by reference to valuation
techniques using inputs that are not based on observable market
data.
15.
INVESTMENTS HELD AT FAIR VALUE THROUGHOUT PROFIT OR LOSS
|
|
31 October 2021 |
|
30 April 2021 |
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
Opening
book cost |
|
77,919 |
|
61,302 |
|
|
Opening
investment gains |
|
39,027 |
|
33,495 |
|
|
Opening
fair value |
|
116,946 |
|
94,797 |
|
|
|
|
|
|
|
|
|
Analysis of transactions |
|
|
|
|
|
|
Purchases
at cost |
|
27,947 |
|
52,294 |
|
|
Sales
proceeds received |
|
(29,484) |
|
(53,568) |
|
|
Gains on
investments |
|
6,783 |
|
23,423 |
|
|
Closing
fair value |
|
122,192 |
|
116,946 |
|
|
|
|
|
|
|
|
|
Closing
book cost |
|
80,320 |
|
77,919 |
|
|
Closing
investment gains |
|
41,872 |
|
39,027 |
|
|
Closing
fair value |
|
122,192 |
|
116,946 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company received £29,484 (30 April
2021: £53,568) from investments sold during the financial
period. The book cost of these investments when they were purchased
was £27,947 (30 April 2021: £52,294).
These investments have been revalued over time and until they were
sold any unrealised gains/losses were included in the fair value of
investments.
16. NAV
HISTORY
|
|
31
October 2021 |
|
30
April 2021 |
|
30
April 2020 |
|
|
|
|
|
|
|
NAV |
|
£120,633,551 |
|
£116,501,330 |
|
£97,913,074 |
Number of Shares in
Issue |
|
41,754,570 |
|
41,794,570 |
|
41,794,570 |
NAV per Ordinary
Share |
|
£2.89 |
|
£2.79 |
|
£2.34 |
|
|
|
|
|
|
|
17.
DIVIDENDS
All amounts held in the Company’s revenue reserve are
distributable to shareholders by way of dividends. There are
regular quarterly payments of 1% of the company’s NAV (based on the
average daily NAV in the final month of the financial year). These
will be paid in March, June, September and December.
The Company declared the following dividends during the
financial period ended 31 October
2021:
|
Date |
Dividend rate per share (pence) |
Dividend (£) |
Record date |
Ex-dividend date |
Pay date |
|
24 May 2021 |
2.17 |
906,942 |
04 June 2021 |
03 June 2021 |
30 June 2021 |
|
25 August 2021 |
2.88 |
1,203,684 |
03 September 2021 |
02 September 2021 |
30 September 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18.
EXCHANGE RATES
The following exchange rates were used during the financial
period/year:
|
|
31
October 2021 |
|
30
April 2021 |
|
30
April 2020 |
|
|
GBP |
|
GBP |
|
GBP |
USD |
|
$1.3708 |
|
$1.3846 |
|
$1.2614 |
JPY |
|
¥156.2999 |
|
¥151.3383 |
|
¥134.8825 |
|
|
|
|
|
|
|
The
following average exchange rates were used during the financial
period: |
|
|
|
|
|
|
|
|
|
|
|
31
October 2021 |
|
31
October 2020 |
|
31
October 2019 |
|
|
GBP |
|
GBP |
|
GBP |
USD |
|
$1.3856 |
|
$1.2782 |
|
$1.2735 |
JPY |
|
¥153.0093 |
|
¥137.5213 |
|
¥139.6658 |
|
|
|
|
|
|
|
19.
CHANGES IN THE PORTFOLIO
A list, specifying for each investment the total purchases and
sales which took place during the six month financial period ended
31 October 2021 may be obtained, upon
request, at the registered office of the Company.
20.
EVENTS DURING THE FINANCIAL PERIOD
Yuki Soga was appointed as a
Director on 1 July 2021.
There were no other significant events during the financial
period ended 31 October 2021 which
require adjustment to or additional disclosure in the Financial
Statements.
21.
EVENTS AFTER THE FINANCIAL PERIOD
There were no significant events subsequent to the financial
period ended 31 October 2021 which
require adjustment to or additional disclosure in the Financial
Statements.
APPENDIX 1: SUPPLEMENTARY
INFORMATION
DISCOUNT MANAGEMENT
The Board reviews the discount level on a regular basis and will
opportunistically buy back stock if the discount is perceived to be
too wide. During the financial period under review, the Company did
not buy back Ordinary shares. At 31 October
2021 there were 4,727,186 Ordinary shares held in
Treasury. The discount to NAV per Ordinary share was 11.7% at
the end of the financial period.
