Fidelity Japan Trust Plc - Annual Financial Report
FIDELITY
Final Results for the year ended
Financial Highlights:
-- During the year ended 31 December 2024 , Fidelity Japan Trust PLC
-- Over the same period, the ordinary share price total return of the
Company was -5.7%.
-- Following news of the retirement of Nicholas Price at the end of 2025,
his Assistant Portfolio Manager, Ying Lu , will become the Portfolio
Manager of the company with effect from 1 October 2025 .
-- The Board is proposing an unconditional tender offer of 100% of the
Company’s issued share capital following the three years to 31 December
2027 .
Contacts
For further information, please contact:
Company Secretary
0207 961 4240
CHAIRMAN’S STATEMENT
I am pleased to present the Annual Report of
The Company has an all-cap mandate and
Illustrative of the challenges of being a growth orientated manager in
DISCOUNT MANAGEMENT, SHARE REPURCHASES AND TREASURY SHARES
The Board has an active approach to discount management, the primary purpose of which is to reduce discount volatility. Over the course of the year, 10,828,535 ordinary shares were repurchased for holding in
While we would like to see our share price discount to NAV in single figures, discounts have remained wide across the whole investment companies’ universe, averaging 14.7% at the end of 2024. The Company’s shares began the year under review at a 9.5% discount and ended it at 13.1%.
At the forthcoming Annual General Meeting (AGM) on
A sustained reduction in the discount of the Company is only likely if broad investor interest in
ONGOING CHARGES RATIO
The ongoing charges ratio for the year, including the variable element, is 0.83% (2023: 0.84%). This comprises a fixed charge of 1.03% (2023: 0.99%) and a variable credit of 0.20% (2023: 0.15%), the maximum refund under the variable fee arrangement. The variable management fee credit is due to the Company’s underperformance in comparison to its Reference Index on a rolling three-year basis.
The Board believes that the variable fee arrangement whereby the Manager is rewarded for outperformance, but shareholders are rebated if the portfolio underperforms, is a significant corporate governance benefit for investors.
GEARING
The Board continues to believe that gearing is a distinct advantage of the investment trust structure and will benefit the performance of the Company. The Company’s use of long Contracts for Difference (CFDs) is a differentiating factor, providing more flexibility and at a low-er cost than traditional bank debt. The level of gearing remained fairly constant in the year under review, beginning 2024 at 23.1% and standing at 24.0% at the year end.
UNLISTED COMPANIES
While there is authority from shareholders for the Company to invest up to 20% of its assets in unlisted companies, the Board has limited the proportion of the portfolio held in unlisted companies to a maximum of 10% while the IPO market in
The actual exposure to unlisted holdings at the end of the year was 6.6% of net assets (2023: 6.3%) across a total of seven companies. This is unchanged from last year.
Twice yearly, the Audit Committee meets specifically to review the unlisted investments together with Fidelity’s Fair Value Committee, Fidelity’s unlisted Asian investments specialist and representatives from Kroll, the independent valuation specialists.
Further details can be found in the Portfolio Manager’s Review below.
DUE DILIGENCE TRIP
As detailed in the half-yearly report for the six months ended
BOARD OF DIRECTORS
As covered in the 2023 Annual Report,
ANNUAL GENERAL MEETING
Once again, we will be holding a ‘hybrid’ AGM, allowing attendance and voting in real time online as well as in person. The AGM is a valuable opportunity for us as a Board to engage with shareholders.
Further details of the AGM are set out in the Annual Report.
PORTFOLIO MANAGER CHANGE AND CONTINUATION VOTE
The Board has recently been notified that the Portfolio Manager,
The Board continues to believe that the Fidelity investment team in
Notwithstanding our strong backing for Nicholas and the Fidelity team, we recognise that continued underperformance would be unacceptable to our shareholders. Accordingly, linked to the vote for the continuation of the Company at the forthcoming AGM, we are proposing an unconditional tender offer of 100% of the Company’s issued share capital (excluding shares held in
Shareholders may ask why the Board is recommending continuation without an immediate cash exit after this period of underperformance. Investment performance has an element of cyclicality, outcomes are unpredictable and investing requires an ability to withstand the gyrations of the markets and take a long-term view. The question for the Board and shareholders is whether a well-resourced and experienced team with a strong historic track record should be dismissed based on the last three years, or whether there is a strong possibility that the current growth-oriented portfolio, highly differentiated from the Reference Index, will emerge from its recent trough/doldrums and deliver the sorts of returns that we and shareholders expect. The Board has taken this view.
