Final Results
26/09/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240926:nRSZ7041Fa&default-theme=true
RNS Number : 7041F Schroder Japan Trust PLC 26 September 2024
26 September 2024
SCHRODER JAPAN TRUST PLC
("the "Company")
ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 31 JULY 2024
Schroder Japan Trust plc announces its financial results for the year ended 31
July 2024.
· The Company's net asset value ("NAV") produced a total return of
21.0%, outperforming the Benchmark's total return 16.4%, to the year ended 31
July 2024. This has resulted in four years of outperformance against the
Benchmark.
· The Board is now adopting an enhanced dividend policy to pay out
4% of the average NAV in each financial year.
· The Board intends to declare dividends on a quarterly basis with
the average NAV of the 12 months trailing the quarter to be used.
· The Board has decided to declare an enhanced final dividend for
the year ended 31 July 2024 of 10.81p per share, representing an increase of
100.19% over the final dividend paid in 2023.
· Merryn Somerset Webb and Samantha Wren have joined the board as
independent non-executive Directors of the Company, effective from 4 July
2024. Belinda Richards resigned from her position as a non-executive Director.
Investor Presentation
The Company's Investment Managers are hosting an annual results presentation
for investors on Thursday, 3 October 2024 at 09.00 a.m. Investors can register
for the event at: https://www.schroders.events/event/SJG24/regProcessStep1.
Philip Kay, Chairman of Schroder Japan Trust plc commented:
"Over the first five years of his tenure as the Company's Investment Manager,
Masaki Taketsume has added considerable value through his distinctive,
disciplined, high conviction investment approach".
The Company's Report and Accounts for the year ended 31 July 2024 are also
being published in hard copy format and an electronic copy will shortly be
available to download from the Company's website www.schroders.com/sjg.
Enquiries:
Katherine Fyfe 020 7658 6000
Schroder Investment Management Limited
Andy Pearce 020 7658 6000
Schroder Investment Management Limited
Annual Report and Financial Statements for the year ended 31 July 2024
Performance Summary
NAV per share total return*
21.0%
Year ended 31 July 2023: 11.7%
Share price total return*
16.1%
Year ended 31 July 2023: 18.7%
Benchmark(†)
16.4%
Year ended 31 July 2023: 9.4%
Some of the financial measures are classified as Alternative Performance
Measures ("APMs"), as defined by the European Securities and Markets Authority
and are indicated with an asterisk (*). Definitions of these performance
measures, and other terms used in this report, are given on pages 70 and 71
together with supporting calculations where appropriate.
(†) Now named Tokyo Stock Price Index Total Return, previously known as TSE
First Section Total Return Index (the "Benchmark")
Investment objective
The principal investment objective of Schroder Japan Trust plc (the "Company")
is to achieve capital growth from an actively managed portfolio principally
comprising securities listed on the Japanese stock markets, with the aim of
achieving returns in excess of the Tokyo Stock Price Index Total Return in
sterling over the longer term.
Investment policy
The Manager utilises an active stock driven investment approach, drawing on
Schroders' extensive research resources in Japan. The portfolio is principally
invested in a broad range of companies quoted on the Tokyo Stock Exchange, the
regional stock markets of Fukuoka, Hiroshima, Kyoto, Nagoya, Niigata, Osaka
and Sapporo and the Japanese over the counter (OTC) market. Investments may
also be made in companies listed elsewhere but controlled from Japan or with a
material exposure to the Japanese economy. There are no constraints on size of
company or sector allocation. This flexibility will allow the Manager to take
advantage of changes in market sentiment and in the domestic economic cycle as
it develops.
The portfolio is mainly invested in equities but may also be invested in
warrants, convertibles and other derivative instruments where appropriate. The
Company may invest up to 5% of its assets in securities which are not listed
on any stock exchange, but would not normally make such investment except
where the Manager expects that the securities will shortly become listed on a
Japanese stock market.
The Company may use gearing (including the use of CFDs) to enhance performance
but investment exposure will not exceed 125% of net asset value.
Scan this QR code on your smartphone camera to sign-up to receive regular
updates on Schroder Japan Trust plc
Ongoing charges*
0.95%
Year ended 31 July 2023: 0.94%
Revenue return per share
5.53p
Year ended 31 July 2023: 5.41p
Share price discount to NAV per share*
11.0%
Year ended 31 July 2023: 7.2%
Net gearing(1)*
1.0%
Year ended 31 July 2023: 9.5%
Net revenue return after taxation
£6.56m
Year ended 31 July 2023: £6.56m
Gross gearing(2)*
14.8%
Year ended 31 July 2023: n/a
Share price
266.00p
Year ended 31 July 2023: 234.00p
(1)Net gearing represents borrowings used for investment purposes, less cash,
expressed as a percentage of net assets.
(2)Gross gearing represents the percentage by which a portfolio's market
exposure exceeds its net assets, expressed as a percentage of net assets.
This is not a sustainable product for the purposes of the Financial Conduct
Authority ("FCA") rules. References to the consideration of sustainability
factors and ESG integration should not be construed as a representation that
the Company seeks to achieve any particular sustainability outcome.
10-Year Financial Record
Definitions of terms and performance measures are given on pages 70 and 71.
At 31 July 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Total assets (£'000)(1) 243,135 270,783 310,493 333,130 318,944 279,365 323,180 318,321 336,950 365,019
Shareholders' funds (£'000) 212,101 226,688 269,304 292,268 273,812 236,128 283,859 281,429 302,460 350,888
NAV per share (pence) 169.67 181.34 215.43 233.80 219.04 189.24 232.40 230.68 252.25 298.88
Share price (pence) 158.75 162.00 195.00 212.00 190.50 161.50 210.00 202.00 234.00 266.00
Share price discount to NAV per share* (%) 6.4 10.7 9.5 9.3 13.0 14.7 9.6 12.4 7.2 11.0
Net gearing* (%)(2) 12.5 12.1 11.2 11.7 12.3 13.3 10.4 11.1 9.5 1.0
Gross gearing* (%)(3) - - - - - - - - - 14.8
For the year ended 31 July 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Net revenue after taxation (£'000) 2,693 3,898 4,522 5,106 5,994 6,252 5,401 6,073 6,563 6,565
Net return per share (pence) 2.15 3.12 3.62 4.08 4.79 5.00 4.38 4.97 5.41 5.53
Dividend per share (pence) 2.00 2.80 3.50 4.00 4.70 4.90 4.30 4.90 5.40 10.81
Ongoing charges* (%)(4) 1.09 1.11 1.00 1.00 1.03 0.92 0.89 0.92 0.94 0.95
Performance(5) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
NAV total return* 100.0 123.9 134.1 161.5 178.1 169.8 149.9 188.4 190.3 212.5 251.8
Share price total return* 100.0 130.2 134.6 164.7 182.1 166.8 144.9 193.7 189.9 225.4 256.2
Benchmark(6) 100.0 117.7 136.2 159.1 174.6 176.2 165.6 195.4 191.7 209.7 244.1
(1)Net assets plus borrowings used for investment purposes.
(2)Net gearing represents borrowings used for investment purposes, less cash,
expressed as a percentage of net assets.
(3)Gross gearing represents portfolio exposure to the market, expressed as a
percentage of net assets.
(4)Ongoing charges represents the management fee and all other operating
expenses excluding finance costs and transaction costs, expressed as a
percentage of the average daily net asset values during the year.
(5)Source: Morningstar/Thomson Reuters. Cumulative performance rebased to 100
at 31 July 2014.
(6)The Company's Benchmark is the Tokyo Stock Price Index Total Return Index
in sterling terms.
*Alternative performance measures.
10 year NAV, share price and benchmark total returns to 31 July 2024
Source: Morningstar/Thomson Reuters. Rebased to 100 at 31 July 2014.
Chairman's Statement
"Over the first five years of his tenure as the Company's Investment Manager,
Masaki Taketsume has added considerable value through his distinctive,
disciplined, high conviction investment approach"
Performance
I am pleased to report that for the year under review our Investment Manager's
strategy has again outperformed the Japanese stock market. During the year
ended 31 July 2024, the Company's net asset value ("NAV") produced a total
return of 21.0%, outperforming its Benchmark which ended the year with a total
return of 16.4%. Meanwhile, the Company's share price produced a total return
of 16.1%, the discount to NAV averaged 10.1% over the year, compared to 11.5%
in the year ended 31 July 2023. Our Investment Manager, Masaki Taketsume, has
remained disciplined within a rising market and has positioned the portfolio
to exploit opportunities in under-valued companies. This has resulted in four
years of outperformance against the Company's Benchmark. Further details about
the Company's investment strategy and portfolio activity during the year can
be found in the Investment Manager's Review.
The Investment Manager has produced excellent relative performance over each
of the last four financial years when market conditions have remained
challenging. He has achieved this by adopting a clear, well defined investment
strategy centred on his disciplined bottom-up stock picking approach which
utilises Schroders' resources on the ground in Japan. At the same time,
Schroders has concentrated its promotional efforts on increasing the
Investment Manager's profile and in helping to raise awareness of his
investment strategy and approach to a wider audience.
The Board has further supported the Company by announcing a package of
dividend and discount management measures.
Enhanced dividend policy
The Board believes that when investing in Japan, dividends will continue to
play an increasingly important part of shareholder returns. Several years ago,
the Board highlighted the growing contribution from the dividends paid, given
the focus of Japanese corporates on improving shareholder value and good
corporate governance practice.
Whilst the Company has been able to grow dividends by 12.7% on an average
yearly basis over the past 10 years, the Board is now adopting an enhanced
dividend policy to pay out 4% of the average NAV in each financial year. The
Board intends to declare dividends on a quarterly basis and, in calculating
the NAV in relation to quarterly dividends, the average NAV of the 12 months
trailing the quarter will be used. It is important to note that the enhanced
dividend policy will not result in a change to the Company's investment
approach and strategy. The Company's focus will continue to be on
well-managed, high-quality companies where the current share price does not
yet fully reflect their potential, across the complete spectrum of Japanese
companies.
Discount management policy
In June 2024, the Board announced its proposal for a new conditional tender
offer mechanism. In the event that the Investment Manager does not deliver
performance at least in line with the Benchmark over a five-year period
starting from 31 July 2024, then the Board will put to shareholders a proposal
for a tender offer of 25% of the issued share capital at a price equal to the
prevailing NAV less costs.
This mechanism aligns the interests of the Investment Manager with those of
our shareholders, ensuring a focus on sustained outperformance, and it follows
the previous conditional tender offer mechanism that was introduced in August
2020. Over the four-year period to 31 July 2024, the Investment Manager has
delivered sustained outperformance of the Benchmark averaging 4.5% per annum,
with the result that the tender offer was not triggered on 31 July 2024.
In addition, the Board monitors the discount of the share price to NAV and,
when necessary, implements a buy-back programme. During the year, the Company
repurchased a total of 2,503,437 shares in line with this policy. The Board
will continue to monitor the discount and intends to buy back shares when
appropriate. It is therefore seeking to renew the share buy-back authority
granted at the Company's Annual General Meeting ("AGM") in December 2023 to
purchase up to 14.99% of the Company's issued share capital to be held in
treasury.
The Board believes that the measures outlined above should improve the
Company's appeal, support share price performance, and ultimately deliver
greater value to shareholders.
Gearing and contracts for difference
The Investment Manager actively used gearing throughout the period. The net
gearing level was 9.5% at the start of the period and ended at 1.0%, with an
average net gearing level of 10.45%. Gearing had a positive effect on
performance during the year. The Company's gearing continues to operate within
its pre-agreed limit of 25% of NAV.
At the 2023 AGM, shareholders approved a change of the Investment Policy to
allow the Company to use Contracts for Difference ("CFDs") to provide exposure
to Japanese equities on a geared basis as an alternative to utilising bank
borrowings. I am pleased to report that we are now actively using CFDs with
the gross gearing level (including CFDs) at the year end being 14.8%, and we
have been able to fully repay our term-loan facility early.
Revenue and dividend
Revenue during the year increased from 5.41p to 5.53p per share. The Board has
decided to declare an enhanced final dividend for the year ended 31 July 2024
of 10.81p per share, representing an increase of 100.19% over the final
dividend paid in 2023. This dividend will be paid on 13 December 2024 to
shareholders on the register on 8 November 2024 subject to approval by
shareholders at the AGM on 10 December 2024.
Going forward, as stated above, the Board will declare dividends on a
quarterly basis based upon the average NAV of the 12 months trailing the
quarter.
Board changes and proposal to amend Directors' fee cap
I am pleased to welcome Samantha Wren and Merryn Somerset Webb as independent
non-executive Directors of the Company, effective from 4 July 2024. Belinda
Richards resigned from her position as a non-executive Director and Alan Gibbs
will not be standing for re-election at the AGM in December 2024 having served
nine years as Director. The Board and I would like to thank Belinda and Alan
for their significant contribution and wise counsel to the Board during their
time spent as Directors. Samantha has taken over the role of Audit and Risk
Committee Chair following a handover period with Belinda and Angus Macpherson
will take over as Senior Independent Director following the upcoming AGM.
Full biographical details of Board members can be found on pages 26 and 27.
A resolution to amend the Company's Articles of Association to increase the
cap on the aggregate Directors' fees from £200,000 to £250,000 will be
included in the Notice of AGM. This is to ensure that any inflationary fee
increases given to Directors in the coming years will not breach the aggregate
fee cap and, whilst it is not the Board's current intention, it will also
allow for the appointment of an additional Director should it be considered
necessary in the future.
Full details of Director remuneration can be found on pages 37 to 40.
Outlook
Despite the Japanese stock market having finally exceeded the bubble-era high
seen in December 1989, your Board believes that Japanese equities remain a
compelling investment opportunity, underpinned by a confluence of favourable
macroeconomic conditions. As well as attractive valuations, there has been
growing momentum in Japan's corporate governance revolution, there has also
been a change in the guidelines for M&A activity which make it more
difficult for Japanese managements to ignore unsolicited bids. All this
suggests that returns will continue to improve in the years ahead.
Inevitably there will be bumps in the road and recent market volatility has
highlighted why a long-term view is of paramount importance when investing in
any regional equity market. Nevertheless, in our opinion there are many
reasons to believe that investors in Japan will be appropriately rewarded when
taking a multi-year view.
While we believe the outlook for the broad Japanese market is positive, this
also represents a very attractive environment for active stock pickers. Over
the first five years of his tenure as the Company's Investment Manager, Masaki
Taketsume has added considerable value through his distinctive, disciplined,
high conviction investment approach, and we have every confidence that he will
continue to deliver superior performance in the years ahead, to the benefit of
our shareholders.
Recent company awards
AJ Bell Investment Awards winner
I am very pleased to announce that the Company has recently been notified that
it has won the AJ Bell Investment Awards in the Japan Equity - Active category
for the second year in a row. Recognition of the Company by a major provider
of platform services to retail clients should help to further increase our
profile within the retail investor community. AJ Bell's platform audience
chose the winner within each category.
Citywire AA Rating
The Company's Investment Manager, Masaki Taketsume, has also recently been
awarded an AA rating from Citywire. This is recognition of Masaki's strong
three-year risk-adjusted performance track record, by a leading financial
publication. The ratings are designed to help investors in their research and
identify good investment company fund managers.
For further information please visit: https://investmentawards.ajbell.co.uk/
https://citywire.com/investment-trust-insider/news/citywire-launches-investment-trust-fund-manager-ratings/a2442748
https://www.theaic.co.uk/aic/news/industry-news/citywire-launches-investment-trust-fund-manager-ratings
AGM and shareholder engagement
The AGM will be held at 1.00pm on Tuesday, 10 December 2024. We are delighted
that this year we will once again be able to invite shareholders to join us to
hear from the Investment Manager. The presentation will be followed by a
question-and-answer session and mince pies. Shareholders are asked to cast
their votes by proxy. The Manager will also be presenting at a webinar
separate from the AGM on Thursday, 3 October 2024 at 9.00am and all
shareholders are encouraged to sign up on the Company's website so that they
can hear the Investment Manager's view and ask questions. Shareholders can
also sign up using this link:
https://www.schroders.events/event/SJG24/regProcessStep1. The Board would like
shareholders to get in touch via the Company Secretary with any questions or
comments, so that the Board can address them in advance of the AGM. To email,
please use: amcompanysecretary@schroders.com or write to us at the Company's
registered office address (Company Secretary, Schroder Japan Trust plc, 1
London Wall Place, London EC2Y 5AU).
For regular news about the Company, shareholders are encouraged to sign up to
the Manager's investment trusts update by visiting the Company's website.
Philip Kay
Chairman
25 September 2024
Investment Manager's Review
"The Japanese equity market continues to provide one of the most attractive
opportunities to be found anywhere in the world, particularly for long-term
investors"
Our investment approach
We believe the Japanese equity market ultimately acts efficiently in
reflecting the intrinsic value of companies. In the short to medium-term,
however, considerable inefficiencies are frequently evident in individual
stocks. These inefficiencies provide repeatable opportunities to identify and
invest in undervalued stocks, with the aim of delivering a better return than
the market as a whole on a rolling three-to-five year view.
Our investment resource is entirely devoted to this aim, focusing on
individual company fundamentals to understand the true worth of a stock and
investing in a portfolio of 60-70 of the highest conviction ideas. These then
tend to be held for the long-term, with value being realised as the market
gradually reflects their true value more efficiently.
Portfolio holdings tend to fall into three categories of inefficiency:
1. Market misperception - companies with self-improving
credentials, with management initiatives to sustainably enhance operational
performance, being under-appreciated by other investors.
2. Market oversight - undervalued companies, especially among
small and mid-caps where research coverage is less widespread, with strong and
defendable business franchises in niche product areas.
3. Short-term overreaction - ideas arising from abrupt but
transitory events which push valuations of quality companies temporarily to
unsustainably low levels.
Outside these three categories, the balance of the portfolio represents best
in class stocks with reasonable valuations. The weighting given to each of
these segments evolves over time, but a reasonable exposure to each category
ensures a good level of diversification for the portfolio as a whole.
Meanwhile, the approach tends to result in a bias towards value stocks(1) and
smaller companies, as well as an overall focus on quality.
The portfolio tends to exhibit a high "active share", which means that its
constituents deviate significantly from the Benchmark index. Gearing
(financial leverage) typically ranges between 10% and 17.5%, allowing
shareholders to potentially benefit even more as the inefficiencies we have
identified become more appropriately priced by the market.
Manager's review
The Japanese stock market performed strongly during the period under review,
moving to new all-time highs as the year progressed. Returns for UK investors
were somewhat undermined by persistent yen weakness, but performance in
sterling terms was still strongly positive.
For the financial year to 31 July 2024, the Company's NAV increased by 21.0%,
while its Benchmark rose by 16.4%(2). Over three years and in sterling terms,
the Company has now returned 10.9% on an annualised basis, which compares
favourably to the 7.7% annualised return from the Tokyo Stock Price Index
Total Return.
Recent performance drivers
After several decades of disappointing domestic stock market performance, the
renaissance of the Japanese equity market continued in the period under
review. Ongoing efforts by regulators and investors to change the culture of
corporate Japan and improve governance, shareholder returns and company
profitability, have continued to gather momentum. This has attracted
increasing interest from the global investment community, driving a positive
cycle of upward share price movements and encouraging even more businesses to
join the corporate governance revolution.
Meanwhile, Japan's domestic economic performance has been improving, helped by
positive inflation, rising wages, increased business investment and export
growth. This has helped Japanese businesses, in general, deliver solid
earnings growth.
Value stocks continued to outperform growth stocks, which assisted performance
given our approach's bias towards value. Smaller companies, however, generally
lagged their larger counterparts, which represented a modest headwind for the
Company. There was a beneficial impact from gearing and helpful contributions
from a range of individual stocks as explained below.
(1)The term "value stocks" refers to shares that appear to trade at a lower
price than justified by company fundamentals, such as dividends, earnings,
sales and book value.
(2)Source: Morningstar, cum-income NAV with dividends reinvested, 31 July 2024
data, net of fees. Past performance is not a guide to future performance and
may not be repeated.
Two key developments contributed positively to performance during the year.
Firstly, in response to the improving macroeconomic backdrop, the Bank of
Japan (BOJ) has taken further significant steps to normalise its extraordinary
monetary policy. Following the first interest rate increase in 17 years and
the abandonment of yield curve control last year, the BOJ raised its policy
rate to 0.25% towards the end of the year. Monetary policy remains
accommodative, but this normalisation process has had a positive impact on
financial sectors, driving a gradual revaluation of some the bank and
insurance companies to which the portfolio is exposed. In particular, the
portfolio's holdings in "mega bank" Sumitomo Mitsui Financial Group and
insurance company Tokio Marine Holdings contributed positively. We view both
companies as best in class operators in their respective sectors.
Secondly, technology-related stocks also generally performed well, supported
by investor enthusiasm for the boom in generative artificial intelligence (AI)
technologies. A number of Japanese companies contribute to the AI value chain
and the semiconductor industry and the portfolio's exposure to these types of
business added value during the period. We tend to view these companies as
market misperception stocks, as the market has not fully reflected their
ability to participate in the AI growth opportunity. For example, Fujikura, a
fibre cable maker, performed well as the market started to realise how
important its advanced fibre optics and connectivity solutions could be for AI
infrastructure. Meanwhile, Hitachi, a large cap industrial conglomerate, also
performed strongly given better than expected results from its IT services and
energy division.
By contrast, some of our technology holdings suffered short-term weakness as
well as return reversal. For example, our market misperception holdings in
electronic component makers Rohm and Ibiden, both underperformed after posting
slower-than-expected growth. Our lack of exposure to large cap stocks such as
Mitsubishi UFJ Financial Group, another large banking group, and Mitsubishi
Heavy Industries, also detracted as their share prices performed well. We
continue to see more compelling opportunities among small and mid-sized
businesses.
Attribution - stock selection
12 Months to 31 July 2024
Portfolio Benchmark(1) Portfolio Benchmark(1) Total
Top 5 contributors weight weight return return effect
Fujikura 1.4 0.1 151.8 151.8 +1.58
Hitachi 4.3 1.7 69.8 69.8 +1.27
Sumitomo Mitsui Fg 4.5 1.6 59.4 59.5 +1.13
Tokio Marine Hldg 2.8 1.1 80.1 80.1 +0.88
Sony Group Corpora 0.0 2.6 0.0 -3.2 +0.58
Portfolio Benchmark(1) Portfolio Benchmark(1) Total
Top 5 detractors weight weight return return effect
Rohm Co Ltd 1.6 0.1 -40.6 -40.6 -1.20
Ibiden Co Ltd 1.6 0.1 -35.6 -35.6 -1.03
Mitsubishi Ufj Fin 0.0 2.4 0.0 48.7 -0.68
Mitsubishi Hvy lnd 0.0 0.5 0.0 162.0 -0.54
Asahi Group Hldgs 2.6 0.4 -3.8 -3.8 -0.52
Past performance is not a guide to future performance and may not be repeated.
The value of investment can go down as well as up and is not guaranteed. The
return may increase or decrease as a result of currency fluctuations.
Source: FactSet, GBP, Gross.
(1)Stocks mentioned are shown for illustrative purposes only and should not be
viewed as a recommendation to buy/sell.
Portfolio strategy
Currently, the biggest category within the portfolio is market misperception
which accounts for almost 40% of assets. This includes companies such as
Hitachi, Nippon Steel and Toyota Motors, where we see the prospect of
sustainable improvements in returns from management efforts that are not yet
reflected in valuations.
In the case of Nippon Steel, the world's leading steel maker, the starting
valuation looks highly attractive, and we foresee the potential for a much
higher multiple in the future, supported by management efforts to improve the
stability and growth profile of its earnings. We believe this to be a classic
market misperception opportunity, as these improving fundamentals have not yet
been fully reflected in the share price. The business has become increasingly
focused on profitability through price discipline, and the strategy of
expanding the business into new territories, such as India, holds significant
future potential. Ultimately, the strategy being pursued by Nippon Steel's
management team should allow the business to become much more resilient, even
in the event of a cyclical downturn in its core markets. These developments
are under-appreciated by investors and comes at a time when the Asian steel
market appears poised for a cyclical upswing.
