Nippon Active Value - Half-year Report
31/08/2023 07:00
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RNS Number : 8714K Nippon Active Value Fund PLC 31 August 2023
LEI: 213800JOFEGZJYS21P75
31 August 2023
Nippon Active Value Fund plc
HALF-YEARLY REPORT
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2023
INVESTMENT OBJECTIVE
The investment objective of Nippon Active Value Fund plc ("the Company" or
"NAVF" or 'the Fund") is to provide Shareholders with attractive long-term
capital growth primarily through the active management of a focused portfolio
of quoted companies that have the majority of their operations in, or revenue
derived from, Japan, or a majority of whose consolidated net assets are held
in Japan, or that are included in the TOPIX, and that have been identified by
the Investment Adviser as being undervalued.
NAVF expects to publish on or around 1 September 2023 a circular proposing the
approval of a revised investment policy in connection with the migration to
the Premium Segment. Further details on the revised investment policy can be
found in that circular.
FINANCIAL INFORMATION
As at 31
As at 30 June 2023 December 2022
Net assets - (millions) £165.8 £158.7
Net asset value ("NAV") per ordinary share ("Share") - (pence)(1) 146.7 140.5
Share price - (pence) 141.5 117.5
Share price discount to NAV - (%)(2) 3.6 16.3
Ongoing charges - (annualised) - (%)(2) 1.48 1.41
PERFORMANCE SUMMARY
For the six month period to 30 June
For the six month period to 30 June 2023 2022
% change(3) % change(3)
NAV total return per Share(2) +6.7 -10.9
Share price total return per Share(2) +23.2 -20.7
MSCI Japan Small Cap index (sterling terms) total return +0.4 -8.7
( )
(1) This is measured on a cum income basis, including dividend reinvested.
(2) These are Alternative Performance Measures ("APM"). Definition of these
and other APMs used in this report, together with how these APMs have been
calculated are disclosed at the end of this report.
(3)Total returns are stated in GBP sterling, including dividend reinvested.
Source: Bloomberg
CHAIR'S STATEMENT
Performance
I am pleased to present Nippon Active Value Fund's interim report, covering
the period from 1 January 2023 to 30 June 2023.
Over that period, the Company's net asset value total return with dividend
reinvested rose by +6.7% while the share price total return with dividend
reinvested rose by +23.2%, reflecting a fall in the discount from 16.3% to
3.6%. For comparison, the MSCI Japan Small Cap Index in sterling terms was
little changed, rising by a modest +0.4% over the same period. Since the
launch of the Company in February 2020 on a dividend reinvested total return
basis, the net asset value of the Company has increased by +53.4% and the
share price by +45.3%, compared to a return in this index of +8.5%.
During the period under review, the Japanese market rallied to the highest
level since 1990 in local currency terms, though the continuation of loose
monetary policy contributed to further weakness in the yen. In contrast to
concerns in other developed markets about the likelihood of continued
increases in interest rates to combat stubborn inflationary pressures, the end
of deflation in Japan is positive for the economy, while the end of Covid
restrictions in China is positive for Japanese exports and inward bound
tourism. Berkshire Hathaway's enthusiasm for Japanese equities, albeit focused
on a narrow sector, was widely covered. Overseas investors have been
significant net buyers of yen assets, while domestic retail investors
responded well to the announcement of an extension of tax-efficient individual
investment accounts, NISAs. While increased investment flows have benefited
larger companies more than the small to mid-cap equities that are the focus of
your Company, continuing news flow about corporate governance initiatives has
provided support for an activist approach.
Our Investment Adviser's report follows below.
Corporate Governance Developments
In April 2022, the Japanese Securities Exchange, JPX, introduced a new system
of classification for listed equities, which divides listed equities into
Prime, Standard and Growth Markets based on criteria including market
capitalisation, tradable shares and corporate governance standards. The
reorganisation allowed a generous transition period. In January this year JPX
clarified the arrangements for ending the transition period and the criteria
to be applied in the annual reassessment of eligibility. As part of this they
announced that they would require companies trading below book value to
provide plans to boost their share price. According to the Financial Times,
53% of companies listed on the Tokyo Stock Exchange trade with a price-to-book
ratio of less than 1x and these companies form the core of our target
investment universe.
In November 2022, The Ministry of Economy, Trade and Industry (METI) announced
a review of Merger and Acquisition Guidelines, which includes a period of
public consultation lasting until early August 2023. Our Investment Advisers
have participated in the consultation process. METI's stated purpose is to
improve transparency and clarity and to encourage the consolidation of
industries where there is excess capacity, which all investors would no doubt
welcome.
In March this year, the Financial Services Agency announced a review of
takeover regulations, including a reassessment of the percentage ownership
that would trigger a compulsory takeover bid, currently 66% in on-market
transactions and 33% in off-market purchases. We await the outcome of both
reviews with interest. Whatever the final result, the inherent value of listed
Japanese equities is unarguable and the emphasis by the Stock Exchange on
improving outcomes for all shareholders has, we feel, made management more
receptive to arguments presented by activist investors for improved capital
allocation, particularly in the small and medium cap sectors.
Gearing
The Company has arranged a borrowing facility of £30 million to provide the
Investment Adviser with flexibility to temporarily gear the portfolio when
appropriate, eg to facilitate takeover initiatives. At 30 June 2023, the
portfolio held 0.6% in cash and at 29 August 2023 is approximately 2.3% in
cash.
Proposed Merger with abrdn Japan Investment Trust plc (AJIT)
In May 2023, the Company announced that, subject to the approval of the
shareholders of both AJIT and NAVF at general meetings, your Company had been
selected as the successor vehicle to AJIT pursuant to its proposed s.110
Insolvency Act 1986 member's voluntary liquidation and reconstruction. We are
delighted to have been selected. Aside from approval by both sets of
shareholders a further condition of the merger was that NAVF move its listing
from the Specialist Fund Segment to the Official List and the Premium Segment
of the London Stock Exchange, a step which the board was already considering,
as a means of improving distribution to retail investors. As part of the
migration to the Premium Segment, the Board appointed a second broker, Joh.
Berenberg, Gossler & Co. KG, as sponsor and joint broker alongside Shore
Capital.
Proposed Merger with Atlantis Japan Growth Fund (AJG)
On 11 August 2023, the Company also announced that, subject to the approval of
the shareholders of both AJG and NAVF at general meetings, your Company had
been selected as the successor vehicle to AJG pursuant to a scheme of
reconstruction and voluntary winding up of AJG pursuant to section 391(1)(b)
of the Companies (Guernsey) Law, 2008. We are again delighted to have been
selected by the board of AJG.
The resulting expansion of the Company will, we believe, improve the liquidity
of our shares as well as expand the universe of potential investment targets
to include slightly larger companies.
