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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Abrdn Japan Investment Trust Plc | LSE:AJIT | London | Ordinary Share | GB0003920757 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 585.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMAJIT
RNS Number : 3767G
Aberdeen Japan Investment Trust PLC
25 November 2020
25 November 2020
Aberdeen Japan Investment Trust PLC (the "Company")
Legal Entity Identifier (LEI): 5493007LN4380BLNLM64
HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHSED 30 SEPTEMBER 2020
INVESTMENT OBJECTIVE
The Company's objective is to achieve long-term capital growth principally through investment in listed Japanese companies which are believed by the Investment Manager to have above average prospects for growth.
CHAIRMAN'S STATEMENT
Performance
Against what has been an extraordinary period due to the global COVID-19 pandemic, both your Company's share price and net asset value have outperformed the benchmark by a healthy margin. The Company's net asset value total return for the six month period to 30 September 2020 was 26.3%, posting a strong and welcome gain compared with the Topix benchmark's 14.8% total return.
Broadly, your Company's holdings fared well across most sectors, reaffirming the Manager's strategy of selecting well-run businesses with management adapting well to the fluidity of market conditions stemming from both international and domestic factors. The volatility has also presented some interesting investment opportunities for the Company. Over the period under review, your Manager has worked to unlock shareholder value in the portfolio companies, including driving improvements in governance and capital efficiency, as well as seeking evidence of post-pandemic recovery plans, in advance of AGM votes. These efforts are bearing fruit and underpin your Manager's approach to long-term, active investment. Further details can be found in the Manager's Report.
The Company's longer term performance has also been strong with NAV returns of 23.9% and 78.0% over 3 and 5 years respectively, compared to benchmark returns of 15.3% and 71.7%.
The ordinary share price's total return for the period was 18.0% as the discount to NAV per ordinary share widened from 10.9% to 16.8% as at 30 September 2020. Market volatility has continued to feature following the COVID-19 outbreak and discounts of most investment trusts have increased substantially at times. We are working closely with the Manager and advisers to address the widening discount. As at 23 November 2020, the discount was 9.0%.
Overview
Japan suffered less from the initial wave of the Coronavirus pandemic than most other major developed economies, with an early declaration of a state of emergency and relatively fewer fatalities. Two multi-trillion yen packages of financial support for companies and households helped mitigate the economic effects, as did continued lending by the Bank of Japan. Japanese firms' strong cash positions cushioned many from the worst impacts. However, corporate concerns persisted regarding worsening trade tensions between the US and China, Japan's top two trading partners, and Japan, in common with other economies, faces recession in the current year.
Shinzo Abe, Japan's longest-serving Prime Minister, resigned because of ill-health in September. His successor, Yoshihide Suga, who had been Abe's Chief Cabinet Secretary (effectively second in command) throughout his premiership, will maintain the principles of 'Abenomics' - fiscal and monetary stimulus, accompanied by structural reform - as well as increasing focus on digitalisation.
Dividend
Under the newly enhanced dividend policy approved last year, a final dividend of 9.0p per ordinary share in respect of the year ended 31 March 2020 was paid to shareholders in July 2020, making a total dividend for the year of 15.0p. Using the Company's closing share price of 640p for 30 September 2020 this indicates a historic yield of 2.3%.
Whilst the revenue return per ordinary share over the six month period to 30 September 2020 fell to 2.65p (2019 - 3.77p), the Manager has forecast an overall drop in dividend income for the full year in the low single digits. This is following a detailed review of the portfolio and discussions with portfolio company management teams.
The Board has declared an unchanged interim dividend of 6.0p for the year ending 31 March 2021 (2020 - 6.0p) which will be paid to shareholders on 31 December 2020. The record date is 4 December 2020.
The Board recognises the importance of income to our shareholders, particularly in this low interest environment. Good performance combined with a regular, sustainable semi-annual dividend should allow the Company to broaden the shareholder base and help to maintain the share price discount to NAV at reasonable levels. The Board continues to make use of the benefits of the investment trust structure to allow the Company to support the enhanced dividend policy.
Gearing
The Company made use of its capacity to gear through the Yen 1.3 billion fixed term and Yen 1.0 billion floating rate facilities with ING Bank. The Board considers a gearing level of around 10% to be appropriate, although, with stock market fluctuations, this may range between 5% -15%. Net g earing as at 30 September 2020 was 11.4% (31 March 2020: 13.6%).
The Board believes that the potential to gear the portfolio at the right time is one of the strong advantages of the closed ended company structure, with the sensible use of modest financial gearing seeking to enhance returns to shareholders. Further gearing options will be considered prior to the maturity of the current loan facility on 22 January 2021.
Discounts and Share Buybacks
The Board monitors the discount level of the Company's shares in relation to the NAV. There is a mechanism in place to buy back shares at appropriate levels when to do so will add value for shareholders. During the six month period, 241,746 shares were bought back into treasury at a cost of GBP1.5 million. Since the period end a further 126,411 shares have been repurchased.
The Board
It was with great sadness and regret earlier this year that I had to report that Kevin Pakenham, the Company's Senior Independent Director, passed away on 19 July 2020. Kevin had served as a Director of the Company since 2007. During this time, the Board and the shareholders benefited hugely from Kevin's significant knowledge and experience and his special wit and humour. He will be greatly missed.
