Schroder Japan Trust plc

Half Year Report

Schroder Japan Trust plc (the "Company") hereby submits its Half Year Report for the six months ended 31 January 2025 as required by the Financial Conduct Authority's Disclosure Guidance and Transparency Rule 4.2.

Key highlights

·      The Company achieved a net asset value ("NAV") total return of 4.0%, surpassing the Benchmark return of 1.4%.

·      The Board previously announced that it was adopting an enhanced dividend policy to pay out 4% of the average NAV in each financial year, on quarterly basis.

·      The Investment Manager actively geared the portfolio using contracts for difference ("CFDs") and this gearing had a positive effect on performance during the period. The gearing level (including CFDs) at the period end was 15.3%.

·      The underlying fundamentals of the Japanese equity market remain strong, with corporate governance reforms continuing to gain momentum. We expect improved shareholder returns to further enhance Japan's appeal.

·      The portfolio is biased towards value opportunities and is overweight small and mid-cap stocks, where we believe valuations look particularly attractive, given the improving domestic economic backdrop.

Philip Kay, Chairman of Schroder Japan Trust plc, commented:

"The Board is confident that Japan remains a compelling investment opportunity. We believe that Masaki Taketsume, supported by his team of Tokyo-based research analysts, continues to be very well-placed to outperform the Company's Benchmark, as he has done for the last five years. The bias towards value that is inherent in his approach combined with his disciplined bottom-up stock picking is precisely the strategy that should perform well in uncertain times."

The Half Year Report is also being published in hard copy format and an electronic copy of that document will shortly be available to download from the Company's web pages: www.schroders.com/japantrust

The Company has submitted a copy of its Half Year Report to the National Storage Mechanism and it will shortly be available for inspection at  https://data.fca.org.uk/#/nsm/nationalstoragemechanism  

Enquiries:

Schroder Investment Management Limited

Half Year Report for the six months ended 31 January 2025

Chairman's Statement

Performance
I am pleased to report that our Investment Manager's strategy has continued to deliver a solid performance over the six-month period ending 31 January 2025. The Company achieved a net asset value ("NAV") total return of 4.0%, surpassing the Benchmark return of 1.4%. The share price delivered a total return of 3.2%. While the financial year began with a sharp market correction following an unexpected interest rate hike from the Bank of Japan ("BOJ"), resilient corporate fundamentals and stabilising conditions enabled a recovery throughout the remainder of the period.

Masaki Taketsume's disciplined approach to stock selection proved effective once again, with strong contributions from holdings exposed to the generative artificial intelligence ("AI") value chain and continuing corporate governance reforms.

More details on the Company's investment strategy and recent portfolio activity can be found in the Investment Manager's Review.

Discount management
During the period, the Company's shares continued to trade at a discount to NAV. The Board exercised its buy-back authority to acquire 1,617,260 shares to be held in treasury, at an average discount of 12.5%. The discount started at 11.0% and changed to 12.3% by period-end. We remain committed to monitoring and addressing the discount through share repurchases as appropriate.

Enhanced dividend policy
The Board previously announced that it was adopting an enhanced dividend policy to pay out 4% of the average NAV in each financial year. The Board has begun declaring dividends on a quarterly basis and, in calculating the NAV in relation to quarterly dividends, the average NAV of the 12 months trailing the quarter will be used. It is important to note that the enhanced dividend policy will not result in a change to the Company's investment approach and strategy. The Company's focus will continue to be on well-managed, high-quality companies where the current share price does not yet fully reflect their potential, across the complete spectrum of Japanese companies.

Gearing
At the 2023 AGM, shareholders approved a change of the investment policy to allow the Company to use contracts for difference ("CFDs") to provide exposure to Japanese equities on a geared basis, as an alternative to utilising bank borrowings. During the period under review, the Investment Manager actively geared the portfolio by using CFDs and this gearing had a positive effect on performance during the period. The Company's gearing continues to operate within its pre-agreed limit of 125% of NAV and the gearing level (including CFDs) at the period end was 15.3%.