The tender offer will be in place for the Company’s Annual General Meeting to be held in
The Board is proposing to extend the time period to draw up proposals regarding the Company’s voluntary liquidation and/or reorganisation and hold a general meeting at which they are submitted to members in the event of an unsuccessful continuation vote, from three to six months. The proposed new time period, which runs from the date of the general meeting at which the unsuccessful vote occurs, is felt to provide a more practicable period to allow proposals to be fully considered and to be in line with market practice.
We have also taken the opportunity to make other changes of a minor, clarificatory or technical nature, including clarifications in relation to hybrid general meetings to follow how practice has developed. However, the amendments do not provide for, and the Board has no intention to move to, fully virtual meetings. A full tracked version of all the changes proposed to the Articles is available at www.fidelity.co.uk/japan . The principal changes proposed to the Articles are set out in more detail in the Annual Report.
OUTLOOK
As mentioned, the Company has generated significant outperformance in the past, and we have every reason to believe that Nicholas, Ying and the Fidelity investment team will do so again. While underperformance is always disappointing, it is at least understandable in times where a tried-and-tested investment approach is at odds with the prevailing market mood. The team are resolute in their commitment to identifying companies where the market is underestimating or mispricing future growth, including those which may be at an early stage of their development, and their bottom-up stock selection approach and multi-cap focus has the full backing of the Board. Where share prices have declined, this has only served to make low valuations even more compelling for businesses with good long-term growth prospects.
The broadening out of the TSE reforms remains encouraging and should lead to a clear improvement in capital efficiency and shareholder returns in companies further down the market cap scale than those that have led the performance of the broad Japanese market in the past two years. Meanwhile, valuations of growth stocks remain low in historical terms and relative to other markets, despite the Japanese market featuring many companies positively exposed to global megatrends such as the growth of artificial intelligence. The Bank of Japan seems committed to a return to positive interest rates, and a sustained but modest level of inflation in both wages and prices could boost consumer and business confidence. Another area of support for the market can be seen in the increase in merger and acquisition activity in
Your Board remains focused on ensuring the Company returns to delivering strong investment performance and is confident that the portfolio is well placed to benefit from this more positive outlook for the Japanese market.
Chairman
PORTFOLIO MANAGER’S REVIEW
QUESTION
The performance for the year under review has remained challenging given the positive headlines of recovery in
ANSWER
It is disappointing to report to our shareholders on another year of poor performance against favourable headlines in
QUESTION
What were the key contributors and detractors for the performance of the Company in the year to
ANSWER
The major contributors to performance over the year included
Ryohin Keikaku
, operator of the MUJI brand of general
merchandise stores. Management is executing incredibly well, and the business is generating double-digit sales growth domestically and in
The most significant detractors from performance over the 12-month review period included
Mitsui High-tec
, a leading supplier of hybrid/EV motor cores and leadframes, which is an essential component that connects semiconductor chips and external circuitry. Prolonged inventory adjustments of leadframes and sluggish demand for motor cores prompted the company to announce a downward revision to its full-year earnings forecast. However, leadframes appear to be at the bottom of the cycle and renewed growth in the motor core segment, supported by further hybrid penetration, is expected to lead to a recovery in earnings and a rerating from its current 10x price-to-earnings level.
Harmonic Drive Systems
, a leading manufacturer of mechatronic drive systems and precision gears for industrial robots, negatively revised its fiscal 2024 earnings guidance due to the slow pace of recovery in the factory automation (FA) sector, which reflects protracted inventory destocking. We retain our view that a sequential improvement in orders and an upturn in valuations will take place in 2025. Funeral services operator
Kosaido Holdings
was a strong performer in 2023 but faced
profit taking at the start of the review year. Its share price came under further pressure following the resignation of its President and CEO,
The ten highest stock contributors and detractors to the NAV total return on a relative basis are shown in the Annual Report.
QUESTION
How has the Company’s portfolio changed over the period? Are there any sectors in which you are particularly interested?