Following a search involving an external recruitment agency, the Board is pleased to report the appointment of Sam Dean as an independent non-executive Director with effect from 1 December 2020. Sam has a long career in investment banking, working in Equity Capital Markets and corporate finance on behalf of corporate and government clients globally .
Outlook
The world remains in a state of uncertainty with a second wave of COVID-19 infections. Many governments have re-imposed social-distancing measures to contain the virus. Meanwhile, the ongoing infusion of massive stimulus to economies worldwide should continue to support asset prices. The full recovery in fundamentals which was thought to be increasingly distant due to the continuing impact of the global pandemic may now seem just a little closer following the latest news on potential vaccines.
In spite of all of the challenges witnessed, healthy balance sheets and ample free cash flow place your Company's holdings on firm ground. These fundamentals, coupled with their managements' experience in successfully navigating previous crises, should allow these companies to recover at a faster pace than that of the broader market. Moreover, many of them have built dominant positions in their own fields and will continue to thrive regardless of the external pressures faced. I have every confidence that your Tokyo-based Manager's consistent approach of seeking out the best companies, whether small, mid or large capitalisation stocks, through stringent screening and regular meetings with senior management will ensure the long-term growth prospects of the underlying investments in your Company's portfolio. The Manager's ESG focus, which is core to its investment process, should also help to ensure effective engagement at all levels as we encourage better and more sustainable practices and thus hopefully better share price ratings in recognition of their efforts.
Karen Brade,
Chairman
24 November 2020
INTERIM BOARD REPORT - OTHER MATTERS
Principal Risks and Uncertainties
The Board has in place a robust process to identify, assess and monitor the principal risks and uncertainties facing the Company and to identify and evaluate newly emerging risks. The Company's risks are regularly assessed by the Audit Committee and managed by the Board through the adoption of a risk matrix which identifies the key risks for the Company, including emerging risks, and covers strategy, investment management, operations, shareholders, regulatory and financial obligations and third party service providers. The Company's risks are regularly monitored at Board meetings and the Board believes that the Company is resilient to most short term operational risks which are effectively mitigated by the internal controls of the Manager and Depositary. Analysis and mitigation of other longer term and more strategic risks are managed by the Board.
The principal risks and uncertainties facing the Company have been identified as follows:
- Market, Economic and Political risk - Investment strategy risk - Investment Management risk - Operational risk - Regulatory risk - Share price and discount risk - Leverage - COVID-19 Pandemic
Further details of these risks are provided on pages 14 to 16 of the 2020 Annual Report and Accounts which is available on the Company's website www.aberdeenjapan.co.uk.
In addition to these risks, there are also a large number of international political and economic uncertainties which could have an impact on the performance of global markets. The outbreak of the COVID-19 virus has resulted in business disruption and stockmarket volatility across the world. The extent of the effect of the virus, including its long term impact, remains uncertain. The Manager has undertaken a detailed review of the investee companies in the Company's portfolio to assess the impact of COVID-19 on their operations such as employee absence, reduced demand, reduced turnover and supply chain breakdowns and will review carefully the composition of the Company's portfolio and will be pro-active where necessary. The Manager has implemented extensive business continuity procedures and contingency arrangements to ensure that they are able to continue to service their clients, including investment trusts.
The outcome and potential impact of Brexit remains an economic risk for the Company. As an investment trust with a Japanese mandate, the Company's portfolio is unlikely to be adversely impacted as a direct result of Brexit although some currency volatility could arise. The uncertainty surrounding Brexit could impact investor sentiment and could lead to increased or reduced demand for the Company's shares, which would be reflected in a narrowing or widening of the discount at which the Company's shares trade relative to their net asset value. Aberdeen Standard Investments has a significant Brexit program in place aimed at ensuring that they can continue to satisfy their clients' investment needs post Brexit.
The Board will continue to monitor developments as they occur.
In all other respects, the Company's principal risks and uncertainties have not changed materially since the publication of the 2020 Annual Report and Accounts.
Related Party Transactions
Any related party transactions during the period are disclosed in the Notes to the Financial Statements. There have been no related party transactions that have had a material effect on the financial position of the Company during the period.
Going Concern
In accordance with the Financial Reporting Council's Guidance on Risk Management, Internal Control and Related Financial and Business Reporting, the Directors have undertaken a rigorous review and consider that there are no material uncertainties and that the adoption of the going concern basis of accounting is appropriate. This review included the additional risks relating to the ongoing Covid-19 pandemic and, where appropriate, action taken by the Manager and Company's service providers in relation to those risks.
The Company's assets consist of equity shares in companies listed on the Tokyo Stock Exchange and in most circumstances are realisable within a short timescale.
The Company has a fixed term loan facility of JPY 1.3 billion and a revolving loan facility of JPY 1.0 billion in place until January 2021. The Board has set limits for borrowing and regularly reviews the Company's gearing levels and its compliance with bank covenants. Initial discussions with banks have commenced with a view to renewing the facility.
The Board have a reasonable expectation that the Company has adequate financial resources to continue its operational existence for the foreseeable future and the ability to meet all its liabilities and ongoing expenses from its assets. Given that the Company's portfolio comprises primarily "Level One" assets (listed on a recognisable exchange and realisable within a short timescale), and the Company's relatively low level of gearing, the Directors believe that adopting a going concern basis of accounting remains appropriate.
