REG - Nippon Active Value - Annual Financial Report
08/04/2025 07:00
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RNS Number : 0028E Nippon Active Value Fund PLC 08 April 2025
NIPPON ACTIVE VALUE FUND PLC
Annual Report and Accounts for the year ended 31 December 2024
Nippon Active Value Fund plc (the "Company") hereby submits its annual report
and financial statements for the year ended 31 December 2024 as required by
the Financial Conduct Authority's Disclosure and Transparency Rule 4.1.
The Company's annual report and financial statements for the year ended 31
December 2024 is being published in hard copy format and an electronic copy
will shortly be available to download from the Company website
www.nipponactivevaluefund.com (http://www.nipponactivevaluefund.com)
It will also be made available to the public at the Company's registered
office: 4th Floor, 46-48 James Street, London, W1U 1EZ.
The Company's annual report and financial statements will also be uploaded to
the Financial Conduct Authority's National Storage Mechanism and will shortly
be available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
INVESTMENT OBJECTIVE, FINANCIAL INFORMATION AND PERFORMANCE SUMMARY
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.
FINANCIAL INFORMATION
At At
31 December
31 December
2024
2023
Net assets - (£ millions) 365.4 319.9
Net asset value ("NAV") per Ordinary Share ("Share") - (pence)(1) 193.2 169.2
Share price - (pence) 187.5 162.0
Share price discount to NAV (%)(2) 3.0 4.2
Ongoing charges (%)(2) 1.18 1.17
========= =========
PERFORMANCE SUMMARY
For the year ended For the year ended
31 December
31 December
2024
2023
(%)
(%)
NAV total return per Share(2,3) +15.2 +23.1
Share price total return per Share(2,3) +16.8 +41.1
MSCI Japan Small Cap index (sterling terms)(3) +6.8 +7.8
========= =========
Source: Bloomberg
1 This is measured on a cum income basis.
2 These are Alternative Performance Measures ("APMs"), which is a
financial measure of historic or future financial performance, financial
position, or cash other than a financial measure defined or specified in the
applicable financial reporting framework. Definition of these and other APMs
used in this report, together with how these APMs have been calculated are
disclosed in the annual report.
3 Total returns are stated in GBP, including dividends reinvested.
CHAIRMAN'S STATEMENT
OVERVIEW OF THE YEAR
I am pleased to present the fifth annual report of Nippon Active Value Fund
plc, covering the year from 1 January to 31 December 2024.
At the end of the year, net assets were £365.4 million and the net asset
value ('NAV') per share was 193.2p, a rise of +15.2% over the year and a
cumulative increase of +103.8% since the Company's launch on 21 February 2020.
While we do not target a particular index benchmark, for comparison the MSCI
Japan Small Cap Index returned +6.8% in sterling terms over the year and
+23.7% since launch. All returns assume dividends were reinvested. The Company
now has a five-year track record with an annualised return of 15.5%.
The closing share price on 31 December 2024 was 187.5p, a discount of 3.0% to
NAV. The average discount to NAV over the year was 3.9% and the shares traded
in a range of a premium of 0.7% to a discount of 8.7%. The discount stood at
9.0% as at 31 March 2025, being the latest practicable date.
Global developed markets had another strong year, led by US stocks and within
that market the large technology companies in particular. The large-cap
Japanese index was the second best performing amongst major markets: the Tokyo
Stock Exchange Price Index ('Topix') reached new historic highs in July 2024,
helped by growing confidence that the era of negative interest rates had ended
and by global investors rebuilding their exposure to Japan, often in a
reallocation away from China. The Bank of Japan ("BoJ") raised the benchmark
interest rate twice in 2024 and a third time, to 0.5%, in early January 2025.
The yen has weakened in response, though was less of a drag on our sterling
performance in 2024 than in preceding years. Our Investment Adviser does not
hedge the currency, preferring to concentrate their efforts on identifying
undervalued stocks and on engagement with corporate management rather than on
macro-economic analysis.
OUR INVESTMENT APPROACH
Our Investment Adviser, Rising Sun Management ('RSM'), with its presence on
the ground in Tokyo and with its affiliate Dalton KK, continues to identify
potential targets and the coverage of portfolio holdings.
As an activist manager, RSM is not seeking to reflect the market as a whole or
the fundamentals of the broad Japanese economy. RSM's strategy is to invest in
a concentrated portfolio of undervalued companies with high quality
businesses. Our Investment Adviser identifies areas in which to engage with
management to improve shareholder returns, particularly around balance sheet
management and capital allocation. In order to have some weight with
management they need to build a significant stake, and as a result, the
portfolio holdings tend to be in small to medium capitalised stocks. We have
memoranda of understanding with other funds advised by RSM and Dalton
Investments with whom we co-invest in opportunities to achieve greater scale.
At the end of 2024, your Company held 29 investments, of which 26 were also
owned by NAVF Select LLC and 21 by Dalton Investments.
Our Investment Adviser's targets are generally good businesses, with strong
cash flow and balance sheets, trading at a material discount to intrinsic
value. They are looking for companies where an opportunity exists to improve
the alignment of interest between management and minority holders. Most of the
engagement with target companies is through letters and private meetings,
though the Investment Adviser also makes formal proposals to annual general
meetings when appropriate and occasionally chooses to publicise that
engagement. The standard requests are to improve corporate governance through
a more independent board, to demonstrate an alignment of interest with
shareholders through a steady increase of directors' investments in the
company's shares and, most importantly, to show evidence of a concrete plan to
improve capital allocation and profitability over the next three to five
years, in line with the Japan Exchange Group's ('JPX') listing guidelines.
Those guidelines have been amended and expanded over the last two years to
emphasise profitability, transparency and liquidity. RSM also advocates the
return of excess capital to shareholders, typically through buy-backs or
increased dividends.
JAPANESE CORPORATE GOVERNANCE DEVELOPMENTS
The choice of strategy at the launch of the fund was designed to capitalise on
developments in Japanese corporate governance since the launch of the
Corporate Governance Code in 2015.
The regulatory environment continues to provide a supportive background for
activist investors. In previous reports we have discussed the importance of
JPX's request, issued in March 2023, that listed companies have a greater
focus on measures to improve mid to long-term profitability and corporate
value, a principle established in the Stewardship Code of 2014. JPX has
reclassified the Tokyo market into Prime and Standard divisions and companies
not fulfilling their requirements will, over time, lose their Prime market
listing, as well as their inclusion in Topix, the major market index. This
continues to ensure that our own proposals to our investee companies are
treated more seriously than might have been the case in earlier decades.
In 2024, JPX increased its focus on share liquidity. Since the 1950s, listed
Japanese companies have held shares in their major business associates, for
example group companies, suppliers, customers, or their banks. These holdings
are not traded and therefore market capitalisation has not been an accurate
indicator of the daily liquidity in a company's shares. The strategic holders
have also rarely, if ever, voted against management in contested shareholder
proposals. JPX has stated that it will now adjust a company's market
capitalisation to remove strategic cross-shareholdings and that companies will
need to have an adjusted market capitalisation in the top 97.0% of all listed
shares to maintain their Prime market listing.
The issue of cross-shareholdings was also highlighted in the coverage of the
insurance sector in 2024: the four major insurers were found to have violated
antitrust law through fixing contract prices for more than 100 corporate
clients, and as part of the penalty exacted by the Financial Services Agency,
have had to pledge to eliminate their cross-shareholdings by 6.5 trillion yen
(over £30 billion). They have since announced plans to reduce their long-term
holdings by 6.5 trillion yen. Other companies, including Toyota, have used the
occasion to announce their own plans for selling off holdings in affiliated
companies. We are hopeful that the trend towards eliminating strategic
holdings will have a positive impact on the success of activists' proposals,
in particular management buy-outs ('MBOs') or takeover bids ('TOBs'). The
increase in liquidity is already making it much easier to acquire stakes in
target companies.
Another initiative, still to be formally announced, concerns the rules
regarding MBOs. Taisho Pharmaceuticals announced an MBO in 2023 at a price
which was contested by minority foreign shareholders (the bid was at a premium
to the share price, but at a significant discount to net assets). The new
regulations were announced in February 2025 and will require boards to provide
a detailed justification of the proposed MBO process and price and to
establish an external committee to ensure that minority shareholders have been
fairly treated.
There were 18 MBOs in Japan in 2024, the third highest since 2001, and,
according to CLSA, around 130 'activist events'. Japan is now the second
largest market for activism after the US, 4.5x the third largest, the UK, with
major global Private Equity firms allocating a larger proportion of their
activities to Japan.
Our Investment Adviser's report, which follows, includes highlights of the
year's engagement.
DIVIDEND
The Company's intention is to achieve its returns primarily through capital
appreciation. As such, no specific dividend policy has been established and
any distributions will be made entirely at the discretion of the Board, taking
into consideration the requirement to ensure the Company continues to be
approved as an investment trust in accordance with sections 1158 and 1159 of
the Corporation Tax Act 2010.
The Board is pleased to declare an interim dividend for the year ended 31
December 2024 of 3.25p (2023: 1.60p) per Ordinary Share. The dividend will be
payable on 23 May 2025 to Shareholders who appear on the register as at close
of business on 22 April 2025, with an ex-dividend date of 17 April 2025. The
Board will not target a dividend for future years but will tend to pay out
most of the distributable income for any particular period by way of dividend
in order to continue to be approved as an investment trust.
DISCOUNT MANAGEMENT
Whilst the Company has had very strong performance, the Board is mindful that
the Company's shares have been trading at a discount to net asset value at
times, during the year under review, and is considering all aspects of capital
allocation which could assist in managing any discount. The Board will take
Shareholder views into account.
GEARING
In line with the increase in the Company's asset base the borrowing facility
with The Northern Trust Company, London Branch has been increased to £70
million to provide the Investment Adviser with flexibility to gear the
portfolio when appropriate. At the end of December 2024, this facility had not
been drawn down and the portfolio held £19,889,000 (31 December 2023:
£22,257,000) in cash. As at 31 March 2025, cash comprised just 2.44% of the
Company's net assets.
UNLISTED HOLDING
As we reported in the 2024 Interim Report, the tender for T & K Toka
successfully concluded in March and our reinvestment in the unlisted entity
was finalised in the second half of the financial year. The holding of
£1,443,000 is reported at cost in these accounts. In February 2025, NAVF and
Dalton KK appointed Competant Inc, a Tokyo-based accountancy firm, to act as
independent valuer of the Company's unlisted holdings.
ANNUAL GENERAL MEETING (THE "AGM")
The Company's AGM is scheduled for 5 June 2025 at 2:00 p.m. and is to be held
at Travers Smith LLP's office located at 10 Snow Hill, London, EC1A 2AL. The
Board strongly encourages all Shareholders to exercise their votes by
completing their proxy forms in advance of the AGM. For more details, please
see enclosed AGM Notice. Those Shareholders who are unable to attend the AGM
in person are welcome to submit questions to the Board or their Investment
Adviser either by writing to the Company Secretary by post to the registered
office as above or by emailing at navf@nsm.group (mailto:navf@nsm.group)
CONTINUATION VOTE
In accordance with the articles of association, shareholders have the
opportunity to vote on the continuation of the Company at the AGM on 5 June
2025 and every second AGM thereafter. Taking account of the attraction of the
Company's investment proposition and considering the track record over the
past five years the Board strongly recommends that shareholders vote in favour
of the Company's continuation.
OUTLOOK
The Company seeks to take advantage of the corporate governance reforms in
Japan introduced over the past twenty years.
One of your Board's responsibilities is periodically to review the
appropriateness of the Company's mandate. We believe that the opportunity set
in Japan for an activist strategy remains strong and will continue to generate
superior returns compared to the broader market and encourage our shareholders
to vote in favour of the Trust's continuation.