Outlook
The Japanese equity market has performed well over the last couple of years, with the Nikkei 225 surpassing its bubble-era high from the late 1980s. The Board shares the Investment Manager's optimism that this marks the start of an exciting new phase for the Japanese stock market, supported by structural improvements in corporate governance and capital efficiency. It is clear that the Japanese government, the BOJ and the Tokyo Stock Exchange ("TSE") are as one in championing these improvements and that large sections of corporate Japan are now focusing on effective capital allocation and profitability increases. Japan's economic backdrop also remains supportive, with rising wages, increased business investment and positive inflation helping to sustain earnings momentum.

Although the world faces several geopolitical and macroeconomic uncertainties at the time of writing, not least the economic impact of the introduction of tariffs by an unpredictable Trump administration, the Board is confident that Japan remains a compelling investment opportunity We believe that Masaki Taketsume, supported by his team of Tokyo-based research analysts, continues to be very well-placed to outperform the Company's Benchmark, as he has done for the last five years. The bias towards value that is inherent in his approach combined with his disciplined bottom-up stock picking is precisely the strategy that should perform well in uncertain times.

PHILIP KAY
Chairman
11 April 2025

Investment Manager's Review

Our investment approach
We believe the Japanese equity market ultimately acts efficiently in reflecting the intrinsic value of companies. In the short-to-medium term, however, considerable inefficiencies are frequently evident in individual stocks. These inefficiencies provide repeatable opportunities to identify and invest in undervalued stocks, with the aim of delivering a better return than the market as a whole on a rolling three-to-five year view.

Our investment resource is entirely devoted to this aim, focusing on individual company fundamentals to understand the true worth of a stock and investing in a portfolio of 60-70 of the highest conviction ideas. These then tend to be held for the long term, with value being realised as the market gradually reflects their true value more efficiently.

Portfolio holdings tend to fall into three categories of inefficiency:

1.     Market misperception - companies with self-improving credentials, with management initiatives to sustainably enhance operational performance being under-appreciated by other investors.

2.     Market oversight - undervalued companies, especially among small and mid-caps where research coverage is less widespread, with strong and defendable business franchises in niche product areas.

3.     Short-term overreaction - ideas arising from abrupt but transitory events which push valuations of quality companies temporarily to unsustainably low levels.

Outside these three categories, the balance of the portfolio represents "best in class" stocks with reasonable valuations. The weighting given to each of these segments evolves over time, but a reasonable exposure to each category ensures a good level of diversification for the portfolio as a whole. Meanwhile, the approach tends to result in a bias towards value stocks¹ and smaller companies, as well as an overall focus on quality.

The portfolio tends to exhibit a high "active share", which means that its constituents deviate significantly from the Benchmark index. Gearing (financial leverage) typically ranges between 10% and 17.5%, allowing shareholders to potentially benefit even more as the inefficiencies we have identified become more appropriately priced by the market.

Manager's review
Over the first six months of the Company's financial year, the Company's NAV total return increased by 4.0%, while its benchmark rose by 1.4%.

The Japanese stock market experienced a significant decline at the beginning of the period under review, with an unexpected interest rate hike from the BOJ triggering strength in the Yen and a sudden unwinding of carry trades.² Global growth concerns added to the volatility, but resilient corporate fundamentals and stabilising market conditions supported a steady recovery throughout the remainder of the period.

Recent performance drivers
Despite macroeconomic uncertainties - including the BOJ's evolving monetary policy outlook, the US presidential election outcome and the US economic outlook - which contributed to volatility in the Japanese equity market, the structural trends that have supported Japan's recent renaissance continued. Ongoing efforts by regulators and investors to change the culture of corporate Japan and improve governance and company profitability have maintained their strong momentum. With more and more businesses stepping up their efforts to structurally improve their behaviour and returns, global investors are becoming increasingly confident in the opportunity to drive a meaningful and sustainable revaluation of the Japanese equity market.

Meanwhile, although domestic consumer spending has remained lacklustre, the overall Japanese economic performance has been robust, helped by positive inflation, rising wages, increased business investment and export growth. This has allowed many Japanese businesses to maintain solid earnings growth.

1   The term 'value stocks' refers to shares of a company that appear to trade at a lower price relative to their fundamentals, such as dividends, earnings, or sales, making it appealing to value investors.

2   Carry trades involve borrowing money in a low interest rate currency such as the yen, to invest in higher-yielding currencies or assets. The strategy profits from the rate differential but can be undermined by sudden, unexpected changes in foreign exchange and interest rates.