Accordingly, the Board continues to adopt the going concern basis in preparing the financial statements.
Directors' Responsibility Statement
The Directors are responsible for preparing the Half Yearly Financial Report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:
- the condensed set of Financial Statements has been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting);
- the Half Yearly Financial Report includes a fair review of the information required by rule 4.2.7R of the Disclosure and Transparency Rules (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of Financial Statements and a description of the principal risks and uncertainties for the remaining six months of the financial year); and
- the Half Yearly Financial Report includes a fair review of the information required by 4.2.8R (being related party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could do so).
-
The Half Yearly Financial Report for the six months ended 30 September 2020 comprises the Interim Board Report, which consists of the Chairman's Statement, Investment Manager's Review and Other Matters (including the Directors' Responsibility Statement), and the condensed set of Financial Statements.
Karen Brade,
Chairman
24 November 2020
INVESTMENT MANAGER'S REVIEW
Overview
Japanese equities rose by 14.8%, in sterling terms, in the half year under review, bouncing back from a sharp fall earlier in the year. The market recovery was driven by effective government efforts to control the outbreak of COVID-19, in conjunction with generous fiscal and monetary polic ies .
Compared with most other developed nations, Japan was spared the worst of the coronavirus outbreak. This was surprising given the country's ageing population, dense cities and over crowded public transportation system. Yet the situation on the ground was less severe than in some other countries , helped primarily by a socially-responsible populace who were quite accustomed to wearing masks even before the pandemic hit. This allowed the government to cautiously re-open the economy only a month after a state of emergency was declared. While Japanese companies reported material declines in their June quarter earnings due to reduced global economic activity, the results were better than expected due to prudent cost controls. Furthermore, Japanese balance sheets were in better shape before the pandemic than those of global peers.
T wo supplementary budgets and the continuation and expansion of the central bank's lending programme helped cushion the economy from the sudden halt in international travel and trade. Although second-quarter gross domestic product contracted by an unprecedented 7.8%, Japan still outpaced its peers, including the US, Europe, and the rest of the OECD.
What could have derailed the market's rise was Abe's unexpected resignation due to ill health. Investors were concerned that this could herald the end of his signature policies, dubbed 'Abenomics', that had fostered seven and a half years of stable growth. Those fears were allayed by Abe's being succeeded by his right-hand man and former Chief Cabinet Secretary, Yoshihide Suga, who reaffirmed his commitment to policy continuity.
Portfolio review
Over the period, the net asset value total return was 26.3% in sterling terms, comfortably surpassing the benchmark's 14.8% rise. The Company's share price rose by 18.0% on a total return basis. This performance was driven by portfolio holdings composed of market leaders with significant barriers to entry, led by experienced management teams, who are equipped to circumnavigate the challenging COVID-19 environment. Their quality is easily quantified through key measures , such as the ir profitability, returns on equity or dividend yield. Our stock picks stand out for their sustainable cash flows and access to liquidity, together with their solid balance sheets that support dividend pay - outs, even during these challenging times.
Having said that, the impact of the pandemic should not be understated. While COVID-19 has been an advantage for the more obvious businesses, it triggered a fundamental shift towards digitalization (which the new Prime Minister wants to accelerate). This has benefited some industries more than others, notably those that cater to the new virtual environment for working or shopping. These trends are mirrored across the world, as stay-at-home strictures compel the global workforce to telecommute, creating a swathe of possible new winners and losers.
Among the top performers was Z Holdings, a beneficiary of this new trend. Its e-commerce business has posted robust transaction volumes as consumers under lockdown were compelled to meet their everyday needs electronically. Another key contributor was Nippon Paint, albeit in a more traditional business segment. It has done well as the lower oil price, a direct consequence of the pandemic, translated into cheaper input costs. COVID-19 stimulus in China, where the company is the market leader in decorative paints, should also boost demand for its products. Also contributing to the Company's outperformance was Japan Exchange Group, the operator of the Tokyo Stock Exchange. Its shares rose on the back of positive sentiment stemming from an increase in trading volumes.
On the flipside, companies that haven't done as well over this period were the more traditional bricks and mortar ones , from owners of shopping malls and hotels, to restaurants and bars. Most forms of transportation have also been adversely affected. Among the portfolio's holdings, general insurer Tokio Marine was a key detractor from performance. Its shares were dampened by concerns over its exposure to small domestic businesses hurt by the pandemic. We met with management , who reassured us that this exposure was contained, and that the company expects an improvement in underwriting when the pandemic recedes and is considering streamlining its operations to prime itself for the eventual upturn. It remains a high quality company and stands out against its domestic rivals because of its successful expansion abroad .
Overall, the Company's holdings are led by capable management teams who were decisive and nimble in the face of the crisis , whether it was taking the initiative to cut costs, conserv e capital or quickly adapting their business es to the 'new normal'. Chief among these are air-conditioner maker Daikin and Hoya , a manufacturer of optical products for use in healthcare and information technology . Both were quick to cut costs, while Daikin pivoted to selling products tied to concerns of air quality in enclosed spaces. Another company that has done well during the period is boutique brokerage Nihon M&A Center, as demand for its services remained firm, aided by its ability to capitalise on technological solutions to reach its clients. For Nippon Paint, its share price was buoyed by its plans to grow the business despite the uncertainty, announcing that it is buying Singapore-based Wuthelam Group's Indonesian operations, together with its other joint ventures across Asia.