As well as the supportive regulatory environment referred to above, the
Japanese equity market still offers value, particularly the smaller and medium
sized companies that form the majority of the target investments. Despite the
JPX's efforts, around half of listed companies in Japan still trade below book
value, though there has been a significant improvement in larger companies'
valuations.
Since the report was drafted, levels of uncertainty in the market and the
global economy have increased dramatically. While the Company's portfolio will
not be immune from market volatility, the Board and Investment Adviser remain
confident in the Company's investee companies, the potential long-term
returns, and the underlying investment thesis. The Company's target companies
are geared towards the domestic market, as opposed to the Japanese export
market, and we believe that their intrinsic valuations will continue to
provide value opportunities. Positive changes in corporate governance in Japan
should also continue to deliver significant opportunities for investors.
We remain confident of the potential for significant returns from our current
investment portfolio and of the prospects for identifying attractive new
targets. Our advisers will continue to seek out undervalued opportunities with
the potential to unlock value for all shareholders, a strategy which we
believe can generate strong absolute returns in a wide range of market
environments.
We are extremely pleased with the Company's first five years of performance
and look forward to the future with continued support from our shareholders.
As set out in the Company's IPO Prospectus, the Company will put a resolution
to shareholders at the AGM to approve the continuation of the Company in its
current form. We strongly encourage shareholders to vote in favour of the
continuation.
ROSEMARY MORGAN
Chairman
7 April 2025
INVESTMENT ADVISER'S REPORT
PERFORMANCE SINCE INITIAL LISTING(1)
Periodic change Cumulative change
Period JPY sterling/yen GBP JPY sterling/yen GBP
%
FX %
%
%
FX %
%
21 February 2020 to Year End December 2020 10.6 3.0 13.6 10.6 3.0 13.6
Year End December 2021 35.0 -12.7 22.3 49.3 -10.4 38.9
Year End December 2022 5.3 -1.9 3.4 57.2 -13.5 43.7
Year End December 2023 39.6 -16.5 23.1 119.5 -42.6 76.9
Year End December 2024 26.3 -11.1 15.2 177.2 -73.4 103.8
CAGR(2) Since Inception 21 February 2020 to Year End December 2024 23.0 -7.5 15.5 177.2 -73.4 103.8
========= ========= ========= ========= ========= =========
1 Investment results assume dividends are reinvested.
2 Compound Annual Growth Rate
INTRODUCTION
This report will provide a 2024 full year overview on key events and themes
affecting Nippon Active Value Fund plc ("NAVF" or the "Company" or the
"Fund"), the UK Investment Trust. I will address individual holdings, to
reflect where they have generated the alpha in our returns or the lack of it.
The driver for success in this Company is not to buy the cheapest or most
undervalued stocks (though it helps), it is to identify businesses where our
hands-on engagement can bring about the greatest change in management
practices. We like sound companies, that have too many non-operational assets,
whether cash, cross-shareholdings or property, on the balance sheet. Even if
these characteristics reflect poor capital allocation, thus making them worthy
of our attention, they also provide comfortable margins of safety, which
protect the portfolio until we can make something happen to unlock value. In
addition, we look for open share registers, a lack of third-party brokerage
research (especially in English), and demonstrable under-valuation of a type
likely to attract the attention of the regulators. This last is most
important: we never forget that the largest shareholder across all Japanese
stock exchanges, still owning 12-13% of the markets, is the combination of the
BoJ and the state pension fund, in other words Japan Inc. When Prime Minister
Shinzo Abe began the corporate governance reform programme in 2014, he did so
out of self-interest.
Eleven years later, reform is still gathering momentum and is starting to take
on a philosophical dimension that goes beyond guidelines to improve capital
allocation. Recent pronouncements have begun a debate not only on encouraging
small companies to trade at or above book value, but also on whether they
should exist as listed companies at all. This makes sense; the US economy is
six times larger than Japan's, and yet the JPX has more listed companies than
any other exchange in the world. Nobody doubts that mass consolidation and
de-listing is desirable, even necessary, but individual companies continue to
cling on for all they are worth - this is becoming a key driver of regulatory
guidance. Simply put, the JPX and the Ministry of Economy, Trade and Industry
('METI') want fewer and larger listed companies. The latest legislation will
encapsulate another investor friendly measure: to ensure all companies
considering an MBO appoint a credible independent panel to ensure assets are
not disposed of too cheaply to insiders, as has been the case in the past. The
winds supporting our investment methodology continue to blow.
PERFORMANCE
During the year under review, the TOPIX and Nikkei indices both hit record
highs in July. Nevertheless, it was not all smooth sailing with the flash
crash of 5 August, following the BoJ's first adjustment of interest rates,
followed by uncertainty late in the year brought about by the US presidential
election. Just what would a second term for President Trump mean for Japanese
trade and security? After a period of marking time, the major indices finished
strongly (the TOPIX was up 19.0%) and have, hopefully, finally banished the
notion that Japan's market recovery is just another 'flash in the pan'. NAVF
outperformed both the MSCI Japan and MSCI Japan Small Cap indices (see below).
During the year ended 31 December 2024, the MSCI Japan index was up 10.5% for
the full year, while the equivalent number for the MSCI Japan Small Cap index
was up 6.8%. Of course, NAVF has no official benchmark, but the relative
performance remains of interest. As the Chairman has already pointed out in
her report, the overall NAV performance for 2024 was up 15.2%. All returns
assume dividends were reinvested. It is gratifying to note that, once again,
NAVF has performed strongly over the whole year and is still the best
performing Japanese investment fund denominated in sterling since its
inception, on 21 February 2020. The Company now has an established track
record over five years with an annualised return of 15.5%.
In terms of the share price premium/discount to NAV, we traded at small premia
in both the spring and autumn but also approached a 9.0% discount in August.
Towards the end of the year the ratio improved, roughly halving the discount
to around 3.0% between the third and fourth quarters. We have been the best
performing Japanese Investment Trust since our inception in February 2020
through 2024. At this point, I normally look at the currency effect of the
weak yen and how it has cost us on performance. This continues to be true:
103.8% gains in sterling NAV since inception would have been 177.2% in yen,
however, it is worth noting that the currency underperformance has narrowed to
26.5%, now that a more normalised interest rate cycle is being established by
the BoJ. We welcomed this trend in the summer, and with the half-point rise in
rates in January 2025, it seems to be becoming established.
NAVF (GBP) Cumulative Performance: +103.8%
NAVF (JPY) Cumulative Performance: +177.2%
=========
NAVF NAV Cumulative Performance: 103.8%
NAVF Share Price Cumulative Performance: 98.3%
MSCI Japan Cumulative Performance: 38.7%
MSCI Japan Small Cap Cumulative Performance: 23.7%
=========
MARKET CAP (USD) 31/12/2023 TO 31/12/2024
31/12/2024 31/12/2023
Portfolio Ending
Portfolio Ending
Weight
Weight
(%)
(%)
Total 100.0 100.0
> $2.5bn 0.0 13.9
$1bn - $2.5bn 6.0 10.0
$750m - $1bn 7.6 5.9
$500m - $750m 11.9 12.2
$250m - $500m 59.6 42.7
< $250m 9.0 5.2
Cash 5.5 7.6
Other 0.4 2.5
========= =========
GLOBAL INDUSTRY CLASSIFICATION STANDARD ("GICS+") SECTOR 31/12/2023 TO
31/12/2024
31/12/2024 31/12/2023
Portfolio Ending
Portfolio Ending
Weight
Weight
(%)
(%)
Total 100.0 100.0
Communication Services 8.1 5.9
Consumer Discretionary 6.5 9.8
Consumer Staples 0.0 4.3
Energy 0.0 0.0
Financials 0.0 3.1
Health Care 28.9 12.9
Industrials 39.2 34.9
Information Technology 1.9 6.3
Materials 9.5 15.2
Real Estate 0.0 0.0
Utilities 0.0 0.0
Cash 5.5 7.6
Other Sectors 0.4 0.0
========= =========
ATTRIBUTION
During the year, the top five contributors to the portfolio, making the
largest gains both realised and unrealised, were as follows:
Ticker Portfolio Portfolio Total Portfolio
Average
Return
Contribution
Weight (%)
(%)
To Return (%)
Total 100.0 +15.6 +15.6
9058 TRANCOM 1.8 +80.1 +2.7
6941 Yamaichi Electronics 2.1 +47.7 +1.9
3593 Hogy Medical 6.5 +21.7 +1.8
5930 Bunka Shutter 6.4 +30.9 +1.8
7292 Murakami 4.5 +40.2 +1.8
The poorest 6 performers (in reverse order), either net detractors or the
lowest contributors were:
4636 T & K Toka 0.4 -6.9 -0.2
4956 Konishi 1.7 -9.9 -0.2
3391 TSURUHA Holdings 0.2 -22.3 -0.3
CASH_JPY Japanese yen 6.0 -9.0 -0.8
4212 Sekisui Jushi 4.6 -20.1 -1.1
4362 Nippon Fine Chemical 3.8 -27.4 -1.5
========= ========= =========
GAINS
Trancom is a logistics company specialising in optimising supply chain
operations. The company offers logistics centre management and transport
matching services. After multiple meetings with the founding family, in 2H
2024 Trancom announced a management buyout with Bain Capital, valued at
approximately 100 billion yen. As a result, the shares increased 80.0%,
contributing to 273bps of NAV performance. We agreed to tender our shares in
the tender offer bid and will be looking to re-invest some of the proceeds
into the go-private special purpose company ("SPC").
Yamaichi Electronics is one of Japan's leading manufacturers of burn-in IC
sockets, selling a consumable product used in semiconductor testing. The
company has benefited from increasing sales due to improvement in unit volume.
The shares increased 48.0% over the period, adding 187bps to performance.
Miniaturisation leads to more pins (greater volume, more revenue) per
integrated chip, creating barriers to entry as it becomes increasingly
difficult to create the underlying mould for chip making. As integrated chips
miniaturise, the test sockets become more prone to short-circuiting due to the
proximity of the chips. In May 2024, the company announced strong earnings
forecast, with operating profit more than doubling (up 150.0% YoY) FY23/24,
driven by the recovery of test stocks for smartphone-related chips. We used
market strength to sell down our entire position, which amounted to 6.9% of
total shares outstanding, ex-treasury shares.
Hogy Medical is a leading manufacturer of medical products, focused on
delivering premium surgical kits and non-woven fabric products. The share
price increased 22.0%, contributing 184bps to performance. Foreign ownership
of the company, including NAVF, exceeds 50%. We have engaged with company's
management, suggesting an improvement in capital allocation and increased
alignment of interest through restricted stock unit compensation. Valuation of
the company is at the high end for the portfolio at 8x Enterprise Value ("EV")
to its Earnings Before Interest, Taxes, Depreciation & Amortisation
("EBITDA"), but we are compensated by the low capital expenditure nature of
the business.
Bunka Shutter is Japan's second largest company in manufacturing of shutters
after Sanwa Holdings. The company manufactures shutters used in households and
warehouses. The share price increased 31.0%, contributing 178bps. We continue
to engage with the company's management, suggesting optimisation of the
business portfolio, focusing on growth, profitability and return on invested
capital ("ROIC"). We think that the company holds excessive amounts of cash
and cross shareholdings, which dilutes any efforts to improve business
performance with a low return on equity ("ROE"). The company valuation remains
attractive to us, trading at sub 5x EV/EBITDA.
Murakami is a leading manufacturer of automotive rearview mirrors. The shares
increased 40.0%, adding 175bps performance to the fund. It has 40.0% domestic
market share, followed by Ichiko Industries' 21.0% and Gentex's 28.0%.
Murakami serves the Japanese domestic original equipment manufacturers
("OEMs"), and historically, the company has followed their customers to
overseas locations when they open up a new factory. Domestic mirrors have high
barriers to entry due to aggressive demands (quality and price) by OEM and
Tier 1 suppliers. Despite the 40.0% increase in the share price, Murakami's
valuation remains attractive at sub 2x EV /EBITDA.