Within the market, value stocks continued to outperform growth stocks, which assisted the Company's performance given the bias towards value that is inherent in our investment approach. Smaller companies, however, generally lagged their larger counterparts, because inflows from overseas investors initially tend to focus on large-cap stocks. This underperformance of small-cap stocks represented a modest headwind. There was a beneficial impact from gearing and helpful contributions from a range of individual stocks as explained below.

Two key developments contributed positively to performance during the period. Firstly, ongoing investor enthusiasm for the boom in generative AI technologies has driven outperformance of related stocks including, but not limited to, providers of semiconductor manufacturing equipment, optical components and power grid infrastructure. The portfolio's exposure to these types of businesses added value during the period. We tend to view these companies as market misperception stocks, as the market has not yet fully reflected their ability to participate in the AI growth opportunity. For example, Fujikura, an optical cable / component maker, performed strongly as the market started to realise how important its advanced optical connectivity solutions could be for AI infrastructure. Meanwhile, Hitachi, a large cap industrial conglomerate, also performed strongly as investors increasingly recognised the growth potential of its power grid business.

Secondly, ongoing improvements in corporate governance standards were evident in the increasing use of share buybacks and dividend hikes as companies sought to deploy capital more effectively. The portfolio benefited from this trend, with holdings such as Sanki Engineering and Nittera delivering strong performance after significantly improving shareholder returns.

By contrast, some of our holdings faced earnings pressure as their end markets went through a period of destocking and lower demand. For example, our market misperception holdings in electronic component maker Rohm and chemical business Mitsui Chemicals, both underperformed after posting weaker-than-expected earnings. General weakness in small and mid-sized stocks, such as Tazmo and Fukushima Galilei, also detracted from performance.

Top 10 contributors and detractors
Six months to 31 January 2025

Source: FactSet, GBP, TOPIX. Stocks mentioned are show for illustrative purposes only and should not be viewed as a recommendation to buy/sell. Past performance is not a guide to future performance and may not be repeated. The value of investment can go down as well as up and is not guaranteed. The return may increase or decrease as a result of currency fluctuations.

Portfolio strategy
Currently, the biggest category within the portfolio is market misperception which accounts for approximately 40% of assets. This includes companies such as Nippon Steel, Japan Post Holdings, and Rohm, where management efforts are paving the way for sustainable improvements in returns which are not yet reflected in valuations.

For example, we expect to see profitability improvements from Japan Post as it implements price increases in its postal services division. A cyclical recovery should also benefit its financial subsidiaries, Yucho Bank and Kampo Life. Additionally, we expect management to enhance shareholder returns, though regulatory constraints and complex stakeholder relationships could hinder progress. This represents a classic market misperception opportunity, as these improving fundamentals have not yet been fully priced into the stock.

Almost 30% of the portfolio is in market oversights, such as Fukushima Galilei, Hosokawa Micron and Kohoku Kogyo, where we find highly competitive smaller businesses trading at a significant discount to their large cap and global peers. For example, Kohoku Kogyo's two main businesses - lead terminals and optical components - are experiencing rapid growth. Demand for its lead terminals, which are used in high-end capacitors, is rising as the expansion of electric and electrified vehicles drives the need for more advanced electronic components. Meanwhile, its optical components business is benefiting from surging global data traffic, which is prompting increased investment in subsea optical networks. Despite these strong and sustainable tailwinds, we believe its shares continue to trade at an unwarranted discount to similar companies worldwide.

Around 10% of the portfolio is invested in short-term overreactions, including out-of-favour technology opportunities such as Recruit Holdings and the frozen food maker Nichirei Corporation. These businesses are beneficiaries of long-term structural tailwinds, but their shares were sold down aggressively - in our view, too aggressively - over the last couple of years. Nichirei Corporation, a leading frozen food and cold chain logistics provider in Japan, is well positioned to capture structural demand growth driven by labour shortages in B2B categories and lifestyle changes in B2C categories. The company's profitability was temporarily pressured by Yen depreciation, which led to higher raw material costs. However, these costs have been passed on to customers through price increase, with little impact on underlying volume growth. Despite this, the company's valuation has contracted significantly, leading to what we consider to be an attractive entry point.