In portfolio activity, we sold several companies in favour of more attractive opportunities elsewhere . These included Mani , Musashi Seimitsu , Pilot Corp , Sakai Moving Service and TKP . Conversely, the sell-off in March allowed us to introduce a number of new companies to the portfolio. They include drug maker Astellas Pharma, semiconductor testing equipment maker Advantest and speech-recognition solutions provider Advanced Media.
We also initiated a position in Zenkoku Hosho, the largest third-party mortgage guarantor in Japan. The company is expected to benefit from local banks' outsourcing of such guarantees, as these financial institutions contend with low yields, a muted economic outlook and an over-competitive operating environment. Zenkoku Hosho's recent tie-up with Bank of Yokohama, one of Japan's largest regional banks, is in line with these trends. Another interesting new addition was Edulab, which provides systems, test design, support, analysis and learning materials for Japan's largest provider of independent English-as-a-foreign-language qualifications in Japan, amongst other testing services. The company has technological expertise in computer-based testing with optical character recognition, as well as education testing-related expertise that can be leveraged to capture other opportunities. Importantly, the government is shifting towards online learning and testing and EduLab is now poised to benefit from the shift to higher-margin computer-based testing, as well as further monetisation of its online portal for test applicants.
Outlook
While we have been pleasantly s urprised by the rebound in Japanese equities considering the global backdrop, the world is facing a second wave of infections. Governments are back to where they were six months ago, re-imposing lockdowns in an attempt to rein in the spike in COVID-19 infections before the winter sets in. Recent announcements in respect of potentially effective vaccines in the pipeline have however lifted investor sentiment and stock markets across the globe. As at 23 November 2020, the Topix index has risen 6.2% since the period end.
In geopolitics, US/China tensions are likely to persist, even under a Democratic US Administration. Japan will remain a crucial political and security ally of the US, although China remains a crucial trade and investment partner for the Japanese corporate sector.
What is certain is that your Company's holdings continue to possess favourable long-term prospects that have not been so badly affected by the pandemic; indeed for many the pandemic has proven to be a very positive catalyst. These holdings reflect the investment approach that we take, in seeking out and investing in good-quality businesses that have the financial strength to withstand protracted and systemic shocks. They are run by progressive management, backed by solid fundamentals, and are open to engaging with investors like ourselves , while respecting minorities' interests. This bodes well for the Company in the uncertain days ahead, knowing that the quality of these underlying holdings is what will make the difference in difficult times.
As a team of locally-based investment managers, we seek to constantly engage with our investee companies to encourage better governance and ESG policies. This should, and often does, deliver better results in terms of share price, as investors recognise the efforts that these companies are making, resulting in share price re-rating where fully disclosed and understood. We are committed to this active engagement and our detailed bottom-up research process should continue to improve returns for shareholders.
Aberdeen Standard Investments (Japan) Limited
Investment Manager
24 November 2020
FINANCIAL HIGHLIGHTS
Hot Features
Premium
Net asset value total Index total return Share price total return{A}
return{A}
Six months to Six months to Six months to
30 September 2020: 30 September 2020: 30 September 2020:
+26.3% +14.8% +18.0%
Six months to Six months to Six months to
30 September 2019: 30 September 2019: 30 September 2019:
13.1% +9.3% +16.4%
Ongoing charges ratio Discount to net asset Dividend per share
{A} value{A}
Six months to As at Six months to
30 September 2020: 30 September 2020: 30 September 2020:
1.03% 16.8% 6.00p
Year to As at Six months to
31 March 2020: 31 March 2020: 30 September 2019:
1.04% 10.9% 6.00p
{A} Considered to be an Alternative Performance Measure. Further
details can be found below.
As at As at
30 September 31 March Change
2020 2020 %
Total assets (GBP'000){A} 117,298 97,904 +19.8%
Total equity shareholders' funds
(GBP'000) 104,838 85,206 +23.0%
Net asset value per Ordinary share 769.6p 617.1p +24.7%
Share price (mid-market) 640.0p 550.0p +16.4%
Discount to net asset value per Ordinary
share{B} 16.8% 10.9%
Net gearing{B} 11.4% 13.6%
Ongoing charges{B} 1.03% 1.04%
{A} Excludes foreign currency bank loans of GBP12,460,000 (31 March
2020 - GBP12,698,000).
{B} Considered to be an Alternative Performance Measure. Further
details can be found below.
Six months Six months
to ended
30 September 30 September % change
2020 2019
Revenue return per Ordinary share 2.65p 3.77p -29.7
Interim dividend 6.00p 6.00p -
PERFORMANCE (total return) {A}
Six months Year Three years Five years
ended ended ended ended
30 Sept 2020 30 Sept 2020 30 Sept 2020 30 Sept 2020
Share price{B} +18.0% +8.3% +18.2% +54.1%
Net asset value per
Ordinary share{B} +26.3% +15.3% +23.9% +78.0%
Index{C} +14.8% +2.4% +15.3% +71.7%
{A} Total return represents capital return plus dividends reinvested.
{B} Considered to be an Alternative Performance Measure. Further
details can be found below.