We are now expecting that the NAVF circular and prospectus required to support
the AJIT and AJG mergers
will be published imminently. We are now expecting that all necessary public
documents in connection with the AJIT and AJG mergers will be published by the
Company, AJIT and AJG in early September.
Outlook
The Company's strategy is to invest in a small number of deeply undervalued
companies where there is a strong potential for engagement with management to
improve returns to shareholders through, for example, higher dividend payouts
or share buy backs. The RSM team continues to identify a number of potential
investment opportunities and is encouraged by the responsiveness of many, if
not all, of the companies with which they engage. We are encouraged by the
more positive sentiment towards Japanese equities this year. Ours is a highly
selective, concentrated approach and we expect our returns to be relatively
lowly correlated to the market as a whole. Even if global investors' focus
shifts away from Japan, we are confident that an activist approach will
continue to perform well.
Rosemary Morgan
Chair
30 August 2023
INVESTMENT ADVISER'S REPORT
For the half-year ended 30 June 2023
Performance
Absolute (ex-inc) (1) Cumulative (ex-inc) (1)
JPY sterling/yen FX Change GBP JPY FX GBP
21 February 2020 to 12.19% 1.39% 13.58% 12.19% 1.39% 13.58%
31 December 2020
Year Ending 34.18% -12.77% 21.41% 50.54% -12.64% 37.90%
31 December 2021
1st Quarter -5.01% -2.28% -7.30% 42.99% -15.15% 27.84%
31 March 2022
2(nd) Quarter -2.26% -3.07% -5.33% 39.76% -18.73% 21.03%
30 June 2022
3(rd) Quarter 6.13% 2.24% 8.37% 48.33% -17.17% 31.16%
30 September 2022
4(th) Quarter 5.19% 1.90% 7.09% 56.04% -15.58% 40.46%
31 December 2022
Year Ending 3.65% -1.79% 1.86% 56.04% -15.58% 40.46%
31 December 2022
1st Quarter 11.26% -3.95% 7.31% 73.61% -22.88% 50.73%
31 March 2023
2(nd) Quarter 8.69% -11.35% -2.66% 85.88% -41.98% 46.72%
30 June 2023
Year to date 20.94% -16.48% 4.46% 85.88% -41.98% 46.72%
30 June 2023
(1) This is measured on an ex-income basis, excluding dividend reinvested.
Source: Bloomberg
Overview
In her report, the Chair has touched on the Bank of Japan's continued 'loose
money' policy, despite what really does appear to be a genuine rise in
inflation. The effects of this aberration amongst the world's developed
economies are starkly illustrated in the table above. This year alone, we
could argue the yen has cost the Fund almost 16.5% of performance and over 40%
since we launched in February 2020. Nonetheless, in sterling terms, the
capital return of the Fund's NAV is +46.7% (53% including dividends) over the
life of the Fund and NAVF is the top performing UK-based Japanese-focused fund
over one and three years, a testament to the continued success of the formula
we set out initially and from which we have not deviated. Nor will we.
Although we have no benchmark, we tend to look at the MSCI Japanese Small Cap
Index companies, it is worth noting for completeness that we have also
outperformed the TOPIX Small Cap index (TPXSM Index) and the TOPIX Index
excluding TOPIX 500. The TOPIX Small Cap Index was up +9.63%(2) as of 30th
June 2023, since February 21(st) 2020, the date the Fund listed on the London
Stock Exchange.
(2) Source: Morningstar
NAVF Returns By Currency (Net Of Fees)
Inception Date: 21/02/2020
Since inception as of 30 June 2023
Source: Bloomberg, company data
I am writing this report towards the end of July and, for the record, on 28th
July 2023, the Fund's NAV was 150.06p and Assets Under Management ("AUM") was
£169.60 million. Further down below of this report gives a snapshot of the
Fund at 30 June 2023.
Merger with abrdn Japan Investment Trust plc
In the first half of this year, performance has mattered even more than usual.
The Chair has already discussed the scheme of reconstruction of abrdn Japanese
Investment Trust plc (AJIT) via s.110 of the Insolvency Act 1986. As this
transaction will transform our business, a fuller account is merited.
As at the end of March this year AJIT was facing a continuation vote following
a prolonged period of underperformance. The Board of AJIT, thinking
imaginatively, wished to offer shareholders the option of rolling over the
majority of their holdings in AJIT into another stronger alternative.
Following an in-depth review of managers across the listed Japan sector, NAVF
was selected by the AJIT board as the most attractive successor vehicle for
their shareholders. The NAVF Board has also agreed to expand and will welcome
one of the AJIT Board members, thus ensuring continued representation of
AJIT's shareholders' interests. The terms of the proposed deal were announced
on 18th May once AJIT had consulted with a number of its major shareholders,
who indicated support for the deal.
Merger with Atlantis Growth Fund
As announced on 11 August 2023 and, following a rigorous review process, NAVF
has also been selected by Atlantis Japan Growth Fund ("AJG") as the successor
vehicle for those AJG shareholders electing (or being deemed to elect) for the
rollover option pursuant to a second scheme of reconstruction.
AJG is a long-only, non-activist investor in the Smaller Japanese Companies
sector, which like AJIT, is facing a continuation vote, and the Board has
determined that its future will be better served by being 'rolled-up' into
another, more successful, fund. As announced on 11 August 2023, AJG consulted
with a number of its major shareholders who indicated support for the move.
The Rising Sun team are delighted by the confidence shown in their performance
by both the boards of AJIT and AJG and by the fact that completion of both
schemes, subject to separate shareholder approvals, should increase NAVF's
assets under management towards the £300 million mark. Furthermore, as set
out in the announcement of 11 August 2023, the terms of the AJIT and AJG
mergers are equivalent, including that your Investment Adviser demonstrates
its conviction in the future success of NAVF and covers the costs of both up
to a cap of £800,000 per scheme.
It is impossible to be certain of the absolute amount that will come across to
NAVF on completion of each scheme but, after the proffered 25% cash
alternative, we still hope to receive assets in excess of £120 million after
expenses. Given the recent strong showing of the Japanese large-caps, we are
keen to receive the proceeds in specie - in other words, both the AJIT and AJG
portfolios should arrive substantially in the form of the stocks remaining,
once any gearing and the cash offer are settled. NAVF will not be 'out of
the market', and we can switch the inherited positions into our target
portfolio stocks at a time of our choosing.
As at 28(th) July 2023 NAVF's ordinary shares were trading on a 3.4% discount
and have traded at NAV or a small discount since the announcement of the AJIT
scheme. We are aware that two impediments to a stronger share rating have
been, to date, our size and relative illiquidity. Completion of the AJIT and
AJG schemes will help relieve both these concerns at once. In addition, the
ownership position of individuals and funds associated with the Investment
Adviser, already down to 31% due to the Fund's growth, will be further diluted
to levels more in line with market norms.