DETRACTORS
Konishi produces and sells adhesives to domestic households, industrial and
consumer markets. The company is also involved in construction and public
infrastructure projects. The share price declined 10.0%, contributing to a
negative 23bps drag to the fund. The company trades at sub 5x EV/EBITDA, while
maintaining a mid-teens ROIC in a relatively stable business, with low capital
expenditure. We own approximately 1.0% of the total shares outstanding, and
will continue to revisit sizing, depending on the opportunity set within the
fund.
Tsuruha Holdings ("Tsuruha") is one of Japan's largest drugstore chains,
operating under the name Tsuruha Drug. The company owned over 2,500 locations
across Japan as of 2024. In early February 2024, Aeon announced that it would
acquire a 13.6% stake from Oasis for Y15,500 per share, 31.5% higher than the
share price at the time of announcement. Aeon will acquire additional shares
to make Tsuruha an equity method affiliate. We exited the position at a loss,
as we were not confident of Aeon's position as a major holder of Tsuruha.
Sekisui Jushi specialises in plastic and resin-based products used in road
infrastructure and urban development. The company supplies products to
government infrastructure projects. The share price declined 20.0%, as the
market adjusted for the high valuation European Merger and Acquisition
("M&A") deal announced earlier in the year. The position contributed a
114bps drag to the fund. The company trades at attractive valuations, trading
at sub 4x EV/EBITDA. We will continue to closely monitor the company's ROIC,
which peaked at 25.0% in 2022.
Nippon Fine Chemical is a Japanese company specialising in fine chemicals,
including cosmetic ingredients, pharmaceuticals, and industrial chemicals. The
company is known for its high-purity chemicals, which plays a significant role
in the cosmetics and healthcare industry. The share price reversed some of the
previous year's gains (up approx. 40.0%), declining 27.0% and contributing a
151bps decline to the fund. The company maintains a high teens EBITDA margin
business, although revenue growth has slowed recently after strong consecutive
growth since COVID-19. The company trades at attractive valuations, trading at
sub 5x EV/EBITDA, while maintaining a mid-teens ROIC.
Of the six poor performers listed above, I have omitted details on two. The
first is the Japanese Yen, consistently illustrating currency fluctuation
impacts on the Fund performance. The second is T&K Toka. The holding in
the delisted entity is valued at cost in these accounts and will henceforth be
updated on a quarterly basis. The remaining stocks we now own only Sekisui
Jushi and a token position in Konishi.
PORTFOLIO ENGAGEMENT IN 2024
We were very active in the M&A space. In Trancom, Bain Capital partnered
with the founding family and took the company private. We were able to
negotiate terms with Bain Capital, including a re-investment of the go-private
vehicle, following the same play book as T&K Toka, where the price
stagnated during the tender period. In both cases, we remain as a minority
shareholder in a company with a private equity sponsor who are one of the top
private equity firms in Japan, both from reputation and returns.
We were also one of the largest shareholders of a fast-growing used car
dealership, Goodspeed. We saw an interesting opportunity as the company had
internal control issues, which we believed would lead to a possible delisting
of the company. The company was eventually bought by one of Japan's largest
fuel station networks, Usami. We subsequently sold our entire position into
the tender offer bid.
We are currently the largest shareholder of Helios Techno Holdings, a
specialist producer of manufacturing equipment used in flat panel display
production. The company received a public bid at compelling valuations from RS
Technologies, in what has been termed a
'take-under', which we were successful in blocking. The company manages a low
capital expenditure business model, despite retaining top market share in a
capital-intensive industry. We continue to engage with the company, discussing
various options for its future direction. We have been impressed by the
unusual breadth of imagination displayed by senior management.
OUTLOOK
There is a great deal going on. We have stepped up our engagement with several
of our largest holdings and continue to urge capital allocation improvements,
even to the extent of calling for MBOs or threatening tender offers for
controlling minorities of outstanding shares.
In addition, since January 2025, we have been engaged in a very public
intervention into the scandal enveloping Fuji Media Holdings ("FMH"). We have
documented the company's egregious failures of corporate governance in a
series of letters available on NAVF's website
http://www.nipponactivevaluefund.com/news-views/
(http://www.nipponactivevaluefund.com/news-views/) , which have stoked the
furore conjured up by both the Japanese and international press. FMH and the
inadequacies of its board structure and composition have caught the public
imagination in Japan - it is hard to see this blowing over without something
fundamental happening. Having failed for so long to get management's
attention, we have certainly got it now!
As mentioned in the Chairman's statement, a great deal of disruption has been
caused in the markets since this report was written, by President Trump's
tariff policies and his administration's behaviour towards geo-political
friends and foes alike. Markets hate uncertainty, and it is likely that
extreme volatility will continue for some time. Nevertheless, the tailwinds
provided by the corporate reforms in Japan continue to blow and we see a
greater opportunity than ever as companies need to evolve to address their
valuations, improve their asset allocation policies and modernise their
governance. The fundamental drivers of our investment strategy remain firmly
in place and more relevant than ever.
PAUL FFOLKES DAVIS
RISING SUN MANAGEMENT LIMITED
7 April 2025
PORTFOLIO AS AT 31 DECEMBER 2024
TOP TEN HOLDINGS AS A PERCENTAGE OF NET ASSETS
Company Sector Percentage Market
of net assets
Value
(%)
(£'000)
1. Hogy Medical Healthcare 10.0 37,973
2. Eiken Chemical Healthcare 9.6 35,004
3. Bunka Shutter Industrials 6.8 24,683
4. Aska Pharmaceutical Healthcare 6.1 22,186
5. Fuji Media Holdings Communication Services 6.0 22,069
6. Mesei Industrial Industrials 6.0 22,000
7. Murakami Consumer Discretionary 5.9 21,546
8. Ebara Jitsugyo Industrials 5.0 18,160
9. Sekisui Jushi Industrials 4.4 16,217
10. Teikoku Sen-I Industrials 4.1 14,897
========= =========
SECTOR BREAKDOWN
Portfolio Characteristics
Equity Investments 94.6%
Price/Book 1.1x
Price/Earnings 10.7x
EV/EBITDA 5.6x
Adjusted Cash/Market Cap* 38.7%
Net Working Capital/Market Cap** 45.8%
=========
* Adjusted Cash / Market Cap = (Cash + Cross Shareholdings - Debt) /
Market Cap
** Net Working Capital / Market Cap = (Cross Shareholdings + Total
Current Assets -Total Liabilities) / Market Cap
INVESTMENT POLICY, RESULTS AND OTHER INFORMATION
The Company's investment objective and investment policy (including defined
terms) are as set out in its prospectus dated 1 September 2023.
INVESTMENT OBJECTIVE
The investment objective of the Company 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.
INVESTMENT POLICY
Asset allocation
The Company will primarily invest in a highly selective portfolio of shares
issued by 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 ("Japanese Shares"), and
which the Investment Adviser deems attractive and undervalued and typically
where (i) cash and other liquid investments, real estate and/or tradeable
securities constitutes a significant proportion of the investee company's
market capitalisation; and (ii) the relevant company has no controlling or
majority shareholders.
The Company may also from time to time obtain exposure to Japanese Shares,
Derivatives (as defined below), cash, cash equivalents, exchange traded funds,
near cash instruments and money market instruments, which may not necessarily
suit activist management by the Investment Adviser, though this will be
opportunistic, including as part of an acquisition of a broader portfolio, and
will not form a core focus for asset allocation on an ongoing basis.
There are no restrictions placed on the market capitalisation of investee
companies; but it is expected that the portfolio will be weighted towards
small-cap and mid-cap companies with market capitalisation of up to US$3
billion. The portfolio is expected to have up to 35 holdings, although there
is no guarantee that this will be the case, and it may contain a lesser or
greater number of holdings at any time.
The Company intends to acquire meaningful minority stakes in each investee
company. The Company will not, however, acquire any stake which could cause a
change in its status as an investment trust under Chapter 4 of Part 24 of the
Corporation Tax Act 2010.
The Board will not set any limits on sector weightings or stock selection
within the portfolio. The Company will not be constrained by any index
benchmark in its asset allocation.
The Company may use derivatives for efficient portfolio management purposes.
Such purposes would include the management of cash received by the Company
upon the occurrence of significant liquidity events (including, without
limitation, the receipt of proceeds of fundraisings, the realisation of
Portfolio assets and other cash-generative events such as the completion of a
management buyout by an investee company). Such derivative contracts may, for
example, give the Company exposure to the whole or a sub-section of the
Japanese stock market until such time as the Investment Adviser determines
that the Company's derivative position should be liquidated and invested in an
investee company in accordance with the Investment Policy (the foregoing
derivative contracts being, for the purposes of this Investment Policy
"Derivatives").
Additionally, while the Company intends that the majority of its investments
will be in quoted companies, it may also make investments in unquoted
companies and the Company may become invested in unquoted companies as a
result of corporate actions or commercial transactions undertaken by quoted
companies. The Company will only make investments in unquoted companies in
order to maintain or improve its position in relation to a business which
operated through a quoted entity at the time of the Company's initial
investment in that business.
Investment restrictions
The Board will apply the following restrictions on the size of its
investments:
· not more than twenty per cent. (20%) of the Gross Asset Value
at the time of investment will be invested in the securities of a single
issuer (such restriction does not, however, apply to investment of cash held
for working capital purposes and pending investment or distribution in near
cash equivalent instruments including securities issued or guaranteed by a
government, government agency or instrumentality of any EU or OECD Member
State or by any supranational authority of which one or more EU or OECD Member
States are members);
· the Company will only make an investment in an unquoted
company if the aggregate interest of the Company in unquoted companies at the
time of such investment is not more than ten per cent. (10%) of the Net Asset
Value of the Company at that time. This will mean if a quoted portfolio
company is delisted or an unquoted investment is revalued with the effect of
increasing the Company's interest in unquoted investments to above ten per
cent. (10%) of the Company's Net Asset Value at that time, the Company will
not be in breach of its Investment Policy and will not have to divest itself
of any unquoted investments. Nevertheless, while the Company's interest in
unquoted investments remains above ten per cent. (10%) of its Net Asset Value,
the Company will not be able to make any further investments in unquoted
companies;
· total net investment Derivative exposure will not exceed
twenty per cent. (20%) of Gross Asset Value at the time of investment; and
· total exposure to any single counterparty which has issued
Derivatives to the Company will not exceed twenty per cent. (20%) of Gross
Asset Value at the time of investment.
The Company will comply with the following investment restrictions for so long
as they remain requirements of the Listing Rules:
· neither the Company, nor any of its subsidiaries will conduct
any trading activity which is significant in the context of the Group as a
whole;
· no more than ten per cent. (10%), in aggregate, of the value
of the total assets of the Company will be invested in other listed
closed-ended investment funds (except to the extent that those investment
funds have stated investment policies to invest no more than fifteen per cent.
(15%) of their total assets in other investment companies which are listed on
the Official List); and
· the Company must, at all times, invest and manage its assets
in a way which is consistent with its object of spreading investment risk and
in accordance with the published Investment Policy.
Treasury policy
Until the Company is fully invested, and pending re-investment or distribution
of cash receipts, the Company will use Derivatives, cash, cash equivalents,
exchange traded funds, near cash instruments and money market instruments in
accordance with the Investment Policy.
The Company expects to maintain any non-operational cash balances in Japanese
yen.
Under the amended Investment Policy, the Company may use Derivatives (as
defined in the Investment Policy) for efficient portfolio management purposes.
Such purposes would include the management of cash received by the Company
upon the occurrence of significant liquidity events (including, without
limitation, the receipt of proceeds of fundraisings, the realisation of
portfolio assets and other cash generative events, such as the completion of a
management buyout by an investee company). Such derivative contracts may, for
example, give the Company exposure to the whole or a sub-section of the
Japanese stock market until such time as the Investment Adviser determines
that the Company's derivative position should be liquidated and invested in an
investee company in accordance with the Investment Policy.