{C} Index represents the TOPIX.
INVESTMENT PORTFOLIO
As at 30 September 2020
Valuation Total assets
Company Sector GBP'000 %
Shin-Etsu Chemical Company Chemicals 4,750 4.0
Toyota Motor Corporation Automobiles & Parts 4,607 3.9
Daikin Industries Construction & Materials 4,469 3.8
Tokio Marine Holdings Nonlife Insurance 4,423 3.8
Electronic & Electrical
Keyence Corporation Equipment 4,236 3.6
Sony Corporation Leisure Goods 3,976 3.4
Nippon Paint Holdings
Company Chemicals 3,388 2.9
Nabtesco Corporation Industrial Engineering 3,305 2.8
Chugai Pharmaceutical Pharmaceuticals &
Company Biotechnology 3,249 2.8
Amada Holdings Company Industrial Engineering 3,066 2.6
Top ten investments 39,469 33.6
Household Goods &
Makita Corporation Home Construction 3,033 2.6
Misumi Group Industrial Engineering 2,975 2.5
Japan Exchange Group Financial Services 2,901 2.5
Z Holdings Corporation Software & Computer
(formerly Yahoo Japan) Services 2,767 2.4
Stanley Electric Company Automobiles & Parts 2,736 2.3
KDDI Corporation Mobile Telecommunications 2,433 2.1
Technology Hardware
Elecom Company & Equipment 2,387 2.0
Health Care Equipment
Asahi Intecc Company & Services 2,344 2.0
Sho-Bond Holdings Company Construction & Materials 2,287 1.9
Welcia Holdings Company Food & Drug Retailers 2,262 1.9
Top twenty investments 65,594 55.8
Real Estate Investment
Heiwa Real Estate & Services 2,180 1.9
Electronic & Electrical
Azbil Corporation Equipment 2,037 1.7
Kansai Paint Company Chemicals 1,987 1.7
USS Company General Retailers 1,851 1.6
Health Care Equipment
Hoya Corporation & Services 1,790 1.5
Resorttrust Travel & Leisure 1,760 1.5
Software & Computer
Otsuka Corporation Services 1,759 1.5
Recruit Holdings Company Support Services 1,735 1.5
Yamaha Corporation Leisure Goods 1,722 1.5
Technology Hardware
NEC Networks & Equipment 1,708 1.5
Top thirty investments 84,123 71.7
Nitori Holdings General Retailers 1,618 1.4
Zenkoku Hosho Company Financial Services 1,524 1.3
Tokyo Century Corporation Financial Services 1,519 1.3
Health Care Equipment
As One Corporation & Services 1,504 1.3
Shiseido Company Personal Goods 1,446 1.2
Real Estate Investment
Tokyu Fudosan Holdings & Services 1,402 1.2
Software & Computer
Fuji Soft Services 1,309 1.1
Health Care Equipment
BML & Services 1,292 1.1
Technology Hardware
Sanken Electric & Equipment 1,282 1.1
Pigeon Corporation Personal Goods 1,186 1.0
Top forty investments 98,205 83.7
Software & Computer
SCSK Corporation Services 1,156 1.0
AIN Holdings Inc. Food & Drug Retailers 1,153 1.0
Milbon Company Personal Goods 1,106 0.9
Nihon M&A Centre Financial Services 1,091 0.9
Sansan Support Services 1,073 0.9
Nippon Sanso Holdings Chemicals 990 0.9
Pharmaceuticals &
Astellas Pharma Biotechnology 871 0.8
Pharmaceuticals &
Daiichi Sankyo Biotechnology 864 0.7
Valuecommerce Company Media 863 0.7
Pharmaceuticals &
Shionogi & Company Biotechnology 854 0.7
Top fifty investments 108,226 92.2
Software & Computer
Fukui Computer Holdings Services 842 0.7
Scroll Corporation Financial Services 795 0.7
Electronic & Electrical
Zuken Equipment 726 0.6
Technology Hardware
Advantest Corporation & Equipment 722 0.6
Edulab General Retailers 703 0.6
Daifuku Industrial Engineering 690 0.6
Health Care Equipment
Menicon Company & Services 592 0.5
Seven & I Holdings Company General Retailers 569 0.5
Daiwa Industrial Industrial Engineering 565 0.5
Software & Computer
Advanced Media Services 560 0.5
Top sixty investments 114,990 98.0
Health Care Equipment
Sysmex Corporation & Services 558 0.5
Okinawa Cellular Telephone Mobile Telecommunications 528 0.5
Fanuc Corporation Industrial Engineering 500 0.4
Total investments 116,576 99.4
Net current assets{A} 722 0.6
Total assets 117,298 100.0
{A} Excludes bank loans of GBP12,460,000
Unless otherwise stated, Japanese stock is held and all investments
are equity holdings.
CONDENSED STATEMENT OF COMPREHENSIVE INCOME (unaudited)
Six months ended
30 September 2020
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Gains on investments - 21,608 21,608
Income (note 2) 807 - 807
Investment management fee (note
11) (128) (193) (321)
Administrative expenses (214) (5) (219)
Exchange gains/(losses) - 228 228
________ _________ ________
Net return before finance costs
and taxation 465 21,638 22,103
Finance costs (21) (31) (52)
________ _________ ________
Net return before taxation 444 21,607 22,051
Taxation (note 4) (81) - (81)
________ _________ ________
Net return after taxation 363 21,607 21,970
________ _________ ________
Return per Ordinary share (pence)
(note 6) 2.65 157.72 160.37
________ _________ ________
The total column of this statement represents the profit and
loss account of the Company.