Migration to the Official List and Premium Segment of the Main Market
Earlier, I described the AJIT deal as transformative. By this, I did not mean
solely the increase in NAVF's AUM. A key condition of the terms agreed with
the AJIT board was that NAVF would move its listing from the Specialist Fund
Segment to the Official List and Premium Segment of the Main Market, something
we were intending to do later this year in any event, the AJIT opportunity
merely accelerated the timing. Moving to the main board is important and good
news. In recent months we have been tipped by, amongst others, Questor, Midas,
City Wire, Shares, as well as Money Makers and other investment podcasts - a
premium listing will make NAVF both more liquid and easier to buy for retail
investors. Our newly appointed second broker, Berenberg, will act as sponsor
for our move to the Official List.
Investment Policy
NAVF was established with a mandate to run a selective portfolio of around 20
names in companies of up to US$1 billion market cap equivalent and with no
more than 30% in anyone holding. This made perfect sense for a portfolio with
a starting value of just over £100 million.
Although we have never approached that kind of concentration in an individual
stock, as the portfolio has grown, so has the number of constituent parts.
Currently, we have 29 names, not including two TOPIX-related Exchange Traded
Funds (see Portfolio Composition below). As a result of the two proposed
scheme mergers, and the move to the Premium Segment, we will be proposing some
modest revisions to the investment policy, details of which will be set out in
the circular to shareholders shortly.
These revisions include a reduced limit on the maximum proportion of the Fund
which can be invested in any one name of 20% (down from 30%) which, given the
expanding size of the Fund, is still gives us plenty of scope. The greater
size of the Fund also behoves us to reconsider the typical number of stocks we
will hold, and this will be advanced to around 35. The portfolio will remain
selective and focused, while we will be acknowledging the existing direction
of travel. Lastly, and more significantly, we have enlarged the core universe
of prospective targets to include companies with up to US$3 billion market cap
equivalent. This will allow the inclusion of more mid-cap names, providing
both greater levels of liquidity and the ability to deploy our larger fund
more quickly. NAVF was always conceived as a small and mid-cap fund, so there
is no fundamental change in our purposes, nor the way in which we pursue them.
The revisions to the Investment Policy are designed in part to cater for a
larger portfolio of assets following the completion of the AJIT and AJG
schemes. Notwithstanding this, your Investment Adviser considers that the
increased flexibility offered by the revised investment policy, will be for
the benefit of shareholders regardless of whether or not the schemes complete.
Portfolio Composition
When writing the first quarter's report, I explained that two actions within
the portfolio had resulted in a large influx of cash. These were the
successful MBO of Ihara Science, which de-listed in Q2, and the unsuccessful
tender offer for T&K Toka. At one point, we had over £40 million of
excess liquidity. As the Chair has noted in her report, the Japanese market
has been 'running' in recent months, the result of many causes, important
amongst which have been: a general recognition of the value proposition of the
cheapest market in the developed world, low interest rates and the 'loose' yen
policy, and the resultant inflows of foreign funds as they sought to diversify
away from China. The temporary solution to get this liquidity to work rapidly
was to buy two ETFs geared to the TOPIX index. We recognised that this was
sub-optimal and undertook to invest these funds in new and existing targets as
quickly as possible.
I am pleased to report that, while on 1st June the ETFs constituted 10.5% of
the portfolio, by the end of the month this had fallen to 5.25% (and, at 28th
July, it is now only 2.5%). It is worth remarking that the composition of
Ihara Science's go-private vehicle is still being structured. Additionally, we
note that T&K Toka's CEO has stepped down and, accordingly, the company's
future direction is still in the balance.
Outlook
This is the easiest section of any report I have ever written. The outlook is
the brightest since NAVF's IPO in 2020. METI's M&A review, the Tokyo Stock
Exchange's announced intention to name and shame all companies trading below
PBR and requiring them to generate comprehensive plans to plot a path to
trading at multiples, and the Corporate Governance programme generally, have
never provided a stronger regulatory wind at our back. Where the standard
answer to our first entreaties with a new subject used always to be a polite
'no', now they are routinely saying 'let's talk'. We know there continue to be
doubters, and that 'I've heard it all before' is a refrain that will take a
long time to fade, but, on the ground, we are really beginning to see a sea
change. Should both the AJIT and AJG schemes be approved by their respective
sets of shareholders leaving us with a nearly £300 million fund, a broader
mixture of institutional and retail shareholders, a Premium Segment listing,
and the ability to buy bigger positions in slightly bigger companies, NAVF's
prospects look better than ever.
Paul ffolkes Davis
Rising Sun Management Limited Investment Adviser
30 August 2023
PORTFOLIO SECTORS BREAKDOWN
As at 30 June 2023
Top ten holdings
Percentage of
as at 30 June 2023 Sector net assets (%)
Intage Holdings Inc Communication Services 11.9
Mitsuboshi Belting Industrials 9.9
Ebara Jitsugyo Co Industrials 8.8
Toyota Industries Industrials 8.5
Nippon Fine Chemical Materials 8.4
Meisei Industrial Industrials 4.6
Ishihara Chemical Materials 4.3
Next Funds Topix Exchange Traded Fund ETP Index ETF 4.0
Vital KSK Holdings Healthcare 3.7
Bunka Shutter Co Industrials 3.6
Top ten holdings 67.7
Other net assets 32.3
Total 100.0
Portfolio Characteristics
Equity Investments 97%
Price/Book 1.2x
Price/Earnings 15.3
EV/EBITDA 5.6
Net Cash/Mkt Cap 11.4%
Adjusted Cash/Mkt Cap 34.2%
Net Working Capital/Market Cap 40.1%
INTERIM MANAGEMENT REPORT
The Directors are required to provide an Interim Management Report in
accordance with the Financial Conduct Authority ("FCA") Disclosure Guidance
and Transparency Rules ("DTR") and consider the Chair's Statement and the
Investment Adviser's Report in this half-yearly report to provide details of
the important events which have occurred during the period and their impact on
the financial statements. The following statements on related party
transactions, going concern and the Directors' Responsibility Statement below,
together constitute the Interim Management Report for the Company for the
period ended 30 June 2023. The outlook for the Company for the remaining six
months of the year ending 31 December 2023 is discussed in the Chair's
Statement and the Investment Adviser's Report.
RISKS AND UNCERTAINTIES
The principal and emerging risks and uncertainties facing the Company are
detailed in the Company's most recent Annual Report for the year ended 31
December 2022. These remain unchanged during the period under review.
The principal and emerging risks, together with a summary of the processes and
internal controls used to manage and mitigate risks where possible are
outlined in the Annual Report for the year ended 31 December 2022.