Almost 30% of the portfolio is in market oversights, such as Fukushima Galilei
and Hosokawa Micron, where we find highly competitive smaller businesses
trading at a significant discount to their large cap and global peers. As the
leading global provider of high-quality powder manufacturing machines,
Hosokawa Micron dominates its niche and is also benefiting from growing demand
for its high-quality powders, which are used in fast growing product areas
such as lithium-ion batteries. Nevertheless, its shares trade at an
unwarranted discount to the shares of similar businesses elsewhere in the
world.
Around 10% of the portfolio is invested in short-term overreactions, including
out-of-favour technology opportunities such as Nomura Research Institute (NRI)
and the food packaging specialist FP Corporation. These businesses are
beneficiaries of long-term structural tailwinds but their share price has been
sold down over the last couple of years. NRI is one of the highest quality IT
service companies in Japan. With its strong consulting capabilities, it is
well positioned to capture rising demand from Japanese companies that are
looking to digitally transform their business models. Its growth prospects
therefore continue to remain positive, but its valuation contracted
significantly during the widespread sell-off in "growth stocks".
The remaining portfolio is invested in what we consider to be best-in-class
operators, such as Sumitomo Mitsui Financial Group, Asahi Group Holdings, Orix
and NTT.
From a sector perspective, this results in a bias towards machinery, glass
& ceramic products, construction and other financing business. As is
typical, the portfolio is also overweight towards small and mid-cap stocks,
where valuations look particularly attractive given the improving domestic
economic backdrop.
Portfolio activity
We initiated a new market misperception position in Japan Post. We expect
profitability to improve as price increases are pushed through in its postal
services division, whilst a cyclical recovery should prove beneficial to its
two financial subsidiaries, Yucho Bank and Kampo Life. We also expect
management to pursue further improvements to shareholder returns, albeit
regulatory constraints and complex stakeholder relationships may act as a
hindrance. Nevertheless, the long-term upside potential looks significant
given its attractive valuation.
We also initiated a position in the regional supermarket chain, Yaoko, as a
new market oversight idea. Yaoko responds to consumer needs with a technology
based product strategy - which balances store specific demands with
centralised initiatives to improve logistics. We expect to see steady market
share growth alongside increasing revenue and profits, supported by the
favourable population dynamics present in its core region of Saitama.
Concordia, one of Japan's larger regional banking groups, was added to the
portfolio as a best in class stock. We expect higher interest rates to improve
the earnings environment for regional banks and favour Concordia's exposure to
the higher growth Greater Tokyo area. Furthermore, its new management team has
committed to improving returns in the year ahead as it focuses on growth
initiatives via digital transformation and efficient capital management.
In terms of disposals, we sold out of several positions including Yokowo,
Astellas Pharma, Aeon Financial Services (mainly due to weaker-than-expected
earnings progress) and Toho where we took profits as the thesis played out as
expected. We used the proceeds to build positions in opportunities in which we
have increasing confidence, such as those outlined above.
Outlook
We believe that the Japanese equity market continues to provide one of the
most attractive opportunities globally, particularly for long-term investors.
Several developments that are unique to Japan should combine to support
corporate earnings growth and increasing valuation multiples in the years
ahead.
At the heart of this positive investment thesis are the increasingly
widespread corporate governance reforms that are driving improved
profitability and returns across large swathes of the Japanese stock market.
After a long period of apathy towards Japanese equities, these reforms are
resulting in renewed interest from the global investment community. Meanwhile,
rising wages, increased business investment and export growth are combining to
offset some recent weakness in consumer sentiment, in what continues to
resemble a more supportive domestic economic environment than we have seen in
several decades.
In the near term, there are reasons for caution, as reflected in the
significant stock market volatility we have witnessed since period end. The
Japanese stock market saw its second largest one-day decline on record on 5
August 2024, amid growing concern about the US economy and the risk of further
interest rate hikes from the BOJ. Markets have quickly regained their poise,
but this represents a timely reminder of what can happen when short-term,
speculative money reverses.
In some respects, such a setback should be seen as healthy in the long run.
From a valuation perspective, the recent volatility has taken the market back
to a reasonably undervalued level. Meanwhile, the sudden strengthening of the
yen which accompanied the sell-off highlights the attractiveness of investing
in domestic demand-oriented companies and the opportunities in small and
mid-cap stocks that have lagged behind the overall market.
Furthermore, with corporate governance reforms already driving a record
amount of share buy-backs, Japanese companies can take advantage of the recent
weakness in their share prices to actively buy back even more shares. This
should ultimately support the market as well as contribute to a better capital
structure for individual companies.
Nevertheless, concerns about the outlook for the US economy are likely to
remain in the months ahead, as are worries about a significant "hawkish" shift
from the BOJ. On both of these fronts, we believe the market has become overly
concerned about the risk of an earnings downturn. The Federal Reserve has
significant scope for interest rate cuts in the US and looks focused on
achieving a soft economic landing. Meanwhile, although the BOJ's interest rate
hike in July was a surprise to many, we do not believe it signals a move away
from a sensible, flexible and well-balanced monetary policy stance. Based on
the soft-landing scenario for the US economy and the solid fundamentals of the
Japanese economy, we expect the robust pace of earnings growth for Japanese
companies to continue this fiscal year and next.
To conclude, there are many reasons to believe that we may be entering a
period of sustained outperformance from the Japanese stock market. We have
seen renewed appetite for Japanese equity from global investors and this
demand should continue to grow as the positive domestic story becomes better
understood.
Furthermore, local investors have also started to invest more in Japan,
supported by the new NISA, a tax-exempt investment scheme that was revamped
earlier this year. With growing interest from a wide range of long-term
investors, this continues to represent a fertile environment for active, high
conviction stock pickers, and we are excited at the opportunity that lies
ahead for investors in the Company.
Schroder Investment Management Limited
25 September 2024
Investment Approach and Process
Investment
Investment process - an overview
The Manager's Japanese equity investment philosophy is based on the belief
that a competitive advantage can be gained from in-house research which should
translate into superior investment performance through disciplined portfolio
construction.
The research focuses on long-term value creation and strength of franchise,
targeting undervalued companies where the long-term growth prospects are not
fully priced in. The Manager prefers companies that can generate and sustain
above average returns on their capital, and also looks for opportunities in
turnaround situations where companies can improve returns from depressed
levels.
The Manager uses a disciplined approach to managing the portfolio. It has a
repeatable process that starts with research and portfolio construction and is
supported by ongoing monitoring and portfolio control. The research is based
on an extensive programme of company meetings, over 2,400 each year.
The portfolio manager is Masaki Taketsume. Mr Taketsume has been part of
Schroders since 2007.
Disciplined and repeatable approach
Management of the portfolio is "bottom up" and long-term: the screening
process begins with fundamental company analysis rather than shorter term
macroeconomic impacts like changes in exchange rates. Given the long-term
approach, portfolio turnover tends to be low. A stock will not be bought
unless the Manager has met the management of the company concerned. Risk
monitoring tools check that the bottom-up approach is on track.
Fundamental research
Comprehensive and detailed research is the key driver of our process and we
have Tokyo-based analysts who are dedicated to researching Japanese companies.
As a result of their experience, our analysts have an exceptional knowledge of
the Japanese market and the companies within it. It is this knowledge base,
paired with the dedication of our analysts, which truly adds value to our
bottom-up approach to stock selection. Company meetings are integral to our
research process and we will not purchase a stock unless we have met the
management of the company concerned.
Our analysts use Schroders' proprietary company valuation model (CVM) to
generate three-year earnings and cashflow forecasts, and a range of valuation
measures. The analysts are also required to score each company on five
qualitative criteria illustrated below. The total of this score determines the
premium or discount we give the stock relative to the market, and is used to
determine a fair value.
We take account of non-financial factors as part of stock evaluation and
valuation process. Environmental, social and governance (ESG) issues are
integrated into our qualitative assessment on the companies, which determines
valuation discounts and premium levels. These 'risks' are addressed with
company management and management's failure to improve will be treated as a
significant discount factor in our fair value analysis.
The process for establishing our Fair Value for each stock focuses on the
broad factors circled below:
Behind those broad factors are a range of specific criteria which analysts
explicitly score within the Fair Value model. Specific sustainability factors
and ESG criteria are included within the broader categories of "Management"
and "Shareholders Value", detailed below:
Analysts are responsible for assigning the scores to each component within the
Fair Value model, reflecting their understanding of best practice within
particular industries. To do this, analysts will draw on internal and external
ESG information so they can form an opinion and assign an overall score to the
stock which will be discussed and challenged during subsequent discussion
within the broader team, including investment managers. This approach ensures
our process is robust and consistent across sectors.
Portfolio construction
Portfolio construction for the Company is then the responsibility of the
investment manager. His focus is on the highest conviction stock ideas within
the context of an appropriate risk management framework, while also setting,
in conjunction with the Board, the gearing of the portfolio.
The portfolio focuses on stocks in which the investment manager has a high
conviction. These then tend to be held for the long term, with value being
realised as the market gradually reflects their true value more efficiently.
An important part of the portfolio construction process is regular meetings to
debate and receive peer group challenge. These meetings provide a forum to
discuss and debate investment views and strategy, together with stock
positions and stock ideas, and importantly, serve to ensure vigorous debate.
Responsible investment and the Company's approach to ESG factors
The Company delegates responsibility for considering ESG factors in investment
decisions to its Manager. The Company's ESG approach also relies on a
bottom-up approach, relying on internal research and company meetings
conducted by Schroders' analysts in Tokyo. The investment views are based on a
long-term assessment of quality, with a focus on the sustainability of a
company's business model. In the evolving Japanese equity market, identifying
early signs of positive change and understanding strengths, weaknesses, and
changes in ESG areas, particularly governance, strengthens the investment
team's understanding of companies and informs investment decisions.
ESG analysis is enhanced through the use of Schroders' proprietary models -
SustainEx and Context. SustainEx calculates a monetary value of the
environmental and social externalities that companies create, which is
important to understand because of the risk that these externalities may
become internalised over time due to factors like regulation and changes in
consumer behaviour. Context provides a systematic framework for analysing the
quality of a company's relationship with its most material stakeholders.
Schroders believes that companies with strong ESG management are more likely
to perform better. It complies with the UK Stewardship Code and provides
regular reporting on its policy implementation to the Board.
The Board also expects the Manager to engage with investee companies, exercise
voting rights, and promote responsible practices. Schroders has a long history
of engagement and active ownership and it has engaged with companies on ESG
related matters for over 15 years. As active investors, Schroders considers
active ownership to be a key channel of influence on management teams so that
more sustainable practices are properly considered in managing the companies.
Proxy votes are largely aligned with the Manager's corporate governance
policy. The Manager's integration of ESG, policy, and engagement details can
be found within Schroders' Group-wide Sustainable Investment Policy
https://mybrand.schroders.com/m/6197143c263420f5/original/Schroders-Group-Sustainable-Investment-Policy.pdf
The Company's stewardship
Schroders' Japanese equity team is committed to local stewardship activities
in Japan and, in demonstration of this, we have been signatories to the
Japanese Stewardship Code since 2014. In 2015 we established our Stewardship
Committee, chaired by Kazuhiro Toyoda and includes four further members from
our team in Tokyo. The purpose of the Committee is to engage with companies on
their ESG activities with the aim of encouraging best practice and
influencing change over time.
The Stewardship Committee maintains a Focus List of engagement stocks, in
consultation with the broader investment team. There are currently 19
companies on the Focus List and a further 13 companies have been removed from
the list during the lifetime of the Committee.
The prospects for improvement in these engagement stocks, within a stated
timeframe, are judged against the ESG/Context analysis that is integrated into
the research output for other positions. The process is designed to ensure
that our resources are focussed on positions with the greatest potential for
positive impact within our portfolios. The relevant analyst will attend the
engagement meetings, ensuring that there is feedback within the process, which
enables a robust debate on prioritisation, time horizon and themes for
engagement.
In addition to the Focus List engagement, the team initiated the programme of
Climate Engagement upon the group wide initiatives under the Engagement
Blueprint published in February 2022. The team started with 33 Japanese
companies in 2022 and have been discussing with company management on their
climate policy and its disclosures. In 2024, we narrowed down the list to 15
companies and continue to engage with them periodically to advocate Schroders'
approach and expectation and shared our view on their climate disclosure and
we aim to identify areas for improvement for individual companies based on our
research output.
The Stewardship Committee members are also responsible for all proxy voting
and the Committee will discuss any contentious items. We are also in regular
contact with the proxy voting team in London, which is responsible for voting
for the Company, to ensure that our views are aligned and that we are sending
consistent messages to companies. All records are disclosed in Japan locally
and globally.
Engagement case studies
We share below two examples of engagements we have carried out with investee
company management under our Stewardship responsibilities.
TOYOTA INDUSTRIES is a Toyota Motor affiliate auto parts maker and a leading
manufacturer of forklifts and material handling systems.
We have been actively engaging with Toyota Industries on corporate governance
and climate issues. In 2024, a significant step in our engagement was the
formalisation of our concerns and expectations in an engagement letter to the
company. The letter emphasised the importance of clear policies on the
reduction of cross-shareholdings and the need for robust measures to ensure
internal controls function effectively, particularly in light of recent
regulatory issues with engine certifications. Our goal is to see these matters
addressed promptly and efficiently. In our past engagement, we suggested that
the company disclose its capital allocation policy promptly, as required by
the Tokyo Stock Exchange (TSE) for all listed companies. However, compared to
other entities in the group, such as Aisin, Toyota Industries' actions have
been notably slower.
Following the letter, in May 2024, we had a productive meeting with the CEO
and the Head of IR to discuss the issues raised. This direct engagement with
top management was highly appreciated, reinforcing our commitment to
constructive dialogue for long-term corporate value enhancement. As we look
forward to additional actions from the company, our ongoing engagement
continues to emphasise the importance of these critical improvements. We
anticipate these measures will not only streamline corporate governance but
also instil greater investor confidence.
NICHIAS CORPORATION manufactures a variety of building and insulating-related
materials.
Since 2022, we have been engaging with Nichias on climate change, focusing on
the adequacy of their target setting. In February 2024, we conducted a
follow-up meeting with the IR team as well as a representative from the
Environment department. Initially, the company committed to reducing emissions
by 30% by 2030, based on 2019 levels. Nichias has indicated its intention to
align with a Science-Based Targets initiative (SBTi) 1.5°C target, though
this is still under consideration. Importantly, the company does not plan to
use carbon credits to meet its targets.
During our discussions, Nichias highlighted that the majority of its emissions
stem from the production of Rockwool, building materials, and gaskets.
However, products like Rockwool also have the potential to contribute to
avoided emissions. We appreciated the company's transparency regarding their
target-setting status and recognise Nichias's significant role in achieving
avoided emissions. We plan to continue our engagement to encourage more robust
reporting and target setting on climate change.
Investment Portfolio
As at 31 July 2024
Stocks in bold are the 20 largest investments, which by portfolio exposure
account for 52.5% (31 July 2023: 52.6%) of total investments.
The Portfolio Exposure indicate the impact on market price movements resulting
from the ownership of shares and derivative instruments. The Fair Value
represents the true value of the portfolio, which is reflected on the Balance
Sheet. In the case of holding a Contract for Difference (CFD), the Fair Value
reflects the profit or loss generated by the contract since its inception,
based on the movement of the underlying share price. However, when the Company
solely holds shares, both the Fair Value and the Portfolio Exposure align.
Fair Value Portfolio Exposure
£'000 £'000 %(1)
Electrical Appliances
Hitachi (shares and
long CFD) 11,241 18,934 4.7
Fujikura 8,808 8,808 2.2
TDK 7,394 7,394 1.8
Ricoh 7,033 7,033 1.7
Nihon Kohden 5,286 5,286 1.3
Ibiden 3,703 3,703 0.9
Total Electrical Appliances 43,465 51,158 12.6
Machinery
Niterra 7,704 7,704 1.9
Disco 7,447 7,447 1.8
Nichias 6,722 6,722 1.7
Amada 6,241 6,241 1.6
Kohoku Kogyo 5,209 5,209 1.3
Teikoku Piston Rings 4,370 4,370 1.1
Tazmo 4,226 4,226 1.0
Rheon Automatic Machinery 3,744 3,744 0.9
Total Machinery 45,663 45,663 11.3
Transportation Equipment
Toyota Motor (shares and
long CFD) 785 17,316 4.3
Toyota Industries 5,044 5,044 1.3
Yamaha Motor 4,684 4,684 1.2
Suzuki Motor 4,135 4,135 1.0
Total Transportation
Equipment 14,648 31,179 7.8
Insurance
Tokio Marine (shares and long CFD) 8,256 13,895 3.5
T&D Holdings 9,101 9,101 2.3
Japan Post 7,070 7,070 1.8
Total Insurance 24,427 30,066 7.6
Banks
Sumitomo Mitsui Financial (shares and long CFD) 13,965 21,378 5.3
Concordia Financial 5,863 5,863 1.5
Total Banks 19,828 27,241 6.8
Fair Value Portfolio Exposure
£'000 £'000 %(1)
Wholesale trade
Mitsui & Co. (shares and long CFD) 3,834 9,467 2.4
Fukushima Galilei 5,238 5,238 1.3
Trusco Nakayama 4,307 4,307 1.1
FP Corporation 4,204 4,204 1.0
Yaoko 3,278 3,278 0.8
Total Wholesale Trade 20,861 26,494 6.6
Chemicals
Mistui Chemicals 7,325 7,325 1.8
Aica Kogyo 5,442 5,442 1.4
Hosokawa Micron 5,221 5,221 1.3
Nippon Soda 5,213 5,213 1.3
Fujimori Kogyo 2,804 2,804 0.7
Total Chemicals 26,005 26,005 6.5
Securities and Commodity
Orix 13,018 13,018 3.2
Nomura Research Institute 5,224 5,224 1.3
Integral 2,832 2,832 0.7
Total Securities and Commodity 21,074 21,074 5.2
Construction
Infroneer 7,484 7,484 1.9
Sanki Engineering 6,014 6,014 1.5
Nippon Densetsu Kogyo 4,383 4,383 1.1
Total Construction 17,881 17,881 4.5
Technology
NEC Systems 6,057 6,057 1.6
LY 5,657 5,657 1.4
WingArc1st 4,603 4,603 1.1
Megachips 1,321 1,321 0.3
Total Technology 17,638 17,638 4.4
Services
Recruit Holdings 9,019 9,019 2.2
Daiei Kankyo 4,690 4,690 1.1
Doshisha 3,834 3,834 1.0
Total Services 17,543 17,543 4.3
Foods
Asahi Breweries 9,249 9,249 2.3
Nichirei 5,778 5,778 1.4
Total Foods 15,027 15,027 3.7
Real Estate
Mitsui Fudosan 8,187 8,187 2.0
Kyoritsu Maintenance 4,076 4,076 1.0
Park24 2,130 2,130 0.5
Total Real Estate 14,393 14,393 3.5
Information and
Communication
Nippon Telegraph and
Telephone (shares and
long CFD) 4,060 8,916 2.2
Otsuka 5,164 5,164 1.3
Total Information and Communication 9,224 14,080 3.5
Precision Instruments
Rohm 5,595 5,595 1.4
Kokusai Electric 3,703 3,703 0.9
Mimasu Semiconductors 1,201 1,201 0.3
Total Precision Instruments 10,499 10,499 2.6
Pharmaceutical
Takeda Pharmaceutical 8,864 8,864 2.2
Total Pharmaceutical 8,864 8,864 2.2
Other Products
Miura 6,951 6,951 1.7
Total Other Products 6,951 6,951 1.7
Ferrous Metals
Nippon Steel 6,595 6,595 1.6
Total Ferrous Metals 6,595 6,595 1.6
Glass and Ceramics
Asahi Glass 6,104 6,104 1.5
Total Glass and Ceramics 6,104 6,104 1.5
Rubber Products
Bridgestone 4,077 4,077 1.1
Total Rubber Products 4,077 4,077 1.1
Electric Power and Gas
Nippon Gas 4,060 4,060 1.0
Total Electric Power and Gas 4,060 4,060 1.0
Total investments and
financial derivative
instruments - asset exposure 402,592 100.00
Total investments and
financial derivative
instruments - fair value 354,827
(1)Portfolio exposure is expressed as a percentage of total investments and
financial derivative instruments.
Business Review
Purpose, values and culture
The Company's purpose is to create long-term shareholder value, in line with
the investment objective.
The Company's culture is driven by its values: transparency, engagement and
rigour, with collegial behaviour and constructive, robust challenge. The
values are all centred on achieving returns for shareholders in line with the
Company's investment objective. The Board also sets out the effective
management or mitigation of the risks faced by the Company and, to the extent
it does not conflict with the investment objective, aims to structure the
Company's operations with regard to all its stakeholders and take account of
the impact of the Company's operations on the environment and community.
As the Company has no employees and acts through its service providers, its
culture is represented by the values and behaviour of the Board and third
parties to which it delegates. The Board aims to fulfill the Company's
investment objective by encouraging a culture of constructive challenge with
all key suppliers and openness with all stakeholders. The Board is responsible
for embedding the Company's culture in its operations.
Business model
The Board has appointed Schroder Unit Trusts Limited (the "Manager"), to
implement the investment strategy and to manage the Company's assets in line
with the appropriate restrictions placed on it by the Board, including limits
on the type and relative size of holdings which may be held in the portfolio
and on the use of gearing, cash, derivatives and other financial instruments
as appropriate. The terms of the appointment of the Manager, and the
delegation by the Manager of investment management services to Schroder
Investment Management Limited ("SIM" or the "Investment Manager"), are
described more completely in the Directors' Report. The Manager also promotes
the Company using its sales and marketing teams. The Board and Manager work
together to deliver the Company's investment objective, as demonstrated in the
diagram below.
Investment trust status
The Company carries on business as an investment trust. Its shares are listed
and admitted to trading on the main market of the London Stock Exchange. It
has been approved by HM Revenue & Customs as an investment trust in
accordance with section 1158 of the Corporation Tax Act 2010, by way of a
one-off application and it is intended that the Company will continue to
conduct its affairs in a manner which will enable it to retain this status.
The Company is domiciled in the UK and is an investment company within the
meaning of section 833 of the Companies Act 2006. The Company is not a "close"
company for taxation purposes.
Continuation vote
It is not intended that the Company should have a limited life but the
Directors consider it desirable that the shareholders should have the
opportunity to review the future of the Company at appropriate intervals.
Accordingly, the Articles of Association contain provisions requiring the
Directors to put a proposal for the continuation of the Company to
shareholders at five yearly intervals. Accordingly, a continuation vote will
be proposed at the upcoming AGM.
Investment model
Investment objective
The principal investment objective of the Company is to achieve capital growth
from an actively managed portfolio principally comprising securities listed on
the Japanese stock markets, with the aim of achieving returns in excess of the
Tokyo Stock Price Index Total Return Index in sterling over the longer term.
Investment policy
The Manager utilises an active stock driven investment approach, drawing on
Schroders' extensive research resources in Japan. The portfolio is principally
invested in a broad range of companies quoted on the Tokyo Stock Exchange, the
regional stock markets of Fukuoka, Hiroshima, Kyoto, Nagoya, Niigata, Osaka
and Sapporo and the Japanese over the counter (OTC) market. Investments may
also be made in companies listed elsewhere but controlled from Japan or with a
material exposure to the Japanese economy. There are no constraints on size of
company or sector allocation. This flexibility will allow the Manager to take
advantage of changes in market sentiment and in the domestic economic cycle as
it develops.
The portfolio is mainly invested in equities but may also be invested in
warrants, convertibles and other derivative instruments where appropriate. The
Company may invest up to 5% of its assets in securities which are not listed
on any stock exchange, but would not normally make such investment except
where the Manager expects that the securities will shortly become listed on a
Japanese stock market.
The Company may use gearing (including the use of CFDs) to enhance performance
but investment exposure will not exceed 125% of net asset value.
Investment restrictions and spread of investment risk
The key restrictions imposed on the Manager are that: a) no more than 15% of
the Company's total net assets, at the date of acquisition, may be invested in
any one company; b) no more than 10% of the value of the Company's gross
assets may be invested in other listed investment companies unless such
companies have a stated investment policy not to invest more than 15% of their
gross assets in other listed companies; c) the Company will not invest more
than 15% of its gross assets in other listed investment companies or
investment trusts; d) no more than 15% of the Company's total net assets may
be invested in open-ended funds; and e) no more than 25% of the Company's
total net assets may be invested in the aggregate of unlisted investments and
holdings representing 20% or more of the equity capital of any company.