PRIIPS KEY INFORMATION DOCUMENT
We are required by the Packaged Retail and Insurance-based
Investment Products (“PRIIPs”) regulations introduced at the
beginning of 2018 to provide investors with a key information
document (“KID”) which includes performance projections which are
the product of prescribed calculations based on the Company’s past
performance. Whilst the content and format of the KID cannot be
amended under the applicable UK law incorporating the EU directive,
the Board does not believe that these projections are an
appropriate or helpful way to assess the Company’s future
prospects.
Accordingly, the Board urges shareholders also to consider the
more complete information set out in these Condensed Interim Report
and Unaudited Financial Statements, together with the monthly fact
sheets and daily net asset value announcements, when considering an
investment in the Company’s shares. These documents, together with
a link to some useful third party research coverage of the Company
are published at www.atlantisjapangrowthfund.com.
GENERAL DATA PROTECTION
REGULATIONS
Changes to our Data Privacy Notice
Our Privacy Notice is in align with the data privacy law in the
European Union, known as the General Data Protection Regulation
(“GDPR”) to which we are subject. Data protection and the security
of your information always has been and remains of paramount
importance to us.
Where a data subject's details are provided to the Company as a
consequence of an investment in the Company, then the Company,
acting as a data controller may itself (or through a third party
such as the Administrator, the Registrar or the Investment Manager)
process that personal data. When processing such personal data,
there may also be times where the Investment Manager will act as a
data controller.
You are not required to take any action in respect of this
notice, but we encourage you to read our Privacy Notice. Our
Privacy Notice can be found on our website,
www.atlantisjapangrowthfund.com. In the event that you hold
your shares as a nominee, we request that you promptly pass on the
details of where to find our Privacy Notice to the underlying
investors and/or the beneficial owners.
ALTERNATIVE PERFORMANCE MEASURES
The European Securities and Markets Authority has published
guidelines on Alternative Performance Measures (“APMs”). APMs are
defined as being a “financial measure of historical or future
financial performance, financial position, or cash flows, other
than a financial measure defined or specified in the applicable
accounting framework.” The guidelines are aimed at promoting the
usefulness and transparency of APMs included in regulated
information and aim to improve comparability, reliability and/or
comprehensibility of APMs. The following APMs are used throughout
the Condensed Interim Report, Financial Statements and Notes to the
Financial Statements.
Benchmark total return index
A total return index is a type of equity performance index that
tracks both the capital gains of a group of stocks over time, and
assumes that any cash distributions, such as dividends, are
reinvested back into the index.
Discount
The amount, expressed as a percentage, by which the share price
is less than the net asset value (‘NAV’) per share.
Gearing
Gearing is the borrowing of cash to buy more assets for the
portfolio with the aim of making a gain on those assets larger than
the cost of the loan. However, if the portfolio doesn’t perform
well the gain might not cover the costs. The more an investment
Company gears, the higher the risk.
Mid-market price
The mid-market price is the mid-point between the buy and the
sell prices.
NAV per share
The NAV is the value of the investment Company’s asset less its
liabilities. The NAV per share is the NAV divided by the number of
shares in issue. The difference between the NAV per share and the
share price is known as the discount or premium.
Ongoing charges
Ongoing charges are the total expenses including both the
investment management fee and other costs but excluding performance
fees, expressed as a percentage of NAV. The total expenses for the
financial period ended 31 October
2021 were £942,434 (£1,884,868 annualised) which expressed
as a percentage of the weighted average NAV of £117,654,806 is
1.60% (30 April 2021 1.58%).
Premium
The amount, expressed as a percentage, by which the share price
is more than the NAV per share.
RETAIL DISTRIBUTION OF NON-MAINSTREAM
PRODUCTS
The Company currently conducts its affairs so that its shares
can be recommended by Independent Financial Advisers to ordinary
retail investors in accordance with the FCA’s rules in relation to
non-mainstream investment products and intends to continue to do so
for the foreseeable future. The Company’s shares are excluded from
the FCA’s restrictions which apply to non-mainstream investment
products because they are shares in an investment trust.
ADVICE TO SHAREHOLDERS
In recent years investment related scams have become
increasingly sophisticated and difficult to spot. We are therefore
warning all our shareholders to be cautious so that they can
protect themselves and spot the warning signs.
Fraudsters will often:
• contact you out of the blue
• apply pressure to invest quickly
• downplay the risks to your money
• promise tempting returns that sound too good to be true
• say that they are only making the offer available to you
• ask you to not tell anyone else about it
You can avoid investment scams by:
• Rejecting unexpected offers – Scammers usually cold
call but contact can also come by email, post, word of mouth or at
a seminar. If you have been offered an investment out of the blue,
chances are it’s a high risk investment or a scam.
• Checking the FCA Warning List – Use the FCA Warning
List to check the risks of a potential investment. You can also
search to see if the firm is known to be operating without proper
FCA authorisation.
• Getting impartial advice – Before investing get
impartial advice and don’t use an adviser from the firm that
contacted you.