The Board is responsible for the management of risks and uncertainties faced
by the Company. The Board relies on the Investment Adviser, who will seek to
mitigate these risks through active asset management initiatives and carrying
out due diligence work on potential targets before entering into any
investments. The principal and emerging risks and uncertainties of the Company
are continuously monitored by the Board, with input from the Investment
Adviser.
The Board is of the opinion that these principal and emerging risks and
uncertainties remain and is very
much applicable to the remaining six months of the Company's financial year.
RELATED PARTY TRANSACTIONS
The Company's Investment Adviser is Rising Sun Management Limited and is
considered a related party under the Listing Rules. The Investment Adviser is
entitled to receive annual advisory fee calculated as 0.85 per cent. of the
Company's net assets (exclusive of VAT). Investment advisory fees paid during
the period to 30 June 2023 is £694,000 (30 June 2022: £634,000). There is no
performance fee payable to the Investment Adviser.
GOING CONCERN
The Board has a reasonable expectation that the Company has adequate resources
to continue in operational existence for at least the following twelve-month
period from the date of this report. In reaching this conclusion, the
Directors have considered the liquidity of the Company's portfolio of
investments as well as its cash position, income, and expense flows. The
Company's net assets as at 30 June 2023 were £165.8 million (31 December
2022: £158.7 million). As at 30 June 2023, the Company held £162.1 million
(31 December 2022: £126.2 million) in quoted investments and had cash and
cash equivalents of
£1.0 million (31 December 2022: £31.7 million). The total expenses
(excluding finance costs and taxation) for the period ended 30 June 2023 is
£1.3 million (30 June 2022: £0.8 million).
As a result of the macro-economic situation, including higher inflation and
increased interest rates brought about, inter alia, by the Russian invasion of
Ukraine and the recovery from the COVID-19 pandemic, the Directors have fully
considered each of the Company's investments. However, the Company currently
has more than sufficient liquidity available to meet any present and future
obligations. In addition, the Board believes that the Company and its key
third party service providers have in place appropriate business continuity
plans to continue to maintain service levels throughout future pandemics.
DIRECTORS' STATEMENT OF RESPONSIBILITY FOR THE HALF-YEARLY REPORT
The Directors confirm to the best of their knowledge that:
• The condensed set of financial statements contained within the half-yearly
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting" as required by DTR 4.2.4R.
• The Interim Management Report includes a fair review of the information
required by 4.2.7R and 4.2.8R of the FCA's Disclosure Guidance and
Transparency Rules.
Rosemary Morgan Chair
For and on behalf of the Board of Directors
30 August 2023
CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
For the period ended For the year ended
30 June 2023 31 December 2022*
For the period ended
30 June 2022
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on investments - 9,520 9,520 - (18,755) (18,755) - 1,274 1,274
Income 4 2,751 - 2,751 3,456 - 3,456 5,487 - 5,487
Foreign exchange gains/(losses) - 41 41 - (466) (466) - 938 938
Investment adviser fees (139) (555) (694) (127) (507) (634) (248) (995) (1,243)
Other operational expenses (646) - (646) (112) - (112) (812) - (812)
Profit/(loss) before taxation 1,966 9,006 10,972 3,217 (19,728) (16,511) 4,427 1,217 5,644
Taxation 5 (277) - (277) (345) - (345) (549) - (549)
Profit/(loss) and comprehensive income for the period 1,689 9,006 10,695 2,872 (19,728) (16,856) 3,878 1,217 5,095
Earnings/(loss) per Ordinary Share - Basic and diluted (pence) 8 1.49p 7.97p 9.46p 2.54p (17.46p) (14.92p) 3.43p 1.08p 4.51p
*Audited
There is no other comprehensive income and therefore the return for the period
is also the total comprehensive income for the period.
The total column of the above statement is the profit and loss account of the
Company. All revenue and capital items in the above statement derive from
continuing operations.
Both the supplementary revenue and capital columns are both prepared in
accordance with Statement of Recommended Practice ("SORP") issued by the
Association of Investment Companies ("AIC").
The notes form part of these interim financial statements.
CONDENSED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
As at 30 June 2023 As at 30 June 2022 As at 31 December 2022*
Note £'000 £'000 £'000
Non-current assets
Investments at fair value through profit or loss 3 162,103 127,188 126,284
Current assets
Cash and cash equivalents 1,012 8,703 31,738
Trade and other receivables 4,779 1,312 1,240
5,791 10,015 32,978
Current liabilities
Trade and other payables (2,070) (409) (517)
(2,070) (409) (517)
Net current assets 3,721 9,606 32,461
Net assets 165,824 136,794 158,745
Capital and reserves attributable to Shareholders
Share capital 7 1,130 1,130 1,130
Share premium 115,349 115,349 115,349
Capital reserve 47,330 17,379 38,324
Revenue reserve 2,015 2,936 3,942
Total equity 165,824 136,794 158,745
NAV per Ordinary Share (pence) 9 146.72p 121.03p 140.46p
*Audited
Approved by the Board of Directors and authorised for issue on • and
signed on their behalf by:
Rosemary Morgan
Chair
Nippon Active Value Fund plc is incorporated in England and Wales with
registration number 12275668.
The notes form part of these interim financial statements.
CONDENSED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
For the period to 30 June 2023 Share capital Share premium Capital reserve Revenue reserve Total
Note £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2023 1,130 115,349 38,324 3,942 158,745
Profit and comprehensive income for the period - - 9,006 1,689 10,695
Dividends paid 6 - - - (3,616) (3,616)
Balance at 30 June 2023 1,130 115,349 47,330 2,015 165,824
For the period to 30 June 2022 Share capital Share premium Capital reserve Revenue reserve Total
Note £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2022 1,130 115,349 37,107 2,268 155,854
Loss and comprehensive income for the period - - (19,728) 2,872 (16,856)
Dividends paid 6 - - - (2,204) (2,204)
Balance at 30 June 2022 1,130 115,349 17,379 2,936 136,794
For the year ended 31 December 2022* Share capital Share premium Capital reserve Revenue reserve Total
£'000 £'000 £'000 £'000 £'000
Balance at 1 January 2022 1,130 115,349 37,107 2,268 155,854
Profit and comprehensive income for the period - - 1,217 3,878 5,095
Dividends paid 6 - - - (2,204) (2,204)
Balance at 31 December 2022 1,130 115,349 38,324 3,942 158,745
*Audited
The Company's distributable reserves consist of the capital reserve
attributable to realised capital profits and revenue reserve.
The notes form part of these interim financial statements.