In accordance with the investment objective, the Company, while being invested
in a single country, ensures that the objective of spreading risk has been
achieved through portfolio diversification (62 investments spread over 21
sectors at 31 July 2024), the largest holding being Sumitomo Mitsui Financial
Group with the portfolio weight of 5.3%.
Promotion
The Company promotes its shares to a broad range of investors who have the
potential to be long-term supporters of the investment strategy. The Company
seeks to achieve this through its Manager and corporate broker, which promote
the shares of the Company through regular contact with both current and
potential shareholders as well as their advisers.
These activities consist of investor lunches, one-on-one meetings, regional
road shows and attendances at conferences for professional investors. In
addition, the Company's shares are supported by the Manager's wider marketing
of investment companies targeted at all types of investors; this includes
maintaining close relationships with adviser and execution-only platforms,
advertising in the trade press, maintaining relationships with financial
journalists and the provision of digital information on Schroders' website.
The Board also seeks active engagement with investors, and meetings with the
Chairman are offered to investors when appropriate.
Shareholders are encouraged to sign up to the Manager's Investment Trusts
update, to receive information on the Company directly
https://www.schroders.com/en/uk/adviser/fund-centre/funds-in-focus/investment-trusts/schroders-investment-trusts/never-miss-an-update/.
Details of the Board's approach to discount management and share issuance may
be found in the Chairman's Statement on page 5 and in the Annual General
Meeting - Recommendations on page 66.
Relations with shareholders
Shareholder relations are given high priority by both the Board and the
Manager. The Company communicates with shareholders through its webpages and
the annual and half year reports which aim to provide shareholders with a
clear understanding of the Company's activities and its results.
In addition to the engagement and meetings held during the year described in
"Promotion" above, the Chairman of the Board, Committee Chairs and the other
Directors attend the AGM and are available to respond to queries and concerns
from shareholders.
Key performance indicators (KPIs)
The Board reviews performance using a number of key measures, to monitor and
assess the Company's success in achieving its objective. Further comment on
performance can be found in the Chairman's Statement. The following KPIs are
used:
• NAV performance;
• Share price discount;
• Share price premium; and
• Ongoing charges ratio.
Some KPIs are Alternative Performance Measures (APMs), and further details can
be found on page 1 and definitions of these terms on pages 70 and 71.
Stakeholder engagement
Section 172 of the Companies Act 2006
During the year under review, the Board discharged its duty under section 172
of the Companies Act 2006 to promote the success of the Company for the
benefit of its members as a whole, having regard to the interests of all
stakeholders. As an externally managed investment trust, the Company has no
employees, operations or premises. The Board has identified its key
stakeholders as the Company's shareholders, the Investment Manager, other
service providers, investee companies and the Company's lender. The table
below explains how the Directors have engaged with all stakeholders during the
year and outlines the key activities undertaken. The key decisions made by the
Board during the year are set out following the table.
Stakeholder Significance Engagement 2023/2024 highlights
Shareholders Continued shareholder support and engagement are critical to the continuing - Annual General Meeting (AGM): The Company welcomes attendance and At the AGM in 2023 questions and feedback from shareholders were welcomed. The
existence of the business and the delivery of the long-term strategy of its participation from shareholders at the AGM. Shareholders have the opportunity Board, along with the Manager, look forward to meeting and interacting with
business. to meet the Directors and the Investment Manager and to ask questions. The more shareholders at the forthcoming AGM in December 2024.
Board values the feedback it receives from shareholders which is incorporated
into Board discussions. The Company's web pages continued to be refreshed and enhanced during the year
to optimise the user experience for shareholders and investors. Shareholders
- Publications: The annual and half year results presentations, as well as can, via the Company's web pages, subscribe to the Schroders investment trusts
factsheets, are available on the Company's web pages with their availability newsletter to receive regular updates on the Company.
announced via the Stock Exchange. Feedback and/or questions received from
shareholders enable the Company to evolve its reporting which, in turn, helps The Investment Manager engaged with a number of its shareholders and investors
to deliver transparent and understandable updates. during the year and regular feedback was provided to the Board. A number of
promotional activities were undertaken during the year including Investment
- Shareholder communication: The Investment Manager communicates with Manager interviews, webinars and coverage in key publications.
shareholders periodically. All investors are offered the opportunity to meet
the Chairman, Senior Independent Director, or other Board members without The Chairman engaged with the Company's largest shareholders prior to
using the Manager or Company Secretary as a conduit, by writing to the announcing its enhanced dividend and discount management policy.
Company's registered office. The Board also corresponds with shareholders by
letter and email. The Board receives regular feedback from its broker on The Board continued to work with Kepler on promoting the Company through its
investor engagement and sentiment. research notes which were published twice during the year.
- Investor Relations updates: At every Board meeting, the Directors receive
updates on share trading activity, share price performance and any
shareholders' feedback, as well as any publications or comments in the press.
To gain a deeper understanding of the views of its shareholders and potential
investors, the Manager also undertakes investor roadshows following
publications of results.
The Investment Manager Holding the Company's shares offers investors a liquid investment vehicle Maintaining a close and constructive working relationship with the Representatives of the Manager, including the Investment Manager, attended
through which they can obtain exposure to the Company's diversified portfolio Investment Manager is crucial as the Board and the Investment Manager both aim each Board meeting to provide an update on the investment portfolio along with
of investments. to continue to achieve consistent, long-term returns in line with the presenting on macroeconomic issues.
investment objective. The Board invites the Investment Manager to attend all
The Investment Manager's performance is critical for the Company to deliver Board and certain Committee meetings in order to update the Directors on the The portfolio activities undertaken by the Investment Manager and the impact
its investment strategy successfully and meet its objective. performance of the investments and the implementation of the investment of decisions affecting investment performance are set out in the Investment
strategy and objective. Manager's Review on pages 7 to 9.
Important components in the Board's collaboration with the Investment Manager
are:
- Encouraging open discussion with the Board;
- Recognising that the interests of shareholders and the Investment Manager
(as well as of its other clients) are, for the most part, well aligned,
adopting a tone of constructive challenge, balanced when those interests are
not fully congruent by robust negotiation of the Investment Manager's terms of
engagement; and
- Drawing on Directors' individual experience to support the Manager in its
monitoring and change management of portfolio companies, for the benefit of
all of the Investment Manager's clients.
The Management Engagement Committee reviews the performance of the Investment
Manager, its remuneration and the discharge of its contractual obligations at
least annually.
Investee companies The Board is committed to responsible investing and actively monitors the The Investment Management team conducts face-to-face and/or virtual meetings The Board received regular updates on engagement with investee companies from
activities of investee companies through its delegation to the Investment with the management teams of all investee companies to understand current the Investment Manager at its Board meetings.
Manager. trading and prospects for their businesses, and to ensure that their ESG
investment principles and approach are understood. During the year, the Investment Manager engaged with many of its investee
companies and voted at shareholder meetings (further details can be found on
The Investment Manager has discretionary powers to exercise the Company's page 13).
voting rights on resolutions proposed by the investee companies within the
Company's portfolio. The Investment Manager reports to the Board on
stewardship (including voting) issues and the Board will question the
rationale for voting decisions made.
By active engagement and exercising voting rights, the Investment Manager
actively works with companies to improve corporate standards, transparency,
and accountability.
Lender Availability of funding and liquidity are crucial to the Company's ability to Considering how important the availability of funding is, the Company aims to The Investment Manager actively used gearing throughout the period and it had
take advantage of investment opportunities as they arise. demonstrate to lenders that it is a well managed business and, in particular, a positive effect on performance during the year. The Company's gearing
that the Board focuses regularly and carefully on the management of risk. continues to operate well within its pre-agreed limit of 25% of net asset
value.
The Manager manages the relationship with the Company's lender and reports to
the Board at each meeting as and when required for renewals of terms or At the 2023 AGM, shareholders approved a change of the Investment Policy to
negotiation of loan covenants. The Manager provides a monthly statement of allow the Company to use CFDs to provide exposure to Japanese equities on a
compliance of the loan covenants to the lender. geared basis as an alternative to utilising bank borrowings. CFDs are now
being used and the Company was able to fully repay its term loan facility
early.
Other service providers In order to operate as an investment trust on the main market of the London The Board maintains regular contact with its key external providers, both Under delegated authority from the Board, the Management Engagement Committee
Stock Exchange, the Company relies on a diverse range of advisers to support through Board and Committee meetings, as well as outside of the regular reviewed all material third party service providers. The Board specifically
meeting all relevant obligations. meeting cycle. Their advice, as well as their needs and views, are routinely considered the effectiveness of the corporate broker and agreed the
taken into account. appointment of new corporate broker following a competitive tender process.
The Board considered the ongoing appointments of its service providers to be
in the best interests of the Company and its shareholders as a whole and will
continue to monitor their progress in the year ahead.
During the year, Directors were invited to attend an internal controls
briefing session, hosted by the Manager which assessed the internal controls
of certain key service providers including the Company's depositary and
custodian, HSBC and the Company's registrar, Equiniti.
Wider society and the environment Whilst strong long-term investment performance is essential for an investment The Board engages with the Investment Manager at each Board meeting in respect The Board's desire for greater engagement reporting has resulted in the
trust, the Board recognises that to provide an investment vehicle that is of its ESG considerations on existing and new investments. inclusion of case studies showcasing how the Investment Manager supports and
sustainable over the long-term, both it and the Investment Manager must have integrates responsible investing in its investment process set out in this
regard to ethical and environmental issues that impact society. Hence ESG Annual Report. Further details of the ESG practices and case studies can be
considerations are integrated into the Investment Manager's investment process found in the Investment Process section of this report.
and will continue to evolve.
Examples of stakeholder consideration during the year
The Directors were particularly mindful of stakeholder considerations in
reaching the following key decisions during the year ended 31 July 2024:
• The declaration of a final dividend of 5.40 pence per Ordinary share
which, following approval by shareholders at the AGM held on 5 December 2023,
was paid to shareholders on 8 December 2023.
• The Board and Management Engagement Committee undertook reviews of
the Investment Manager and the Company's third-party service providers and
agreed that their continued appointment and fees remained in the best
interests of the Company and its shareholders.
• Together with the Investment Manager, the Board undertook its annual
visit to Japan to conduct due diligence meetings with key personnel from the
Investment Manager, consultants, and investee companies.
• The Board reviewed the effectiveness of the corporate broker and
carried out a competitive tender process. In February 2024, the Board
announced the appointment of J.P. Morgan Cazanove as the Company's sole
corporate broker.
• The Board continued to consider succession planning and undertook a
recruitment process to strengthen the Board. Following the resignation of
Belinda Richards and the upcoming retirement of Alan Gibbs, the Board has
welcomed two new independent non-executive Directors; Samantha Wren, who will
serve as Chair of the Audit and Risk Committee, and Merryn Somerset Webb.
• The Board announced an enhanced dividend policy to pay out 4% of
average NAV in each financial year.
• The Board announced a new Conditional Tender Offer mechanism. In the
event that the Investment Manager does not deliver performance at least in
line with the Benchmark over a five-year period starting from 31 July 2024,
then the Board will put to shareholders a proposal for a tender offer of 25%
of the issued share capital at a price equal to the prevailing NAV less costs.
Corporate and social responsibility
The Board recognises the Company's responsibilities with respect to corporate
and social responsibility and engages with its outsourced service providers to
safeguard the Company's interests. As part of this ongoing monitoring, the
Board receives reporting from its service providers with respect to their
anti-bribery and corruption policies; Modern Slavery Act 2015 statements;
diversity policies; financial crime policies; greenhouse gas and energy usage
reporting.
Diversity policy
The Board has adopted a diversity and inclusion policy. Appointments and
succession plans will always be based on merit and objective criteria and,
within this context, the Board seeks to promote diversity of gender, social
and ethnic backgrounds, cognitive and personal strengths. The Board will
encourage any recruitment agencies it engages to find a range of candidates
that meet the objective criteria agreed for each appointment. Candidates for
Board vacancies are selected based on their skills and experience, which are
matched against the balance of skills and experience of the overall Board
taking into account the criteria for the role being offered.
Statement on Board diversity - gender and ethnic background
The Board has made a commitment to consider diversity when reviewing the
composition of the Board and notes the Listing Rules requirements (LR
9.8.6R(9) and (11)) regarding the targets on board diversity:
• at least 40% of individuals on the Board are women;
• at least one senior Board position is held by a woman;
and
• at least one individual on the Board is from a
minority ethnic background.
The FCA defines senior board positions as Chairman, Chief Executive Officer
("CEO"), Chief Financial Officer ("CFO") or Senior Independent Director
("SID"). As an investment trust with no executive officers, the Company has no
CEO or CFO. The Board has reflected that the senior positions of the Company
are the Chair of the Board and the SID in its diversity tables.
The Board has chosen to align its diversity reporting reference date with the
Company's financial year end and proposes to maintain this alignment for
future reporting periods. The following information has been provided by each
Director through the completion of a questionnaire.
As at 31 July 2024, the Company met two of the three criteria which were the
targets in relation to the number of Board members from a minority ethnic
background and the percentage of women Board members. The target for at least
one senior Board position to be held be a woman was not met and the Board is
conscious that while the Directors are all independent and have a diverse
range of views and experience, its small composition will make these targets
challenging to fully implement. There have been no changes since 31 July 2024
to the date of publication of the annual report and accounts. Notwithstanding
the FCA's definition of senior board positions, the appointment in July 2024
of a new Audit and Risk Committee Chair was to a woman.
The below tables set out the gender and ethnic diversity composition of the
Board as at 31 July 2024 and at the date of this report.
Gender identity
Number of
Number of Percentage senior
Board of the positions on
members Board the Board
Men 2 33.3 1
Women 3 50.0 0
Not specified/prefer not to say 1 16.6 1
Ethnic background
Number of
Number of Percentage senior
Board of the positions on
members Board the Board
White British or other White
(including minority-white
groups) 4 66.6 1
Mixed/Multiple Ethnic Groups n/a n/a n/a
Asian/Asian British 1 16.6 n/a
Black/African/Caribbean/Black
British n/a n/a n/a
Other ethnic group, including
Arab n/a n/a n/a
Not specified/prefer not to say 1 16.6 1
Financial crime policy
The Company continues to be committed to carrying out its business fairly,
honestly and openly, and operates a financial crime policy, covering bribery
and corruption, tax evasion, money laundering, terrorist financing and
sanctions, as well as seeking confirmations that the Company's service
providers' policies are operating soundly.
Modern Slavery Act 2015
As an investment trust, the Company does not provide goods or services in the
normal course of business and does not have customers. Accordingly, the
Directors consider that the Company is not required to make any slavery or
human trafficking statement under the Modern Slavery Act 2015.
Climate
Greenhouse gas emissions and energy usage
As the Company outsources its operations to third parties, it has no
significant greenhouse gas emissions and energy usage to report.
Taskforce for Climate-Related Financial Disclosures ("TCFD")
Investment trusts are currently exempt from the TCFD. The Board will continue
to monitor the situation. However, the Company's Manager produces an annual
product level disclosure consistent with the TCFD which can be found here:
https://api.schroders.com/document-store/TCFD-GB72369M-Schroder%20Japan%20Growth%20Fund.pdf
Principal and emerging risks and uncertainties
The Board itself, and through its delegation to its Audit and Risk Committee,
is responsible for the Company's system of risk management and internal
control and for reviewing its effectiveness. The Board has adopted a detailed
matrix of principal risks affecting the Company's business as an investment
trust and has established associated policies and processes designed to manage
and, where possible, mitigate those risks, which are monitored by the Audit
and Risk Committee on an ongoing basis. This system assists the Board in
determining the nature and extent of the risks it is willing to take in
achieving the Company's strategic objectives.
Risk assessment and internal controls review by the Board
Risk assessment includes consideration of the scope and quality of the systems
of internal control operating within key service providers, and ensures
regular communication of the results of monitoring by such providers to the
Audit and Risk Committee, including the incidence of significant control
failings or weaknesses that have been identified at any time and the extent to
which they have resulted in unforeseen outcomes or contingencies that may have
a material impact on the Company's performance or condition.
Although the Board believes that it has a robust framework of internal
controls in place this can provide only reasonable, and not absolute,
assurance against material financial misstatement or loss and is designed to
manage, not eliminate, risk.
Both the principal risks and uncertainties and the monitoring system are also
subject to robust review at least annually. The last assessment took place in
March 2024.
During the year, the Board discussed and monitored a number of risks that
could potentially impact the Company's ability to meet its strategic
objectives. The Board receives updates from the Investment Manager, Company
Secretary and other service providers on emerging risks that could affect the
Company. The Board was mindful of the evolving global environment during the
year; and the risks posed by volatile markets; geopolitical uncertainty; and
inflation and corresponding interest levels which could affect the asset
class. However, these are not factors which explicitly impacted the Company's
performance.
No significant control failings or weaknesses were identified from the Audit
and Risk Committee's ongoing risk assessment throughout the financial year and
up to the date of this report. The Board is satisfied that it has undertaken a
detailed review of the risks facing the Company and that the internal control
environment continues to operate effectively.
Actions taken by the Board and, where appropriate, its Committees, to manage
and mitigate the Company's principal risks and uncertainties are set out in
the table below. The "Change" column on the right highlights at a glance the
Board's assessment of any increases or decreases in risk during the year after
mitigation and management. The arrows show the risks as increased, decreased,
or unchanged.
Change during
Risk Mitigation and management the year
Strategy
Investment objective The appropriateness of the Company's investment remit is periodically reviewed è
and the success of the Company in meeting its stated objectives is monitored.
The Company's investment objectives may become out of line with the
requirements of investors, resulting in a wide discount of the share price to The share price relative to NAV per share is monitored and the use of buy back
underlying NAV per share. authorities is considered on a regular basis.
The marketing and distribution activity is actively reviewed.
Proactive engagement with shareholders.
Cost base The ongoing competitiveness of all service provider fees is subject to è
periodic benchmarking against their competitors.
The Company's cost base could become uncompetitive, particularly in light of
open-ended alternatives. Annual consideration of management fee levels.
Investment
Investment management Review of the Manager's compliance with its agreed investment restrictions, è
investment performance and risk against investment objectives and strategy;
The Manager's investment strategy, if inappropriate, may result in the Company relative performance; the portfolio's risk profile; and whether appropriate
underperforming the market and/or peer group companies, leading to the Company strategies are employed to mitigate any negative impact of substantial changes
and its objectives becoming unattractive to investors. in markets.
Annual review of the ongoing suitability of the Manager is undertaken.
Financial and currency The risk profile of the portfolio considered appropriate strategies to è
mitigate any negative impact of substantial changes in markets discussed with
The Company is exposed to the effect of market fluctuations due to the nature the Manager.
of its business. A significant fall in Japanese equity markets could have an
adverse impact on the market value of the Company's underlying investments The Board considers overall hedging policy on a regular basis.
and, as the Company invests predominantly in assets which are denominated in
yen, its exposure to changes in the exchange rate between sterling and yen has
the potential to have a significant impact on returns.
Custody The depositary reports on safe custody of the Company's assets, including è
cash, and portfolio holdings independently reconciled with the Manager's
Safe custody of the Company's assets may be compromised through control records.
failures by the depositary.
The review of audited internal controls reports covering custodial
arrangements is undertaken.
Regular reports from the depositary on its activities, including matters
arising from custody operations is received.
Gearing and leverage Gearing is monitored daily and strict restrictions on borrowings are imposed: è
gearing continues to operate within pre-agreed limits so as not to exceed 25%
The Company has the option to make use of loan facilities or to use CFDs to of shareholders' funds. The Company has now started to use long CFDs which are
invest in equities. These arrangements increase the funds available for currently cheaper than bank loans and provide greater flexibility.
investment through borrowing. While this has the potential to enhance
investment returns in rising markets, in falling markets the impact could be
detrimental to performance.
Compliance
Accounting, legal and regulatory The confirmation of compliance with relevant laws and regulations by key è
service providers is reviewed.
In order to continue to qualify as an investment trust, the Company must
comply with the requirements of Section 1158 of the Corporation Tax Act 2010. Shareholder documents and announcements, including the Company's published
annual report, are subject to stringent review processes.
Breaches of the UK Listing Rules, the Companies Act or other regulations with
which the Company is required to comply, could lead to a number of detrimental Procedures are established to safeguard against the disclosure of inside
outcomes. information.
Operational
Service providers Service providers are appointed subject to due diligence processes and with è
clearly-documented contractual arrangements detailing service expectations.
The Company has no employees and has delegated certain functions to a number
of service providers, principally the Manager, depositary and registrar. Regular reporting is provided by key service providers and monitoring of the
Failure of controls, and poor performance of any service provider could lead quality of their services provided. The Directors also receive presentations
to disruption, reputational damage, or loss. from the Manager, depositary and custodian, and the registrar on an annual
basis.
Review of annual audited internal controls reports from key service providers,
including confirmation of business continuity arrangements and IT controls,
and follow up of remedial actions as required.
Operational
Cyber Service providers report on cyber risk mitigation and management at least é
annually, which includes confirmation of business continuity capability in the
The Company's service providers are all exposed to the risk of cyber attacks. event of a cyber attack.
Cyber attacks could lead to loss of personal or confidential information or
disrupt operations. In addition, the Board received presentations from the Manager, depositary and
custodian, and the registrar on cyber risk.
Viability statement
The Directors have assessed the viability of the Company over a five year
period, taking into account the Company's position at 31 July 2024 and the
potential impacts of the principal risks and uncertainties it faces for the
review period. The Directors have assessed the Company's operational
resilience and they are satisfied that the Company's outsourced service
providers will continue to operate effectively, following the implementation
of their business continuity plans.
A period of five years has been chosen as the Board believes that this
reflects a suitable time horizon for strategic planning, taking into account
the investment policy, liquidity of investments, potential impact of economic
cycles, nature of operating costs, dividends, and availability of funding.
In its assessment of the viability of the Company, the Directors have
considered each of the Company's principal risks and uncertainties detailed on
pages 22 to 24 and in particular the impact of a significant fall in Japanese
equity markets on the value of the Company's investment portfolio. The
Directors also considered the beneficial tax treatment the Company is eligible
for as an investment trust. If changes to these taxation arrangements were to
be made it would affect the viability of the Company to act as an effective
investment vehicle.
Whilst the Company's Articles of Association require that a proposal for the
continuation of the Company be put forward at the AGM in 2024, the Directors
have no reason to believe such a resolution will not be passed by
shareholders.
The Directors have considered the Company's income and expenditure projections
and the fact that the Company's investments comprise of readily realisable
securities which can be sold to meet funding requirements if necessary and on
that basis consider that five years is an appropriate time period.
The Directors also considered a stress test in which the Company's NAV dropped
by 50% and noted that, based on the assumptions in the test, the Company would
continue to be viable over a five year period.
Based on the Company's processes for monitoring operating costs, the Board's
view that the Manager has the appropriate depth and quality of resource to
achieve superior returns in the longer term, the portfolio risk profile,
limits imposed on gearing, counterparty exposure, liquidity risk and financial
controls, the Directors have concluded that there is a reasonable expectation
that the Company will be able to continue in operation and meet its
liabilities as they fall due over the five year period of their assessment.
Going concern
The Directors have assessed the principal risks, the impact of the emerging
risks and uncertainties and the matters referred to in the viability
statement. Based on the work the Directors have performed, they have not
identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Company's
ability to continue as a going concern for the period assessed by the
Directors, which is at least 12 months from the date the financial statements
were authorised for issue.
By order of the Board
Schroder Investment Management Limited
Company Secretary
25 September 2024
Board of Directors
Philip Kay
Status: Chairman
Length of service: 2 years - appointed a Director in March 2022.
Experience: Dr Kay has over 40 years' experience in the Japanese investment
market. He is a former Director of Fidelity Japan Trust plc, Schroder
Securities Limited, and Smith New Court plc. He is currently Chairman of
Hansard Global plc, a London listed financial services business. He is also a
Director of The Hellenic and Roman Library, and The Society for the Promotion
of Roman Studies.
Committee membership: Audit and Risk, Management Engagement (Chairman), and
Nomination (Chairman) Committee.