The remaining portfolio is invested in what we consider to be best in class operators, such as Sumitomo Mitsui Financial Group, Asahi Breweries and Orix.

From a sector perspective, this results in a bias towards machinery, glass & ceramic products, chemicals and services. As is typical, the portfolio is also biased towards value opportunities and overweight to small and mid-cap stocks, where we believe valuations look particularly attractive given the improving domestic economic backdrop.

SECTOR POSITIONS - TOP 10 AND BOTTOM 10
Schroder Japan Trust plc
As at 31 January 2025

Source: Schroders, FactSet. ¹TOPIX.

The accounting data used by FactSet is un-audited, therefore any subsequent cleaning data will not be reflected in FactSet.

The sectors, securities, regions and countries shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell.

Portfolio activity
We initiated a new market misperception position in Mizuho Financial. Due to a series of mis-executions in the past, Mizuho has been seen as a laggard on returns and shareholder remunerations, when compared to other Japanese 'mega' bank groups such as MUFG and SMFG. We have held a series of meetings with Mizuho management and have been closely following their recent track record. In our view, Mizuho's strategic discipline has improved significantly and its business qualities are now, in several respects, on a par with peers. From here, attempts to further narrow the performance gap on return on equity and shareholder remunerations, should lead to a meaningful share price revaluation.

We also initiated a position in network / system integrator, Internet Initiative Japan ("IIJ"), as a new market oversight idea. We expect IIJ's growth to accelerate as more businesses upgrade and expand their enterprise networks to meet the increasingly complex demands of the modern digital organisation. We also anticipate a recovery in profit growth in the near term, as the temporary impact of higher software licensing costs, specifically from key partner VMware, fades.

Fanuc, one of the largest manufacturers of factory automation equipment and industrial robots, was added to the portfolio as a best in class stock. It holds a leading market position in the US industrial robotics market and we expect rising manufacturing capital expenditure to drive strong earnings growth. The recent share price weakness, driven by concerns over potential U.S. tariffs, provided an opportunity to build a position. These tariffs are unlikely to have a meaningful impact on Fanuc's competitiveness, as nearly all major robotics manufacturers are non-U.S. companies. Furthermore, with fixed costs peaking, Fanuc should see meaningful profitability improvements alongside higher revenue growth.

In terms of exits, we sold out of several positions including SMC, AGC and Bridgestone, mainly due to weaker-than-expected earnings progress. We also sold out of positions in Mimasu Semiconductor and NEC Networks & System Integrations, both of which are being fully acquired by their respective parent companies, reflecting Japan's ongoing corporate governance improvements. Both acquisitions were made at all-time high prices.

Outlook
The Japanese equity market has delivered impressive growth over the last eighteen months, with the Nikkei 225 finally exceeding its late 1980s bubble-era high. We believe this marks the beginning of a new era for Japanese equities, underpinned by structural improvements that have the capacity to drive sustained earnings growth and rising valuations for many years.

At the heart of this positive investment thesis are Japan's increasingly widespread corporate governance reforms, which are enhancing profitability and capital efficiency across large swathes of the Japanese stock market. The ongoing efforts of investors, including activist shareholders, alongside TSE initiatives, are further encouraging corporate management teams to focus on the crucial discipline of effective capital allocation. This corporate governance movement is nothing short of a revolution, which is transforming the Japanese equity landscape, making it increasingly attractive to global investors.

From a macroeconomic perspective, Japan's transition from deflation to inflation is having a lasting impact on corporate earnings, particularly by strengthening pricing power. Wage growth has remained steady, and early indications from the Shunto spring wage negotiations suggest that 2025 could bring another positive uplift in pay. We believe this should support real income growth and, in turn, drive a long-awaited recovery in consumption.

Following the historic year of 2024, in which the Nikkei 225 surpassed its previous all-time high for the first time in 34 years, the Japanese equity market experienced a weak start to 2025, largely due to various macroeconomic concerns, including trade policy uncertainties under the Trump administration. At the time of writing, the tariffs proposed by the US administration have effectively reset the narrative for global equity markets, shifting the outlook toward one characterised by slower economic growth, higher inflation, and increased uncertainty surrounding U.S. economic policies - arguably one of the most unfavourable combinations for global equity markets, including Japan.