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
For the period to 30 June 2023 For the period to 30 June 2022 For the year ended 31 December 2022*
Note £'000 £'000 £'000
Operating activities cash flows
Profit/(loss) before taxation ** 10,972 (16,511) 5,644
Adjustment for:
(Gains)/losses on investments 3 (9,520) 18,755 (1,274)
(Increase)/decrease in trade and other receivables (798) (494) 174
(Decrease)/increase in trade and in other payables (58) 2 (20)
Tax withheld on overseas income 5 (277) (345) (549)
Net cash flow from operating activities 319 1,407 3,975
Investing activities cash flows
Purchases of investments (61,957) (28,763) (41,052)
Sales of investments 34,528 22,448 55,204
Net cash flow (used in)/from investing activities (27,429) (6,315) 14,152
Financing activities cash flows
Equity dividends paid 6 (3,616) (2,204) (2,204)
Net cash flow used in financing activities (3,616) (2,204) (2,204)
(Decrease)/increase in cash and cash equivalents (30,726) (7,112) 15,923
Cash and cash equivalents at the beginning of the period 31,738 15,815 15,815
Cash and cash equivalents at the end of the period 1,012 8,703 31,738
* Audited
**Cash inflow from dividends received for the period is £1,727,000 (30 June
2022: 3,340,000 and 31 December 2022: 5,161,000).
The notes form part of these interim financial statement.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. GENERAL INFORMATION
The Company is a closed-ended investment company incorporated on 22 October
2019 in England and Wales with registered number 12275668 and registered as an
investment company under Section 833 of Companies Act 2006, as amended from
time to time (the "Act"). The Company is an investment trust within the
meaning of Chapter 4 of Part 24 of the Corporation Tax Act 2010, as amended.
On 21 February 2020, the Company's shares were admitted to the Specialist Fund
Segment of the Main Market of the London Stock Exchange. On the same day,
trading of the Ordinary Shares commenced on the London Stock Exchange.
The investment objective of the Company is to provide Shareholders with
attractive capital growth through the active management of a focussed
portfolio of quoted companies which have the majority of their operations in,
or revenue derived from, Japan and that have been identified by the Investment
Adviser as being undervalued. The principal activity of the Company is that of
an investment trust company within the meaning of section 1158 of the
Corporation Tax Act 2010.
The Company's registered office is 6th Floor, 125 London Wall, London EC2Y
5AS.
2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
a) Basis of preparation
Statement of compliance
The Company's condensed unaudited interim financial statements have been
prepared in accordance with IAS 34 Interim Financial Reporting and the
Disclosure Guidance and Transparency Rules ("DTRs") of the UK's Financial
Conduct Authority. When presentational guidance set out in the Statement of
Recommended Practice ("SORP") for Investment Companies issued by the
Association of Investment Companies ("the AIC") in July 2022 is consistent
with the requirements of IFRS, the Directors have sought to prepare the
financial statements on a basis compliant with the recommendations of the
SORP.
The financial statements were approved and authorised for issue by the Board
on insert date. This half year report will be made available to the public at
the Company's registered office. It will also be made available on the
Company's website: https://www.nipponactivevaluefund.com
(https://www.nipponactivevaluefund.com/) .
Going Concern
The Board has a reasonable expectation that the Company has adequate resources
to continue in operational existence for at least the following twelve-month
period from the date of this report and believe that it is appropriate to
prepare the interim financial statements of the Company on the going concern
basis. Further disclosure on going concern can be found at section Interim
Management Report.
Use of estimates and judgements
The preparation of the financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income
and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an on-going basis.
Revisions to accounting estimates are recognised in the year in which the
estimates are revised and in any future periods affected. Except Company's
investment in contingent variable right, there have been no estimates,
judgements or assumptions, which have had a significant impact on the
financial statements for the period.
Basis of measurement
The financial statements have been prepared on the historical cost basis
except for financial instruments at
fair value through profit or loss, which are measured at fair value.
Functional and presentational currency
The Company's investments are denominated in multiple currencies. However, the
Company's Ordinary shares are issued in GBP sterling, the currency of the
primary economic environment in which the Company operates is GBP sterling,
and the majority of its expenses are paid in GBP sterling, as are dividends.
Therefore, the financial statements are presented in sterling, which is the
Company's functional currency. All financial information presented in sterling
has been rounded to the nearest thousand pounds.
New and amended standards and interpretations
At the date of approval of these financial statements, there were no new or
revised standards or interpretations relevant to the Company which had come
into effect.
3. INVESTMENTS
As at 30 June 2023 As at 30 As at 31 December 2022
June 2022
Investment at fair value through profit or loss £'000 £'000 £'000
Listed on a recognised overseas exchange 162,103 127,118 126,284
Total 162,103 127,118 126,284
Fair Value Measurements of Financial Assets and Financial Liabilities
The financial assets and liabilities are either carried at their fair value,
or the amount is a reasonable approximation of fair value (due from brokers,
dividends receivable, accrued income, due to brokers, expense accruals and
cash and cash equivalents).
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.
Level 2 - valued by reference to valuation techniques using observable inputs
including quoted prices.
Level 3 - valued by reference to valuation techniques using inputs that are
not based on observable market data.
The table below sets out fair value measurements using the Fair Value
Hierarchy.
Level 1 Level 2 Level 3 Total
As at 30 June 2023 £'000 £'000 £'000 £'000
Assets:
Equity investments 162,103 - - 162,103
Total 162,103 - - 162,103
There were no transfers between levels during the period.
Level 1 Level 2 Level 3 Total
As at 30 June 2022 £'000 £'000 £'000 £'000
Assets:
Equity investments 127,188 - - 127,188
Total 127,188 - - 127,188
Level 1 Level 2 Level 3 Total
As at 31 December 2022 £'000 £'000 £'000 £'000
Assets:
Equity investments 126,284 - - 126,284
Total 126,284 - - 126,284
4. INVESTMENT INCOME
For the period to 30 June 2023 For the period to 30 June 2022 For the year ended 31 December 2022
£'000 £'000 £'000
Income from investments:
Overseas dividends 2,750 3,456 5,487
Other income:
Deposit interest 1 - -
Total 2,751 3,456 5,487
5. TAXATION
Analysis of tax charge in the period:
For the period to 30 June 2023 For the period to 30 June 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Overseas withholding tax 277 - 277 345 - 345
Total tax charge for the period 277 - 277 345 - 345
For the year ended 31
December 2022
Revenue Capital Total
£'000 £'000 £'000
Overseas withholding tax 549 - 549
Total tax charge for the year 549 - 549
6. DIVIDEND
As per the powers set out in the Prospectus, the Board has decided not to
declare an interim dividend. This decision will be reviewed at the year-end
stage, where a dividend distribution may be required to maintain investment
trust status of the Company.