Current remuneration: £41,500 per annum (effective from 1 July 2024).
Number of shares held: 26,527*
Helena Coles
Status: Independent Non-Executive Director
Length of service: 2 years - appointed a Director in March 2022.
Experience: Ms Coles has over 20 years' experience in emerging markets and
Asian equity investment, which includes co-founding a specialist investment
boutique, Rexiter Capital Management, part owned by State Street Global
Advisors. She has held roles with Fidelity International and the Bank of
England. Helena is currently a Director of JPMorgan Emerging Markets
Investment Trust plc, and HgCapital Trust plc and Independent Investment
Advisor to the Joseph Rowntree Charitable Trust.
Committee membership: Audit and Risk, Management Engagement, and Nomination
Committee.
Current remuneration: £31,000 per annum (effective from 1 July 2024).
Number of shares held: 5,000*
Alan Gibbs
Status: Senior Independent Non-Executive Director
Length of service: 8 years - appointed a Director in February 2016.
Experience: Mr Gibbs worked for the Fleming Group, after which he helped set
up and run two Far Eastern brokerages before joining J.O. Hambro (latterly
Waverton). Mr Gibbs is Chairman of the Burdett Trust and a member of the
Advisory Committee of the M&G Charibond Charities Fixed Interest Common
Investment Fund as well as a member of the Advisory Committee of the M&G
Equities Investment Fund for Charities. He is also a Director of The Junius S
Morgan Benevolent Fund.
Committee membership: Audit and Risk, Management Engagement, and Nomination
Committee.
Current remuneration: £31,000 per annum (effective from 1 July 2024).
Number of shares held: 150,000*
Angus Macpherson
Status: Independent Non-Executive Director
Length of service: 4 years - appointed a Director in February 2020.
Experience: Mr Macpherson's experience spans 30 years of working in corporate
finance and capital markets, with Noble, Merrill Lynch and Lazard in London,
Asia, New York and Edinburgh. Mr Macpherson is chairman of Templeton Emerging
Markets Investment Trust and Noble & Company (UK) Limited and a
non-executive director of Hampden Bank.
Committee membership: Audit and Risk, Management Engagement, and Nomination
Committee.
Current remuneration: £31,000 per annum (effective from 1 July 2024).
Number of shares held: 49,440*
Merryn Somerset Webb
Status: Independent Non-Executive Director
Length of service: Less than 1 year - appointed a Director on 4 July 2024.
Experience: Ms Somerset Webb is a seasoned financial expert with a
comprehensive understanding of investment trusts. Known for her role as a
senior columnist for Bloomberg Opinion and before that for the Financial
Times, she regularly shares her financial insights across various media. She
was also Editor-in-Chief of MoneyWeek, the UK personal finance magazine. Ms
Somerset Webb's previous non-executive directorships include Murray Income
Investment Trust plc, Baillie Gifford Shin Nippon plc, Montanaro European
Smaller Companies Trust plc and Netwealth Investments Limited. She is
currently a Director of BlackRock Throgmorton Trust plc. Early in her career,
Ms Somerset Webb worked in Tokyo as an institutional salesperson in Japanese
equities for UBS Warburg, having previously studied Japanese at SOAS
(University of London) and as a Daiwa scholar in Japan.
Committee membership: Audit and Risk, Management Engagement, and Nomination
Committee.
Current remuneration: £31,000.
Number of shares held: nil*
Samantha Wren
Status: Independent Non-Executive Director and Chairman of the Audit and Risk
Committee
Length of service: Less than 1 year - appointed a Director on 4 July 2024.
Experience: Ms Wren has extensive accounting and auditing experience. She has
previously held the position of Chief Executive at IPGL Limited, a private
investment firm where she held a number of directorships of investee companies
across a variety of sectors. Before her tenure at IPGL, she served as a board
member and Group Chief Financial Officer and Group Chief Operating Officer at
NEX Group plc. Earlier in her career, Ms Wren held various positions at The
Rank Group plc, where she also served as a director of the Rank Pension Plan
Trustee Limited. Ms Wren is a qualified Chartered Management Accountant and
holds an honours degree in Economics from the University of Portsmouth. She is
currently a Director of Chapel Down Group plc where she chairs the
Remuneration Committee, and The City of London Investment Trust plc, where she
also chairs the Audit Committee, however, she will be stepping down in October
2024 having served nine years.
Committee membership: Audit and Risk (Chairman), Management Engagement, and
Nomination Committee.
Current remuneration: £35,500.
Number of shares held: 1,650*
Directors' Report
The Directors submit their report and the audited financial statements of the
Company for the year ended 31 July 2024.
Corporate governance statement
The Company is committed to high standards of corporate governance and has
implemented a framework for corporate governance which it considers to be
appropriate for an investment trust.
The Financial Conduct Authority requires all UK listed companies to disclose
how they have applied the principles and complied with the provisions of the
UK Corporate Governance Code 2018 (the "UK Code") issued by the Financial
Reporting Council ("FRC"). The UK Code is available on the FRC's website:
www.frc.org.uk.
The Company is a member of the Association of Investment Companies ("AIC"),
which has published its own Code of Corporate Governance to recognise the
special circumstances of investment trusts (www.theaic.co.uk) as endorsed by
the FRC. The Board has considered the principles and provisions of the AIC
Code of Corporate Governance 2019 (the "AIC Code"), which addresses those set
out in the UK Code, as well as setting out additional provisions on issues
that are of specific relevance to the Company as an investment trust.
The AIC Code also includes an explanation of how the principles and provisions
set out in the UK Code are adapted to make them relevant for investment
companies.
The Board considers that reporting against the principles and provisions of
the AIC Code provides more relevant information to shareholders.
The Board confirms that the Company has complied throughout the year under
review with the relevant provisions of the UK Code and the principles and
provisions of the AIC Code except as set out below.
The UK Code includes provisions relating to:
- the role of the chief executive;
- executive Directors' remuneration;
- the need for an internal audit function;
- the Chair of the Board not being a member of the Audit
Committee; and
- the requirement to establish a Remuneration Committee.
The Board considers that these provisions, are not relevant to the Company, as
an externally managed investment company. Furthermore, all of the Company's
day-to-day management and administrative functions are outsourced to third
parties and the Company has no executive Directors, employees or internal
operations. The Company has not therefore reported further in respect of these
provisions.
The Nomination Committee fulfils the function of the Remuneration Committee
and considers any change in the Directors' remuneration policy. A separate
committee has not therefore been established. As permitted under the AIC Code,
the Chair is a member of the Audit and Risk Committee. An explanation as to
why this is considered appropriate is set out in the Audit and Risk Committee
Report on page 31.
Directors and officers
Chairman
The Chairman is an independent non-executive Director who is responsible for
leadership of the Board and ensuring its effectiveness in all aspects of its
role. The Chairman's significant commitments are detailed on page 26. He has
no conflicting relationships.
Senior Independent Director ("SID")
The SID acts as a sounding board for the Chairman, meets with major
shareholders as appropriate, provides a channel for any shareholder concerns
regarding the Chairman and takes the lead in the annual evaluation of the
Chairman by the independent Directors.
Company Secretary
Schroder Investment Management Limited provides company secretarial support to
the Board and is responsible for assisting the Chairman with Board meetings
and advising the Board with respect to governance. The Company Secretary also
manages the relationship with the Company's service providers, except for the
Manager. Shareholders wishing to lodge questions in advance of the AGM are
invited to do so by writing to the Company Secretary at the address given on
the back cover or by email: amcompanysecretary@schroders.com.
Role and operation of the Board
The Board of Directors, listed on pages 26 and 27 is the Company's governing
body; it sets the Company's strategy and is collectively responsible to
shareholders for its long term success. The Board is responsible for
appointing and subsequently monitoring the activities of the Manager and other
service providers to ensure that the investment objective of the Company
continues to be met. The Board also ensures that the Manager adheres to the
investment restrictions set by the Board and acts within the parameters set by
it in respect of any gearing. The Business Review on pages 16 to 24 sets out
further detail of how the Board reviews the Company's strategy, risk
management and internal controls and also includes other information required
for the Directors' Report, and is incorporated by reference.
A formal schedule of matters specifically reserved for decision by the Board
has been defined and a procedure adopted for Directors, in the furtherance of
their duties, to take independent professional advice at the expense of the
Company.
The Chairman ensures that all Directors receive relevant management,
regulatory and financial information in a timely manner and that they are
provided, on a regular basis, with key information on the Company's policies,
regulatory requirements and internal controls. The Board meets at least
quarterly and receives and considers reports regularly from the Manager and
other key advisers, and ad hoc reports and information are supplied to the
Board as required.
The Board is satisfied that it is of sufficient size with an appropriate
balance of diverse skills and experience, independence and knowledge of the
Company, its sector, and the wider investment trust industry, to enable it to
discharge its duties and responsibilities effectively and that no individual
or group of individuals dominates decision making.
The Board has approved a policy on Directors' conflicts of interest. Under
this policy, Directors are required to disclose all actual and potential
conflicts of interest to the Board as they arise for consideration and
approval. The Board may impose restrictions or refuse to authorise such
conflicts if deemed appropriate. No Directors have any connections with the
Manager, shared directorships with other Directors or material interests in
any contract which is significant to the Company's business.
Committees
In order to assist the Board in fulfilling its governance responsibilities, it
has delegated certain functions to Committees. The roles and responsibilities
of these Committees, together with details of work undertaken during the year
under review, are outlined over the next few pages.
The reports of the Audit and Risk Committee, Nomination Committee, and
Management Engagement Committee are incorporated, and form part of, the
Directors' Report.
Key service providers
The Board has adopted an outsourced business model and has appointed the
following key service providers:
Manager
The Company is an Alternative Investment Fund as defined by the AIFM Directive
and has appointed Schroder Unit Trusts Limited ("SUTL") as the Manager in
accordance with the terms of an Alternative Investment Fund Manager ("AIFM")
agreement. The AIFM agreement, which is governed by the laws of England and
Wales, can be terminated by either party on six months' notice or on immediate
notice in the event of certain breaches or the insolvency of either party. As
at the date of this report no such notice had been given by either party.
SUTL is authorised and regulated by the FCA and provides portfolio management,
risk management, accounting and company secretarial services to the Company
under the AIFM agreement. The Manager also provides general marketing support
for the Company and manages relationships with key investors, in conjunction
with the Chairman, other Board members or the corporate broker as appropriate.
The Manager has delegated investment management, administrative, accounting
and company secretarial services to another wholly owned subsidiary of
Schroders plc, Schroder Investment Management Limited. The Company Secretary
has an independent reporting line to the Manager and distribution functions
within Schroders. The Manager has in place appropriate professional indemnity
cover.
The Schroders Group manages £773.7 billion (as at 30 June 2024) on behalf of
institutional and retail investors, financial institutions and high net worth
clients from around the world, invested in a broad range of asset classes
across equities, fixed income, multi-asset and alternatives.
The Manager is entitled to a fee at the rate of 0.75% per annum on assets up
to and including £200 million and 0.65% per annum thereafter, charged on the
net value of the Company's assets under management.
The management fee payable in respect of the year ended 31 July 2024 amounted
to £2,349,000 (2023: £2,023,000).
A marketing support fee of £50,000 per annum is also payable to the Manager
in respect of the promotion of the Company.
The Manager is also entitled to receive a fee for providing administration,
accounting and company secretarial services to the Company. For those
services, it receives an annual fee of £90,000.
Details of all amounts payable to the Manager are set out in note 17 on page
59.
The Management Engagement Committee has reviewed the performance of the
Manager during the year under review and continues to consider that it has the
appropriate depth of resource to deliver above average returns over the longer
term and that the continuing appointment of the Manager on the terms agreed
remains in the best interests of shareholders as a whole.
Depositary
HSBC Bank plc, which is authorised by the Prudential Regulation Authority
("PRA") and regulated by the FCA and the PRA, carries out certain duties of a
depositary specified in the AIFM Directive including, in relation to the
Company, as follows:
- safekeeping of the assets of the Company which are
entrusted to it;
- cash monitoring and verifying the Company's cash flows;
and
- oversight of the Company and the Manager.
The Company, the Manager and the depositary may terminate the Depositary
Agreement at any time by giving 90 days' notice in writing. The Depositary may
only be removed from office when a new Depositary is appointed by the Company.
Registrar
Equiniti Limited ("Equiniti") has been appointed as the Company's registrar.
Equiniti's services to the Company include share register maintenance
(including the issuance, transfer and cancellation of shares as necessary),
acting as agent for the payment of any dividends, management of company
meetings (including the registering of proxy votes and scrutineer services as
necessary), handling shareholder queries and correspondence and processing
corporate actions.
Share capital and substantial share interests
As at 25 September 2024, the Company had 118,453,286 ordinary shares of 10p
in issue. 1,765,177 shares were held in treasury. Accordingly, the total
number of voting rights in the Company as at 25 September 2024 were
116,688,109. Details of changes to the Company's share capital during the year
are given in note 14 to the accounts on page 57. All shares in issue rank
equally with respect to voting, dividends and any distribution on winding up.
The Board noted that the Company's shareholders appreciated the Board's
discount management. The Board agreed to request renewal of the authorities to
issue and buy back shares as described on page 5.
As at 31 July 2024 the following had interests in 3% or more of the voting
rights attached to the Company's issued share capital.
%
Shares at of total
31 July voting
2024 rights
City of London Investment
Management Company Limited 22,933,601 19.53
1607 Capital Partners, LLC 20,785,700 17.70
Allspring Global Investments, LLC 16,201,363 13.80
Hargreaves Lansdown Nominee Limited 5,597,247 4.77
Rathbones Investment Management Ltd* 5,166,289 4.40
Interactive Investor Services Nominees
Limited 3,882,128 3.31
Wesleyan Assurance Society 3,803,283 3.24
*This holding is a combination of the Investec Wealth & Investment Ltd
(3,439,926 shares) and Rathbones Investment Management Ltd (1,726,363 shares)
Revenue, final dividend and dividend policy
The net revenue return for the year, before finance costs and taxation, was
£7,551,000 (2023: £7,526,000). After deducting finance costs and taxation
the revenue amount available for distribution to shareholders was £6,565,000
(2023: £6,563,000) equivalent to net revenue of 5.53p (2023: 5.41p) per
ordinary share. Distributable capital reserve amounts will be used to cover
the outstanding distribution amount not covered by the revenue reserve.
The Directors have recommended the payment of a final dividend for the year of
10.81p per share (2023: 5.40p) payable on 13 December 2024 to shareholders on
the register on 8 November 2024, subject to approval by shareholders at the
Annual General Meeting on 10 December 2024.
Going forward, as stated previously, the Board will declare dividends on a
quarterly basis based upon the average NAV of the 12 months trailing the
quarter.
The Board's policy is to pay out substantially all the Company's revenue.
Provision of information to the auditor
The Directors at the date of approval of this report confirm that, so far as
each of them is aware, there is no relevant audit information of which the
Company's auditor is unaware; and each Director has taken all the steps that
he or she ought to have taken as a Director in order to make himself or
herself aware of any relevant audit information and to establish that the
Company's auditor is aware of that information.
Directors' attendance at meetings
Four Board meetings are usually scheduled each year to deal with matters
including: the setting and monitoring of investment strategy; approval of
borrowings and/or cash positions; review of investment performance; the level
of premium or discount of the Company's shares to NAV per share and promotion
of the Company; and services provided by third parties. Additional meetings of
the Board are arranged as required.
The number of scheduled meetings of the Board and its Committees held during
the financial year, and the attendance of individual Directors, is shown
overleaf. Whenever possible all Directors attend the AGM.
Audit Management
Nomination and Risk Engagement
Director Board Committee Committee Committee
Philip Kay 4/4 1/1 2/2 1/1
Helena Coles 4/4 1/1 2/2 1/1
Alan Gibbs 4/4 1/1 2/2 1/1
Angus Macpherson 4/4 1/1 2/2 1/1
Belinda Richards(1) 4/4 1/1 2/2 1/1
(1)Belinda Richards resigned on 3 July 2024.
*Samantha Wren and Merryn Somerset Webb were appointed on 4 July 2024, after
the last scheduled Board meeting of the year took place.
The Board is satisfied that the Chairman and each of the other non-executive
Directors commits sufficient time to the affairs of the Company to fulfil
their duties.
Directors' and officers' liability insurance and indemnities
Directors' and officers' liability insurance cover was in place for the
Directors throughout the year. The Company's Articles of Association provide,
subject to the provisions of UK legislation, an indemnity for Directors in
respect of costs which they may incur relating to the defence of any
proceedings brought against them arising out of their positions as Directors,
in which they are acquitted or judgment is given in their favour by the court.
This is a qualifying third party indemnity provision and was in place
throughout the year under review and to the date of this report.
By order of the Board
Schroder Investment Management Limited
Company Secretary
25 September 2024
Audit and Risk Committee Report
The responsibilities and work carried out by the Audit and Risk Committee
during the year under review are set out in this report. The duties and
responsibilities of the Committee, which include monitoring the integrity of
the Company's financial reporting and internal controls, are set out in
further detail below, and may be found in the terms of reference which are
available on the Company's web pages: https://www.schroders.com/japantrust.
All Directors are members of the Committee. Belinda Richards acted as Chair of
the Committee for the majority of the year and has now been succeeded by
Samantha Wren following her appointment on 4 July 2024. The Board has
satisfied itself that at least one of the Committee's members has recent and
relevant financial experience and that the Committee as a whole has competence
relevant to the sector in which the Company operates. The AIC Code permits the
Chair of the Board to be a member of the Audit Committee of an investment
trust. Therefore, it is considered appropriate for the Chair of the Board, who
was independent on appointment, to be a member of the Committee.
Approach
Risk management and internal controls Financial reports and valuation Audit
Principal and emerging risks and uncertainties Financial statements Audit results
To establish a process for identifying, assessing, managing and monitoring the To monitor the integrity of the financial statements of the Company and any To discuss any matters arising from the audit and recommendations made by the
principal and emerging risks of the Company and to explain how these are formal announcements relating to the Company's financial performance and auditor.
managed or mitigated. valuation. To also review the half-year report and accounts.
The Committee is responsible for reviewing the adequacy and effectiveness of
the Company's internal controls and the whistleblowing procedures operated by
the AIFM and other services providers.
Going concern and viability Auditor appointment, independence and performance
To review the position and make recommendations to the Board in relation to To make recommendations to the Board, in relation to the appointment,
whether it considers it appropriate to adopt the going concern basis of reappointment, effectiveness and removal of the external auditor, to review
accounting in preparing its annual and half-year report and accounts. their independence, and to approve their remuneration and terms of engagement.
Reviewing and agreeing the audit plan and engagement letter.
The Committee is also responsible for reviewing the disclosures made by the
Company in the viability statement.
ä
The Committee met twice during the year under review and the below table sets
out how the Committee discharged its duties during the year under review and
up until the approval of this report.
Further details on attendance can be found on page 30. Significant issues
identified during the year under review and key matters communicated by the
auditor during reporting are included below.
Application during the year
Risk management and internal controls Financial reports and valuation Audit
Principal risks Recognition of investment income Meetings with the auditor
Reviewed the principal and emerging risks faced by the Company together with Considered dividends received against forecast and the allocation of special The auditor attended meetings of the Committee to present their audit plan and
the systems, processes and oversight in place to identify, manage and dividends to income or capital. the findings of the audit.
mitigate.
The Committee met the auditor without representatives of the Manager present.
Service provider controls Valuation and existence of holdings Effectiveness of the independent audit process and auditor performance
The operational controls maintained by the Manager, administrator, depositary The Company's assets are principally invested in quoted equities. The Board The effectiveness of the independent audit firm and audit process was
and registrar were reviewed and included consideration of: reviews detailed reports on portfolio holdings on a quarterly basis. evaluated prior to making a recommendation to the Board that the auditor
should be re-appointed at the forthcoming AGM. The Committee evaluated the
- a summary, prepared by the AIFM, following review of the internal controls The Committee reviewed internal control reports from the AIFM in the year, auditor's performance against agreed criteria including: qualification;
reports prepared bi-annually by HSBC in respect of its European Traditional reporting on the systems and controls around the pricing and valuation of knowledge, expertise and resources; independence policies; effectiveness of
Fund Services, Global Custody Services and Information Technology Services securities. audit planning; adherence to auditing standards. Overall competence was also
operations; considered, alongside feedback from the Manager on the audit process. The
professional scepticism of the auditor, during the audit process was
- a summary, prepared by the AIFM following review, of the internal controls questioned and the Committee was satisfied with the auditor's replies.
reports prepared annually by SIM; and
- the Assurance Report on internal controls of Equiniti Share Registration
Services.
All internal controls reports were reported on by independent external
accountants.
Internal controls and risk management Calculation of the investment management fee and performance fee Auditor independence
Consideration of several key aspects of internal control and risk management Consideration of methodology used to calculate the fees, matched against the Deloitte LLP has provided audit services to the Company since it was appointed
operating within the Manager, administrator, depositary and registrar, criteria set out in the AIFM agreement. on 19 June 2019.
including assurance reports and presentations on these controls.
Allocation rate of indirect expenses to capital The auditors are required to rotate the senior statutory auditor every five
years. There are no contractual obligations restricting the choice of external
Consideration of policy of allocating certain indirect expenses to capital. auditors. Following Chris Hunter rotating off, this is the first year that
Further details in note 1(e). Michael Caullay has conducted the audit of the Company's financial statements.
Compliance with the investment trust qualifying rules in S1158 of the Overall accuracy of the report and financial statements Audit results
Corporation Tax Act 2010
Consideration of the annual report and financial statements and the letter Met with and reviewed a comprehensive report from the auditor which detailed
Consideration of the Manager's report confirming compliance from the Manager in support of the letter of representation to the auditor. the results of the audit, compliance with regulatory requirements, safeguards
that have been established, and on their own internal quality control
procedures.
Fair, balanced and understandable Provision of non-audit services by the auditor
Reviewed the annual report and financial statements to advise the Board Reviewed the FRC's Guidance on Audit Committees and formulated a policy on the
whether it was fair, balanced and understandable. Reviewed whether performance provision of non-audit services by the Company's auditor. The Committee has
measures were reflective of the business, whether there was adequate determined that the Company's appointed auditor will not be considered for the
commentary on the Company's strengths and weaknesses and that the annual provision of certain non-audit services, such as accounting and preparation of
report and financial statements, taken as a whole was consistent with the the financial statements, internal audit and custody. The auditor may, if
Board's view of the operation of the Company. required, provide other non-audit services which will be judged on a
case-by-case basis.
The auditor did not provide any non-audit services to the Company during the
year.
Going concern and viability Consent to continue as auditor
Reviewed the impact of risks on going concern and longer-term viability. Deloitte LLP indicated to the Committee its willingness to continue to act as
auditor.
ä
Recommendations made to, and approved by, the Board:
• The Committee recommended that the Board approve the half year
report and the annual report and financial statements.
• The Committee recommended the adoption of the going concern basis of
accounting in the report and financial statements and the explanations set out
in the viability statement.
• As a result of the work performed, the Committee has concluded that
the annual report for the year ended 31 July 2024, taken as a whole, is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the Company's position, performance, business model and
strategy and has reported on these findings to the Board. The Board's
conclusions in this respect are set out in the Statement of Directors'
Responsibilities on page 41.
• Having reviewed the performance of the auditor, as described above,
the Committee was satisfied that there were no circumstances that affected the
independence and objectivity of the auditor and therefore considered it
appropriate to recommend the auditor's re-appointment. Resolutions to
re-appoint Deloitte as auditor to the Company, and to authorise the Directors
to determine their remuneration will be proposed at the AGM.
Samantha Wren
Audit and Risk Committee Chairman
25 September 2024
Management Engagement Committee Report
The Management Engagement Committee is responsible for (1) the monitoring and
oversight of the Manager's performance and fees, and confirming the Manager's
ongoing suitability, and (2) reviewing and assessing the Company's other
service providers, including reviewing their fees. All Directors are members
of the Committee. Philip Kay chaired the Committee during the year however,
post year end it was decided that this responsibility would be taken by the
Senior Independence Director. Its terms of reference are available on the
Company's webpages: https://www.schroders.com/japantrust.