A Statement of Total Recognised Gains and Losses has not been
prepared as all gains and losses have been reflected in the
Condensed Statement of Comprehensive Income.
All revenue and capital items in the above statement derive
from continuing operations.
The accompanying notes are an integral part of the financial
statements.
CONDENSED STATEMENT OF COMPREHENSIVE INCOME (Cont'd)
Six months ended
30 September 2019
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Gains on investments - 11,776 11,776
Income (note 2) 976 - 976
Investment management fee (note
11) (128) (193) (321)
Administrative expenses (185) (8) (193)
Exchange gains/(losses) - (884) (884)
________ _________ ________
Net return before finance costs
and taxation 663 10,691 11,354
Finance costs (23) (34) (57)
________ _________ ________
Net return before taxation 640 10,657 11,297
Taxation (note 4) (97) - (97)
________ _________ ________
Net return after taxation 543 10,657 11,200
________ _________ ________
Return per Ordinary share (pence)
(note 6) 3.77 73.93 77.70
________ _________ ________
CONDENSED STATEMENT OF FINANCIAL POSITION (unaudited)
As at
As at 31 March 2020
30 September (audited)
2020
Note GBP'000 GBP'000
Fixed assets
Investments held at fair value through
profit or loss 116,576 96,247
_________ _________
Current assets
Debtors 607 982
Cash at bank and in hand 469 1,000
_________ _________
1,076 1,982
_________ _________
Creditors: amounts falling due within
one year
Foreign currency bank loans 7 (12,460) (12,698)
Other creditors (354) (325)
_________ _________
(12,814) (13,023)
_________ _________
Net current liabilities (11,738) (11,041)
_________ _________
Net assets 104,838 85,206
_________ _________
Share capital and reserves
Called-up share capital 1,582 1,582
Share premium 6,656 6,656
Capital redemption reserve 2,273 2,273
Capital reserve 92,287 72,334
Revenue reserve 2,040 2,361
_________ _________
Equity shareholders' funds 104,838 85,206
_________ _________
Net asset value per Ordinary share
(pence) 9 769.64 617.09
_________ _________
The accompanying notes are an integral part of the
financial statements.
CONDENSED STATEMENT OF CHANGES IN EQUITY (unaudited)
Six months ended 30 September
2020
Capital
Share Share redemption Capital Revenue
capital premium reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 March 2020 1,582 6,656 2,273 72,334 2,361 85,206
Purchase of Ordinary shares
to be held in treasury - - - (1,105) - (1,105)
Return after taxation - - - 21,607 363 21,970
Dividend paid (note 5) - - - (549) (684) (1,233)
_____ _____ _____ _____ _____ _____
Balance at 30 September
2020 1,582 6,656 2,273 92,287 2,040 104,838
_____ _____ _____ _____ _____ _____
Six months ended 30 September
2019
Capital
Share Share redemption Capital Revenue
capital premium reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 March 2019 1,582 6,656 2,273 74,675 2,839 88,025
Purchase of Ordinary shares
to be held in treasury - - - (1,210) - (1,210)
Return after taxation - - - 10,657 543 11,200
Dividend paid (note 5) - - - - (782) (782)
_____ _____ _____ _____ _____ _____
Balance at 30 September
2019 1,582 6,656 2,273 84,122 2,600 97,233
_____ _____ _____ _____ _____ _____
The accompanying notes are an integral part of the financial statements.
CONDENSED STATEMENT OF CASH FLOWS (unaudited)
Six months Six months
ended ended
30 September 30 September
2020 2019
GBP'000 GBP'000
Operating activities
Net return before taxation 22,051 11,297
Adjustments for:
Gains on investments (21,608) (11,776)
Increase in other creditors 151 81
Finance costs 52 57
Expenses taken to capital reserve 5 7
Foreign exchange (gains)/losses (228) 884
Overseas withholding tax (81) (97)
Decrease in accrued dividend income 139 34
Decrease/(increase) in other debtors 11 (2)
_________ _________
Net cash inflow from operating activities 492 485
Investing activities
Purchases of investments (19,969) (25,355)
Sales of investments 21,354 25,752
Expenses allocated to capital (5) (8)
_________ _________
Net cash inflow from investing activities 1,380 389
Financing activities
Bank and loan interest paid (54) (55)
Equity dividend paid (1,233) (782)
Purchase of own shares to treasury (1,105) (1,210)
_________ _________
Net cash outflow from financing activities (2,392) (2,047)
Decrease in cash (520) (1,173)
_________ _________
Analysis of changes in cash during the
period
Opening balance 1,000 1,516
Effect of exchange rate fluctuations
on cash held (11) 94
Decrease in cash as above (520) (1,173)
_________ _________
Closing balance 469 437
_________ _________
The accompanying notes are an integral part of the
financial statements.
NOTES TO THE ACCOUNTS (unaudited)
1. Accounting policies - Basis of accounting. The condensed financial
statements have been prepared in accordance with Financial
Reporting Standard 104 'Interim Financial Reporting' and with
the Statement of Recommended Practice for 'Financial Statements
of Investment Trust Companies and Venture Capital Trusts'.