Dividends paid during the respective periods are detailed in the below table:
For the For the For the
period to 30 June 2022 period to 30 year ended 31 December 2021
June 2021
Type - respective financial period/year end - dividend rate (pence) £'000 £'000 £'000
Interim dividend - paid 30 April 2023 (3.2p per ordinary share) 3,616 - -
Interim dividend - paid 26 April 2022 (1.95p per ordinary share) - 2,204 2,204
Total 3,616 2,204 2,204
7. SHARE CAPITAL
Share capital represents the nominal value of shares that have been issued.
The share premium includes any premiums received on issue of share capital.
Any transaction costs associated with the issuing of shares are deducted from
share premium.
The Directors have been authorised to issue up to 400 million Shares.
Share capital movement during the period
For the period to 30 June 2023 For the period to 30 June 2022
Nominal value of shares Nominal value of shares
Allotted, issued and fully paid: No. of shares £'000 No. of shares £'000
Opening balance 113,021,433 1,130 113,021,433 1,130
Ordinary Shares of 1p each ('Ordinary Shares') issued - - - -
Closing balance 113,021,433 1,130 113,021,433 1,130
For the year ended 31 December 2022
Nominal value of shares
Allotted, issued and fully paid: No. of shares £'000
Opening balance 113,021,433 1,130
Ordinary Shares of 1p each ('Ordinary Shares') issued - -
Closing balance 113,021,433 1,130
Rights attaching to the Ordinary Shares
Dividend rights: All Ordinary Shares are entitled to a distribution of
dividends, in the event that the Directors resolve to make such a distribution
to Shareholders, in the same proportions as capital is attributable to them.
Rights as respect to capital: On a winding-up or a return of capital, in the
event that the Directors resolve to make such a distribution to Shareholders,
all Ordinary Shares are entitled to a distribution of capital in the same
proportions as capital is attributable to them.
Voting rights: Every Shareholder shall have one vote for each Ordinary Share
held.
8. EARNINGS PER ORDINARY SHARE
Total return per Ordinary Share is based on the return on ordinary activities,
including income, for the period after taxation of £10,695,000 (30 June 2022:
loss of 16,856,000 and 31 December 2022: profit of 5,095,000).
Based on the weighted average number of Ordinary Shares in issue for the
period to 30 June 2023 of 113,021,433 (30 June 2022: 113,021,433 and 31
December 2022: 113,021,433), the returns per share were as follows:
For the period to 30 June 2023 For the period to 30 June 2022
Revenue Capital Total Revenue Capital Total
Return per Ordinary Share 1.49p 7.97p 9.46p 2.54p (17.46)p (14.92)p
For the year ended 31 December 2022
Revenue Capital Total
Return per Ordinary Share 3.43p 1.08p 4.51p
9. NET ASSET VALUE PER SHARE
Total equity and the net asset value ("NAV") per share attributable to the
Ordinary Shareholders at the period end calculated in accordance with the
Articles of Association were as follows:
As at 30 June 2023 As at 30 June 2022 As at 31 December 2022
Net Asset Value (£) 165,824,000 136,794,000 158,745,000
Ordinary Shares in issue 113,021,433 113,021,433 113,021,433
NAV per Ordinary Share 146.72p 121.03p 140.46p
10. RELATED PARTY TRANSACTION
Transactions with the Investment Adviser
Total Investment Adviser and AIFM fees for the period to 30 June 2023 are
shown in the Statement of Comprehensive Income. As at 30 June 2023, no
Investment Adviser fees and AIFM fees were outstanding.
Akey member of the RSM team is a major shareholder of Rosenwald Capital
Management, Inc. As at 30 June 2023, Rosenwald Capital Management, Inc had
notified the Company that it held 38,460,001 shares, which is 34.03% of the
Company's 113,021,433 Shares in issue as at that date.
Rosenwald Capital Management Inc, receives dividends paid by the Company based
on its shareholding.
Directors' fees and shareholdings
Directors' fees are payable at the rate of £27,810 per annum for each
Director other than the Chair, who is entitled to receive £41,000. The
Chair of the Audit Committee is also entitled to an additional fee of £5,190
per annum.
The Directors had the following shareholdings in the Company, all of which
were beneficially owned.
As at 30 June 2023 As at 30 June 2022 As at 31 December 2022
Rosemary Morgan 40,000 40,000 40,000
Chetan Ghosh 40,000 40,000 40,000
Rachel Hill 115,791 80,000 115,791
Alicia Ogawa 25,000 25,000 25,000
Ayako Weissman 27,000 27,000 27,000
11. PRINCIPAL RISKS AND CAPITAL MANAGEMENT
(i) Market risks
Economic conditions
Changes in economic conditions in Japan (for example, interest rates and rates
of inflation, industry conditions competition, political and diplomatic events
and other factors) and in the countries in which the Company's investee
companies operate could substantially and adversely affect the Company's
prospects.
Sectoral diversification
The Company is not subject to restrictions on the amount it may invest in any
particular sector. Although the portfolio is expected to be diversified in
terms of sector exposures, the Company may have significant exposure to
portfolio companies from certain sectors from time to time. As there is no
hard limit on the amount the Company may invest in any sector the entire
Portfolio may, at certain times, be invested solely in one sector. Greater
concentration of investments in any one sector may result in greater
volatility in the value of the Company's investments and consequently its NAV
and may materially and adversely affect the performance of the Company and
returns to Shareholders.
Management of market risks
The Company is invested in a diversified portfolio of investments.
The Board will not set any limits on sector weightings or stock selection
within the portfolio. The Board will apply the following restrictions on the
size of its investments:
· not more than 30 per cent. of the Gross Asset Value at the time of
investment will be invested in the securities of a single issuer; and
· the value of the four largest investments at the time of investment
will not constitute more than 75 per cent. of the Gross Asset Value.
(ii) Liquidity risks
The securities of small-to-medium-sized (by market capitalisation) companies
may have a more limited secondary market than the securities of larger
companies. Accordingly, it may be more difficult to effect sales of such
securities at an advantageous time or without a substantial drop in price than
securities of a company with a large market capitalisation and broad trading
market. In addition, securities of small-to-medium-sized companies may have
greater price volatility as they can be more vulnerable to adverse market
factors such as unfavourable economic reports.
Management of liquidity risks
The Company's Investment Adviser monitors the liquidity of the Company's
portfolio on a regular basis.
(iii) Currency risks
The majority of the Company's assets will be denominated in a currency other
than sterling (predominantly in Japanese yen) and changes in the exchange rate
between sterling and Japanese yen may lead to a depreciation of the value of
the Company's assets as expressed in sterling and may reduce the returns to
the Company from its investments and, therefore, negatively impact the level
of dividends paid to Shareholders.
Management of currency risks
The Company does not currently intend to enter into any arrangements to hedge
its underlying currency exposure to investment denominated in Japanese yen,
although the Investment Adviser and the Board may review this from time to
time.