Approach
Oversight of the Manage Oversight of other service providers
The Committee: The Committee reviews the performance and competitiveness of the following
service providers on at least an annual basis:
• reviews the Manager's performance, over the short- and long-term,
against the Benchmark, peer group and the market; • depositary and custodian;
• considers the reporting it has received from the Manager throughout • corporate broker;
the year, and the reporting from the Manager to the shareholders;
• registrar; and
• assesses management fees on an absolute and relative basis,
receiving input from the Company's broker, including peer group and industry • lender.
figures, as well as the structure of the fees;
The Committee also receives a report from the Company Secretary on ancillary
• reviews the appropriateness of the Manager's contract, including service providers, and considers any recommendations.
terms such as notice period; and
The Committee notes the Audit and Risk Committee's review of the auditor.
• assesses whether the Company receives appropriate administrative,
accounting, company secretarial and marketing support from the
Manager.services providers.
ä
Application during the year
The Committee undertook a detailed review of the Manager's performance and The annual review of each of the service providers was satisfactory.
agreed that it has the appropriate depth and quality of resource to deliver
superior returns over the longer term. The Committee noted that the Audit and Risk Committee had undertaken a
detailed evaluation of the Manager, registrar, and depositary and custodian's
The Committee also reviewed the terms of the AIFM agreement and agreed they internal controls.
remained fit for purpose.
The Committee reviewed the other services provided by the Manager and agreed
they were satisfactory.
The Committee reviewed the progress of the Company with respect to the
conditional tender offer conditions and noted that for the financial year the
Company had delivered performance in excess over the conditions.
ä
Recommendations made to, and approved by, the Board:
• That the ongoing appointment of the Manager on the terms of the AIFM
agreement, including the fee, was in the best interests of shareholders as a
whole.
• That the Company's service providers' performance remained
satisfactory.
Nomination Committee Report
The Nomination Committee is responsible for (1) the recruitment, selection and
induction of Directors, (2) their assessment during their tenure, (3) the
Board's succession, and (4) Directors' fees. All Directors are members of the
Committee. Philip Kay is the Chairman of the Committee. Its terms of reference
are available on the Company's webpages: https://www.schroders.com/japantrust
(https://www.schroders.com/japantrust) .
Oversight of Directors
Approach
Selection and induction Board evaluation and Directors' fees Succession
• Committee prepares a job specification for each role, and an • Committee assesses each Director annually. • The Board's succession policy is that Directors' tenure will be for no
independent recruitment firm is appointed. For the Chairman and the Chairs of
longer than nine years, except in exceptional circumstances, and that each
Committees, the Committee considers current Board members too. • Evaluation focuses on whether each Director continues to demonstrate Director will be subject to annual re-election at the AGM.
commitment to their role and provides a valuable contribution to the Board
• Job specification outlines the knowledge, professional skills, during the year, taking into account time commitment, independence, conflicts • Committee reviews the Board's current and future needs at least
personal qualities and experience requirements. and training needs. annually. Should any need be identified the Committee will initiate the
selection process.
• Potential candidates assessed against the Company's diversity • Following the evaluation, the Committee provides a recommendation to
policy. shareholders with respect to the annual re-election of Directors at the AGM. • Committee oversees the handover process for retiring Directors.
• Committee discusses the long list, invites a number of candidates • All Directors retire at the AGM and their re-election is subject to
for interview and makes a recommendation to the Board. shareholder approval.
• Committee reviews the induction and training of new Directors. • Committee reviews Directors' fees, taking into account comparative
data and reports to shareholders.
• Any proposed changes to the remuneration policy for Directors are
discussed and reported to shareholders.
ä
• Following a rigorous selection process using an independent external • The Board evaluation was undertaken in July 2024. • The Committee reviewed the succession policy and agreed it was still
recruitment agency, Sapphire Partners, Samantha Wren and Merryn Somerset Webb
fit for purpose.
were appointed to the Board with effect from 4 July 2024. Sapphire has no • The Chairman reported on the effectiveness of the Board, himself and
connection with the Company or any of the Directors. its leadership following the internal evaluation lead by the Chairman and • The Committee considered the future needs of the Company and the
Senior Independent Director where appropriate. effect of individual Directors leaving and whether this would create a
• The Committee noted that, as part of the appointment process, the
skills/knowledge/ experience gap.
new Directors have engaged in an induction programme with the Manager and its • The Committee also reviewed each Director's time commitment and
various operating functions. independence by reviewing a complete list of appointments, including pro bono
not for profit roles, to ensure that each Director remained free from conflict
• Samantha Wren and Merryn Somerset Webb will stand for election as and had sufficient time available to discharge each of their duties
Directors at the forthcoming AGM, as set out in resolutions 7 and 8 of the effectively. All Directors were considered to be independent in character and
Notice of AGM. judgement.
• Other independent external recruitment agencies were also approached • The Committee considered each Director's contributions, and noted
to provide proposals. that in addition to extensive experience as professionals and non-executive
Directors, each Director had valuable skills and experience, as detailed in
their biographies on pages 26 and 27.
• Based on its assessment, the Committee provided individual
recommendations for each Director's election or re-election.
• The Committee reviewed Directors' fees, using external benchmarking,
and recommended an increase in Directors' fees, as detailed in the
remuneration report.
ä
Recommendations made to, and approved by, the Board:
• That all Directors continue to demonstrate commitment to their
roles, provide a valuable contribution to the deliberations of the Board,
remuneration of the Directors was appropriate and Directors remain free from
conflicts with the Company and its Directors, so should all be recommended for
election or re-election by shareholders at the AGM.
• That Directors' fees be increased to £41,500 for the Chairman,
£31,000 for non-executive Directors and £35,500 for the Audit and Risk
Committee Chairman.
• That the Remuneration Report be put to shareholders for approval.
• That Sapphire Partners be engaged to assist in the search for two
new non-executive Director positions.
• That Samantha Wren and Merryn Somerset Webb be appointed as a
non-executive Directors with effect from 4 July 2024 and that their election
as non-executive Directors be proposed, and recommended to shareholders for
approval at the forthcoming AGM.
• That an AGM resolution be proposed to amend to Company's Articles of
Association to increase the aggregate Director fee cap from £200,000 to
£250,000 per annum to allow for potential interest rate fee increases over
the coming years.
Directors' Remuneration Report
Introduction
The following remuneration policy is currently in force and is subject to a
binding vote every three years. The next vote will take place at the 2026 AGM
and the current policy provisions will apply until that date. The below
Directors' annual report on remuneration is subject to an annual advisory
vote. An ordinary resolution to approve this report will be put to
shareholders at the forthcoming AGM.
At the AGM held on 5 December 2023, 99.96% of the votes cast (including votes
cast at the Chairman's discretion) in respect of approval of the Directors'
remuneration policy were in favour, while 0.04% were against and 23,581 votes
were withheld.
At the AGM held on 5 December 2023, 99.97% of the votes cast (including votes
cast at the Chairman's discretion) in respect of approval of the Directors'
remuneration report for the year ended 31 July 2023 were in favour, while
0.03% were against and 15,581 votes were withheld.
Directors' remuneration policy
The determination of the Directors' fees is a matter considered by the
Nomination Committee and the Board.
It is the Nomination Committee's policy to determine the level of Directors'
remuneration having regard to amounts payable to non-executive Directors in
the industry generally, the role that individual Directors fulfil in respect
of Board and Committee responsibilities, and time committed to the Company's
affairs, taking into account the aggregate limit of fees set out in the
Company's Articles of Association. This aggregate level of Directors' fees is
currently set at £200,000 per annum however, an AGM resolution has been
proposed to approve the amendment of the Articles of Association to increase
this to £250,000 per annum to allow for potential interest rate increases to
Directors' fees in the coming years.
The Chairman of the Board and the Chairman of the Audit and Risk Committee
both receive fees at a higher rate than the other Directors to reflect their
additional responsibilities. Directors' fees are set at a level to recruit
and retain individuals of sufficient calibre, with the level of knowledge,
experience and expertise necessary to promote the success of the Company in
reaching its short and long-term strategic objectives. Any Director who
performs services which in the opinion of the Directors are outside the scope
of the ordinary duties of a Director, may be paid additional remuneration to
be determined by the Directors, subject to the previously mentioned fee cap.
The Board and its Committees are exclusively comprised of non-executive
Directors. No Director past or present has an entitlement to a pension, and
the Company has not, and does not intend to operate a share scheme for
Directors or to award any share options or long-term performance incentives to
any Director. No Director has a service contract with the Company. However,
Directors have a letter of appointment. Directors do not receive exit payments
and are not provided with any compensation for loss of office. No other
payments are made to Directors other than the reimbursement of reasonable
out-of-pocket expenses incurred in attending to the Company's business.
Implementation of policy
The terms of Directors' letters of appointment are available for inspection at
the Company's registered office address during normal business hours and
during the AGM at the location of such meeting.
The Board did not seek the views of shareholders in setting this policy. Any
comments on the policy received from shareholders would be considered on a
case-by-case basis.
As the Company does not have any employees, no employee pay and employment
conditions were taken into account when setting this policy and no employees
were consulted in its construction.
Directors' fees are reviewed annually and take into account research from
third parties on the fee levels of Directors of peer group companies, as well
as industry norms and factors affecting the time commitment expected of the
Directors. New Directors are subject to the provisions set out in this
remuneration policy.
Directors' annual report on remuneration
This report sets out how the Directors' remuneration policy was implemented
during the year ended 31 July 2024.
Fees paid to Directors
The following amounts were paid by the Company to Directors for their services
in respect of the year ended 31 July 2024 and the preceding financial year.
Directors' remuneration is all fixed; they do not receive any variable
remuneration. The performance of the Company over the financial year is
presented in the Performance Summary at the start of the report.
Fees Taxable benefits(1) Total
2024 2023 2024 2023 2024 2023
Director £ £ £ £ £ £
Philip Kay 40,125 35,786 641 - 40,766 35,786
Anja Balfour(2) - 13,534 - 2,464 - 15,998
Helena Coles(3) 30,083 29,167 284 - 30,367 29,167
Alan Gibbs 30,083 29,167 95 - 30,178 29,167
Angus Macpherson(4) 30,083 29,167 16,042 - 46,125 29,167
Belinda Richards(5) 31,441 33,167 - - 31,441 33,167
Samantha Wren(6) 2,672 - - - 2,672 -
Merryn Somerset Webb(7) 2,250 - - - 2,250 -
Total 166,737 169,988 17,062 2,464 183,799 172,452
(1)Comprise amounts reimbursed for expenses incurred in carrying out business
for the Company, and which have been grossed up to include PAYE and NI
contributions.
(2)Resigned as Chairman, and from the Board on 5 December 2022.
(3)Appointed as a Director on 30 March 2022.
(4)The Director, who resides in Scotland, incurred taxable expenses associated
with attending Board and Committee meetings. The taxable benefits paid this
year covered expenses spanning a period of five years since appointment.
(5)Resigned as Audit Chair and from the Board on 3 July 2024.
(6)Appointed as Director and Audit Chair on 4 July 2024.
(7)Appointed as Director on 4 July 2024.
The information in the above table has been audited.
Change in annual fee over years ended 31 July
2024 2023 2022 2021 2020
Director % % % % %
Philip Kay (Chairman) 12.1 n/a n/a n/a n/a
Anja Balfour n/a n/a 9.8 (1.2) (1.7)
Helena Coles 3.1 n/a n/a n/a n/a
Alan Gibbs 3.1 0.5 7.5 - 2.1
Angus Macpherson 3.1 2.7 5.2 n/a n/a
Belinda Richards (5.2) 2.0 4.5 - 5.2
Samantha Wren n/a n/a n/a n/a n/a
Merryn Somerset Webb n/a n/a n/a n/a n/a
Consideration of matters relating to Directors' remuneration
Following the review of Directors' fees by the Nomination Committee, it was
proposed to increase to all Directors' fees by 3.33% (rounded to the nearest
£500), to commence from 1 July 2024. (Chairman £41,500, Audit and Risk
Committee Chairman £35,500, non-executive Directors £31,000). The Board
approved this recommendation.
The members of the Board at the time that remuneration levels were considered
were as set out on pages 26 and 27. Although no external advice was sought in
considering the levels of Directors' fees, information on fees paid to
Directors of other investment trusts managed by Schroders and peer group
companies provided by the Manager and corporate broker was taken into
consideration, as was independent third party research.
Change in annual remuneration payable
2024 2023 2022 2021 2020
Directors £ £ £ £ £
Philip Kay 40,766 35,786 9,640 - -
Anja Balfour - 15,998 41,327 37,624 38,092
Helena Coles 30,367 29,167 9,487 - -
Alan Gibbs 30,178 29,167 29,024 27,000 27,000
Richard Greer - - - - 18,000
Angus Macpherson(1) 46,125 29,167 28,404 27,000 13,500
Belinda Richards 31,441 33,167 32,504 31,100 31,100
Samantha Wren 2,672 - - - -
Merryn Somerset Webb 2,250 - - - -
183,799 172,452 150,386 122,724 127,692
(1)The Director, who resides in Scotland, incurred taxable expenses associated
with attending Board and Committee meetings. The taxable benefits paid this
year covered expenses spanning a period of five years since appointment.
The table below compares the remuneration payable to Directors, to
distributions made to shareholders during the year under review and the prior
period. In considering these figures, shareholders should take into account
the Company's investment objective.
Distributions to shareholders (share buy-backs) vs Directors' remuneration
Year ended Year ended
31 July 31 July
2024 2023
£'000 £'000 % Change
Remuneration payable to Directors 184 172 7.0
Dividends 6,439 5,961
Share buybacks 6,160 4,359
Total distributions paid to shareholders 12,599 10,320 22.1
Directors' share interests
The Company's Articles of Association do not require Directors to own shares
in the Company. The interests of Directors, including those of connected
persons, at the beginning and end of the financial year under review, are set
out below.
At 31 July At 31 July
2024 2023
Helena Coles 5,000 nil
Alan Gibbs 150,000 150,000
Philip Kay 26,527 18,627
Angus Macpherson 49,440 49,440
Belinda Richards(1) 4,513 4,513
Samantha Wren(2) 1,650 nil
Merryn Somerset Web(3) nil nil
(1) Belinda Richards resigned on 3 July 2024
(2) Samantha Wren was appointed as Director and Audit Chair.on 4 July 2024
(3) Merryn Somerset Webb was appointed as Director on 4 July 2024
The information in the above table has been audited. There have been no
changes since the year end.
10-year performance of share price and benchmark total returns(1)
(1)Source: Morningstar/Thomson Reuters.
Returned to 100 at 31 July 2014.
Definitions of terms and performance measures are provided on pages 70 and 71.
On behalf of the Board
Philip Kay
Chairman
25 September 2024
Statement of Directors' Responsibilities
Directors' responsibilities
The Directors are responsible for preparing the annual report and financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the financial
statements in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 102 "The
Financial Reporting Standard applicable in the UK and Republic of Ireland",
and applicable law). 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 return or loss of the
Company for that period. In preparing the financial statements, the Directors
are required to:
- select suitable accounting policies and then apply them consistently;
- state whether applicable United Kingdom Accounting Standards, comprising
FRS 102, have been followed, subject to any material departures disclosed and
explained in the financial statements;
- make judgements and accounting estimates that are reasonable and
prudent; and
- prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements and the Directors'
remuneration report comply with the Companies Act 2006.
The Directors 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 Manager is responsible for the maintenance and integrity of the webpage
dedicated to the Company. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors' statement
Each of the Directors, whose names and functions are listed in the Board of
Directors on pages 26 and 27 confirm that, to the best of their knowledge:
- the Company financial statements, which have been prepared in accordance
with United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 102 "The Financial Reporting Standard
applicable in the UK and Republic of Ireland", and applicable law), give a
true and fair view of the assets, liabilities, financial position and profit
of the Company;
- the Strategic Report includes a fair review of the development and
performance of the business and the position of the Company, together with a
description of the principal risks and uncertainties that it faces; and
- that the annual report and financial statements, taken as a whole, are
fair, balanced and understandable and provides the information necessary for
shareholders to assess the Company's performance, business model and strategy.
On behalf of the Board
Philip Kay
Chairman
25 September 2024
Independent Auditor's Report
to the Members of Schroder Japan Trust plc
1. Opinion
In our opinion the financial statements of Schroder Japan Trust plc (the
'Company'):
- give a true and fair view of the state of the company's affairs as at 31
July 2024 and of its profit for the year then ended;
- have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice, including Financial Reporting Standard 102 "The
Financial Reporting Standard applicable in the UK and Republic of Ireland" and
the Statement of Recommended Practice issued by the Association of Investment
Companies in July 2022 "Financial Statements of Investment Trust Companies and
Venture Capital Trusts"; and
- have been prepared in accordance with the requirements of the Companies
Act 2006.
We have audited the financial statements which comprise:
- the statement of comprehensive income;
- the statement of changes in equity;
- the statement of financial position; and
- the related notes 1 to 21.
The financial reporting framework that has been applied in their preparation
is applicable law and United Kingdom Accounting Standards, including Financial
Reporting Standard 102 "The Financial Reporting Standard applicable in the UK
and Republic of Ireland" (United Kingdom Generally Accepted Accounting
Practice) and the Statement of Recommended Practice issued by the Association
of Investment Companies ("SORP") in July 2022 "Financial Statements of
Investment Trust Companies and Venture Capital Trusts".
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the auditor's responsibilities for the
audit of the financial statements section of our report.
We are independent of the company in accordance with the ethical requirements
that are relevant to our audit of the financial statements in the UK,
including the Financial Reporting Council's (the 'FRC's') Ethical Standard as
applied to listed public interest entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We confirm
that we have not provided any non-audit services prohibited by the FRC's
Ethical Standard to the company.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
3. Summary of our audit approach
Key audit matters The key audit matter that we identified in the current year was:
- Valuation and existence of listed investments
Within this report, key audit matters are identified as follows:
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality The materiality that we used in the current year was £3.51m which was
determined on the basis of 1% of net assets.
Scoping We performed our audit scoping based upon quantitative and qualitative risk
assessment factors for each account balance recorded as at 31 July 2024.
Significant changes in our approach There have been no other significant changes to our
audit approach in the current year.
4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
Our evaluation of the directors' assessment of the company's ability to
continue to adopt the going concern basis of accounting included:
- Considering as part of our risk assessment the nature of the company,
its business model and related risks, the requirements of the applicable
financial reporting framework and the system of internal control;
- Assessed the underlying data and key assumptions used to make the
assessment, and evaluating the directors' plans for future actions in relation
to their going concern assessment;
- Assessing the liquidity and ability of the Investment Manager to trade
in the investment portfolio to cover operational expenditure as appropriate;
and
- Assessing the appropriateness of the directors' disclosure in note 1 to
the financial statements.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the company's ability to continue
as a going concern for a period of at least 12 months from when the financial
statements are authorised for issue.
In relation to the reporting on how the company has applied the UK Corporate
Governance Code, we have nothing material to add or draw attention to in
relation to the directors' statement in the financial statements about whether
the directors considered it appropriate to adopt the going concern basis of
accounting.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These matters
included those which had the greatest effect on: the overall audit strategy;
the allocation of resources in the audit; and directing the efforts of the
engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
6. Our application of materiality
6.1 Materiality
We define materiality as the magnitude of misstatement in the financial
statements that makes it probable that the economic decisions of a reasonably
knowledgeable person would be changed or influenced. We use materiality both
in planning the scope of our audit work and in evaluating the results of our
work.
Based on our professional judgement, we determined materiality for the
financial statements as a whole as follows:
Materiality £3.51m (2023: £3.02m)
Basis for 1% of net assets (2023: 1% of net assets)
determining
materiality
Rationale as we consider it to be the most relevant indicator of
for the the company's performance for the users of the
benchmark financial statements, as well as being a key driver of
applied shareholder value.
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the
probability that, in aggregate, uncorrected and undetected misstatements
exceed the materiality for the financial statements as a whole. Performance
materiality was set at 70% of materiality for the 2024 audit (2023: 70%). In
determining performance materiality, we considered the following factors:
a. The company's structure and operating model.
b. The continuity in place within the business from the
previous year with both management and the administrator.
c. The lack of changes to accounting policies during the
current period which would require significant judgement.
d. Our experience from prior period audits, where there has
not been a history of uncorrected misstatements or controls deficiencies.
e. Quality of the control environment and our ability to
rely on controls over the valuation and existence of listed investments.
6.3 Error reporting threshold
We agreed with the Audit and Risk Committee that we would report to the
Committee all audit differences in excess of £0.18 million (2023:
£0.15 million), as well as differences below that threshold that, in our
view, warranted reporting on qualitative grounds. We also report to the Audit
and Risk Committee on disclosure matters that we identified when assessing the
overall presentation of the financial statements.
7. An overview of the scope of our audit
7.1. Scoping
Our audit scope was determined by obtaining an understanding of the company
and its environment, including internal controls, and assessing the risks of
material misstatement. Audit work to respond to the risks of material
misstatement was performed directly by the audit engagement team.
7.2. Our consideration of the control environment
In assessing the company's control environment, we considered controls in
place at the company's service organisation which acts as administrator. As
part of this, we reviewed the System and Organisation Controls (SOC 1) Report
of the service organisation and have taken a controls reliance approach in
respect of the controls relating to valuation and existence of listed
investments. For the period of 4 months between the date of the SOC1 report
and the company's year end, we tested the controls relating to valuation and
existence of listed investments. We also reviewed the controls report of the
service organisation in respect of general IT controls. Further, we obtained
an understanding of relevant business processes and controls that address the
risk of material misstatement in financial reporting.
7.3. Our consideration of climate-related risks
In planning our audit, we have considered the potential impact of climate
change on the business and its financial statements. The company continues to
develop its model for assessing and assigning an ESG score on existing and
potential investments based on assessment of the potential impacts of
environmental, social and governance ("ESG") related risks, including climate
change, as outlined on page 12. As a part of our audit, we held discussions
with Management to understand the process of identifying climate-related risks
and the impact on the Company's financial statements. We have read the climate
related disclosures in the annual report to consider whether they are
materially consistent with the financial statements and our knowledge obtained
in the audit.
8. Other information
The other information comprises the information included in the annual report,
other than the financial statements and our auditor's report thereon. The
directors are responsible for the other information contained within the
annual report.
Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not
express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or otherwise
appears to be materially misstated.
If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise to a
material misstatement in the financial statements themselves. If, based on the
work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.
9. Responsibilities of directors
As explained more fully in the directors' responsibilities statement, the
directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the company's ability to continue as a going concern, disclosing as
applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the company or
to cease operations, or have no realistic alternative but to do so.
10. Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
A further description of our responsibilities for the audit of the financial
statements is located on the FRC's website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor's report.
11. Extent to which the audit was considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below.
11.1 Identifying and assessing potential risks related to
irregularities
In identifying and assessing risks of material misstatement in respect of
irregularities, including fraud and non-compliance with laws and regulations,
we considered the following:
- the nature of the industry and sector, control environment and business
performance including the design of the company's remuneration policies, key
drivers for directors' remuneration, bonus levels and performance targets;
- results of our enquiries of management, Directors, and the Audit and
Risk Committee about their own identification and assessment of the risks of
irregularities, including those that are specific to the company's sector;
- any matters we identified having obtained and reviewed the company's
documentation of their policies and procedures relating to:
- identifying, evaluating and complying with laws and regulations and
whether they were aware of any instances of non-compliance;
- detecting and responding to the risks of fraud and whether they have
knowledge of any actual, suspected or alleged fraud;
- the internal controls established to mitigate risks of fraud or
non-compliance with laws and regulations;
- the matters discussed among the audit engagement team and relevant
internal specialists, including tax, IT, and financial instrument specialists,
regarding how and where fraud might occur in the financial statements and any
potential indicators of fraud.
As a result of these procedures, we considered the opportunities and
incentives that may exist within the organisation for fraud and identified the
greatest potential for fraud in the following area: valuation and existence of
listed investments. In common with all audits under ISAs (UK), we are also
required to perform specific procedures to respond to the risk of management
override.
We also obtained an understanding of the legal and regulatory framework that
the company operates in, focusing on provisions of those laws and regulations
that had a direct effect on the determination of material amounts and
disclosures in the financial statements. The key laws and regulations we
considered in this context included the UK Companies Act, Listing Rules, and
Investment Trust Tax Legislations.