Despite this, the underlying fundamentals of the Japanese equity market remain strong. Governance reforms continue to gain momentum, and we expect improved shareholder returns to further enhance Japan's appeal. While the broad market opportunity is compelling, this environment should particularly favour active, high-conviction investors who can identify the strongest beneficiaries of Japan's evolving corporate landscape. As a result, we are excited about the opportunity that lies ahead for the Company's shareholders.

MASAKI TAKETSUME
Portfolio Manager
11 April 2025

Investment Portfolio
as at 31 January 2025

Stocks in bold are the 20 largest investments, which by portfolio exposure account for 51.5% (31 July 2024: 52.5% and 31 January 2024: 52.1%) of total investments.

The Portfolio Exposure indicate the impact on market price movements resulting from the ownership of shares and derivative instruments. The Fair Value represents the true value of the portfolio, which is reflected on the Balance Sheet. In the case of holding a Contract for Difference (CFD), the Fair Value reflects the profit or loss generated by the contract since its inception, based on the movement of the underlying share price. However, when the Company solely holds shares, both the Fair Value and the Portfolio Exposure align.

1   Portfolio exposure is expressed as a percentage of total investments and financial derivative instruments.

2   The portfolio of investments is categorized using the Tokyo Stock Exchange (TSE) sectors, which are part of the TOPIX Sector Indices.

Interim Management Statement

Principal risks and uncertainties
The principal risks and uncertainties with the Company's business fall into the following risk categories: strategic; investment management; financial and currency; custody; gearing and leverage; accounting, legal and regulatory; service provider; and cyber. A detailed explanation of the risks and uncertainties in each of these categories can be found on pages 22 and 24 of the Company's published annual report and financial statements for the year ended 31 July 2024.

These risks and uncertainties have not materially changed during the six months ended 31 January 2025. However, the Board undertook a review of principal and emerging risks for the Company while reviewing this report. The Directors noted a wider set of technology risks, plus added the impact of climate change factors into investment performance and these risks will be reported on in the next annual report as appropriate.

Going concern
Having assessed the principal risks and uncertainties, and the other matters discussed in connection with the viability statement as set out on page 24 of the published annual report and financial statements for the year ended 31 July 2024, the Directors consider it appropriate to adopt the going concern basis in preparing the financial statements.

Related party transactions
There have been no transactions with related parties that have materially affected the financial position or the performance of the Company during the six months ended 31 January 2025.

Directors' responsibility statement
In respect of the half year report for the six months ended 31 January 2025, we confirm that, to the best of our knowledge:

-      the condensed set of Financial Statements contained within have been prepared in accordance with IAS 34 Interim Financial Reporting and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company as at 31 January 2025, as required by the Disclosure Guidance and Transparency Rule 4.2.4R;

-      the half year report includes a fair review as required by the Disclosure Guidance and Transparency Rule 4.2.7R, of important events that have occurred during the six months to 31 January 2025, and their impact on the condensed set of Financial Statements, and a description of the principal and emerging risks for the remaining six months of the financial year; and

-      the half year report includes a fair review of the information concerning related party transactions as required by the Disclosure Guidance and Transparency Rule 4.2.8R.

The half year report has not been reviewed or audited by the Company's auditors.

The half year report for the six months ended 31 January 2025 was approved by the Board and the above Responsibilities Statement has been signed on its behalf.

Financial

Statement of Comprehensive Income for the six months ended 31 January 2025 (unaudited)

The "Total" column of this statement is the profit and loss account of the Company. The "Revenue" and "Capital" columns represent supplementary information prepared under guidance issued by The Association of Investment Companies. The Company has no other items of other comprehensive income and therefore the net return after taxation is also the total comprehensive income for the period.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period.

Statement of Changes in Equity for the six months ended 31 January 2025 (unaudited)

for the six months ended 31 January 2024 (unaudited)

for the year ended 31 July 2024 (audited)

Statement of Financial Position as at 31 January 2025 (unaudited)

Registered in England and Wales as a public company limited by shares.

Company Registration Number: 02930057

Notes to the Financial Statements

1. Financial Statements
The information contained within the financial statements in this half year report has not been audited or reviewed by the Company's independent auditor.