(iv) Interest rate risks
The Company pays interest on its borrowings. As such, the Company is exposed
to interest rate risk due to fluctuations in the prevailing market rates.
Management of interest rate risks
Prevailing interest rates are taken into account when deciding on borrowings.
(v) Credit risks
Cash and other assets held by the custodian
Cash and other assets that are required to be held in custody will be held by
the custodian or its sub-custodians. Cash and other assets may not be treated
as segregated assets and will therefore not be segregated from any custodian's
own assets in the event of the insolvency of a custodian.
Cash held with any custodian will not be treated as client money subject to
the rules of the FCA and may be used by a custodian in the course of its own
business. The Company will therefore be subject to the creditworthiness of its
custodians. In the event of the insolvency of a custodian, the Company will
rank as a general creditor in relation thereto and may not be able to recover
such cash in full, or at all.
Management of credit risks
The Company has appointed Northern Trust Global Services Limited as its
custodian. The credit rating of Northern Trust was reviewed at time of
appointment and will be reviewed on a regular basis by the Investment Adviser
and/or the Board.
The Investment Adviser monitors the Company's exposure to its counterparties
on a regular basis and the
position is reviewed by the directors at Board meetings.
12. POST PERIOD END EVENTS
There are no post period end events other than as disclosed in this
Half-yearly Report.
13. STATUS OF THIS REPORT
These interim financial statements are not the Company's statutory accounts
for the purposes of section 434 of the Companies Act 2006. They are unaudited.
The Half-yearly report will be made available to the public at the registered
office of the Company. The report will also be available on the Company's
website (https://www.nipponactivevaluefund.com/
(http://www.nipponactivevaluefund.com/)) ).
(http://www.nipponactivevaluefund.com/))
ALTERNATIVE PERFORMANCE MEASURES ("APM")
Discount
The amount, expressed as a percentage, by which the share price is less than
the NAV per Ordinary Share.
As at 30 June 2023 Pence
NAV per Ordinary Share a 146.72
Share price b 141.50
Discount (b÷a)-1 3.6%
Total return
Ameasure of performance that includes both income and capital returns. This
takes into account capital gains and reinvestment of dividends paid out by the
Company into its Ordinary Shares on the ex-dividend date.
Period ended 30 June 2023 Share price NAV
Opening at 1 January 2023 (pence) a 117.5 140.5
Closing at 30 June 2023 (pence) b 141.5 146.7
Movement (b÷a)-1 c 20.4% 4.4%
Dividend reinvestment factor d 2.8% 2.3%
Total return (c+d) 23.2% 6.7%
Ongoing charges
Period ended 30 June 2023
Average NAV a 167,410,000
Annualised expenses b 2,478,000
Ongoing charges (b÷a) 1.48%
Enquiries:
Company Secretary
Apex Listed Companies Services (UK) Ltd
Tel: +44 (0) 20 3327 9720
-END-
4. INVESTMENT INCOME
For the period to 30 June 2023 For the period to 30 June 2022 For the year ended 31 December 2022
£'000 £'000 £'000
Income from investments:
Overseas dividends 2,750 3,456 5,487
Other income:
Deposit interest 1 - -
Total 2,751 3,456 5,487
5. TAXATION
Analysis of tax charge in the period:
For the period to 30 June 2023 For the period to 30 June 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Overseas withholding tax 277 - 277 345 - 345
Total tax charge for the period 277 - 277 345 - 345
For the year ended 31
December 2022
Revenue Capital Total
£'000 £'000 £'000
Overseas withholding tax 549 - 549
Total tax charge for the year 549 - 549
6. DIVIDEND
As per the powers set out in the Prospectus, the Board has decided not to
declare an interim dividend. This decision will be reviewed at the year-end
stage, where a dividend distribution may be required to maintain investment
trust status of the Company.
Dividends paid during the respective periods are detailed in the below table:
For the For the For the
period to 30 June 2022 period to 30 year ended 31 December 2021
June 2021
Type - respective financial period/year end - dividend rate (pence) £'000 £'000 £'000
Interim dividend - paid 30 April 2023 (3.2p per ordinary share) 3,616 - -
Interim dividend - paid 26 April 2022 (1.95p per ordinary share) - 2,204 2,204
Total 3,616 2,204 2,204
7. SHARE CAPITAL
Share capital represents the nominal value of shares that have been issued.
The share premium includes any premiums received on issue of share capital.
Any transaction costs associated with the issuing of shares are deducted from
share premium.
The Directors have been authorised to issue up to 400 million Shares.
Share capital movement during the period
For the period to 30 June 2023 For the period to 30 June 2022
Nominal value of shares Nominal value of shares
Allotted, issued and fully paid: No. of shares £'000 No. of shares £'000
Opening balance 113,021,433 1,130 113,021,433 1,130
Ordinary Shares of 1p each ('Ordinary Shares') issued - - - -
Closing balance 113,021,433 1,130 113,021,433 1,130
For the year ended 31 December 2022
Nominal value of shares
Allotted, issued and fully paid: No. of shares £'000
Opening balance 113,021,433 1,130
Ordinary Shares of 1p each ('Ordinary Shares') issued - -
Closing balance 113,021,433 1,130
Rights attaching to the Ordinary Shares
Dividend rights: All Ordinary Shares are entitled to a distribution of
dividends, in the event that the Directors resolve to make such a distribution
to Shareholders, in the same proportions as capital is attributable to them.
Rights as respect to capital: On a winding-up or a return of capital, in the
event that the Directors resolve to make such a distribution to Shareholders,
all Ordinary Shares are entitled to a distribution of capital in the same
proportions as capital is attributable to them.
Voting rights: Every Shareholder shall have one vote for each Ordinary Share
held.
8. EARNINGS PER ORDINARY SHARE
Total return per Ordinary Share is based on the return on ordinary activities,
including income, for the period after taxation of £10,695,000 (30 June 2022:
loss of 16,856,000 and 31 December 2022: profit of 5,095,000).
Based on the weighted average number of Ordinary Shares in issue for the
period to 30 June 2023 of 113,021,433 (30 June 2022: 113,021,433 and 31
December 2022: 113,021,433), the returns per share were as follows:
For the period to 30 June 2023 For the period to 30 June 2022
Revenue Capital Total Revenue Capital Total
Return per Ordinary Share 1.49p 7.97p 9.46p 2.54p (17.46)p (14.92)p
For the year ended 31 December 2022
Revenue Capital Total
Return per Ordinary Share 3.43p 1.08p 4.51p
9. NET ASSET VALUE PER SHARE
Total equity and the net asset value ("NAV") per share attributable to the
Ordinary Shareholders at the period end calculated in accordance with the
Articles of Association were as follows:
As at 30 June 2023 As at 30 June 2022 As at 31 December 2022
Net Asset Value (£) 165,824,000 136,794,000 158,745,000
Ordinary Shares in issue 113,021,433 113,021,433 113,021,433
NAV per Ordinary Share 146.72p 121.03p 140.46p
10. RELATED PARTY TRANSACTION
Transactions with the Investment Adviser
Total Investment Adviser and AIFM fees for the period to 30 June 2023 are
shown in the Statement of Comprehensive Income. As at 30 June 2023, no
Investment Adviser fees and AIFM fees were outstanding.