In addition, we considered provisions of other laws and regulations that do
not have a direct effect on the financial statements but compliance with which
may be fundamental to the company's ability to operate or to avoid a material
penalty.
11.2 Audit response to risks identified
As a result of performing the above, we identified the valuation and existence
of listed investments as a key audit matter related to the potential risk of
fraud. The key audit matters section of our report explains the matter in more
detail and also describes the specific procedures we performed in response to
that key audit matter.
In addition to the above, our procedures to respond to risks identified
included the following:
- reviewing the financial statement disclosures and testing to supporting
documentation to assess compliance with provisions of relevant laws and
regulations described as having a direct effect on the financial statements;
- enquiring of management and the Audit and Risk Committee concerning
actual and potential litigation and claims;
- performing analytical procedures to identify any unusual or unexpected
relationships that may indicate risks of material misstatement due to fraud;
- reading minutes of meetings of those charged with governance; and
- in addressing the risk of fraud through management override of controls,
testing the appropriateness of journal entries and other adjustments;
assessing whether the judgements made in making accounting estimates are
indicative of a potential bias; and evaluating the business rationale of any
significant transactions that are unusual or outside the normal course of
business.
We also communicated relevant identified laws and regulations and potential
fraud risks to all engagement team members, including internal specialists,
and remained alert to any indications of fraud or non-compliance with laws and
regulations throughout the audit.
Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors' remuneration report to be audited
has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
- the information given in the strategic report and the directors' report
for the financial year for which the financial statements are prepared is
consistent with the financial statements; and
- the strategic report and the directors' report have been prepared in
accordance with applicable legal requirements.
In the light of the knowledge and understanding of the company and its
environment obtained in the course of the audit, we have not identified any
material misstatements in the strategic report or the directors' report.
13. Corporate Governance Statement
The Listing Rules require us to review the directors' statement in relation to
going concern, longer-term viability and that part of the Corporate Governance
Statement relating to the company's compliance with the provisions of the UK
Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each
of the following elements of the Corporate Governance Statement is materially
consistent with the financial statements and our knowledge obtained during the
audit:
- the directors' statement with regards to the appropriateness of adopting
the going concern basis of accounting and any material uncertainties
identified set out on page 24;
- the directors' explanation as to its assessment of the company's
prospects, the period this assessment covers and why the period is appropriate
set out on page 24;
- the directors' statement on fair, balanced and understandable set out on
page 33;
- the board's confirmation that it has carried out a robust assessment of
the emerging and principal risks set out on page 22;
- the section of the annual report that describes the review of
effectiveness of risk management and internal control systems set out on page
22; and
- the section describing the work of the Audit and Risk Committee set out
on pages 31 to 33.
14. Matters on which we are required to report by exception
14.1 Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our
opinion:
- we have not received all the information and explanations we require for
our audit; or
- adequate accounting records have not been kept, or returns adequate for
our audit have not been received from branches not visited by us; or
- the financial statements are not in agreement with the accounting
records and returns.
We have nothing to report in respect of these matters.
14.2 Directors' remuneration
Under the Companies Act 2006 we are also required to report if in our opinion
certain disclosures of directors' remuneration have not been made or the part
of the directors' remuneration report to be audited is not in agreement with
the accounting records and returns.
We have nothing to report in respect of these matters.
15. Other matters which we are required to address
15.1 Auditor tenure
Following the recommendation of the Audit and Risk Committee, we were
appointed by the board of directors on 10 April 2019 to audit the financial
statements for the year ending 31 July 2019 and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals and
reappointments of the firm is six years, covering the years ending 31 July
2019 to 31 July 2024.
15.2 Consistency of the audit report with the additional report to the
Audit and Risk Committee
Our audit opinion is consistent with the additional report to the Audit and
Risk Committee we are required to provide in accordance with ISAs (UK).
16. Use of our report
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company's members those matters we
are required to state to them in an auditor's report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company's members as a
body, for our audit work, for this report, or for the opinions we have formed.
Michael Caullay (Senior statutory auditor)
for and on behalf of Deloitte LLP
Statutory Auditor
Glasgow, United Kingdom
25 September 2024
Statement of Comprehensive Income
for the year ended 31 July 2024
2024 2023
Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000
Net gains on investments held at fair value through profit or loss 2 - 52,343 52,343 - 22,484 22,484
Net gains on derivative contracts 10 - 929 929 - - -
Net foreign currency gains - 3,055 3,055 - 3,920 3,920
Income from investments 3 8,917 - 8,917 8,766 - 8,766
Other interest receivable and similar income 3 54 - 54 20 - 20
Gross return 8,971 56,327 65,298 8,786 26,404 35,190
Investment management fee 4 (705) (1,644) (2,349) (607) (1,416) (2,023)
Administrative expenses 5 (715) - (715) (653) - (653)
Net return before finance costs and taxation 7,551 54,683 62,234 7,526 24,988 32,514
Finance costs 6 (94) (221) (315) (86) (200) (286)
Net return before taxation 7,457 54,462 61,919 7,440 24,788 32,228
Taxation 7 (892) - (892) (877) - (877)
Net return after taxation 6,565 54,462 61,027 6,563 24,788 31,351
Return per share (pence) 8 5.53 45.85 51.38 5.41 20.45 25.86
The "Total" column of this statement is the profit and loss account of the
Company. The "Revenue" and "Capital" columns represent supplementary
information prepared under guidance issued by The Association of Investment
Companies. The Company has no other items of other comprehensive income and
therefore the net return/(loss) after taxation is also the total comprehensive
income for the year.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the year.
The notes on pages 52 to 64 form an integral part of these accounts.
Statement of Changes in Equity
for the year ended 31 July 2024
Called-up Capital Warrant Special
share Share redemption exercise purchase Capital Revenue
capital premium reserve reserve reserve reserves reserve Total
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 31 July 2022 12,200 7 301 3 91,237 170,347 7,334 281,429
Repurchase of the Company's own
shares for cancellation (210) - 210 - (4,359) - - (4,359)
Net return after taxation - - - - - 24,788 6,563 31,351
Dividend paid in the year 9 - - - - - - (5,961) (5,961)
At 31 July 2023 11,990 7 511 3 86,878 195,135 7,936 302,460
Repurchase of the Company's own
shares for cancellation (145) - 145 - (3,426) - - (3,426)
Repurchase of the Company's own
shares into treasury - - - - (2,734) - - (2,734)
Net return after taxation - - - - - 54,462 6,565 61,027
Dividend paid in the year 9 - - - - - - (6,439) (6,439)
At 31 July 2024 11,845 7 656 3 80,718 249,597 8,062 350,888
The notes on pages 52 to 64 form an integral part of these accounts.
Statement of Financial Position
at 31 July 2024
2024 2023
Note £'000 £'000
Fixed assets
Investments held at fair value through profit or loss 10 353,898 331,756
Current assets
Debtors 11 2,382 1,113
Cash and cash equivalents 7,396 4,081
Derivative financial instruments held at fair value through profit or loss 1,343 -
10 11,121 5,194
Current liabilities
Creditors: amounts falling due within one year 12 (13,179) (1,669)
Amounts held at derivative clearing houses and brokers 11 (538) -
Derivative financial instruments held at fair value through profit or loss 10 (414) -
(14,131) (1,669)
Net current (liabilities)/assets (3,010) 3,525
Total assets less current liabilities 350,888 335,281
Creditors: amounts falling due after more than one year 13 - (32,821)
Net assets 350,888 302,460
Capital and reserves
Called-up share capital 14 11,845 11,990
Share premium 15 7 7
Capital redemption reserve 15 656 511
Warrant exercise reserve 15 3 3
Share purchase reserve 15 80,718 86,878
Capital reserves 15 249,597 195,135
Revenue reserve 15 8,062 7,936
Total equity shareholders' funds 350,888 302,460
Net asset value per share (pence) 16 298.88 252.25
These accounts were approved and authorised for issue by the Board of
Directors on 25 September 2024 and signed on its behalf by:
Philip Kay
Chairman
The notes on pages 52 to 64 form an integral part of these accounts.
Registered in England and Wales
Company registration number: 02930057
Notes to the Financial Statements
for the year ended 31 July 2024
1. Accounting policies
(a) Basis of accounting
Schroder Japan Growth Fund plc (the "Company") is registered in England and
Wales as a public company limited by shares. The company's registered office
is 1 London Wall Place, London EC2Y 5AU.
The financial statements are prepared in accordance with the Companies Act
2006, United Kingdom Generally Accepted Accounting Practice ("UK GAAP"), in
particular in accordance with Financial Reporting Standard (FRS) 102 "The
Financial Reporting Standard applicable in the UK and Republic of Ireland",
and with the Statement of Recommended Practice "Financial Statements of
Investment Trust Companies and Venture Capital Trusts" (the "SORP") issued by
the Association of Investment Companies in July 2022. All of the Company's
operations are of a continuing nature.
The financial statements have been prepared on a going concern basis under the
historical cost convention, as modified by the revaluation of investments held
at fair value through profit or loss. The Directors believe that the Company
has adequate resources to continue operating for at least 12 months from the
date of approval of these accounts. In forming this opinion, the Directors
have taken into consideration: the controls and monitoring processes in place;
the Company's level of debt and other payables; the level of operating
expenses, comprising largely variable costs which would reduce pro rata in the
event of a market downturn; and that the Company's assets comprise cash and
readily realisable securities quoted in active markets. In forming this
opinion, the Directors have also considered any potential impact of climate
change, and the risk/impact of elevated and sustained inflation and interest
rates on the viability of the Company. The Company has additionally performed
stress tests which confirm that a 50% fall in the market prices of the
portfolio would not affect the Board's conclusions in respect of going
concern. Further details of Directors' considerations regarding this are given
in the Chairman's Statement, Portfolio Managers' Review, Going Concern
Statement, Viability Statement and under the Emerging Risks and uncertainties
heading on page 22.
The Company has not presented a statement of cash flows, as it is not required
for an investment trust which meets certain conditions; in particular that
substantially all of the Company's investments are highly liquid and carried
at market value.
The financial statements are presented in sterling and amounts have been
rounded to the nearest thousand.
The accounting policies applied to these financial statements are consistent
with those applied in the financial statements for the year ended 31 July
2023.
Other than the Directors' assessment of going concern, no significant
judgements, estimates or assumptions have been required in the preparation of
the accounts for the current or preceding financial year.
(b) Valuation of investments
The Company's business is investing in financial assets with a view to
profiting from their total return in the form of income and capital growth.
This portfolio of financial assets and derivative instruments is managed and
its performance evaluated on a fair value basis, in accordance with
a documented investment strategy and information is provided internally on
that basis to the Company's Board of Directors. Accordingly, upon initial
recognition, the investments are designated by the Company as "held at fair
value through profit or loss". Investments are included initially at
transaction price, excluding expenses incidental to purchase which are written
off to capital at the time of acquisition. Subsequently, investments are
valued at fair value, which are last traded prices as quoted on the Tokyo
Stock Exchange.
The Contracts for Difference (CFD) held in the portfolio are valued based on
the price of the underlying security or index which they are purchased to
reflect. The fair value of the CFDs is the difference between the strike price
and the underlying shares in the contract.
Investments that are unlisted or not actively traded are valued using a
variety of techniques to determine their fair value; all such valuations are
reviewed by both the AIFM's Fair Value Pricing Committee and by the directors.
No investments held at the current or comparative year end have been valued
using other techniques.
All purchases and sales are accounted for on a trade date basis.
(c) Accounting for reserves
Gains and losses on sales of investments and increases and decreases in the
valuation of investments are included in the statement of comprehensive income
and in capital reserves within "gains on investments held at fair value
through profit or loss.
Gains and losses on sales of CFDs and increases and decreases in the valuation
of CFDs are included in the statement of comprehensive income and in capital
reserves within "net gains on derivative contracts.
Foreign exchange gains and losses on cash and deposit balances and unrealised
exchange gains and losses on foreign currency loans are included in the
statement of comprehensive income and in capital reserves.
(d) Income
Dividends receivable are included in revenue on an ex-dividend basis except
where, in the opinion of the board, the dividend is capital in nature, in
which case it is included in capital.
Overseas dividends are included gross of any withholding tax.
Where the Company has elected to receive scrip dividends in the form of
additional shares rather than in cash, the amount of the cash dividend
foregone is recognised in revenue. Any excess in the value of the shares
received over the amount of the cash dividend is recognised in capital.
Deposit interest outstanding at the year end is calculated and accrued on a
time apportionment basis using market rates of interest.
(e) Expenses
All expenses are accounted for on an accruals basis. Expenses are allocated
wholly to the revenue column of the income statement with the following
exceptions:
- The investment management fee is allocated 30% to revenue and 70% to
capital in line with the board's expected long-term split of revenue and
capital return from the Company's investment portfolio.
- Expenses incidental to the purchase or sale of an investment are charged
to capital. These expenses are commonly referred to as transaction costs and
mainly comprise brokerage commission. Details of transaction costs are given
in note 10 on page 56.
(f) Finance costs
Finance costs, including any premiums payable on settlement or redemption and
direct issue costs, are accounted for on an accruals basis using the effective
interest method in accordance with FRS 102.
Finance costs are allocated 30% to revenue and 70% to capital in line with the
board's expected long-term split of revenue and capital return from the
Company's investment portfolio.
(g) Financial instruments
Cash and cash equivalents may comprise cash and demand deposits which are
readily convertible to a known amount of cash and are subject to insignificant
risk of changes in value.
Other debtors and creditors do not carry any interest, are short-term in
nature and are accordingly stated at nominal value, with debtors reduced by
appropriate allowances for estimated irrecoverable amounts.
Bank loans and overdrafts are classified as loans and receivables and are
initially measured at fair value and subsequently measured at amortised cost.
They are recorded at the proceeds received net of direct issue costs. Finance
costs, including any premiums payable on settlement or redemption and direct
issue costs, are accounted for on an accruals basis using the effective
interest method.
(h) Taxation
The tax charge for the year is based on amounts expected to be received or
paid.
Deferred tax is accounted for in accordance with FRS 102.
Deferred tax is provided on all timing differences that have originated but
not reversed by the balance sheet date.
Deferred tax liabilities are recognised for all taxable timing differences but
deferred tax assets are only recognised to the extent that it is probable that
taxable profits will be available against which those timing differences can
be utilised.
Tax relief is allocated to expenses charged to the capital column of the
statement of comprehensive income on the "marginal basis". On this basis, if
taxable income is capable of being entirely offset by revenue expenses, then
no tax relief is transferred to capital.
Deferred tax is measured at the tax rate which is expected to apply in the
periods in which the timing differences are expected to reverse, based on tax
rates that have been enacted or substantively enacted at the accounting date
and is measured on an undiscounted basis.
(i) Foreign currency
In accordance with FRS 102, the Company is required to determine a functional
currency, being the currency in which the Company predominantly 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 and the currency in which the accounts are
presented.
Transactions denominated in foreign currencies are converted at actual
exchange rates as at the date of the transaction.
Monetary assets, liabilities and equity investments denominated in foreign
currencies at the year end, are translated at the rates of exchange prevailing
at the year end.
(j) Dividends payable
In accordance with FRS 102, the final dividend is included in the accounts in
the year in which it is paid.
(k) Repurchase of Ordinary Shares
The costs of repurchasing Ordinary shares including related stamp duty and
transaction costs are taken directly to equity and reported through the
Statement of Changes in Equity as a charge on the share purchase reserve.
Share repurchase transactions are accounted for on a trade date basis.
The nominal value of Ordinary share capital repurchased and cancelled is
transferred out of called up share capital and into the capital redemption
reserve. The nominal value of Ordinary share capital repurchased and held in
treasury remain in the called up share capital reserve.
2. Gains on investments held at fair value through profit or
loss
2024 2023
£'000 £'000
Gains on sales of investments based on historic cost 40,054 16,885
Amounts recognised in investment holding gains and losses in the previous year
in respect of investments
sold in the year (29,179) (17,909)
Gains/(losses) on sales of investments based on the carrying value at the 10,875 (1,024)
previous balance sheet date
Net movement in investment holding gains and losses 41,468 23,508
Gains on investments held at fair value through profit and loss 52,343 22,484
3. Income
2024 2023
£'000 £'000
Income from investments:
Overseas dividends 8,917 8,766
Other interest receivable and similar income
Deposit interest 54 20
Total income 8,971 8,786
4. Investment management fee
2024 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Management fee 705 1,644 2,349 607 1,416 2,023
The basis for calculating the investment management fee is set out in the
Report of the Directors on page 29 and details of all amounts payable to the
Manager are given in note 17 on page 59.
5. Administrative expenses
2024 2023
£'000 £'000
Administration expenses 361 305
Directors' fees1 167 170
Company secretarial fee 90 90
Marketing support fee 58 50
Auditor's remuneration for audit services 39 38
715 653
(1)Details of all amounts payable to Directors are given in the Remuneration
Report on page 38.
6. Finance costs
2024 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Interest on bank loans and overdrafts 94 221 315 86 200 286
7. Taxation
(a) Analysis of tax charge for the year
2024 2023
£'000 £'000
Irrecoverable overseas tax 892 877
Taxation 892 877
(b) Factors affecting tax charge for the year
The tax assessed for the year is lower (2023: lower) than the Company's
applicable rate of corporation tax for the year of 25% (2023: 21%).
The factors affecting the tax charge for the year are as follows:
2024 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Net return before taxation 7,457 54,462 61,919 7,526 24,988 32,514
Net return before taxation multiplied by the Company's
applicable rate of corporation tax for the year of 25% (2023: 21%)
Effects of : 1,864 13,616 15,480 1,562 5,206 6,768
Capital gains on investments - (14,082) (14,082) - (5,545) (5,545)
Income not chargeable to corporation tax (2,229) - (2,229) (1,840) - (1,840)
Unrelieved expenses 365 466 831 278 339 617
Irrecoverable overseas tax 892 - 892 877 - 877
Taxation for the year 892 - 892 877 - 877
(c) Deferred tax
The Company has an unrecognised deferred tax asset of £11,513,000 (2023:
£10,682,000) based on a prospective corporation tax rate of 25.0% (2023:
25%). The main rate of corporation tax increased to 25% for fiscal years
beginning on or after 1 April 2023.
This deferred tax asset has arisen due to the cumulative excess of deductible
expenses over taxable income. Given the composition of the Company's
portfolio, it is not likely that this asset will be utilised in the
foreseeable future and therefore no asset has been recognised in the accounts.
Given the Company's status as an Investment Trust Company, no provision has
been made for deferred tax on any capital gains or losses
8. Return per share
2024 2023
£'000 £'000
Revenue return 6,565 6,563
Capital return 54,462 24,788
Total return 61,027 31,351
Weighted average number of ordinary shares in issue during the year 118,779,949 121,214,425
Revenue return per share (pence) 5.53 5.41
Capital return per share (pence) 45.85 20.45
Total return per share (pence) 51.38 25.86
9. Dividends
Dividend paid and proposed
2024 2023
£'000 £'000
2023 final dividend proposed of 5.40p (2022: 4.90p) to be paid out of revenue 6,4391 5,961
profits
2024 2023
£'000 £'000
2024 final dividend proposed of 10.81p (2023: 5.40p) to be paid out of revenue 12,691 6,475
profits
(1)The 2023 final dividend amounted to £6,475,000. However the amount
actually paid was £6,439,000 as shares were repurchased and cancelled, after
the accounting date, but prior to the dividend Record Date.
The proposed dividend amounting to £12,691,000 (2023: £6,475,000) is the
amount used for the basis of determining whether the Company has satisfied the
distribution requirements of Section 1158 of the Corporation Tax Act 2010. The
revenue available for distribution by way of dividend for the year is
£6,565,000 (2023; £6,563,000).
10. Investments held at fair value through profit or loss
(a) Movement in investments
2024 2023
£'000 £'000
Opening book cost 277,426 264,723
Opening investment holding gains 54,330 48,731
Opening fair value 331,756 313,454
Analysis of transactions made during the year
Purchases at cost 108,919 85,094
Sales proceeds received (139,120) (89,276)
Gains on investments held at fair value 52,343 22,484
Closing fair value 353,898 331,756
Closing book cost 287,279 277,426
Closing investment holding gains 66,619 54,330
Closing fair value 353,898 331,756
All investments are listed on a recognised stock exchange.
The Company received £139,120,000 (2023: £89,276,000) from disposal of
investments in the year. The book cost of these investments when they were
purchased were £99,066,000 (2023: £72,391,000). 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.
(b) Transaction costs
The following transaction costs, mainly comprising brokerage commissions, were
incurred during the year:
2024 2023
£'000 £'000
On acquisitions 23 23
On disposals 30 21
53 44
(c) Derivative financial instruments
2024 2023
Contracts for Differences (CFDs) £'000 £'000
Currency gains on CFDs - -
Movement in investment holding gains on CFDs 929 -
929 -
2024 2024 2023 2023
Asset Fair Asset Fair
exposure value exposure value
Derivative financial instruments held at fair value through profit or loss £'000 £'000 £'000 £'000
CFD assets 32,577 1,343 - -
CFD liabilities 16,117 (414) - -
48,694 929 - -
The CFDs are held in order to increase exposure to stock movements without the
financial commitment of purchasing the stock. The total market exposure on the
CFDs held at the year end is £48,694,000 (2023: £nil) and the liability
attached to the contract for differences is £47,765,000 (2023: nil). This
resulted in a net unrealised gain of £929,000 (2023: £nil).
11. Current Assets
2024 2023
Debtors £'000 £'000
Securities sold awaiting settlement 1,960 750
Dividends and interest receivable 398 338
Other debtors 24 25
2,382 1,113
The Directors consider that the carrying amount of debtors approximates to
their fair value.
2024 2023
Cash and cash equivalents £'000 £'000
Cash at bank 7,396 4,081
Amounts held at derivative clearing houses and brokers (538) -
6,858 4,081
12. Current Liabilities Creditors: amounts falling due within one
year
2024 2023
£'000 £'000
Securities purchased awaiting settlement 1,943 951
Repurchase of ordinary shares into treasury awaiting settlement 109 -
Other creditors and accruals 778 718
Bank loan 10,349 -
13,179 1,669
The Directors consider that the carrying amount of creditors approximates to
their fair value.
The Company has a yen 2.0 billion credit facility available from Sumitomo
Mitsui Banking Corporation, London Branch, which was fully drawn at the year
end (2023: undrawn).
Further details of the facility are given in note 20 on page 59.
13. Creditors: amounts falling due after more than one year
2024 2023
£'000 £'000
Bank loan - 32,821
In addition to the credit facility detailed in Note 12 above, the Company had
a yen 6.0 billion three-year term loan from SMBC Bank International plc, which
was to expire January 2025. The bank loan was fully repaid during the year
(2023: yen 6.0 billion).
14. Called-up share capital
2024 2023
£'000 £'000
Ordinary shares allotted, called-up and fully paid:
Ordinary shares in issue:
Opening balance of 119,903,965 (2023: 122,00,562) ordinary shares of 10p each 11,990 12,200
Repurchase and cancellation of 1,450,679 (2023: 2,096,597) shares (145) (210)
Repurchase of 1,052,758 (2023: nil) shares held in treasury (105) -
Subtotal of 117,400,528 (2023: 119,903,965) shares 11,740 11,990
1,052,758 (2023: nil) shares held in treasury 105 -
Closing balance of 118,453,286 (2023: 119,903,965) shares 11,845 11,990
During the year, the Company purchased 2,503,437 of its own shares, nominal
value £145,000, for cancellation and £105,000 to hold in treasury, for a
total consideration of £6,160,000 representing 2.09% of the shares
outstanding at the beginning of the year. The reason for these share
repurchases was to seek to manage the volatility of the share price discount
to net asset value per share.