The Board will apply the following restrictions on Derivative exposure:
- total net investment Derivative exposure will not exceed twenty
per cent. (20 per cent.) of Gross Asset Value at the time of investment; and
- total exposure to any single counterparty which has issued
Derivatives to the Company will not exceed twenty per cent. (20 per cent.) of
Gross Asset Value at the time of investment.
The Company's exposure to any investments in Derivatives will be monitored
daily by the Investment Adviser and AIFM and, in the event that any particular
Derivative exposure was determined by the Investment Adviser, the AIFM or the
Board to be inappropriately large, that Derivative exposure would be closed
out as soon as reasonably practicable and in any event within three Business
Days.
Gearing Policy
The Company may use borrowings and other gearing to seek to enhance investment
returns at a level (not exceeding 20 per cent. of the Company's net assets
calculated at the time of drawdown) which the Directors, the AIFM and Rising
Sun consider to be appropriate. It is expected that gearing will primarily
comprise bank borrowings, public bond issuance or private placement
borrowings, although overdraft or revolving credit facilities may be used to
increase acquisition and cash flow flexibility.
Hedging Policy
Although the Company does not currently intend to enter into any arrangements
to hedge its underlying currency exposure to investments denominated in
Japanese yen, it may in future, at its discretion, enter into currency hedging
arrangements using futures, forwards, swaps or other derivative instruments.
Material breach of investment restrictions
In the event of any breach of the investment restrictions applicable to the
Company, Shareholders will be informed of the actions to be taken by Rising
Sun and the Company through a Regulatory Information Service.
Amendment to Investment Policy
No material change will be made to the Investment Policy without the approval
of Shareholders by ordinary resolution and the FCA in accordance with the UK
Listing Rules.
Dividend policy
The Company's intention is to look to achieve its results primarily through
capital appreciation. As such, no specific dividend policy has been
established and any distributions will be made entirely at the discretion of
the Board.
Distribution policy
The Company believes that the substantial undervaluation of Japanese equities,
coupled with an activist strategy designed to unlock underlying value should
allow the Company to achieve significant investment results over time. Given
the nature of this strategy, however, it is possible that such returns could
be "lumpy" and unpredictable. Accordingly, the Company will target results
primarily through capital appreciation. No specific dividend policy will be
established in the first instance and any distributions will be made entirely
at the discretion of the Board.
Notwithstanding the foregoing, the Company will make such distributions as may
be required to ensure compliance with the rules relating to investment trusts.
KEY PERFORMANCE INDICATORS ("KPIS")
The Board measures the Company's success in attaining its investment objective
by reference to the following KPIs:
(i) Long-term capital growth
The Board considers the NAV and Share price total return figures to be the
best indicator of performance over time and this therefore is the main
indicator of performance used by the Board. The NAV and Share price total
return for the year ended 31 December 2024 were +15.2% and +16.8% respectively
(31 December 2023: +23.1% and +41.1% respectively).
(ii) Revenue return per Share
The Company's revenue return per Ordinary Share based on the weighted average
number of shares in issue during the year was 3.27p (31 December 2023: 2.44p).
(iii) Discount/premium to NAV
The discount/premium relative to the NAV per Share represented by the share
price is closely monitored by the Board. The Share price closed at a 3.0%
discount to the NAV as at 31 December 2024 (31 December 2023: discount of
4.2%).
(iv) Control of the level of ongoing charges
The Board monitors the Company's operating costs carefully. Based on the
Company's average net assets for the year ended 31 December 2024, the
Company's ongoing charges figure calculated in accordance with the AIC
methodology was 1.18% (31 December 2023: 1.17%).
RISKS AND RISK MANAGEMENT
PRINCIPAL AND EMERGING RISKS AND UNCERTAINTIES
The Company has carried out a robust assessment of its principal and emerging
risks and the procedures in place to identify any emerging risks are described
below.
PROCEDURES TO IDENTIFY PRINCIPAL OR EMERGING RISKS
The Board regularly reviews the Company's risk matrix and focuses on ensuring
that the appropriate controls are in place to mitigate each risk. The
experience and knowledge of the Board is important, as is advice received from
the Board's service providers, specifically the Alternative Investment Fund
Manager ("AIFM"), who is responsible for the risk and portfolio management
services. The AIFM outsources the portfolio management to the Investment
Adviser. The following is a description of the work that each service provider
highlights to the Board on a regular basis.
1. Investment Adviser: the Investment Adviser provides a report to
the Board at least quarterly or periodically as required on industry trends,
insight to future challenges in the Japanese equity sector including the
regulatory, political and economic changes likely to impact the sector;
2. AIFM: following advice from the Investment Adviser and other
service providers, the AIFM maintains a register of identified risks including
emerging risks likely to impact the Company; The Board reviews and updates the
risk register if necessary on a quarterly basis.
3. Broker: provides advice periodically, specific to the Company on
the Company's sector, competitors and the investment company market whilst
working with the Board and Investment Adviser to communicate with
shareholders;
4. Company secretary and auditor: briefs the Board on forthcoming
legislation/regulatory change that might impact on the Company. The auditor
provides their findings at least annually; and
5. Association of Investment Companies ("AIC"): The Company is a
member of the AIC, which provides regular technical updates as well as drawing
members' attention to forthcoming industry and regulatory issues.
PROCEDURE FOR OVERSIGHT
The Board is responsible for the management of risks faced by the Company. 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 below.
Risk Possible consequences Possible Impact Risk Mitigation
MARKET The Company may not meet its investment objective Low The Investment Adviser has a well-defined investment strategy and process
which is regularly and rigorously reviewed by both the independent Board of
Directors and the AIFM.
The Investment Adviser has a contract in place which defines the duties and
responsibilities of the Investment Adviser and has safeguards in place
including provisions for the termination of the agreement upon 12 months'
notice, not to be served within the first 4 years from First Admission.
The Investment Adviser has stated that it will run a diversified portfolio and
the Board reviews the composition and performance of that portfolio as well as
the performance of the Company at each Board meeting. A review of transactions
is performed at each quarterly Board meeting.
Management Accounts, and Income and expense forecasts are reviewed at
quarterly Board meetings.
The Investment Adviser sends the Board its monthly newsletter/ factsheet and
an investment report on a quarterly basis.
The Board considers the Investment Adviser and the AIFM's appointment on an
annual basis.
MARKET Board fails to monitor whether there is style drift within the investment Low The Investment Adviser provides individual company updates on both existing
process. and target holdings regularly. These updates include key metrics that allow
the Board to monitor whether these companies are consistent with the original
investment thesis.
Details of the portfolio composition are monitored by the AIFM and also
provided regularly to allow the Board to see if the portfolio construction is
consistent with investment guidelines.
MARKET The Company's Shares trade at a discount to NAV. High The Investment Adviser, AIFM and Broker review market conditions on an ongoing
basis.
Shares may trade to their NAV through further issues and buy-backs, as
appropriate.
Discount protection mechanism in place whereby the Board will consider
whether, in light of prevailing market conditions, the Company should purchase
its own shares.
MARKET Board fails to monitor the Company's ability to build the Portfolio. Low The Investment Advisor/AIFM/Brokers review market conditions on an ongoing
basis.
Quarterly meetings with the Investment Adviser to discuss market environment,
team and business dynamics and ongoing viability of the strategy.
The Investment Adviser will inform the AIFM and Board as soon as they are
aware of any issues that might compromise their ability to deliver vs
the strategy.
OPERATIONAL Board fails to monitor the execution of the Investment Process. Medium Quarterly meetings with the Investment Adviser that cover implementation of
the Investment Process. The Board relies on the AIFM to monitor the
implementation of individual trades.
If the Investment Adviser considers the opportunity to be appropriate after
their extensive due diligence process, the Investment Adviser will send an
initial recommendation to the Board and AIFM, to add a target company to the
investible universe.
Upon approval of a target company by the Board and AIFM, the Investment
Adviser will send a formal recommendation, outlining the rationale for the
recommendation, along with the size of investment and forward to the AIFM for
consideration.
Upon receipt of approval from the AIFM, the Investment Adviser will arrange
execution.
The Board regularly carries out Investment Process reviews of the Investment
Adviser.
OPERATIONAL Cyber Security risks could potentially lead to breaches Medium Cyber security policies and procedures are implemented by the Company's key
service providers.
The AIFM has cyber essentials accreditation, which is reviewed on a continuous
basis.
Penetration testing is carried out by the AIFM and Administrator every year.
OPERATIONAL Failure to provide notification of FEFTA/ FOREX, FIEA threshold clearances Medium The Investment Adviser is tasked with notifying the AIFM at time of trade
along with required information to Hibiya-Nakata to allow for timely filing whenever a deal has caused the holding to surpass a threshold.
with the appropriate regulatory bodies.
Filing is delegated to third party specialist Hibiya-Nakata, the Company's
Tokyo-based legal advisor.
The AIFM performs their own daily review of these limits against a portfolio
that is reconciled to both the Investment Adviser and Custody records.
Once a deal has surpassed a threshold, the AIFM continue to provide
Hibiya-Nakata with any subsequent trades to ensure their records can be as up
to date as possible, this will allow them to act quickly in the event that a
subsequent threshold is passed.
LIQUIDITY It may be difficult for Shareholders to realise their investment and there may Medium Secondary market liquidity can be improved by strong investor communications
not be a liquid market in the Shares and/or the C Shares. and having an active broker and market maker. The Broker monitor and report to
the Board as soon as they are aware of any issues.
Funding liquidity to satisfy redemption rights is not applicable, as the
Company is a closed-ended fund.
Discount protection mechanism in place whereby the Board will consider
whether, in the light of prevailing market conditions, the Company should
purchase its own shares.
MARKET A corporate action is missed and the Company suffers a consequential loss. Medium The Custodian (Northern Trust) and Investment Adviser monitor such actions.
Northern Trust is a very large and experienced global custodian and produces
an Internal Controls report which is reported to the Board.
MARKET Climate change has recently become one of the most critical issues confronting Low The Board is also considering the threat posed by the impact on climate change
asset managers and their investors. and its effects on the operations of the Investment Adviser and other major
service providers. As climate change's impact becomes more common, the
Investors can no longer ignore the impact that the world's changing climate resiliency, business continuity planning and the location strategies of our
will have on their portfolio, with the inevitable impact on returns. service providers will come under more scrutiny.
An ESG analysis is provided with investment recommendations.
MARKET Interest rate/Inflation Medium The Company may use derivative instruments such as futures, forwards, swaps or
other derivative instruments, to protect the Company from fluctuations in
Risk/Currency foreign exchange rates.
The AIFM constantly monitors risks and impact on portfolio, discussing with
the Investment Adviser and Board as appropriate.
The AIFM would review any proposal for the use of derivatives against the
requirements of the prospects.
ARTIFICIAL INTELLIGENCE Risks that the emergence of increasingly advanced AI will lead to new risks to EMERGING The Company, its advisers and service providers will aim to utilise the power
the Fund, including but not limited to, decline in human autonomy, increased of AI to enhance capabilities, rather than fall foul of the potential pitfalls
cybersecurity vulnerabilities, algorithm perpetuated bias though using its emergence presents. Through careful monitoring of the new technologies
historical data, insufficient training data to perform correctly and algorithm being released into the world, it will be hoped that the Company can utilise
driven price manipulation. AI to its benefit.
GEOPOLITICAL Act of War; EMERGING The portfolio is constantly monitored by the Investment Adviser, ensuring the
portfolio avoids any sanction lists and exposures where possible, together
· Sanctions and restrictions imposed. with consideration of any market impacts.
· Volatile markets and general uncertainty. · The Board and the AIFM continue to monitor events.