The figures and financial information for the year ended 31 July 2024 are extracted from the latest published financial statements of the Company and do not constitute statutory financial statements for that year. Those financial statements have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.

2. Accounting policies
Basis of accounting
The financial statements have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice, in particular with Financial Reporting Standard 104 "Interim Financial Reporting" and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" issued by the Association of Investment Companies in July 2022.

All of the Company's operations are of a continuing nature.

The accounting policies applied to these financial statements are consistent with those applied in the financial statements for the year ended 31 July 2024.

3. Taxation on ordinary activities
The Company's effective corporation tax rate is nil, as deductible expenses exceed taxable income. The tax charge comprises irrecoverable overseas withholding tax.

4. Return per share

5. Dividends paid

The 2024 final dividend amounted to £12,691,000. However the amount actually paid was £12,561,000 as shares were repurchased and held in treasury, after the accounting date, but prior to the dividend Record Date.

A second interim dividend of 2.89p (2024: nil) per share, amounting to £3,350,000 (2024: nil) has been declared in respect for the year ending 31 July 2025.

6. Creditors: amounts falling due within one year

The company has a yen 1.0 billion credit facility available from Sumitomo Mitsui Banking Corporation, London Branch, which was undrawn at the period end (2024: yen 2.0 billion).

7. Called-up share capital

Changes in the number of shares in issue during the period were as follows:

8. Net asset value per share
Net asset value per share is calculated by dividing shareholders' funds by the number of shares in issue (excluding shares held in treasury) of 115,783,268 (31 January 2024: 118,522,739 and 31 July 2024: 117,400,528).

9. FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE
The Company's financial instruments within the scope of FRS 102 that are held at fair value comprise its investment portfolio and derivative financial instruments.

FRS 102 requires financial instruments to be categorised into a hierarchy consisting of the three levels below.

Level 1 - valued using unadjusted quoted prices in active markets for identical assets.
Level 2 - valued using observable inputs other than quoted prices included within Level 1.
Level 3 - valued using inputs that are unobservable.

The following table sets out the fair value measurements using the FRS 102 hierarchy above:

10. EVENTS AFTER THE INTERIM PERIOD THAT HAVE NOT BEEN REFLECTED IN THE FINANCIAL STATEMENTS FOR THE INTERIM PERIOD
The Directors have evaluated the period since the interim date and have not noted any significant events which have not been reflected in the financial statements.

OTHER INFORMATION

ALTERNATIVE PERFORMANCE MEASURES ("APMS") AND DEFINITIONS OF FINANCIAL TERMS

The terms and performance measures below are those commonly used by investment companies to assess values, investment performance and operating costs. Numerical calculations are given where relevant. Some of the financial measures below are classified as APMs as defined by the European Securities and Markets Authority. Under this definition, APMs include a financial measure of historical financial performance or financial position, other than a financial measure defined or specified in the applicable financial reporting framework. APMs have been marked with an asterisk (*).

NET ASSET VALUE ("NAV") PER SHARE
The NAV per share of 296.46p (31 July 2024: 298.88p) represents the net assets attributable to equity shareholders of £343,252,000 (31 July 2024: £350,888,000) divided by the number of shares in issue of 115,783,268 (31 July 2024: 117,400,528).

The change in the NAV amounted to -0.8% (year ended 31 July 2024: +18.5%) over the period. However, this performance measure excludes the positive impact of dividends paid out by the Company during the period. When these dividends are factored into the calculation, the resulting performance measure is termed the "total return". Total return calculations and definitions are given below.

TOTAL RETURN*
The combined effect of any dividends paid, together with the rise or fall in the share price or NAV per share. Total return statistics enable the investor to make performance comparisons between investment companies with different dividend policies. Any dividends received by a shareholder are assumed to have been reinvested in either the assets of the Company at its NAV per share at the time the shares were quoted ex-dividend (to calculate the NAV per share total return) or in additional shares of the Company (to calculate the share price total return).

The NAV total return for the period ended 31 January 2025 is calculated as follows:

The NAV total return for the year ended 31 July 2024 is calculated as follows:

The share price total return for the period ended 31 January 2025 is calculated as follows:

The share price total return for the year ended 31 July 2024 is calculated as follows:

BENCHMARK
The measure against which the Company compares its performance. The Benchmark is now named Tokyo Stock Price Index Total Return since April 4, 2022, previously known as TSE First Section Total Return Index.