15. Reserves
Capital reserves
Gains and Investment
Capital Warrant Share losses on holding
Share redemption exercise purchase sales of gains and Revenue
premium(1) reserve(1) reserve(1) reserve(2) investments(2) losses(3) reserve(4)
2024 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Opening balance 7 511 3 86,878 135,027 60,108 7,936
Gains on sales of investments based on the
carrying value at the previous balance sheet date - - - - 10,875 - -
Net movement in investment holding gains and losses - - - - - 41,468 -
Transfer on disposal of investments - - - - 29,179 (29,179) -
Gains on contracts for difference - - - - - 929 -
Realised exchange losses on cash and short-term deposits - - - - (8) - -
Exchange gains/(losses) on foreign currency loan - - - - 8,282 (5,219) -
Management fee and finance costs allocated to capital - - - - (1,865) - -
Share repurchases for cancellation - 145 - (3,426) - - -
Share repurchases into treasury - - - (2,734) - - -
Dividend paid - - - - - - (6,439)
Retained revenue for the year - - - - - - 6,565
Closing balance 7 656 3 80,718 181,490 68,107 8,062
Capital reserves
Gains and Investment
Capital Warrant Share losses on holding
Share redemption exercise purchase sales of gains and Revenue
premium1 reserve1 reserve2 reserve2 investments2 losses3 reserve4
2023 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Opening balance 7 301 3 91,237 119,908 50,439 7,334
Losses on sales of investments based on the carrying
value at the previous balance sheet date - - - - (1,024) - -
Net movement in investment holding gains and losses - - - - - 23,508 -
Transfer on disposal of investments - - - - 17,909 (17,909) -
Realised exchange losses on cash and short-term deposits - - - - (150) - -
Exchange gains on foreign currency loan - - - - - 4,070 -
Management fee and finance costs allocated to capital - - - - (1,616) - -
Share repurchases for cancellation - 210 - (4,359) - - -
Dividend paid - - - - - - (5,961)
Retained revenue for the year - - - - - - 6,563
Closing balance 7 511 3 86,878 135,027 60,108 7,936
(1)These reserves are not distributable.
(2)These are realised (distributable) capital reserves which may be used to
repurchase the Company's own shares or distributed as dividends.
(3)This reserve comprises holding gains on liquid investments (which may be
deemed to be realised) and other amounts which are unrealised. An analysis has
not been made between those amounts that are realised (and may be distributed
as dividends or used to repurchase the Company's own shares) and those that
are unrealised.
(4)The revenue reserve may be distributed as dividends or used to repurchase
the Company's own shares.
16. Net asset value per share
2024 2023
Net assets attributable to shareholders (£'000) 350,888 302,460
Shares in issue at the year end 117,400,528 119,903,965
Net asset value per share (pence) 298.88 252.25
17. Transactions with the Manager
Under the terms of the AlFM Agreement, the Manager is entitled to receive a
management fee, a marketing support fee and a company secretarial fee. Details
of the AIFM agreement are given in the Report of the Directors on page 29. Any
investments in funds managed or advised by the Manager or any of its
associated companies are excluded from the assets used for the purpose of the
management fee calculation and therefore incur no fee.
The management fee payable in respect of the year ended 31 July 2024 amounted
to £2,349,000 (2023: £2,023,000), of which £613,000 (2023: £535,000) was
outstanding at the year end. The marketing support fee payable to the Manager
amounted to £50,000 (2023: £50,000) of which £13,000 (2023: £13,000) was
outstanding at the year end. The company secretarial fee payable to the
Manager amounted to £90,000 (2023: £90,000) of which £23,000 (2023:
£23,000) was outstanding at the year end.
18. Related party transactions
Details of the remuneration payable to Directors are given in the Remuneration
Report on page 38 and details of Directors' shareholdings are given in the
Report of the Directors on page 39. Details of transactions with the Manager
are given in note 17 above. There have been no other transactions with related
parties during the year (2023: nil).
19. Disclosures regarding financial instruments measured at fair
value
The Company's financial instruments within the scope of FRS 102 that are held
at fair value comprise its investment portfolio and derivative financial
instruments.
FRS 102 requires financial instruments to be categorised into a hierarchy
consisting of the three levels below.
Level 1 - valued using unadjusted quoted prices in active markets for
identical assets.
Level 2 - valued using observable inputs other than quoted prices included
within Level 1.
Level 3 - valued using inputs that are unobservable.
Details of the valuation techniques used by the Company are given in note 1(b)
on page 52.
The following table sets out the fair value measurements using the FRS 102
hierarchy at 31 July:
2024
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Financial instruments held at fair value through profit or loss
Equity investments 353,898 - - 353,898
Derivative financial instruments - contracts for differences (CFDs) - 929 - 929
Total 353,898 929 - 354,827
2023
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Financial instruments held at fair value through profit or loss
Equity investments 331,756 - - 331,756
Total 331,756 - - 331,756
20. Financial instruments' exposure to risk and risk management
policies
The investment objective is set out on the inside front cover of this report.
In pursuing this objective, the Company is exposed to a variety of risks that
could result in a reduction in the Company's net assets or a reduction in
profits available for dividends.
These risks include market risk (comprising currency risk, interest rate risk
and market price risk), liquidity risk and credit risk. The Directors' policy
for managing these risks is set out below. The Board coordinates the Company's
risk management policy.
The objectives, policies and processes for managing the risks and the methods
used to measure the risks that are set out below, have not changed from those
applying in the comparative year.
The Company's classes of financial instruments are as follows:
- investments in shares of Japanese companies which are held in accordance
with the Company's investment objective;
- a credit facility and a term loan, the purpose of which are to manage
working capital requirements and to gear the Company as appropriate;
- short-term debtors, creditors and cash arising directly from its
operations; and
- Contract for differences, which are used for the purpose to gain
exposure to the Japanese market.
(a) Market risk
The fair value or future cash flows of a financial instrument held by the
Company may fluctuate because of changes in market prices. This market risk
comprises three elements: currency risk, interest rate risk and market price
risk. Information to enable an evaluation of the nature and extent of these
three elements of market risk is given in parts (i) to (iii) of this note,
together with sensitivity analyses where appropriate. The Board reviews and
agrees policies for managing these risks and these policies have remained
unchanged from those applying in the comparative year. The Manager assesses
the exposure to market risk when making each investment decision and monitors
the overall level of market risk on the whole of the investment portfolio on
an ongoing basis.
(i) Currency risk
The Company's functional currency and the currency in which it reports, is
sterling. However the Company's assets, liabilities and income are almost
entirely denominated in yen. As a result, movements in the exchange rate will
affect the sterling value of those items.
Management of currency risk
The Manager monitors the Company's exposure to foreign currencies on a daily
basis and reports to the Board, which meets on at least four occasions each
year. The Manager measures the risk to the Company of the foreign currency
exposure by considering the effect on the Company's net asset value and income
of a movement in the yen/sterling exchange rate. It is currently not the
Company's policy to actively hedge against currency risk. However any yen
denominated borrowing acts to reduce the exposure of the Company's portfolio
to the yen/sterling exchange rate. Income is converted to sterling on receipt.
The Company may use short-term forward currency contracts to manage working
capital requirements.
Foreign currency exposure
The fair value of the Company's monetary items that have exposure to the yen
at 31 July are shown below. The Company's investments and derivative financial
instruments (which are not monetary items) have been included separately in
the analysis so as to show the overall level of exposure.
2024 2023
£'000 £'000
Debtors (securities sold awaiting settlement, dividends and interest 2,358 1,080
receivable)
Cash and cash equivalents 5,709 694
Creditors (securities purchased awaiting settlement) (1,943) (951)
Bank loans (including accrued interest payable) (10,373) (32,833)
Foreign currency exposure on net monetary items (4,249) (32,010)
Investments held at fair value through profit or loss that are equities 353,898 331,756
Derivative financial instruments held at fair value through profit or loss 929 -
Total net foreign currency exposure 350,578 299,746
The above year end amounts are broadly representative of the exposure to
foreign currency risk during the current and comparative year.
Foreign currency sensitivity
The following tables illustrate the sensitivity of return after taxation for
the year and net assets with regard to the Company's monetary financial
assets, financial liabilities and exchange rates. The sensitivity analysis is
based on the Company's monetary currency financial instruments held at each
balance sheet date and assumes a 10% (2023: 10%) appreciation or depreciation
in sterling against the yen, which is considered to be a reasonable
illustration based on the volatility of exchange rates during the year.
If sterling had weakened by 10% this would have had the following effect:
2024 2023
£'000 £'000
Statement of comprehensive income - return after taxation
Revenue return 798 782
Capital return (447) (3,221)
Total return after taxation for the year 351 (2,439)
Net assets 35,058 29,975
35,409 27,536
Conversely if sterling had strengthened by 10% this would have had the
following effect:
2024 2023
£'000 £'000
Statement of comprehensive income - return after taxation
Revenue return (798) (782)
Capital return 447 3,221
Total return after taxation for the year (351) 2,439
Net assets (35,058) (29,975)
(35,409) (27,536)
In the opinion of the Directors, the above sensitivity analysis is broadly
representative of the current and comparative year.
(ii) Interest rate risk
Interest rate movements may affect the level of income receivable on cash
deposits and the interest payable on variable rate borrowings when interest
rates are re-set.
Management of interest rate risk
Liquidity and borrowings are managed with the aim of increasing returns to
shareholders. The Company may use gearing to enhance performance (including
the use of CFDs) but investment exposure will not exceed 125% of net asset
value.
The possible effects on cash flows that could arise as a result of changes in
interest rates are taken into account when the Company borrows on the credit
facility. However, amounts drawn down on this facility are for short-term
periods and therefore exposure to interest rate risk is not significant. The
Company has a revolving credit facility agreement which carries a floating
rate of interest and which is therefore exposed to interest rate changes.
Interest rate exposure
The exposure of financial assets and financial liabilities to floating
interest rates, giving cash flow interest rate risk when rates are re-set, is
shown below:
2024 2023
£'000 £'000
Exposure to floating interest rates:
Cash and cash equivalents 7,396 4,081
Creditors: amounts falling due within one year:
Bank loan - revolving credit facility (10,349) -
Creditors: amounts falling due after more than one year :
Bank loan - term loan - (32,821)
Total exposure (2,953) (28,740)
The floating rate assets consist of cash deposits on call. Sterling cash
deposits at call earn interest at floating rates based on Sterling Overnight
Index Average ("SONIA") rates, (2023: same).
The bank loan is a yen 2 billion, 184 day credit facility arrangement with
SMBC, to 10 November 2024. Under the terms of the agreement, interest is
payable at the "Compounded Reference Rate", being the aggregate of the Daily
Non-Cumulative Compounded Risk Free Reference Rate plus the applicable Credit
Adjustment Spread.
During the year, the Company fully repaid its yen 6.0 billion three-year term
loan from SMBC Bank International plc, expiring in January 2025 and carrying a
floating interest rate, calculated at the daily Compounded Risk Free Rate,
plus a 0.8% margin.
The above year end amounts are not representative of the exposure to interest
rates during the year as the level of cash balances has fluctuated. The
maximum and minimum exposure during the year was as follows:
2024 2023
£'000 £'000
Maximum debit interest rate exposure during the year - net debt (41,938) (35,502)
Minimum debit interest rate exposure during the year - net debt (3,491) (27,447)
Interest rate sensitivity
The following table illustrates the sensitivity of the return after taxation
for the year and net assets to a 1.0% (2023: 1.0%) increase or decrease in
interest rates. This level of change is considered to be a reasonable
illustration based on observation of current market conditions. The
sensitivity analysis is based on the Company's monetary financial instruments
held at the accounting date and which are exposed to interest rate movements,
with all other variables held constant.
2024 2023
1.0% increase 1.0% decrease 1.0% increase 1.0% decrease
in rate in rate in rate in rate
£'000 £'000 £'000 £'000
Statement of comprehensive income - return after taxation
Revenue return 38 (38) (58) 58
Capital return (72) 72 (230) 230
Total return after taxation (34) 34 (288) 288
Net assets (34) 34 (288) 288
In the opinion of the Directors, this sensitivity analysis may not be
representative of the Company's future exposure to interest rate changes due
to fluctuations in the level of cash balances and drawings on the credit
facility.
(iii) Market price risk
Market price risk includes changes in market prices, other than those arising
from interest rate risk, which may affect the value of the Company's
investments.
Management of market 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.
Market price risk exposure
The Company's total exposure to changes in market prices at 31 July comprised
its portfolio of investments as follows:
2024 2023
£'000 £'000
Investments held at fair value through profit or loss 353,898 331,756
Derivative financial instruments - portfolio exposure 48,694 -
402,592 331,756
The above data is broadly representative of the exposure to market price risk
during the year.
Concentration of exposure to market price risk
An analysis of the Company's investments is given on page 14. The portfolio
comprises securities listed on Japanese stock markets and CFDs with exposure
to the Japanese stock market. Accordingly there is a concentration of exposure
to that country. However it should be noted that an investment may not be
entirely exposed to the economic conditions in its country of listing.
Market price risk sensitivity
The following table illustrates the sensitivity of the return after taxation
for the year and net assets to an increase or decrease of 10% (2023: 10%) in
the fair values of the Company's investments. This level of change is
considered to be a reasonable illustration based on observation of current
market conditions. The sensitivity analysis is based on the Company's exposure
to market price risk through its portfolio of investments and includes the
impact on the management fee but assumes all other variables are held
constant.
2024 2023
10% increase 10% decrease 10% increase 10% decrease
in fair value in fair value in fair value in fair value
£'000 £'000 £'000 £'000
Statement of comprehensive income - return after taxation
Revenue return (79) 79 (65) 65
Capital return 40,076 (40,076) 33,025 (33,025)
Total return after taxation and net assets 39,998 (39,998) 32,960 (32,960)
Percentage change in net asset value 11.4% (11.4%) 10.9% (10.9%)
(b) Liquidity risk
This is the risk that the Company will encounter difficulty in meeting its
obligations associated with financial liabilities that are settled by
delivering cash or another financial asset.
Management of the risk
Liquidity risk is not significant as the Company's assets comprise mainly
readily realisable securities and derivative instruments, which can be sold to
meet funding requirements if necessary. Short-term flexibility is achieved
through the use of a credit facility.
Liquidity risk exposure
Contractual maturities of financial liabilities, based on the earliest date on
which payment can be required are as follows:
2024 2023
Within Within Two
one one to three
year Total year years Total
£'000 £'000 £'000 £'000 £'000
Creditors: amounts falling due within one year
Securities purchased awaiting settlement 1,943 1,943 951 - 951
Repurchase of ordinary shares into treasury awaiting settlement 109 109 - - -
Other creditors and accruals 753 753 706 - 706
Amounts held at derivative clearing houses and brokers 538 538 - - -
Interest on revolving credit facility 25 25 - - -
Bank loan - revolving credit facility 10,349 10,349 - - -
Creditors: amounts falling due after more than one year
Interest on term loan Term loan - - 263 123 386
Bank loan -- term loan - - - 32,821 32,821
13,717 13,717 1,920 32,944 34,864
(c) Credit risk
Credit risk is the risk that the failure of the counterparty to a transaction
to discharge its obligations under that transaction could result in loss to
the Company.
Management of credit risk
This risk is not significant and is managed as follows:
Portfolio dealing
The Company invests almost entirely in markets that operate a 'Delivery versus
Payment' settlement process, ensuring the security of trades and reducing the
risk of losing the principal amount. This approach extends to various
investment instruments, while Contracts for Difference (CFDs) are settled
through cash payments based on the difference between the opening and closing
prices, rather than physical delivery of the underlying assets. The Manager
continuously monitors dealing activity to ensure best execution, which
involves measuring various indicators including the quality of trade
settlement and incidence of failed trades. Counterparties and brokers must be
pre-approved by the Manager's credit committee. In relation to CFDs,
Counterparty risk is limited to the profit on a contract, not the notional
value. The value in this regard is shown in the table below under credit risk
exposure.
Exposure to the Custodian
The Custodian of the Company's assets is HSBC Bank plc which has Long-Term
Credit Ratings of AA- with Fitch and Aa3 with Moody's.
The Company's investments are held in accounts which are segregated from the
Custodian's own trading assets. If the Custodian were to become insolvent, the
Company's right of ownership of its investments is clear and they are
therefore protected. However the Company's cash balances are all deposited
with the Custodian as banker and held on the Custodian's balance sheet. In
accordance with usual banking practice, the Company will rank as a general
creditor to the Custodian in respect of cash balances.
Credit risk exposure
The following amounts shown in the Statement of Financial Position, represent
the maximum exposure to credit risk at the current and
comparative year end.
2024 2023
£'000 £'000
Current assets
Debtors - securities sold awaiting settlement, dividends and interest 2,382 1,113
receivable and other debtors
Cash and cash equivalents 7,396 4,081
Derivative Financial instruments 1,343 -
11,121 5,194
No debtors are past their due date and no provision has been made for
impairment.
The Company held collateral denominated in Japanese Yen (JPY) in a segregated
account with JPMorgan Chase Bank. The total amount from JPMorgan Chase Bank as
at 31 July 2024 was £538,000.
(d) Fair values of financial assets and financial liabilities
All financial assets and liabilities are either carried at fair value or the
amount in the Statement of Financial Position is a reasonable approximation of
fair value.
21. Capital management policies and procedures
The Company's objectives, policies and processes for managing capital are
unchanged from the preceding year.
The Company's debt and capital structure comprises the following:
2024 2023
£'000 £'000
Debt
Bank loan 10,349 32,821
Equity
Called-up share capital 11,845 11,990
Reserves 339,043 290,470
350,888 302,460
Total debt and equity 361,237 335,281
The Company's capital management objectives are to ensure that it will
continue as a going concern and to maximise the capital return to shareholders
through an appropriate level of gearing. The Board's policy is that the
Company may use gearing to enhance performance (including the use of CFDs) but
investment exposure will not exceed 125% of net asset value. Following the
change in investment policy gross gearing is calculated as the amounts by
which portfolio exposure exceeds net assets expressed as a percentage of net
assets.
2024 2024 2023 2023
Portfolio exposure Portfolio exposure
£'000 %(1) £'000 %(1)
Investments 353,898 100.9 - -
Portfolio exposure on CFDs 48,694 13.9 - -
Total portfolio exposures 402,592 114.8 - -
Net assets 350,888 - -
Gross gearing(2) 14.8 - -
(1)Portfolio exposure to the market expressed as a percentage of net assets.
(2)Gross gearing is the amount by which portfolio exposure exceeds net assets
expressed as a percentage of net assets.
In the prior year the Board's policy was to limit gearing to 25%. Net gearing
for this purpose is defined as borrowings used for investment purposes, less
cash, expressed as a percentage of net assets.
2024 2023
£'000 £'000
Borrowings used for investment purposes, less cash 3,491 28,740
Net assets 350,888 302,460
Net gearing 1.0% 9.5%
The board, with the assistance of the Manager, monitors and reviews the broad
structure of the Company's capital on an ongoing basis. This review includes:
- the planned level of gearing, which takes into account the
Manager's views on the market;
- the need to buy back shares to be held in treasury, which
takes into account the share price discount;
- the opportunity for issues of new shares; and
- the level of dividend distribution in excess of that which
is required to be distributed.
Annual General Meeting - Recommendations
The Annual General Meeting ("AGM") of the Company will be held on Tuesday, 10
December 2024 at 1.00pm The formal Notice of Meeting is set out on page 67.
The following information is important and requires your immediate attention.
If you are in any doubt about the action you should take, you should consult
an independent financial adviser, authorised under the Financial Services and
Markets Act 2000. If you have sold or transferred all of your ordinary shares
in the Company, please forward this document with its accompanying form of
proxy at once to the purchaser or transferee, or to the stockbroker, bank or
other agent through whom the sale or transfer was effected, for onward
transmission to the purchaser or transferee.
Ordinary business
Resolutions 1 to 12 are all ordinary resolutions. Resolution 1 is a required
resolution. Resolution 2 invites shareholders to approve the final dividend.
Resolution 3 concerns the Remuneration Report set out on pages 37 to 40.
Resolutions 4 to 8 invite shareholders to elect or re-elect each of the
Directors for another year, following the recommendations of the Nomination
Committee, set out on pages 35 and 36 (their biographies are set out on pages
26 and 27). Resolutions 9 and 10 concern the re-appointment and remuneration
of the Company's auditors, discussed in the Audit and Risk Committee Report on
pages 31 to 33.
Special business
Resolution 11: Continuation (ordinary resolution)
In accordance with the Company's Articles of Association, the Directors are
required to put forward a proposal for the continuation of the Company to
shareholders at five yearly intervals. The Board considers that the long-term
investment objectives of the Company remain appropriate and that the current
Manager remains well placed to continue to deliver them over the long-term. An
ordinary resolution will therefore be proposed at the AGM to agree that the
Company should continue as an investment trust for a further five year
period.
Resolution 12: Directors' authority to allot shares (ordinary resolution) and
Resolution 13: power to disapply pre-emption rights (special resolution)
The Directors are seeking authority to allot a limited number of unissued
ordinary shares for cash without first offering them to existing shareholders
in accordance with statutory pre-emption procedures.
Appropriate resolutions will be proposed at the forthcoming AGM and are set
out in full in the Notice of AGM. An ordinary resolution will be proposed to
authorise the Directors to allot shares up to a maximum aggregate nominal
amount of £583,441 (being 5% of the issued share capital as at 25 September
2024, excluding any shares held in treasury). A special resolution will also
be proposed to give the Directors authority to allot securities for cash on a
non pre-emptive basis up to a maximum aggregate nominal amount of £583,441
(being 5% of the Company's issued share capital as at 25 September 2024).
The Directors do not intend to allot shares pursuant to these authorities
other than to take advantage of opportunities in the market as they arise and
only if they believe it to be advantageous to the Company's existing
shareholders to do so and when it would not result in any dilution of NAV per
share.
If approved, both of these authorities will expire at the conclusion of the
AGM in 2025 unless renewed, varied or revoked earlier.
Resolution 14: Authority to make market purchases of the Company's own shares
(special resolution)
At the AGM held on 5 December 2023, the Company was granted authority to make
market purchases of up to 17,917,392 ordinary shares of 10p each for
cancellation or to be held in treasury. As at 25 September 2024 2,425,617
shares have been bought back under this authority granted on 5 December 2023
and the Company therefore has remaining authority to purchase up to 15,491,775
ordinary shares. This authority will expire at the forthcoming AGM.
The Directors believe it is in the best interests of the Company and its
shareholders to have a general authority for the Company to buy-back its
ordinary shares in the market as they keep under review the share price
discount to NAV and the purchase of ordinary shares. A special resolution
will be proposed at the forthcoming AGM to give the Company authority to make
market purchases of up to 14.99% of the ordinary shares in issue as at the
date of the Notice of the AGM. The Directors will exercise this authority only
if the Directors consider that any purchase would be for the benefit of the
Company and its shareholders, taking into account relevant factors and
circumstances at the time. Any shares so purchased would be cancelled or held
in treasury for potential reissue. If renewed, the authority to be given at
the 2024 AGM will lapse at the conclusion of the AGM in 2025 unless renewed,
varied or revoked earlier.
Resolution 15: Notice period for general meetings (special resolution)
Resolution 15 set out in the Notice of AGM is a special resolution and will,
if passed, allow the Company to hold general meetings (other than AGMs) on a
minimum notice period of 14 clear days, rather than 21 clear days as required
by the Companies Act 2006. The approval will be effective until the Company's
next AGM to be held in 2025. The Directors will only call general meetings on
14 clear days' notice when they consider it to be in the best interests of
the Company's shareholders and will only do so if the Company offers
facilities for all shareholders to vote by electronic means and when the
matter needs to be dealt with expediently.
Resolution 16: Amendment of the Articles of Association (special resolution)
The Board is proposing to make an amendment to the Articles of Association.
The proposed change is set out below:
Fees of non-executive Directors
The Board's existing aggregate level of Directors' fees is currently set at
£200,000 per annum and it is proposed to increase this level to £250,000 per
annum. The increase in aggregate fees would allow for interest rate fee
increases, necessary appointments and appropriate succession planning.
Recommendations
The Board considers that the resolutions relating to the above items of
special business are in the best interests of shareholders as a whole.
Accordingly, the Board unanimously recommends to shareholders that they vote
in favour of the above resolutions and the other resolutions to be proposed at
the forthcoming AGM, as they intend to do in respect of their own beneficial
holdings.
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of Schroder Japan Trust
plc will be held on Tuesday, 10 December 2024 at 1.00pm at 1 London Wall
Place, London EC2Y 5AU to consider the following resolutions of which
resolutions 1 to 12 will be proposed as ordinary resolutions and resolutions
13 to 16 will be proposed as special resolutions:
1. To receive the Report of the Directors and the audited
Accounts for the year ended 31 July 2024.