· Potential world order change and globalisation. · Registrar will monitor payments of dividends to shareholders
in line with regulations.
· The global impact of the re-election of Donald Trump as the
President of the USA.
VIABILITY STATEMENT
The Directors have assessed the viability of the Company for the period to 31
December 2027 (the "Period"). The Board believes that the Period, being
approximately three years, is an appropriate time horizon over which to assess
the viability of the Company, particularly when taking into account the nature
of the Company's investment strategy and the principal risks outlined above.
As mentioned above, in accordance with the Company's articles, a continuation
vote will be proposed at the forthcoming AGM. This is the first continuation
vote for the Company since its inception. Taking into consideration the
Company's track record over the past five years, the Board believes the
continuation vote will pass. Additionally, based on their assessment, the
Directors have a reasonable expectation that the Company will be able to
continue to operate and to meet its liabilities as they fall due over the
Period.
In their assessment of the prospects of the Company, the Board considered each
of the principal and emerging risks and uncertainties set out above and the
liquidity and solvency of the Company. The Board also considered the Company's
income and expenditure projections and the fact that the majority of the
Company's investments comprise reasonably realisable securities, which could,
if necessary, be sold to meet the Company's funding requirements. Portfolio
changes, market developments, level of premium/discount to NAV and share
buybacks/share issues are discussed at quarterly Board meetings. The internal
control framework of the Company is subject to a formal review on at least an
annual basis.
The level of the ongoing charges is dependent to a large extent on the level
of net assets. The Company's income from investments and cash realisable from
the sale of its investments provide substantial cover to the Company's
operating expenses, and any other costs likely to be faced by the Company over
the Period of their assessment.
SECTION 172 STATEMENT
SECTION 172 OF THE COMPANIES ACT 2006
This section of the Annual Report covers the Board's considerations and
activities in discharging their duties under s.172(1) of the Companies Act
2006, in promoting the long-term success of the Company for the benefit of its
members as a whole. In doing so, the Board is also required to consider the
likely consequences of its actions over the long-term and on other
stakeholders and the environment.
Therefore, this statement includes consideration of the likely consequences of
the decisions of the Board in the longer term, how the Board has taken wider
stakeholders' needs into account and the impact of the Company's operations on
the environment.
KEY BOARD DECISIONS DURING THE YEAR
· In January 2024, K. K. BCJ-74, a company owned by a Bain
Capital-advised fund, initiated a tender offer to acquire all shares in
T&K TOKA CO., LTD. ("T&K Toka"). Following the strategic approach, the
Investment Adviser decided to tender its holding and recommended a
reinvestment of 15% of their proceeds into the Offering Vehicle's holding
company with its co-investors, after T&K Toka's de-listing. The Board
accepted this proposal and reviewed and approved the relevant shareholders'
agreement.
· The Board provided continuous support for the Investment
Adviser's approach to investment activism (see the Investment Adviser's
Report) ensuring that their activism aligns with the long-term goals of the
Company. The activism is focused on governance improvements, growth strategies
and long-term value creation in Japanese investee companies.
· The Board decided that in 2025 and 2026, respectively, it is
expected that one director will retire to bring the size of the board from
seven directors down to five directors by the end of 2026. Mr Noel Lamb has
voluntarily opted not to seek re-election as a director of the Company at the
forthcoming AGM.
· NAVF focuses on generating returns by engaging with
undervalued Japanese equities. In September 2024 K. K. BCJ-86, a company owned
by Bain Capital Private Equity LP, initiated a tender offer to acquire all
shares of Trancom Co Ltd., excluding those held by its founder family.
Following the recommendation from the Investment Adviser and consistent with
its strategy, NAVF's Board opted to tender its holding as a part of this
Management Buyout ('MBO') transaction and reinvest 10% of the proceeds into
the Offering Vehicle's holding company alongside co-investors Dalton
Investments, Inc and NAVF Select LLC, after Trancom's de-listing. Further
details can be found in the annual report.
· Having undertaken a thorough tender process, the Board
approved the appointment of NSM Funds (UK) Limited ("NSM") as the Company's
Company Secretary and Administrator with effect from 1 January 2025.
Additionally, the Registered Office was relocated to the offices of NSM at 4th
floor, 46-48 James Street, London, England, W1U 1EZ at the same time.
· During the year and in order to reduce costs, the Board
agreed that Shore Capital Stockbrokers Limited act as the Company's sole
broker, relieving Berenberg of their duties.
COMPANY SUSTAINABILITY AND STAKEHOLDERS
As an externally managed investment company, the Company does not have any
employees. Its main stakeholders are as set out in the following paragraphs,
which explain the relationship between the Company and each of its
stakeholders.
The Company's Shares are listed on the Main Market for listed securities of
the London Stock Exchange.
The Board continues to foster the Company's business relationships with
suppliers, customers and other key stakeholders through its stakeholder
management activities as described below.
STAKEHOLDER MANAGEMENT
SHAREHOLDERS AND PROSPECTIVE INVESTORS
The Investment Adviser and Board feel it is important for the Company's
continued success to have the potential access to equity capital in order to
expand the Company's portfolio over time to further diversify the investment
portfolio to create economies of scale and to help manage any discount or
premium at which the Company's Shares trade against its NAV. Additionally, the
Board looks to attract long-term investors in the Company and, in doing so,
the Board will seek opportunities to meet with Shareholders to gauge the
opinion of investors on the Company's activities. Periodic communications are
published such as interim and annual reports, monthly factsheets, NAV updates
are published for the benefit and information of investors and analysts. They
can be found on RNS or the Company's website, as appropriate.
To help the Board in its aim to act fairly between the Company's members, it
seeks to ensure effective communication is provided to all Shareholders. The
Board invites Shareholders to attend the AGM to be held on 5 June 2025. The
Annual and Interim reports will be issued to Shareholders and made available
on the Company's website. The physical copies of these reports will be
available to Shareholders upon request. Monthly factsheets are also available
on the Company's website. The Investment Adviser and the Company's Broker have
met with several of the Company's larger Shareholders during the year under
review. Members of the Board would be happy to arrange meetings with
shareholders upon request to the Company's Corporate Broker, Shore Capital.
Shareholders' views are considered by the Board at their quarterly Board
meetings.
INVESTMENT ADVISER
The Investment Adviser is the most significant service provider to the Company
and a description of its role, along with that of the AIFM, can be found in
the annual report.
The Board receives regular reports from the Investment Adviser and discusses
the portfolio at each Board meeting but maintains an ongoing dialogue between
scheduled meetings. Representatives of the Investment Adviser attend Board
meetings. The Investment Adviser's remuneration is based on the NAV of the
Company which aligns their interests with those of Shareholders.
The Management Engagement Committee reviews the performance and resources of
the Investment Adviser at least annually. The last review was undertaken
during the Management Engagement Committee meeting held in November 2024 at
which the Committee agreed that the Investment Adviser's service delivery was
acceptable.
KEY SERVICE PROVIDERS
Each service provider has an established track record and has in place
suitable policies and procedures to ensure they maintain high standards of
business conduct and corporate governance. The Board believes that positive
relationships with each of the Company's service providers are important to
support the Company's long-term success.
To build and maintain strong working relationships, the Company's key service
providers (notably the Investment Adviser, AIFM, and Company
Secretary/Administrator) are invited to attend quarterly Board meetings to
present their respective reports. This enables the Board to exercise effective
oversight of the Company's activities. In addition, the Company's external
auditor is invited to attend at least two Audit Committee meeting per year.
The Chair of the Audit Committee maintains regular contact with the auditor,
Investment Adviser and Administrator to ensure that the audit process is
undertaken effectively. The Board has also spent time engaging with the
Company's key service providers outside of scheduled Board meetings to develop
its working relationship with those service providers and ensure the smooth
operational function of the Company. The Board and its advisers seek to
maintain constructive relationships with the Company's key service providers
on behalf of the Company through regular communications, meetings and the
provision of relevant information and update meetings.
Another significant service provider for the Company's long-term success is
the AIFM, who has engaged the Investment Adviser for the purpose of providing
investment advisory services to the Company. The Board regularly monitors the
Company's investment performance in relation to its objectives, investment
policy and strategy. The Board receives and reviews regular reports and
presentations from both the AIFM and Investment Adviser and seeks to maintain
regular contact to foster a constructive working relationship.
During the year the Company approved the appointment of NSM Funds (UK) Limited
as its Administrator and Company Secretary with effect from 1 January 2025.
Additionally, the Board agreed that Shore Capital act as the Company's sole
Broker, relieving Berenberg of their duties.
INVESTMENT PROCESS
The Company's Investment Adviser, RSM, has combined capabilities in
origination, evaluation and transaction execution with expertise across
equities, shareholder activism and active portfolio management. RSM maintains
a management committee that is responsible for reviewing and evaluating
potential investment opportunities.
RSM screens investment opportunities to identify potential investments that
meet the Company's investment objective and comply with its investment policy.
Through this screening process, RSM determines whether to proceed with
detailed due diligence and evaluation of the investee company.
After a potential investment opportunity has been identified and screened
against the target investment criteria and if it determines to proceed then
RSM performs a detailed due diligence review of the investee company, where
key risks, including those related to ESG factors, are assessed. RSM employs a
robust due diligence process applying principles of quantitative analysis to
stress test assumptions, price capital structures, and determine expected
returns in the context of the risks faced.
Where an investment opportunity proceeds to the execution phase, RSM will
manage the transaction process, including co-ordinating the work of other
professional advisers and service providers, including agents, valuers,
lawyers, accountants, and tax advisers.
CONCLUSION
The Board is mindful of the directors' duties as described by section 172 of
the Companies Act 2006, when deliberating all important decisions.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the annual report and the
financial statements in accordance with UK adopted international accounting
standards and applicable law and regulations.
Company law requires the directors to prepare financial statements for each
financial year. Under that law the Directors are required to prepare the
Company's financial statements in accordance with UK adopted international
accounting standards. Under company law the Directors must not approve the
financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the company and of the profit or loss for the
company for that period.
In preparing these financial statements, the Directors are required to:
● Select suitable accounting policies and then
apply them consistently;
● Make judgements and accounting estimates that
are reasonable and prudent;
● State whether they have been prepared in
accordance with UK adopted international accounting standards, subject to any
material departures disclosed and explained in the financial statements;
● Prepare the financial statements on the going
concern basis unless it is inappropriate to presume that the company will
continue in business; and
● Prepare a Directors' report, a Strategic report
and Directors' remuneration report which comply with the requirements of the
Companies Act 2006.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company transactions and disclose with
reasonable accuracy at any time the financial position of the company and
enable them to ensure that the financial statements comply with the Companies
Act 2006.
They are also responsible for safeguarding the assets of the Company and hence
for taking reasonable steps for the prevention and detection of fraud and
other irregularities. The Directors are responsible for ensuring that the
annual report and accounts, taken as a whole, is fair, balanced, and
understandable and provides the information necessary for shareholders to
assess the Company's performance, business model and strategy.
Website publication
The Directors are responsible for ensuring the annual report and the financial
statements are made available on a website. Financial statements are published
on the Company website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial statements, which may
vary from legislation in other jurisdictions. The maintenance and integrity of
the company's website is the responsibility of the directors. The Directors'
responsibility also extends to the ongoing integrity of the financial
statements contained therein.
Directors' responsibilities pursuant to DTR4
The Directors confirm to the best of their knowledge:
● The financial statements have been prepared in
accordance with the applicable set of accounting standards, give a true and
fair view of the assets, liabilities, financial position and profit and loss
of the company.
● The Annual Report includes a fair review of the
development and performance of the business and the financial position of the
company, together with a description of the principal risks and uncertainties
that they face.
Directors' Statement as to the Disclosure of Information to Auditor
All of the current Directors have taken all the steps that they ought to have
taken to make themselves aware of any information needed by the Company's
auditor for the purposes of their audit and to establish that the auditor are
aware of that information. The Directors are not aware of any relevant audit
information of which the auditor are unaware.