DISCOUNT/PREMIUM*
The amount by which the share price of an investment trust is lower (discount) or higher (premium) than the NAV per share. If shares are trading at a discount, investors would be paying less than the value attributable to the shares by reference to the underlying assets. A premium or discount is generally the consequence of supply and demand for the shares on the stock market. The discount or premium is expressed as a percentage of the NAV per share. The discount at the period end amounted to 12.3% (31 July 2024: 11.0%), as the closing share price at 260.00p (31 July 2024: 266.00p) was 12.3% (31 July 2024: 11.0%) lower than the closing NAV of 296.46p (31 July 2024: 298.88p).

GEARING*
Gearing is the total portfolio exposure which is defined as the amount by which portfolio exposure exceeds the net asset values expressed as percentages of net asset value. The total portfolio exposure will not exceed 125% of the net asset value.

If assets rise in value, gearing magnifies the return to ordinary shareholders. Correspondingly, if assets fall in value, gearing magnifies that fall. Contracts for Difference are used as a way of gaining exposure to the price movements of shares without buying the underlying
shares directly.

1   The notional market value of a CFD represents the total value of the underlying asset of the CFD contract.

LEVERAGE*
For the purpose of the Alternative Investment Fund Managers (AIFM) Directive, leverage is any method which increases the Company's exposure, including the borrowing of cash and the use of derivatives. It is expressed as the ratio of the Company's exposure to its net asset value and is required to be calculated both on a "Gross" and a "Commitment" method. Under the Gross method, exposure represents the sum of the absolute values of all positions, so as to give an indication of overall exposure. Under the Commitment method, exposure is calculated in a similar way, but after netting off hedges which satisfy certain strict criteria.

The Company's leverage policy and details of its leverage ratio calculation and exposure limits as required by the AIFM Directive are published on the Company's webpages and within this report. The Company is also required to publish periodically its actual leverage exposures. As at 31 January 2025 these were:

ONGOING CHARGES*
Ongoing Charges is calculated in accordance with the AIC's recommended methodology and represents the management fee and all other operating expenses excluding finance costs and transaction costs, amounting to £3,038,000 (31 July 2024: £3,064,000), expressed as a percentage of the average daily "net asset values" during the year of £333.7 million (31 July 2024: £320.9 million).

SHAREHOLDER INFORMATION

WARNING TO SHAREHOLDERS
Companies are aware that their shareholders have received unsolicited telephone calls or correspondence concerning investment matters. These are typically from overseas-based 'brokers' who target UK shareholders, offering to sell them what often turn out to be worthless or high risk shares or investments.

These operations are commonly known as 'boiler rooms'. These 'brokers' can be very persistent and extremely persuasive.

Shareholders are advised to be wary of any unsolicited advice, offers to buy shares at a discount or offers of free company reports. If you receive any unsolicited investment advice:

●      Make sure you get the correct name of the person and organisation

●      Check that they are properly authorised by the FCA before getting involved by visiting https://register.fca.org.uk/s/

●      Report the matter to the FCA by calling 0800 111 6768 or visiting https://www.fca.org.uk/consumers/report-scam

●      Do not deal with any firm that you are unsure about

If you deal with an unauthorised firm, you will not be eligible to receive payment under the Financial Services Compensation Scheme.

The FCA provides a list of unauthorised firms of which it is aware, which can be accessed at https://www.fca.org.uk/consumers/unauthorised-firmsindividuals#list .

More detailed information on this or similar activity can be found on the FCA website at https://www.fca.org.uk/consumers/protectyourself-scams .

DIVIDENDS
Paying dividends into a bank or building society account helps reduce the risk of fraud and will provide you with quicker access to your funds than payment by cheque.

Applications for an electronic mandate can be made by contacting the Registrar, Equiniti.

This is the most secure and efficient method of payment and ensures that you receive any dividends promptly.

If you do not have a UK bank or building society account, please contact Equiniti for details of their overseas payment service.

Further information can be found at www.shareview.co.uk , including how to register with Shareview Portfolio and manage your shareholding online.