A key member of the RSM team is a major shareholder of Rosenwald Capital
Management, Inc. As at 30 June 2023, Rosenwald Capital Management, Inc had
notified the Company that it held 38,460,001 shares, which is 34.03% of the
Company's 113,021,433 Shares in issue as at that date.
Rosenwald Capital Management Inc, receives dividends paid by the Company based
on its shareholding.
Directors' fees and shareholdings
Directors' fees are payable at the rate of £27,810 per annum for each
Director other than the Chair, who is entitled to receive £41,000. The
Chair of the Audit Committee is also entitled to an additional fee of £5,190
per annum.
The Directors had the following shareholdings in the Company, all of which
were beneficially owned.
As at 30 June 2023 As at 30 June 2022 As at 31 December 2022
Rosemary Morgan 40,000 40,000 40,000
Chetan Ghosh 40,000 40,000 40,000
Rachel Hill 115,791 80,000 115,791
Alicia Ogawa 25,000 25,000 25,000
Ayako Weissman 27,000 27,000 27,000
11. PRINCIPAL RISKS AND CAPITAL MANAGEMENT
(i) Market risks
Economic conditions
Changes in economic conditions in Japan (for example, interest rates and rates
of inflation, industry conditions competition, political and diplomatic events
and other factors) and in the countries in which the Company's investee
companies operate could substantially and adversely affect the Company's
prospects.
Sectoral diversification
The Company is not subject to restrictions on the amount it may invest in any
particular sector. Although the portfolio is expected to be diversified in
terms of sector exposures, the Company may have significant exposure to
portfolio companies from certain sectors from time to time. As there is no
hard limit on the amount the Company may invest in any sector the entire
Portfolio may, at certain times, be invested solely in one sector. Greater
concentration of investments in any one sector may result in greater
volatility in the value of the Company's investments and consequently its NAV
and may materially and adversely affect the performance of the Company and
returns to Shareholders.
Management of market risks
The Company is invested in a diversified portfolio of investments.
The Board will not set any limits on sector weightings or stock selection
within the portfolio. The Board will apply the following restrictions on the
size of its investments:
· not more than 30 per cent. of the Gross Asset Value at the time of
investment will be invested in the securities of a single issuer; and
· the value of the four largest investments at the time of investment
will not constitute more than 75 per cent. of the Gross Asset Value.
(ii) Liquidity risks
The securities of small-to-medium-sized (by market capitalisation) companies
may have a more limited secondary market than the securities of larger
companies. Accordingly, it may be more difficult to effect sales of such
securities at an advantageous time or without a substantial drop in price than
securities of a company with a large market capitalisation and broad trading
market. In addition, securities of small-to-medium-sized companies may have
greater price volatility as they can be more vulnerable to adverse market
factors such as unfavourable economic reports.
Management of liquidity risks
The Company's Investment Adviser monitors the liquidity of the Company's
portfolio on a regular basis.
(iii) Currency risks
The majority of the Company's assets will be denominated in a currency other
than sterling (predominantly in Japanese yen) and changes in the exchange rate
between sterling and Japanese yen may lead to a depreciation of the value of
the Company's assets as expressed in sterling and may reduce the returns to
the Company from its investments and, therefore, negatively impact the level
of dividends paid to Shareholders.
Management of currency risks
The Company does not currently intend to enter into any arrangements to hedge
its underlying currency exposure to investment denominated in Japanese yen,
although the Investment Adviser and the Board may review this from time to
time.
(iv) Interest rate risks
The Company pays interest on its borrowings. As such, the Company is exposed
to interest rate risk due to fluctuations in the prevailing market rates.
Management of interest rate risks
Prevailing interest rates are taken into account when deciding on borrowings.
(v) Credit risks
Cash and other assets held by the custodian
Cash and other assets that are required to be held in custody will be held by
the custodian or its sub-custodians. Cash and other assets may not be treated
as segregated assets and will therefore not be segregated from any custodian's
own assets in the event of the insolvency of a custodian.
Cash held with any custodian will not be treated as client money subject to
the rules of the FCA and may be used by a custodian in the course of its own
business. The Company will therefore be subject to the creditworthiness of its
custodians. In the event of the insolvency of a custodian, the Company will
rank as a general creditor in relation thereto and may not be able to recover
such cash in full, or at all.
Management of credit risks
The Company has appointed Northern Trust Global Services Limited as its
custodian. The credit rating of Northern Trust was reviewed at time of
appointment and will be reviewed on a regular basis by the Investment Adviser
and/or the Board.
The Investment Adviser monitors the Company's exposure to its counterparties
on a regular basis and the
position is reviewed by the directors at Board meetings.
12. POST PERIOD END EVENTS
There are no post period end events other than as disclosed in this
Half-yearly Report.
13. STATUS OF THIS REPORT
These interim financial statements are not the Company's statutory accounts
for the purposes of section 434 of the Companies Act 2006. They are unaudited.
The Half-yearly report will be made available to the public at the registered
office of the Company. The report will also be available on the Company's
website (https://www.nipponactivevaluefund.com/
(http://www.nipponactivevaluefund.com/)) ).
(http://www.nipponactivevaluefund.com/))
ALTERNATIVE PERFORMANCE MEASURES ("APM")
Discount
The amount, expressed as a percentage, by which the share price is less than
the NAV per Ordinary Share.
As at 30 June 2023 Pence
NAV per Ordinary Share a 146.72
Share price b 141.50
Discount (b÷a)-1 3.6%
Total return
A measure of performance that includes both income and capital returns. This
takes into account capital gains and reinvestment of dividends paid out by the
Company into its Ordinary Shares on the ex-dividend date.
Period ended 30 June 2023 Share price NAV
Opening at 1 January 2023 (pence) a 117.5 140.5
Closing at 30 June 2023 (pence) b 141.5 146.7
Movement (b÷a)-1 c 20.4% 4.4%
Dividend reinvestment factor d 2.8% 2.3%
Total return (c+d) 23.2% 6.7%
Ongoing charges
Period ended 30 June 2023
Average NAV a 167,410,000
Annualised expenses b 2,478,000
Ongoing charges (b÷a) 1.48%
Enquiries:
Company Secretary
Apex Listed Companies Services (UK) Ltd
Tel: +44 (0) 20 3327 9720
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