For and on behalf of the Board
Rosemary Morgan
Chairman of the Board of Directors
7 April 2025
Statement of Comprehensive Income
Year ended Year ended
31 December 2024
31 December 2023
Note Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Gains on investments 3 - 46,508 46,508 - 48,138 48,138
Income 4 9,132 - 9,132 4,994 - 4,994
Foreign exchange losses - (1,834) (1,834) - (2,605) (2,605)
Investment adviser fees 5 (583) (2,334) (2,917) (287) (1,147) (1,434)
Other operational expenses 6 (1,446) - (1,446) (1,031) - (1,031)
--------------- --------------- --------------- --------------- --------------- ---------------
Profit before taxation 7,103 42,340 49,443 3,676 44,386 48,062
Taxation 7 (913) - (913) (498) - (498)
--------------- --------------- --------------- --------------- --------------- ---------------
Profit and comprehensive income for the year 6,190 42,340 48,530 3,178 44,386 47,564
========= ========= ========= ========= ========= =========
Earnings per Ordinary Share - Basic and diluted 12 3.27p 22.39p 25.66p 2.44p 34.06p 36.50p
========= ========= ========= ========= ========= =========
There is no other comprehensive income and therefore the return for the year
is also the total comprehensive income for the year.
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
Association of Investment Companies ("AIC").
The notes form part of these financial statements.
Statement of Financial Position
Note As at As at
31 December
31 December
2024
2023
£'000
£'000
Non-current assets
Investments at fair value through profit or loss 3 345,593 295,268
Current assets
Cash and cash equivalents 19,889 22,257
Trade and other receivables 9 1,270 2,936
--------------- ---------------
21,159 25,193
Current liabilities
Trade and other payables 10 (1,310) (523)
--------------- ---------------
Net current assets 19,849 24,670
========= =========
Net assets 365,442 319,938
========= =========
Capital and reserves attributable to Shareholders
Share capital 11 1,891 1,891
Share premium 231,834 231,834
Capital reserve 125,050 82,710
Revenue reserve 6,667 3,503
--------------- ---------------
Total equity 365,442 319,938
========= =========
NAV per Ordinary Share (pence) 13 193.21p 169.15p
========= =========
Approved by the Board of Directors and authorised for issue on 7 April 2025
and signed on their behalf by:
CHETAN GHOSH
Director
Nippon Active Value Fund plc is incorporated in England and Wales with
registration number 12275668.
The notes form part of these financial statements.
Statement of Changes in Equity
Year ended 31 December 2024 Note Share Share Capital Revenue Total
capital
premium
reserve
reserve
£'000
£'000
£'000
£'000
£'000
Balance at 1 January 2024 1,891 231,834 82,710 3,503 319,938
Profit and comprehensive income for the year - - 42,340 6,190 48,530
Dividends paid 8 - - - (3,026) (3,026)
--------------- --------------- --------------- --------------- ---------------
Balance at 31 December 2024 1,891 231,834 125,050 6,667 365,442
========= ========= ========= ========= =========
Year ended 31 December 2023 Note Share Share Capital Revenue Total
capital
premium
reserve
reserve
£'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 year - - 44,386 3,178 47,564
Dividends paid 8 - - - (3,617) (3,617)
Issue of Ordinary Shares 11 761 117,623 - - 118,384
Share issue costs 11 - (1,138) - - (1,138)
--------------- --------------- --------------- --------------- ---------------
Balance at 31 December 2023 1,891 231,834 82,710 3,503 319,938
========= ========= ========= ========= =========
The capital reserve as at 31 December 2024 includes realised gains of
£67,021,000 (as at 31 December 2023: realised gains of £29,167,000).
The revenue reserve and realised element of the capital reserve represents the
amount of the Company's retained and distributable reserves.
The notes form part of these financial statements.
Statement of Cash Flows
Note Year ended Year ended
31 December
31 December
2024
2023
£'000
£'000
Operating activities cash flows
Profit before taxation* 49,443 48,062
Adjustment for:
Gains on investments 3 (46,508) (48,138)
Increase in trade and other receivables (177) (624)
Increase in trade and in other payables (56) (81)
Tax withheld on overseas income 7 (913) (498)
--------------- ---------------
Net cash flow from/(used in) operating activities 1,789 (1,279)
========= =========
Investing activities cash flows
Purchases of investments 3 (163,798) (338,602)
Sales of investments 3 162,667 216,771
--------------- ---------------
Net cash flow used in investing activities (1,131) (121,831)
========= =========
Financing activities cash flows
Dividends paid (3,026) (3,617)
Issue of Ordinary Share capital - 118,384
Ordinary Share issue costs 8 - (1,138)
--------------- ---------------
Net cash flow (used in)/from financing activities (3,026) 113,629
Decrease in cash and cash equivalents 11 (2,368) (9,481)
--------------- ---------------
Cash and cash equivalents at the beginning of the year 22,257 31,738
========= =========
Cash and cash equivalents at the end of the year 19,889 22,257
========= =========
* Cash inflow from dividends received for the year is £7,766,000 (31
December 2023: £4,178,000).
The notes form part of these financial statements.
Notes to the Accounts
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. 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. On 11 October 2023, the Company's Ordinary Shares were admitted to
the Official List of the FCA and trading on the main market for listed
securities of the London Stock Exchange.
The investment objective of the Company 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.
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.
FundRock Management Company (Guernsey) Limited acts as the Company's
Alternative Investment Fund Manager (the "AIFM") for the purposes of Directive
2011/61/EU on Alternative Investment Fund Managers.
The Company's Investment Adviser is Rising Sun Management Limited.
Apex Listed Companies Services (UK) Limited, the Company's appointed
Administrator, (the "Administrator") provides administrative and company
secretarial services to the Company under the terms of an administration
agreement between the Company and the Administrator.
The Company's registered office for the year to 31 December 2024 was 6th
Floor, 125 London Wall, London EC2Y 5AS.
The Board approved the appointment of NSM Funds (UK) Limited ("NSM") as the
new Company Secretary and Administrator with effect from 1 January 2025.
Consequently, the registered office has changed to 4th floor, 46-48 James
Street, London W1U 1EZ.
2. BASIS OF PREPARATION AND MATERIAL ACCOUNTING POLICIES
a) Basis of preparation
Statement of compliance
The financial statements have been prepared in accordance with UK adopted
international accounting standards. The financial statements have also been
prepared as far as is relevant and applicable to the Company in accordance
with the Statement of Recommended Practice ("SORP") issued by Association of
Investment Companies ("AIC") in July 2022.
Going Concern
The Directors have adopted the going concern basis in preparing the financial
statements. The Directors do not foresee any immediate material risk to the
Company's investment portfolio, however, a prolonged and deep market decline
could lead to falling values in the underlying business or interruptions to
cash flow. The following is a summary of the Directors' assessment of the
going concern status of the Company.
The Company's ability to continue as a going concern for the period assessed
by the Directors, being at least 12 months from the date the financial
statements were authorised for issue.
The assessment took into consideration the risks and impact of actual and
emerging risks such as those relating to the macroeconomic political and
geopolitical environment including the continuing conflicts in Ukraine and the
Middle East, tariffs and the possibility of a trade war. Further details on
the impact of the market, liquidity and credit risks and how they are managed
are disclosed in note 15 to the Accounts.
The Company is subject to a continuation vote at this year's AGM to be held on
5 June 2025. Having regard to the Company's performance and track record, the
board are confident that the continuation vote will be passed by the
shareholders at the forthcoming AGM.
The Directors have a reasonable expectation that the Company has adequate
resources to continue in operational existence for at least twelve months 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 at 31
December 2024 were £365,442,000 (31 December 2023: £319,938,000). As at 31
December 2024, the Company held £19,889,000 (31 December 2023: £22,257,000)
in cash. The total expenses for the year ended 31 December 2024 were
£4,363,000 (31 December 2023: £2,465,000). The ongoing charges ratio
represented approximately 1.18% (31 December 2023: 1.17%) of average net
assets during the year. At the date of approval of this document, based on the
aggregate of investments and cash held, the Company has substantial operating
expenses cover.
Use of estimates and judgements
The preparation of the financial statements and the manner in which they are
presented 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. See below paragraph for judgement around determination of the
functional and presentation currency.
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. There have been no
estimates, judgements or assumptions which have had a significant impact on
the financial statements for the year.
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 presentation currency
The financial statements are presented in sterling, which is the Company's
functional currency. The Company's investments are denominated in Japanese
yen. However, the Company's Shares are issued in sterling. In addition, a
substantial majority of the Company's expenses are paid in sterling. It is
also expected that the Company's dividend shall be declared and paid in
sterling. All financial information presented in sterling has been rounded to
the nearest thousand pounds.
The Company is required to identify its functional currency, being the
currency of the primary economic environment in which the Company operates.
The Board, having regard to the currency of the Company's share capital and
the predominant currency in which its shareholders operate, has determined
that sterling is the functional currency. Sterling is also the currency in
which the financial statements are presented.
New Standards, Interpretations and Amendments Adopted from 1 January 2024
A number of new standards and amendments to standards are effective for the
annual periods beginning after 1 January 2024. None of these have a
significant effect on the measurement of the amounts recognised in the
financial statements of the Company.
New Standards and Amendments Issued but not yet Effective
The relevant new and amended standards and interpretations that are issued,
but not yet effective, up to the date of issuance of the Company's financial
statements are disclosed below.
Amendments to IAS 21 - Lack of Exchangeability (effective for annual periods
beginning on or after 1 January 2025)
In August 2023, the IASB amended IAS 21 to help entities to determine whether
a currency is exchangeable into another currency, and which spot exchange rate
to use when it is not. The Company does not expect these amendments to have a
material impact on its operations or financial statements.
Amendments to the Classification and Measurement of Financial Instruments -
Amendments to IFRS 9 and IFRS 7 (effective for annual periods beginning on or
after 1 January 2026)
On 30 May 2024, the IASB issued targeted amendments to IFRS 9 and IFRS 7 to
respond to recent questions arising in practice, and to include new
requirements not only for financial institutions but also for corporate
entities. These amendments:
· clarify the date of recognition and derecognition of some
financial assets and liabilities, with a new exception for some financial
liabilities settled through an electronic cash transfer system;
· clarify and add further guidance for assessing whether a
financial asset meets the solely payments of principal and interest (SPPI)
criterion;
· add new disclosures for certain instruments with contractual
terms that can change cash flows (such as some financial instruments with
features linked to the achievement of environment, social and governance
targets); and
· update the disclosures for equity instruments designated at
fair value through other comprehensive income (FVOCI).
The Company does not expect these amendments to have a material impact on its
operations or financial statements.
IFRS 18 Presentation and Disclosure in Financial Statements (effective for
annual periods beginning on or after 1 January 2027)
IFRS 18 will replace IAS 1 Presentation of financial statements, introducing
new requirements that will help to achieve comparability of the financial
performance of similar entities and provide more relevant information and
transparency to users. Even though IFRS 18 will not impact the recognition or
measurement of items in the financial statements, its impacts on presentation
and disclosure are expected to be pervasive, in particular those related to
the statement of comprehensive income and providing management-defined
performance measures within the financial statements.
Management is currently assessing the detailed implications of applying the
new standard on the Company's financial statements. From the high-level
preliminary assessment performed, the following potential impacts have been
identified:
· Although the adoption of IFRS 18 will have no impact on the
Company's net profit, the Company expects that grouping items of income and
expenses in the statement of comprehensive income into the new categories will
impact how operating profit is calculated and reported. From the high-level
impact assessment that the Company has performed, the following might
potentially impact operating profit:
- Foreign exchange differences currently aggregated in the line
item 'Foreign exchange loss/gain' in operating profit might need to be
disaggregated, with some foreign exchange gains or losses presented below
operating profit.