If you are suspicious, report it.
• You can report the firm or scam to the FCA by contacting their
Consumer Helpline on 0800 111 6768 or using their online reporting
form.
• If you have lost money in a scam, contact Action Fraud on 0300
123 2040 or www.actionfraud.police.uk.
For further helpful information about investment scams and how
to avoid them please visit www.fca.org.uk/scamsmart.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
(“ESG”) POLICIES
Although the Company does not have specific ESG or
sustainability objectives. the Board is convinced that integrating
ESG risks into the Company’s financial analysis will support making
better decisions for its shareholders. As a long-term investor it
is fundamentally important that the Company understands the
environmental, social and governance risks and opportunities
affecting its investments. Strong relationships built over many
years in the market enable the Company to use its position to
encourage transparency and flag areas of high ESG risk.
The Investment Manager, in consultation with the Investment
Adviser, operates an exclusion policy which incorporates exclusion
lists to screen investments across all applicable investment
strategies. These exclusion lists include any companies involved in
the production or distribution of indiscriminate and controversial
weapons, in line with international convention. Additionally,
companies whose conduct is in systematic and severe breach of UN
Global Compact principles are also excluded from investment
consideration. So too are companies that have a significant part of
their business exposed to coal mining and coal powered energy
without any public plans for significant reduction.
The Investment Manager and the Investment Adviser support all
the Principles of the Japan Stewardship Code for responsible
institutional investors and seek to fulfil their stewardship
responsibilities under the Code. Whilst using both external
and internal analysis, the Investment Manager, in consultation with
the Investment Adviser, seeks to vote on all investee companies’
matters in line with its responsible investment philosophy with the
aim of contributing positively and promoting the sustainable growth
and long-term success of investee companies and stakeholders.
The Investment Manager is a signatory/member of the
following:
· UN
PRI (United Nations Principles for Responsible Investment)
to demonstrate commitment to responsible investment. The PRI acts
in the long-term interests of its signatories, of the financial
markets and economies in which they operate and ultimately of the
environment and society.
· IIGCC (Institutional Investors
Group on Climate Change), which looks to influence corporations to
address long term risks associated with climate change.
· CDP (Carbon Disclosure Project),
which looks to influence companies to disclose their carbon
footprint and address risks associated with climate change. The
project also provides a wealth of environmental data reported by
companies.
· TCFD (Task Force for
Climate-related Financial Disclosure). The Investment Manager has
signed the statement of support for the Financial Stability Board’s
Task Force on Climate-related Financial Disclosures. As such as it
will make annual disclosures in line with the recommendation in its
annual Sustainability Report, outlining its strategy and its
targets.
MANAGING YOUR SHAREHOLDING ONLINE
If your shareholding is held in your own name you will have been
allocated a unique Shareholder Reference Number “SRN” which is
quoted on your share certificate. All correspondence in respect of
your shareholding should be sent to: Computershare Investor
Services (Guernsey) Limited, c/o 1st Floor, Tudor House, Le
Bordage, St Peter Port, Guernsey, GY1 1DB. General shareholder
queries can also be sent to info@computershare.co.je.
If you wish to register to manage your shareholding online, you
can do so by registering on the Computershare Investor Centre
website at www.investorcentre.co.uk/je. Investor Centre can
also be used to check your current shareholding balance and confirm
the details of any transactions. In addition, Investor Centre
allows you to securely update your address and change your payment
details for any dividend payments.
To register for Investor Centre you will need to select the
‘Register’ button on the home page which will direct you to the
online registration form. You will then be required to enter
‘Atlantis Japan Growth Fund Limited’ under the Company name and
enter your personal Shareholder Reference Number (SRN). UK &
Channel Islands resident shareholders should insert a post code,
whereas other shareholders should select the appropriate country.
You will also be required to enter a security code and accept the
terms and conditions.
For security reasons, an activation code will be sent to your
registered postal address, should your holding be valued at over
£25,000. In the event that your holding is valued under the
threshold, no activation code will be necessary and you will be
able to view your account information immediately online.
INTERNATIONAL TAX REPORTING
For the purposes of the US Foreign Account Tax Compliance Act,
the Company registered with the US Internal Revenue Services
(“IRS”) as a Guernsey reporting Foreign Financial Institution
(“FFI”), received a Global Intermediary Identification Number
PYT2PS.99999.SL.831, and can be found on the IRS FFI list.
The Common Reporting Standard (“CRS”) is a global standard for
the automatic exchange of financial account information developed
by the Organisation for Economic Co-operation and Development
(“OECD”), which has been adopted by Guernsey and which came into
effect on 1 January 2016. The Board
has taken the necessary action to ensure that the Company is
compliant with Guernsey regulations and guidance in this
regard.