They have also been prepared on a going concern basis and on
the assumption that approval as an investment trust will continue
to be granted.
The Half-Yearly financial statements have been prepared using
the same accounting policies applied as the preceding annual
financial statements, which were prepared in accordance with
Financial Reporting Standard 102.
2. Income
Six months Six months
ended ended
30 September 30 September
2020 2019
GBP'000 GBP'000
Income from investments
Overseas dividends 807 976
Total income 807 976
3. Transaction costs. During the period expenses were incurred
in acquiring or disposing of investments classified as fair
value through profit or loss. Expenses incurred in acquiring
investments have been expensed through capital and are included
within administration expenses in the Condensed Statement of
Comprehensive Income, whilst expenses incurred in disposing
of investments have been expensed through capital and are included
within gains on investments in the Condensed Statement of Comprehensive
Income. The total costs were as follows:
Six months Six months
ended ended
30 September 30 September
2020 2019
GBP'000 GBP'000
Purchases 5 8
Sales 5 7
_________ _________
10 15
_________ _________
The above transaction costs are calculated in line with the
AIC SORP. The transaction costs in the Company's Key Information
Document are calculated on a different basis and in line with
the PRIIPs regulations.
4. Taxation. The taxation charge for the period represents withholding
tax suffered on overseas dividend income.
5. Dividends
Six months Six months
ended ended
30 September 30 September
2020 2019
GBP'000 GBP'000
2019 final dividend - 5.40p - 782
2020 final dividend (paid from revenue 684 -
- 5.00p)
2020 final dividend (paid from capital 549 -
- 4.00p)
_________ _________
1,233 782
_________ _________
An interim dividend of 6.00p for the year to 31 March 2021
(2020 - 6.00p) will be paid on 31 December 2020 to shareholders
on the register on 4 December 2020. The ex-dividend date will
be 3 December 2020.
6. Return per Ordinary share
Six months Six months
ended ended
30 September 30 September
2020 2019
GBP'000 GBP'000
Based on the following figures:
Revenue return 363 543
Capital return 21,607 10,657
_________ _________
Total return 21,970 11,200
_________ _________
Weighted average number of Ordinary
shares in issue 13,699,382 14,414,748
Total net return per share (p) 160.37 77.70
7. Foreign currency bank loan
As at As at
30 September 31 March
2020 2020
GBP'000 GBP'000
Falling due within one year 12,460 12,698
_________ _________
Revolving credit facility
Japanese Yen loan Amount GBP'000 2,932 2,987
JPY'000 400,000 400,000
Interest
rate (%) 0.7000 0.7000
Short term Japanese Yen loan Amount GBP'000 9,528 9,711
JPY'000 1,300,000 1,300,000
Interest
rate (%) 0.7150 0.7150
The revolving credit facility loan is drawn down from the JPY1,000,000,000
one year revolving credit facility with ING Bank entered into
in January 2020 and which expires in January 2021.
The short term loan is drawn from the JPY1,300,000,000 one
year credit facility with ING Bank entered into in January
2020 and which expires in January 2021.
8. Analysis of changes in
net debt
At At
31 March Currency Cash 30 September
2020 differences flows 2020
GBP'000 GBP'000 GBP'000 GBP'000
Cash and short term deposits 1,000 (11) (520) 469
Debt due within one year (12,698) 238 - (12,460)
_________ ________ _______ _________
(11,698) 227 (520) (11,991)
_________ _________ ________ ________
At At
31 March Currency Cash 30 September
2019 differences flows 2019
GBP'000 GBP'000 GBP'000 GBP'000
Cash and short term deposits 1,516 94 (1,173) 437
Debt due within one year (11,785) 21 - (11,764)
_________ _________ ________ _________
(10,269) 115 (1,173) (11,327)
_________ _________ ________ _________
A statement reconciling the movement in net funds to the net
cash flow has not been presented as there are no differences
from the above analysis.
9. Net asset value per Ordinary share
As at As at
30 September 31 March 2020
2020
Attributable net assets (GBP'000) 104,838 85,206
Number of Ordinary shares in issue 13,621,695 13,807,780
Net asset value per Ordinary share
(p) 769.64 617.09
10. Fair value hierarchy. FRS 102 requires an entity to classify
fair value measurements using a fair value hierarchy that reflects
the significance of the inputs used in making the measurements.
The fair value hierarchy shall have the following classifications:
Level unadjusted quoted prices in an active market for identical
1: assets or liabilities that the entity can access at
the measurement date.
Level inputs other than quoted prices included within Level
2: 1 that are observable (i.e. developed using market data)
for the asset or liability, either directly or indirectly.
Level inputs are unobservable (i.e. for which market data
3: is unavailable) for the asset or liability.
All of the Company's investments are in quoted equities (31
March 2020 - same) which are actively traded on recognised
stock exchanges, with their fair value being determined by
reference to their quoted bid prices at the reporting date.
The total value of the investments as at 30 September 2020
of GBP116,576,000 (31 March 2020 - GBP96,247,000) has therefore
been deemed as Level 1.