· The line items presented on the primary financial statements
might change as a result of the application of the concept of 'useful
structured summary' and the enhanced principles on aggregation and
disaggregation.
· The Company does not expect there to be a significant change
in the information that is currently disclosed in the notes because the
requirement to disclose material information remains unchanged; however, the
way in which the information is grouped might change as a result of the
aggregation/disaggregation principles. In addition, there will be significant
new disclosures required for:
- management-defined performance measures;
- a break-down of the nature of expenses for line items presented
by function in the operating category of the statement of comprehensive income
- this break-down is only required for certain nature expenses; and
- for the first annual period of application of IFRS 18, a
reconciliation for each line item in the statement of comprehensive income
between the restated amounts presented by applying IFRS 18 and the amounts
previously presented applying IAS 1.
· From a cash flow statement perspective, there will be changes
to how interest received and interest paid are presented. Interest paid will
be presented as financing cash flows and interest received as investing cash
flows, which is a change from current presentation as part of operating cash
flows.
The Company will apply the new standard from its mandatory effective date of 1
January 2027. Retrospective application is required, and so the comparative
information for the financial year ending 31 December 2026 will be restated in
accordance with IFRS 18.
b) Material accounting policies
The following accounting policies have been applied consistently throughout
the reporting year.
Investments
Upon initial recognition investments are classified by the Company "at fair
value through profit or loss". They are accounted for on the date they are
traded and are included initially at fair value which is taken to be their
cost. Subsequently quoted investments are valued at fair value, which is the
bid market price, or if bid price is unavailable, last traded price on the
relevant exchange. Subsequently investments are revalued at fair value, which
is the bid market price for listed investments over the time until they are
sold, any unrealised gains/losses are included in the fair value of the
investments. Investments are derecognised on the trade date of their disposal,
which is the point where the Company transfers substantially all the risks and
rewards of the ownership of the financial asset.
Changes in the fair value of investments held at fair value through profit or
loss and gains or losses on disposal are included in the capital column of the
Statement of Comprehensive Income within "gains on investments".
Taxation
Investment trusts which have approval under Section 1158 of the Corporation
Tax Act 2010 are not liable for taxation on capital gains. The Company has
been granted approval as an Investment Trust by HMRC.
Irrecoverable withholding tax is recognised on any overseas dividends on an
accruals basis using the applicable rate for the country of origin.
Segmental reporting
The Chief Operating Decision Maker, which is the Board, is of the opinion that
the Company is engaged in a single segment of business. The financial
information used by the Chief Operating Decision Maker to manage the Company
presents the business as a single segment.
Dividends payable
Dividends payable to Shareholders are recognised in the year of the
ex-dividend date.
Income
Income includes investment income from financial assets at fair value through
profit or loss and finance income. Investment income from financial assets at
fair value through profit or loss is recognised in the Statement of
Comprehensive Income within investment income when the Company's right to
receive payments is established.
Dividend income is presented gross of non-recoverable withholding taxes, which
are disclosed separately in the Statement of Comprehensive Income.
Dividends receivable arising from companies within the United Kingdom (UK) are
classified as UK dividend income and all other income is classified as
overseas dividend income.
Special dividends are assessed on their individual merits and may be credited
to the Statement of Comprehensive Income as a capital item if considered to be
closely linked to reconstructions of the investee company or other capital
transactions.
Other income comprises interest earned on cash held on deposit. Other income
is recognised on a receipt basis.
Expenses
All expenses are accounted for on accruals basis. In respect of the analysis
between revenue and capital items presented within the Statement of
Comprehensive Income, the Investment Adviser's fees are split 20% to revenue
and 80% to capital. All other expenses are recognised as revenue.
Foreign currency
Transactions denominated in foreign currencies are translated into sterling at
the exchange rates as at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the period end are reported
at the rates of exchange prevailing at the period end. Any gain or loss
arising from a change in exchange rates subsequent to the date of the
transaction is included as an exchange gain or loss to capital or revenue in
the Income Statement as appropriate. Foreign exchange movements on investments
are included in the Income Statement within gains on investments.
Cash and cash equivalents
Cash and cash equivalents include deposits held at call with banks and other
short-term deposits with original maturities of three months or less.
Trade and other payables
Trade and other payables are initially recognised at fair value, and
subsequently re-measured at amortised cost using the effective interest method
where necessary.
Nature and purpose of equity and reserves:
Share capital and share premium
Share capital represents the 1p nominal value of the issued share capital.
Ordinary shares are classified as equity. Costs directly attributable to the
issue of new shares (that would have been avoided if there had not been a new
issue of new shares) are recognised against the value of the ordinary share
premium.
The share premium account arose from the net proceeds of new shares and from
the excess proceeds received on the sale of shares from treasury over the
repurchase cost.
Capital reserve
Profits and losses achieved by selling investments, changes in fair value
arising upon the revaluation of investments that remain in the portfolio and
other capital expenditure are all charged to the capital column of the
Statement of Comprehensive Income and allocated to the capital reserve. The
capital reserve reflects any:
· gains or losses on the disposal of investments;
· exchange movements of a capital nature;
· the increases and decreases in the fair value of investments
which have been recognised in the capital column of the income statement; and
· expenses which are capital in nature.
Any gains in the fair value of investments that are not readily convertible to
cash are treated as unrealised gains in the capital reserve.
Revenue reserve
The revenue reserve reflects all income and expenditure recognised in the
revenue column of the income statement and is distributable by way of
dividends.
The Company's distributable reserve consists of the capital reserve
attributable to realised profit and the revenue reserve.
3. INVESTMENTS
(a) Investment at fair value through profit or loss
As at As at
31 December
31 December
2024
2023
£'000
£'000
Listed on a recognised overseas exchange 345,593 295,268
--------------- ---------------
Total 345,593 295,268
========= =========
(b) Movements during year
Year ended Year ended
31 December
31 December
2024
2023
£'000
£'000
Book cost at the beginning of the year 241,725 105,214
Revaluation gains on investments held at beginning of the year 53,543 21,070
--------------- ---------------
Valuation at beginning of the year 295,268 126,284
========= =========
Investment purchases, at cost 164,515 338,475
Investment sales, at cost (118,676) (201,964)
--------------- ---------------
Closing book cost 287,564 241,725
========= =========
Revaluation gains on investments held at year end 58,029 53,543
--------------- ---------------
Closing valuation 345,593 295,268
========= =========
These investments have been revalued over time and until they were sold any
unrealised gains/(losses) were included in the fair value of the investments.
Transaction costs on investment purchases for the year ended 31 December 2024
amounted to £125,000 (2023: £214,000) and on investment sales for the year
amounted to £109,000 (2023: £159,000).
(c) Gains on investments
Year ended Year ended
31 December
31 December
2024
2023
£'000
£'000
Realised gains on disposal of investments 42,256 16,037
Revaluation gains on investments held at year end 4,486 32,473
Net transactions costs (234) (372)
--------------- ---------------
Total gains on investments held at fair value 46,508 48,138
========= =========
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 valuation techniques for investments used by the Company are explained in
the accounting policies note 2.
The table below sets out fair value measurements using the Fair Value
Hierarchy.
As at 31 December 2024 Level 1 Level 2 Level 3 Total
£'000
£'000
£'000
£'000
Assets:
Equity investments 344,150 - 1,443 345,593
--------------- --------------- --------------- ---------------
Total 344,150 - 1,443 345,593
========= ========= ========= =========
As at 31 December 2023 Level 1 Level 2 Level 3 Total
£'000
£'000
£'000
£'000
Assets:
Equity investments 295,268 - - 295,268
--------------- --------------- --------------- ---------------
Total 295,268 - - 295,268
========= ========= ========= =========
The movement on the Level 3 unquoted investments during the year is shown
below:
Year ended Year ended
31 December
31 December
2024
2023
£'000
£'000
Opening balance - -
Additions during the year 1,443 -
Disposals during the year - -
Unrealised gains/(losses) on investments - -
--------------- ---------------
Closing balance 1,443 -
========= =========
There were no transfers between levels during the year. (31 December 2023:
none).
4. INCOME
Year ended Year ended
31 December
31 December
2024
2023
£'000
£'000
Income from investments:
Overseas dividends 9,125 4,987
Other income:
Deposit interest 7 7
--------------- ---------------
Total: 9,132 4,994
========= =========
5. INVESTMENT ADVISER FEES
Year ended Year ended
31 December
31 December
2024
2023
£'000
£'000
Basic fee:
20% charged to revenue 583 287
80% charged to capital 2,334 1,147
--------------- ---------------
Total: 2,917 1,434
========= =========
The Company's Investment Adviser is Rising Sun Management Ltd. The Investment
Adviser is entitled to receive an annual fee from the Company of 0.85% per
annum of NAV.
There is no performance fee payable to the Investment Adviser.
6. OTHER OPERATIONAL EXPENSES
Year ended Year ended
31 December
31 December
2024
2023
£'000
£'000
Directors' fees 227 170
Administrator fees 146 111
Auditor's remuneration(1) 49 44
AIFM fees 124 70
Broker retainer fees 77 79
Custodian fees 116 75
D&O insurance 18 12
Marketing fees 75 56
Legal Fees 82 40
Regulatory fees 21 20
Secretarial fees 71 69
Miscellaneous expenses 440 285
--------------- ---------------
Total other operational expenses - Revenue 1,446 1,031
========= =========
1 This is the auditor's fee for the statutory audit of these financial
statements excluding VAT of £9,800 (2023: £8,800) and out of pocket
expenses. The year ended 31 December 2023 excludes the extra merger audit work
of £3,500 and audit overrun of £2,625, both excluding VAT.
7. TAXATION
(a) Analysis of tax charge in the year:
Year ended Year ended
31 December 2024
31 December 2023
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Overseas withholding tax 913 - 913 498 - 498
--------------- --------------- --------------- --------------- --------------- ---------------
Total tax charge for the year (see note 7 (b)) 913 - 913 498 - 498
========= ========= ========= ========= ========= =========
(b) Factors affecting the tax charge for the year:
The effective corporation tax rate for the year is 25.0% (2023: 23.5%). The
tax charge for the Company differs from the charge resulting from applying the
standard rate of UK corporation tax for an investment trust company. The
differences are explained below:
Year ended Year ended
31 December 2024
31 December 2023
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Profit before taxation 7,103 42,340 49,443 3,676 44,386 48,062
--------------- --------------- --------------- --------------- --------------- ---------------
Effective corporation tax at 25.0% (2023: 23.5%) 1,776 10,585 12,361 864 10,431 11,295
Effects of:
Overseas withholding tax suffered 913 - 913 498 - 498
Non-taxable overseas dividends (2,281) - (2,281) (1,172) - (1,172)
Capital gains not subject to tax - (11,628) (11,628) - (11,313) (11,313)
Movement in unutilised management expenses 507 584 1,091 296 270 566
Unutilised finance costs (2) - (2) 12 - 12
Foreign exchange losses not subject to tax - 459 459 - 612 612
--------------- --------------- --------------- --------------- --------------- ---------------
Total tax charge for the year 913 - 913 498 - 498
========= ========= ========= ========= ========= =========
The Company is not liable to pay tax on capital gains due to its status as an
investment trust. The company has an unrecognised deferred tax asset of
£3,043,000 (2023: £1,954,000) based on the long-term prospective corporation
tax rate of 25.0% (2023: 25.0%). This asset has accumulated because deductible
expenses exceeded taxable income for the year ended 31 December 2024. No asset
has been recognised in the financial statements because, given the composition
of the Company's portfolio, it is not likely that this asset will be utilised
in the foreseeable future.