2. To approve a final dividend of 10.81p per share for the
year ended 31 July 2024.
3. To approve the Directors' Remuneration Report for the
year ended 31 July 2024.
4. To approve the re-election of Helena Coles as a Director
of the Company.
5. To approve the re-election of Philip Kay as a Director of
the Company.
6. To approve the re-election of Angus Macpherson as a
Director of the Company.
7. To approve the election of Merryn Somerset Webb as a
Director of the Company.
8. To approve the election of Samantha Wren as a Director of
the Company.
9. To re-appoint Deloitte LLP as auditors to the Company.
10. To authorise the Directors to determine the remuneration of
Deloitte LLP as auditors to the Company.
11. To consider, and if thought fit, to pass the following
resolution as an ordinary resolution:
"THAT in accordance with the Articles of Association, the Company
should continue as an investment trust for a further five years."
12. To consider, and if thought fit, pass the following resolution as an
ordinary resolution:
"THAT in substitution for all existing authorities the Directors be
generally and unconditionally authorised pursuant to section 551 of the
Companies Act 2006 (the "Act") to exercise all the powers of the Company to
allot relevant securities (within the meaning of section 551 of the Act) up to
an aggregate nominal amount of £583,441 (being 5% of the issued ordinary
share capital, excluding shares held in treasury, as at 25 September 2024) for
a period expiring (unless previously renewed, varied or revoked by the Company
in a general meeting) at the conclusion of the next Annual General Meeting of
the Company, but that the Company may make an offer or agreement which would
or might require relevant securities to be allotted after expiry of this
authority and the Board may allot relevant securities in pursuance of that
offer or agreement."
13. To consider and, if thought fit, to pass the following resolution as a
special resolution:
"THAT, subject to the passing of Resolution 12 set out above, the
Directors be and are hereby empowered, pursuant to Section 571 of the Act, to
allot equity securities (including any shares held in treasury) (as defined in
section 560(1) of the Act) pursuant to the authority given in accordance with
section 551 of the Act by the said Resolution 12 and/or where such allotment
constitutes an allotment of equity securities by virtue of section 560(2) of
the Act as if Section 561(1) of the Act did not apply to any such allotment,
provided that this power shall be limited to the allotment of equity
securities up to an aggregate nominal amount of £583,441 (representing 5% of
the aggregate nominal amount of the share capital in issue as at 25 September
2024); and provided that this power shall expire at the conclusion of the next
Annual General Meeting of the Company but so that this power shall enable the
Company to make offers or agreements before such expiry which would or might
require equity securities to be allotted after such expiry."
14. To consider and, if thought fit, to pass the following resolution as a
special resolution:
"THAT the Company be and is hereby generally and unconditionally
authorised in accordance with Section 701 of the Companies Act 2006 (the
"Act") to make market purchases (within the meaning of Section 693 of the Act)
of ordinary shares of 10p each in the capital of the Company ("Share") at
whatever discount the prevailing market price represents to the prevailing net
asset value per Share provided that:
(a) the maximum number of Shares which may be purchased is 17,491,548,
representing 14.99% of the Company's issued ordinary share capital as at 25
September 2024 (excluding treasury shares);
(b) the maximum price (exclusive of expenses) which may be paid for a Share
shall not exceed the higher of;
i) 105% of the average of the middle market quotations for the Shares as
taken from the London Stock Exchange Daily Official List for the five business
days preceding the date of purchase; and
ii) the higher of the last independent bid and the highest current
independent bid on the London Stock Exchange;
(c) the minimum price (exclusive of expenses) which may be paid for a Share
shall be 10p, being the nominal value per Share;
(d) this authority hereby conferred shall expire at the conclusion of the next
Annual General Meeting of the Company in 2025 (unless previously renewed,
varied or revoked by the Company prior to such date);
(e) the Company may make a contract to purchase Shares under the authority
hereby conferred which will or may be executed wholly or partly after the
expiration of such authority and may make a purchase of Shares pursuant to any
such contract; and
(f) any Shares so purchased will be cancelled or held in treasury."
15. To consider and, if thought fit, to pass the following resolution as a
special resolution:
"THAT a general meeting, other than an Annual General Meeting, may be
called on no less than 14 clear days' notice."
16. To consider and, if thought fit, to pass the following resolution as a
special resolution:
"THAT the amended Articles of Association as set out in the printed
document produced to the meeting (and initialled by the Chairman of the
meeting for the purposes of identification) be and are hereby approved and
adopted as the Articles of Association of the Company in substitution for, and
to the exclusion of, all existing Articles of Association.
By order of the Board Registered Office:
Schroder Investment Management Limited
1 London Wall Place,
Company Secretary
London EC2Y 5AU
25 September
2024
Registered Number: 02930057
Explanatory Notes to the Notice of Meeting
1. Ordinary shareholders are entitled to attend and vote at the meeting and
to appoint one or more proxies, who need not be a shareholder, as their proxy
to exercise all or any of their rights to attend, speak and vote on their
behalf at the meeting.
A proxy form is attached. If you wish to appoint a person other than
the Chairman as your proxy, please insert the name of your chosen proxy holder
in the space provided at the top of the form. If the proxy is being appointed
in relation to less than your full voting entitlement, please enter in the box
next to the proxy holder's name the number of shares in relation to which they
are authorised to act as your proxy. If left blank your proxy will be deemed
to be authorised in respect of your full voting entitlement (or if this proxy
form has been issued in respect of a designated account for a shareholder,
the full voting entitlement for that designated account). Additional proxy
forms can be obtained by contacting the Company's Registrars, Equiniti
Limited, on +44(0) 121 415 0207, or you may photocopy the attached proxy form.
Please indicate in the box next to the proxy holder's name the number of
shares in relation to which they are authorised to act as your proxy. Please
also indicate by ticking the box provided if the proxy instruction is one of
multiple instructions being given. Completion and return of a form of proxy
will not preclude a member from attending the Annual General Meeting and
voting in person.
On a vote by show of hands, every ordinary shareholder who is present
in person has one vote and every duly appointed proxy who is present has one
vote. On a poll vote, every ordinary shareholder who is present in person or
by way of a proxy has one vote for every share of which he/she is a holder.
However it should be noted that a "Vote Withheld" is not a vote in law and
will not be counted in the calculation of the proportion of the votes 'For'
and 'Against' a resolution.
A proxy form must be signed and dated by the shareholder or his or
her attorney duly authorised in writing. In the case of joint holdings, any
one holder may sign this form. The vote of the senior joint holder who tenders
a vote, whether in person or by proxy, will be accepted to the exclusion of
the votes of the other joint holder and for this purpose seniority will be
determined by the order in which the names appear on the Register of Members
in respect of the joint holding. To be valid, proxy form(s) must be completed
and returned to the Company's Registrars, Equiniti Limited, Aspect House,
Spencer Road, Lancing, West Sussex BN99 6DA, in the enclosed envelope together
with any power of attorney or other authority under which it is signed or a
copy of such authority certified notarially, to arrive no later than 48 hours
before the time fixed for the meeting, or an adjourned meeting. Shareholders
may also appoint a proxy to vote on the resolutions being put to the meeting
online by going to Equiniti's Shareview website, http://www.shareview.co.uk,
and logging in to your Shareview Portfolio. Once you have logged in, simply
click 'View' on the 'My Investments' page and then click on the link to vote
and follow the on-screen instructions. If you have not yet registered for a
Shareview Portfolio, go to http://www.shareview.co.uk and enter the requested
information. It is important that you register for a Shareview Portfolio with
enough time to complete the registration and authentication processes. Please
note that to be valid, your proxy instructions must be received by Equiniti
no later than 1.00pm on Friday 6th December 2024. If you have any difficulties
with online voting, you should contact the shareholder helpline on +44(0) 121
415 0207.
If an ordinary shareholder submits more than one valid proxy
appointment, the appointment received last before the latest time for receipt
of proxies will take precedence.
Shareholders may not use any electronic address provided either in
this Notice of Annual General Meeting or any related documents to communicate
with the Company for any purposes other than expressly stated.
Representatives of shareholders that are corporations will have to
produce evidence of their proper appointment when attending the Annual General
Meeting.
2. Any person to whom this notice is sent who is a person nominated under
section 146 of the Companies Act 2006 to enjoy information rights (a
"Nominated Person") may, under an agreement between him or her and the
shareholder by whom he or she was nominated, have a right to be appointed (or
to have someone else appointed) as a proxy for the Annual General Meeting. If
a Nominated Person has no such proxy appointment right or does not wish to
exercise it, he or she may, under any such agreement, have a right to give
instructions to the shareholder as to the exercise of voting rights.
The statement of the rights of ordinary shareholders in relation to
the appointment of proxies in note 1 above does not apply to Nominated
Persons. The rights described in that note can only be exercised by ordinary
shareholders of the Company.
3. Pursuant to Regulation 41 of the Uncertificated Securities Regulations
2001, the Company has specified that only those shareholders registered in the
Register of Members of the Company business at 6.30 p.m. two days prior to
the date of an adjourned meeting, shall be entitled to attend and vote at the
meeting in respect of the number of shares registered in their name at that
time. Changes to the Register of Members after 6.30 p.m. on 6 December 2024
shall be disregarded in determining the right of any person to attend and vote
at the meeting.
4. CREST members who wish to appoint a proxy or proxies through the CREST
electronic proxy appointment service may do so by using the procedures
described in the CREST manual. The CREST manual can be viewed at
www.euroclear.com. A CREST message appointing a proxy (a "CREST proxy
instruction") regardless of whether it constitutes the appointment of a proxy
or an amendment to the instruction previously given to a previously appointed
proxy must, in order to be valid, be transmitted so as to be received by the
issuer's agent (ID RA19) by the latest time for receipt of proxy appointments.
5. If you are an institutional investor, you may be able to appoint a proxy
electronically via the Proxymity platform, a process which has been agreed by
the Company and approved by the Registrar. For further information regarding
Proxymity, please go to www.proxymity.io. Your proxy must be lodged by 1.00
p.m. on Friday, 6th December 2024 in order to be considered valid. Before you
can appoint a proxy via this process you will need to have agreed to
Proxymity's associated terms and conditions. It is important that you read
these carefully as you will be bound by them, and they will govern the
electronic appointment of your proxy.
6. Copies of the terms of appointment of the non-executive Directors and a
statement of all transactions of each Director and of his family interests in
the shares of the Company, will be available for inspection by any member of
the Company at the registered office of the Company during normal business
hours on any weekday (English public holidays excepted) and at the Annual
General Meeting by any attendee, for at least 15 minutes prior to, and during,
the Annual General Meeting. None of the Directors has a contract of service
with the Company.
7. The biographies of the Directors offering themselves for election and
re-election are set out on pages 26 and 27 of the Company's annual report and
financial statements for the year ended 31 July 2024.
8. As at 25 September 2024, 118,453,286 ordinary shares of 10 pence each
were in issue (1,765,177 shares were held in treasury). Therefore the total
number of voting rights of the Company as at 25 September 2024 was
116,688,109.
9. A copy of this notice of meeting, which includes details of shareholder
voting rights, together with any other information as required under Section
311A of the Companies Act 2006, is available from the Company's webpages,
https://www.schroders.com/japantrust.
10. Pursuant to Section 319A of the Companies Act 2006, the Company must cause
to be answered at the Annual General Meeting any question relating to the
business being dealt with at the Annual General Meeting which is put by a
member attending the meeting, except in certain circumstances, including if it
is undesirable in the interests of the Company or the good order of the
meeting that the question be answered or if to do so would involve the
disclosure of confidential information.
11. The Company's privacy policy is available on its webpages.
https://www.schroders.com/japantrust. Shareholders can contact Equiniti for
details of how Equiniti processes their personal information as part of the
AGM.
Definitions of Terms and Alternative Performance Measures
The terms and performance measures below are those commonly used by investment
companies to assess values, investment performance and operating costs.
Numerical calculations are given where relevant. Some of the financial
measures below are classified as APMs as defined by the European Securities
and Markets Authority. Under this definition, APMs include a financial measure
of historical financial performance or financial position, other than
a financial measure defined or specified in the applicable financial
reporting framework. APMs have been marked with an asterisk.
Net asset value ("NAV") per share
The NAV per share of 298.88p (31 July 2023: 252.25p) represents the net assets
attributable to equity shareholders of £350,888,000 (31 July 2023:
£302,460,000) divided by the number of shares in issue of 117,400,528 (31
July 2023: 119,903,965).
The change in the NAV amounted to +18.5% (year ended 31 July 2023: +9.4%) over
the year. However, this performance measure excludes the positive impact of
dividends paid out by the Company during the year. When these dividends are
factored into the calculation, the resulting performance measure is termed the
"total return". Total return calculations and definitions are given below.
Total return*
The combined effect of any dividends paid, together with the rise or fall in
the share price or NAV per share. Total return statistics enable the investor
to make performance comparisons between investment companies with different
dividend policies. Any dividends received by a shareholder are assumed to have
been reinvested in either the assets of the Company at its NAV per share at
the time the shares were quoted ex-dividend (to calculate the NAV per share
total return) or in additional shares of the Company (to calculate the share
price total return).
The NAV total return for the period ended 31 July 2024 is calculated as
follows:
Opening NAV at 31/7/23 252.25p
Closing NAV at 31/7/24 298.88p
NAV on
Dividend received XD date XD date Factor
5.4p 2/11/23 250.95p 1.022
NAV total return, being the closing NAV,
multiplied by the factor, expressed as a
percentage change in the opening NAV:
21.0%
The NAV total return for the year ended 31 July 2023 is calculated as follows:
Opening NAV at 31/7/22 230.68p
Closing NAV at 31/7/23 252.25p
NAV on
Dividend received XD date XD date Factor
4.9p 3/11/22 228.35p 1.021
NAV total return, being the closing NAV,
multiplied by the factor, expressed as a
percentage change in the opening NAV: +11.7%
The share price total return for the year ended 31 July 2024 is calculated as
follows:
Opening share price at 31/7/23 234.00p
Closing share price at 31/7/24 266.00p
Share
price on
Dividend received XD date XD date Factor
5.4p 2/11/23 230.00p 1.022
Share price total return, being the closing share
price, multiplied by the factor, expressed as a
percentage change in the opening share price: 16.1%
Share price total return for the year ended 31 December 2023 is calculated as
follows:
Opening share price at 31/7/22 202.00p
Closing share price at 31/7/23 234.00p
Share
price on
Dividend received XD date XD date Factor
4.9p 3/11/22 200.50p 1.024
Share price total return, being the closing share
price, multiplied by the factor, expressed as a
percentage change in the opening share price: +18.7%
Benchmark
The measure against which the Company compares its performance. The Benchmark
is now named Tokyo Stock Price Index Total Return since April 4, 2022,
previously known as TSE First Section Total Return Index.
Discount/premium*
The amount by which the share price of an investment trust is lower (discount)
or higher (premium) than the NAV per share. If shares are trading at a
discount, investors would be paying less than the value attributable to the
shares by reference to the underlying assets. A premium or discount is
generally the consequence of supply and demand for the shares on the stock
market. The discount or premium is expressed as a percentage of the NAV per
share. The discount at the year end amounted to 11.0% (31 July 2023: 7.2%), as
the closing share price at 266.00p (31 July 2023: 234.00p) was 11.0% (31 July
2023: 7.2%) lower than the closing NAV of 298.88p (31 July 2023: 252.25p).
Gearing*
The gross gearing percentage reflects the portfolio exposure to the market but
will not exceed 125% of net asset value. Gross gearing is defined as the
amount by which portfolio exposure exceeds the net asset values expressed as
percentages of net asset value.
2024 2024 2023 2023
Portfolio exposure Portfolio exposure
£'000 % £'000 %
Investments 353,898 100.9 - -
CFDs 48,694 13.9 - -
Total Portfolio exposures 402,592 114.8 - -
Net assets 350,888
Gross gearing 14.8
Before the change investment policy the net gearing percentage reflected the
amount of borrowings (i.e. bank loans or overdrafts) which the Company has
drawn down and invested in the market. This figure is indicative of the extra
amount by which shareholders' funds would move if the Company's investments
were to rise or fall. Net gearing is defined as: borrowings used for
investment purposes, less cash, expressed as a percentage of net assets. The
gearing figure at the relevant year end is calculated as follows:
2024 2023
£'000 £'000
Borrowings used for investment
purposes, less cash 3,491 28,740
Net assets 350,888 302,460
Net gearing 1.0% 9.5%
Leverage*
For the purpose of the Alternative Investment Fund Managers (AIFM) Directive,
leverage is any method which increases the Company's exposure, including the
borrowing of cash and the use of derivatives. It is expressed as the ratio of
the Company's exposure to its net asset value and is required to be calculated
both on a "Gross" and a "Commitment" method. Under the Gross method, exposure
represents the sum of the absolute values of all positions, so as to give an
indication of overall exposure. Under the Commitment method, exposure is
calculated in a similar way, but after netting off hedges which satisfy
certain strict criteria.
The Company's leverage policy and details of its leverage ratio calculation
and exposure limits as required by the AIFM Directive are published on the
Company's webpages and within this report. The Company is also required to
publish periodically its actual leverage exposures. As at 31 July 2024 these
were:
Leverage exposure Maximum ratio Actual ratio
Gross method 200.0% 114.8%
Commitment method 200.0% 114.8%
Ongoing Charges*
Ongoing Charges is calculated in accordance with the AIC's recommended
methodology and represents the management fee and all other operating expenses
excluding finance costs and transaction costs, amounting to £3,064,000 (31
July 2023: £2,676,000), expressed as a percentage of the average daily "net
asset values" during the year of £320.9 million (31 July 2023:
£286.2 million).
*Alternative performance Measures ("APMs").
Shareholder Information
Web pages and share price information
The Company has dedicated webpages, which may be found at
https://www.schroders.com/japantrust. The webpages have been designed to be
utilised as the Company's primary method of electronic communication with
shareholders. It contains details of the Company's ordinary share price and
copies of annual reports and other documents published by the Company as well
as information on the Directors, terms of reference of Committees and other
governance arrangements. In addition, the webpages contain links to
announcements made by the Company to the market, Equiniti's shareview service
and Schroders' website. There is also a section entitled "How to Invest".
The Company releases its NAV on both a cum and ex-income basis to the market
on a daily basis.
Share price information may also be found in the Financial Times and on the
Company's webpages.
Association of Investment Companies
The Company is a member of the Association of Investment Companies. Further
information on the Association can be found on its website, www.theaic.co.uk.
Individual Savings Account ("ISA") status
The Company's shares are eligible for stocks and shares ISAs.
Non-Mainstream Pooled Investments status
The Company currently conducts its affairs so that its shares can be
recommended by IFAs to ordinary retail investors in accordance with the FCA's
rules in relation to non-mainstream investment products and intends to
continue to do so for the foreseeable future. The Company's shares are
excluded from the FCA's restrictions which apply to non-mainstream investment
products because they are shares in an investment trust.
Financial calendar
Half year results announced March
Financial year end 31 July
Annual results announced September
Final dividend paid December
Annual General Meeting December
Alternative Investment Fund Managers ("AIFM") Directive
Certain pre-sale, regular and periodic disclosures required by the AIFM
Directive may be found either in this annual report or on the Company's
webpages.
The Company's leverage policy and details of limits on leverage required under
the AIFM Directive are published on the Company's webpages.
Illiquid assets
As at the date of this report, none of the Company's assets are subject to
special arrangements arising from their illiquid nature.
Remuneration disclosures
Quantitative remuneration disclosures to be made in this annual report in
accordance with FCA Handbook rule FUND3.3.5 may also be found in the AIFM's
website www.schroders.com/rem-disclosures, which will have the information for
the reporting period 31 December 2023.
Publication of Key Information Document ("KID") by the AIFM
Pursuant to the Packaged Retail and Insurance Based Products ("PRIIPs")
Regulation, the Manager, as the Company's AIFM, is required to publish a short
KID on the Company. KIDs are designed to provide certain prescribed
information to retail investors, including details of potential returns under
different performance scenarios and a risk/reward indicator. The Company's KID
is available on its webpages.
Warning to shareholders
Companies are aware that their shareholders have received unsolicited
telephone calls or correspondence concerning investment matters. These are
typically from overseas-based 'brokers' who target UK shareholders, offering
to sell them what often turn out to be worthless or high risk shares or
investments.
These operations are commonly known as 'boiler rooms'. These 'brokers' can be
very persistent and extremely persuasive.
Shareholders are advised to be wary of any unsolicited advice, offers to buy
shares at a discount or offers of free company reports. If you receive any
unsolicited investment advice:
• Make sure you get the correct name of the person and
organisation
• Check that they are properly authorised by the FCA
before getting involved by visiting https://register.fca.org.uk.
• Report the matter to the FCA by calling 0800 111 6768
or visiting www.fca.org.uk/consumers/report-scam-unauthorised- firm.
• Do not deal with any firm that you are unsure about.
If you deal with an unauthorised firm, you will not be eligible to receive
payment under the Financial Services Compensation Scheme.
The FCA provides a list of unauthorised firms of which it is aware, which can
be accessed at
https://www.fca.org.uk/consumers/unauthorised-firms-individuals#list.
More detailed information on this or similar activity can be found on the FCA
website at https://www.fca.org.uk/consumers/protect-yourself-scams.
Dividends
Paying dividends into a bank or building society account helps reduce the risk
of fraud and will provide you with quicker access to your funds than payment
by cheque.
Applications for an electronic mandate can be made by contacting the
Registrar, Equiniti.
This is the most secure and efficient method of payment and ensures that you
receive any dividends promptly.
If you do not have a UK bank or building society account, please contact
Equiniti for details of their overseas payment service.
Further information can be found at www.shareview.co.uk, including how to
register with Shareview Portfolio and manage your shareholding online.
Information about the Company
www.schroders.com/japantrust
Directors
Philip Kay (Chairman)
Helena Coles
Alan Gibbs
Angus Macpherson
Merryn Somerset Webb
Samantha Wren
Registered Office
1 London Wall Place
London EC2Y 5AU
Tel: +44 (0) 20 7658 6000
Advisers and service providers
Alternative Investment Fund Manager (the "Manager")
Schroder Unit Trusts Limited
1 London Wall Place
London EC2Y 5AU
Investment Manager and Company Secretary
Schroder Investment Management Limited
1 London Wall Place
London EC2Y 5AU
Email: amcompanysecretary@schroders.com
Depositary and Custodian
HSBC Bank plc
8 Canada Square
London E14 5HQ
Lending bank
SMBC Bank International plc
99 Queen Victoria Street
London EC4V 4EH
Corporate broker
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Independent auditor
Deloitte LLP
2 New Street Square
London EC4A 3BZ
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Shareholder helpline: 0121-415-0207
Website: www.shareview.co.uk (http://www.shareview.co.uk)
Communications with shareholders are mailed to the address held on the
register. Any notifications and enquiries relating to shareholdings, including
a change of address or other amendment should be directed to Equiniti Limited
at the address above.
Other information
Shareholder enquiries
General enquiries about the Company should be addressed to the Company
Secretary at the Company's registered office.
Company number
02930057
Dealing codes
ISIN Number: GB0008022849
SEDOL Number: 0802284
Ticker: SJG
Global Intermediary Identification Number (GIIN)
7T0909.99999.SL.826
Legal Entity Identifier (LEI)
549300SSPK3AXNJOC673
Privacy notice
The Company's privacy notice is available on its webpages.
Status of announcement
2023 Financial Information
The figures and financial information for 2023 are extracted from the
published Annual Report and Accounts for the period ended 31 July 2023 and do
not constitute the statutory accounts for that year. The 2023 Annual Report
and Accounts have been delivered to the Registrar of Companies and included
the Report of the Independent Auditors which was unqualified and did not
contain a statement under either section 498(2) or section 498(3) of the
Companies Act 2006.
2024 Financial Information
The 2024 Annual Report and Financial Statements include the Report of the
Independent Auditors which is unqualified and does not contain a statement
under either section 498(2) or section 498(3) of the Companies Act 2006. The
2024 Annual Report and Accounts will be delivered to the Registrar of
Companies in due course.
Neither the contents of the Company's webpages nor the contents of any website
accessible from hyperlinks on the Company's webpages (or any other website) is
incorporated into, or forms part of, this announcement.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR SEEFAIELSEDU