11. Transactions with the Manager. The Company has agreements
with the Standard Life Aberdeen Group (the "Manager") for the
provision of investment management, secretarial, accounting
and administration and promotional activity services.
The management fee is payable monthly in arrears at a rate
of 0.75% per annum on the lesser of the Company's net asset
value or market capitalisation. The investment management fee
is chargeable 40% to revenue and 60% to capital. During the
period GBP321,000 (30 September 2019 - GBP321,000) of investment
management fees were payable to the Manager, with a balance
of GBP215,000 (30 September 2019 - GBP106,000) being outstanding
at the period end.
The promotional activities fee is based on a current annual
amount of GBP51,000 (30 September 2019 - GBP51,000 per annum),
payable quarterly in arrears. During the period GBP25,500 (30
September 2019 - GBP25,500) of fees were payable to the Manager,
with a balance of GBP25,500 (30 September 2019 - GBP12,750)
being outstanding at the period end.
12. Segmental information. The Company is engaged in a single
segment of business, which is to invest in equity securities
and debt instruments. All of the Company's activities are interrelated,
and each activity is dependent on the others. Accordingly,
all significant operating decisions are based on the Company
as one segment.
13. Subsequent events. Following the period end, the Company purchased
a further 126,411 Ordinary shares at a cost of GBP836,000.
As at the date of this report there were 13,495,284 Ordinary
shares in issue and 2,326,288 Ordinary shares held in treasury.
14. The financial information contained in this Half-Yearly Financial
Report does not constitute statutory accounts as defined in
Sections 434 - 436 of the Companies Act 2006. The financial
information for the six months ended 30 September 2020 and
30 September 2019 has not been audited by the Company's independent
auditor.
The information for the year ended 31 March 2020 has been extracted
from the latest published audited financial statements which
have been filed with the Registrar of Companies. The report
of the auditor on those accounts contained no qualification
or statement under Section 498 of the Companies Act 2006.
15. This Half-Yearly Report was approved by the Board on 24 November
2020.
ALTERNATIVE PERFORMANCE MEASUREMENTS
Alternative performance measures are numerical measures of the
Company's current, historical or future performance, financial
position or cash flows, other than financial measures defined or
specified in the applicable financial framework. The Company's
applicable financial framework includes FRS 102 and the AIC SORP.
The Directors assess the Company's performance against a range
of criteria which are viewed as particularly relevant for closed-end
investment companies.
Total return. NAV and share price total returns show how the NAV
and share price has performed over a period of time in percentage
terms, taking into account both capital returns and dividends paid
to shareholders. NAV total return involves investing the net dividend
in the NAV of the Company with debt at fair value on the date on
which that dividend goes ex-dividend. Share price total return
involves reinvesting the net dividend in the share price of the
Company on the date on which that dividend goes ex-dividend.
The tables below provide information relating to the NAVs and share
prices of the Company on the dividend reinvestment dates during
the six months ended 30 September 2020 and the year ended 31 March
2020 and total return for the periods.
Dividend Share
Value as at: rate NAV price
31 March 2020 N/A 617.09p 550.00p
2 July 2020 9.00p 718.97p 642.50p
30 September 2020 N/A 769.64p 640.00p
_________ _________
Total return for the six months ended
30 September 2020 +26.3% +18.0%
_________ _________
Dividend Share
Value as at: rate NAV price
31 March 2019 N/A 607.89p 525.00p
13 June 2019 5.40p 623.10p 552.50p
28 November 2019 6.00p 702.31p 632.50p
31 March 2020 N/A 617.09p 550.00p
_________ _________
Total return for the year ended 31 March
2020 +3.3% +6.8%
_________ _________
Discount to net asset value per Ordinary share. The discount is
the amount by which the share price of 640.00p (31 March 2020 -
550.00p) is lower than the net asset value per share of 769.64p
(31 March 2020 - 617.09p), expressed as a percentage of the net
asset value.
Net gearing. Net gearing measures the total borrowings of GBP12,460,000
(31 March 2020 - GBP12,698,000) less cash and cash equivalents
of GBP469,000 (31 March 2020 - GBP1,106,000) divided by shareholders'
funds of GBP104,838,000 (31 March 2020 - GBP85,206,000), expressed
as a percentage. Under AIC reporting guidance cash and cash equivalents
includes net amounts due to and from brokers at the period end
of GBPnil (31 March 2020 - due from brokers of GBP106,000) as well
as cash at bank and in hand of GBP469,000 (2019 - GBP1,000,000).
Ongoing charges. The ongoing charges ratio has been calculated
in accordance with guidance issued by the AIC as the total of investment
management fees and administrative expenses, expressed as a percentage
of the average net asset values throughout the year. The ratio
for 30 September 2020 is based on forecast ongoing charges for
the year ending 31 March 2021.
30 September 31 March
2020 2020
Investment management fees (GBP'000) 648 635
Administrative expenses (GBP'000) 394 354
Less: transaction costs on investment purchases
(GBP'000) - (20)
_________ _________
Ongoing charges (GBP'000) 1,042 969
_________ _________
Average net assets (GBP'000) 101,251 93,581
_________ _________
Ongoing charges ratio 1.03% 1.04%
_________ _________
The ongoing charges ratio provided in the Company's Key Information
Document is calculated in line with the PRIIPs regulations which
amongst other things, includes the cost of borrowings and transaction
costs.
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