8. DIVIDEND
(i). Dividend paid during the year is detailed in the
below table:
Year ended Year ended
31 December 2024
31 December 2023
Type - respective financial year end Pence per £'000 Pence per £'000
- dividend rate (pence)
Ordinary share
Ordinary share
Interim dividend - paid 26 May 2023 (3.2p per ordinary share) - - 3.20p 3,617
Interim dividend - paid 24 May 2024 (1.6p per ordinary share) 1.6p 3,026 - -
--------------- --------------- --------------- ---------------
Total 1.6p 3,026 3.20p 3,617
========= ========= ========= =========
(ii). The dividend relating to the year ended 31 December 2024, which is
the basis on which the requirements of Section 1159 of the Corporation Tax Act
2010 are considered is detailed below:
Year ended Year ended
31 December 2024
31 December 2023
Type - respective financial year end Pence per £'000 Pence per £'000
- dividend rate (pence)
Ordinary share
Ordinary share
Interim dividend - paid 23 May 2025 (2023: paid 24 May 2024)* 3.25p 6,147 1.60 3,026
--------------- --------------- --------------- ---------------
Total 3.25p 6,147 1.60p 3,026
========= ========= ========= =========
* Not included as a liability in the respective year-end accounts.
The Directors have declared an interim dividend for the financial year ended
31 December 2024 of 3.25p per Ordinary Share. The dividend will be paid on 23
May 2025 to Shareholders on the register at the close of business on 22 April
2025.
9. TRADE AND OTHER RECEIVABLES
As at As at
31 December
31 December
2024
2023
£'000
£'000
Sales for future settlement 2 1,845
Accrued income 969 523
Other receivables 292 516
Prepayments 7 52
--------------- ---------------
Total 1,270 2,936
========= =========
10. TRADE AND OTHER PAYABLES
As at As at
31 December 2024
31 December 2023
£'000
£'000
Amounts falling due within one year:
Purchases for future settlement 1,186 343
Accrued expenses 124 180
--------------- ---------------
Total 1,310 523
========= =========
11. 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.
Year ended Year ended
31 December 2024
31 December 2023
No. of shares £'000 No. of shares £'000
Allotted, issued & fully paid:
Opening balance 189,141,704 1,891 113,021,433 1,130
Ordinary Shares of 1p each ('Ordinary Shares') issued - - 76,120,271 761
----------------- ----------------- ----------------- -----------------
Closing balance 189,141,704 1,891 189,141,704 1,891
========== ========== ========== ==========
There was no transaction in the Company's own Ordinary Shares during the year
ended 31 December 2024 (2023: the Scheme of Reconstruction where the Company
acquired approximately £61.6 million and £56.8 million of net assets,
respectively from abrdn Japan Investment Trust plc ("AJIT") and Atlantis Japan
Growth Fund Limited, in consideration for the issue of new Ordinary shares in
the Company).
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 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.
12. EARNINGS PER ORDINARY SHARE
Total return per Ordinary Share is based on the return on ordinary activities,
including income, for the year after taxation of £48,530,000 (2023:
47,564,000).
Based on the weighted average number of Ordinary Shares in issue for the year
ended 31 December 2024 of 189,141,704 (2023: 130,330,974), the returns per
share were as follows:
Year ended Year ended
31 December 2024
31 December 2023
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
--------------- --------------- --------------- --------------- --------------- ---------------
Return per Ordinary Share 3.27p 22.39p 25.66p 2.44p 34.06p 36.50p
========= ========= ========= ========= ========= =========
The Company does not have any dilutive securities therefore basic and diluted
earnings per share are the same.
13. NET ASSET VALUE PER SHARE
Total equity and the NAV per share attributable to the Ordinary Shareholders
at the year end calculated in accordance with the Articles of Association were
as follows:
As at As at
31 December
31 December
2024
2023
Net Asset Value (£) 365,442,000 319,938,000
Ordinary Shares in issue 189,141,704 189,141,704
--------------- ---------------
NAV per Ordinary Share 193.21p 169.15p
========= =========
14. RELATED PARTY TRANSACTIONS
Transactions with the Investment Adviser
The fees for the year are disclosed in note 5 with no amounts outstanding at
the year ended 31 December 2024.
A key member of the RSM team is a major shareholder of Rosenwald Capital
Management, Inc. Further details of Rosenwald Management Inc's shareholding is
disclosed in the annual report.
Rosenwald Capital Management Inc, receives dividends paid by the Company based
on its shareholding.
Directors' fees and shareholdings
During the year ended 31 December 2024, Directors' fees were paid at a rate of
£29,535 (2023: £27,810) per annum for each Director other than the Chairman,
who was entitled to receive £43,830 (2023: £41,000) and the Chair of the
Audit Committee who was entitled to an additional fee of £5,515 (2023:
£5,190) per annum.
The Board reviewed the rate of Directors' fees in 2024 and decided that the
fees be increased in line with the average market levels of 7.3% for Directors
and 7.2% for the Chair (rounded up to the nearest five pounds) with effect
from 1 January 2025.
Position Directors' Fees Directors' Fees
per annum for
per annum for
the year ending
the year ended
Increase in
31 December 2024
31 December 2023
line with
(GBP)
(GBP)
market levels
%
Board Chairman 43,830 41,000 6.9
Director 29,535 27,810 6.2
Audit Committee Chair (additional fee) 5,515 5,190 6.2
========= ========= =========
The Directors had the following shareholdings in the Company, all of which
were beneficially owned.
As at As at
31 December
31 December
2024
2023
Rosemary Morgan 41,450 40,000
Chetan Ghosh 40,000 40,000
Rachel Hill 115,791 115,791
Alicia Ogawa 25,000 25,000
Ayako Weissman 50,000 50,000
Claire Boyle - -
Noel Lamb 35,853 35,853
========= =========
15. FINANCIAL INSTRUMENTS AND CAPITAL DISCLOSURES
Risk Management Policies and Procedures
As an investment trust the Company invests in equities for the long term in
order to achieve its investment objective stated in the annual report. In
pursuing its investment objective, the Company is exposed to a variety of
risks that could result in either a reduction in the Company's net assets or a
reduction of the profits available for dividends.
These risks include market risk (comprising currency risk, interest rate risk,
and other price risk), liquidity risk, credit risk and the Directors' approach
to the management of them are set out follows.
The objectives, policies and processes for managing the risks and the methods
used to measure the risks, are set out below.
Market risk
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 20 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.
(a) 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.
Foreign currency exposures
An analysis of the Company's equity investments that are priced in a foreign
currency is:
As at As at
31 December
31 December
2024
2023
£'000
£'000
Portfolio of investments: yen 345,593 295,268
Trade and other receivables: yen 971 2,368
Cash: yen 19,804 22,079
--------------- ---------------
Total 366,368 319,715
========= =========
Foreign currency sensitivity
If the Japanese yen had appreciated or depreciated by 10% as at 31 December
2024 then the value of the portfolio as at that date would have increased or
decreased as shown below.
Increase in Decrease in Increase in Decrease in
Fair Value
Fair Value
Fair Value
Fair Value
As at
As at
As at
As at
31 December
31 December
31 December
31 December
2024
2024
2023
2023
£'000
£'000
£'000
£'000
Impact on portfolio - increase/(decrease) 34,559 (34,559) 29,527 (29,527)
Impact on NAV - increase/(decrease) 36,637 (36,637) 31,972 (31,972)
========= ========= ========= =========
(b) Interest rate risks
The Company is exposed to interest rate risk specifically through its cash
holdings. Interest rate movements may affect the level of income receivable
from any cash on deposit with banks. The effect of interest rate changes on
the earnings of the companies held within the portfolio may have a significant
impact on the valuation of the Company's investments.
Management of interest rate risks
Prevailing interest rates are taken into account when deciding on borrowings.
Interest rate exposure
The exposure at 31 December 2024 of financial assets and liabilities to
interest rate risk is shown by reference to floating interest rates - when the
interest rate is due to be reset.
As at As at
31 December
31 December
2024
2023
£'000
£'000
Exposure to floating interest rates:
Floating rate on cash balance: yen 19,804 22,079
========= =========
(c) Price risks
Price risk includes changes in market prices, other than those arising from
interest rate risk or currency risk, which may affect the value of equity
investments.
Management of price risk
The Board meets on at least four occasions each year to consider the asset
allocation of the portfolio and the risk associated with particular industry
sectors. The investment management team has responsibility for monitoring the
portfolio, which is selected in accordance with the Company's investment
objective and seeks to ensure that individual stocks meet an acceptable
risk/reward profile.
Price risk exposure
The Company's total exposure to changes in market prices at 31 December 2024
comprises its holdings in equity investments as follows:
As at As at
31 December
31 December
2024
2023
£'000
£'000
Investments held at fair value through profit or loss 344,150 295,268
========= =========
The effect on the portfolio of a 10% increase or decrease in the value of the
Investments held at fair value through profit or loss would have resulted in
an increase or decrease of £34,415,000 (2023: £29,526,800).
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.
Liquidity risk exposure
The undiscounted gross cash outflows of the financial liabilities as at 31
December 2024, based on the earliest date on which payment can be required,
were as follows:
As at As at
31 December
31 December
2024
2023
less than
less than
3 months
3 months
Creditors: amounts falling due within one year
Trade and other payables 1,310 523
--------------- ---------------
Total 1,310 523
========= =========
Liquidity risk is minimised by holding sufficient liquid investments which can
be readily realised to meet liquidity demands. The Company's liquidity risk is
managed on a daily basis by the Investment Adviser in accordance with
established policies and procedures in place. Liquidity risk is not
significant as the majority of the Company's assets are investments in quoted
equities that are readily realisable.
Credit risks
Cash and other assets held by the depositary
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 as its custodian. The credit rating
of Northern Trust was reviewed at the time of appointment and is reviewed on a
regular basis by the Investment Adviser and/or the Board. The Fitch's credit
rating of Northern Trust as at the year end is AA- (2023: AA-).
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.
In summary, the exposure to credit risk was as follows:
As at As at
31 December
31 December
2024
2023
£'000
£'000
Cash at bank 19,889 22,257
Trade and other receivables 971 2,936
--------------- ---------------
Total 20,860 25,193
========= =========
(d) Capital Management Policies and Procedures
The Company's capital management objectives are:
· to ensure that the Company will be able to continue as a
going concern; and
· to provide dividend income combined with capital growth,
mainly through investment in equities listed or quoted in Japan.
The key performance indicators are contained in the strategic report.
The Company is subject to several externally imposed capital requirements:
· As a public company, the Company has to have a minimum share
capital of £50,000.
· In order to be able to pay dividends out of profits available
for distribution by way of dividends, the Company has to be able to meet one
of the two capital restriction tests imposed on investment companies by
company law.
The Company's capital at 31 December 2024 comprises called-up share capital
and reserves totalling £365,442,000 (2023: £319,938,000).
The Board regularly monitors, and has complied with, the externally imposed
capital requirements.
16. POST YEAR-END EVENTS
Since 31 December 2024, there are no post balance sheet events which would
require adjustment of or disclosure in the financial statements.
FINANCIAL INFORMATION
This announcement does not constitute the Company's statutory accounts. The
financial information is derived from the statutory accounts, which will be
delivered to the registrar of companies and will be put forward for approval
at the Company's Annual General Meeting. The auditors have reported on the
accounts for the year ended 31 December 2023 and the year ended 31 December
2024, their reports were unqualified and did not include a statement under
Section 498(2) or (3) of the Companies Act 2006.
The Annual Report for the year ended 31 December 2024 was approved on 7 April
2025.
ANNUAL GENERAL MEETING
The Annual General Meeting will be held on 5 June 2025 at 2:00 p.m. at the
offices of Travers Smith LLP, 10 Snow Hill, London, EC1A 2AL.
For further information contact:
NSM Funds (UK) Limited
4th Floor, 46-48 James Street, London, W1U 1EZ
Email: Navf@nsm.group (mailto:Navf@nsm.group)
Tel: +44 (0) 20 3697 5770
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