ANSWER
Against this backdrop, the task has been to continuously re-test arguments for holding every name in the portfolio and selling those that do not exhibit the excellent execution/valuation anomalies that underpin our investment approach. I believe that these future drivers of performance will work when fundamentals reassert themselves. In the short-term, the market is a voting machine but over the longer-term it is a weighing machine, and cheap mid-cap growth with favourable fundamentals will find favour again. As such, I expect a clear mean reversion in the performance of mid-cap companies, which account for around 50% of the Company’s active weight.
With the guidance of the Board, I have also placed renewed emphasis on the Company being an all-cap portfolio that will do well even if a large-cap market continues to dominate. I have re-allocated the capital from names that did not meet our criteria to larger-cap growth names such as
Recruit Holdings
and
Ajinomoto
in the food sector. Given the interest rate regime change in
QUESTION
ANSWER
So far, the highest disclosure rates have been concentrated in large-cap, low price-to-book companies in sectors including banks, shipping, utilities and commodities. However, the TSE-led reforms are broadening out across the market. Through our engagements, we are seeing growth and mid-cap companies becoming more active in their shareholder returns. Given that mid/small-caps have a large presence both in absolute numbers and the proportion that trade below book value, there are grounds for optimism.
Many mid/small-cap companies have solid balance sheets with high net cash to market capitalisation ratios, which means that they can easily conduct share buybacks to improve their returns on equity (RoE). As we have already seen among larger companies, higher rates of disclosure translate into better share price performance, and in 2025 mid/small-caps are likely to emulate these trends.
From a valuation perspective, Japanese mid/small-caps are trading at a steep price-to-book discount to the larger-cap indices and have lost the price-earnings premium that was a constant feature of the past decade or so. As we have seen in the past, when the valuation cycle widens to such an extreme level, it tends to snap back and compliance with the TSE reforms can prompt this.
Interestingly, in addition to a rise in share buybacks, we are seeing a clear increase in corporate activity through management buyouts, tender offers and mergers and acquisitions (M&A) more broadly. As noted by KKR founder
Question
What engagements did you conduct over the year?
Answer
In 2024, the engagement team in
In terms of specific engagements with investee companies, we worked with Riken Keiki , a world leader in gas detectors, to develop its capital strategy and tackle its low price-to-book ratio. The company has an excellent business model with stable long-term profit and free cashflow growth among Prime companies, but its price-to-book ratio is low, and the denominator of returns on equity (RoE) is inflated due to excessive equity capital in pursuit of stability, resulting in poor capital efficiency. The company understands the points raised and is preparing to respond to the TSE. We requested the company to strengthen its investor relations (IR) activities, especially to increase the number of IR meetings from twice a year to avoid inadvertent underperformance of the stock price.
In September, our engagement team met with a senior managing director from
Around the same time, we engaged with industrial electronics company Mitsubishi Electric . In terms of its business strategy, we discussed the company’s efforts to implement structural changes, moving from a pure hardware player to a software and solutions provider, and bridge the profitability gap with its US and European peers. We explained that the current level of disclosure is insufficient to accurately gauge its progress on reforms and that information at a segmental level would enable investors to assess the capital efficiency of its various businesses and thereby attain a holistic view of its overall portfolio. On the governance side, we spoke about the need to address the company’s cross shareholdings and the low valuations of its listed subsidiaries. Management agreed and it was reassuring to hear that they had identified the same issues internally. At the same time, we encouraged the company to establish a clear dividend policy given its ability to generate stable free cashflows, a move that would provide reassurance to investors should the cyclical environment change.
Question
What is your approach to gearing? And what impact did it have on returns during the year?
Answer
The level of gearing was little changed over the year and closed the year at 24.0% (versus 23.1% at the end of 2023). If we see a sustained uptrend in Japanese stocks, then I would be inclined to reduce the level of gearing employed. However, I am happy with where market valuations currently stand, and the leverage is deployed in stable growth companies rather than high beta names. So, overall, I am comfortable with the Company’s current positioning. Over the course of 2024, the CFDs had a modest positive impact on absolute returns, notably through the exposure to speciality retailer
Ryohin Keikaku
and HR company
Recruit
Holdings
.
Question
How has the Company’s exposure to unlisted companies changed during the year under review?
Answer
As always, we continue to evaluate new opportunities, while maintaining a disciplined approach towards valuations. At the end of the review period, we continued to hold seven unlisted names, representing 6.6% of net assets. While there were no changes during the review period, we expect specific unlisted companies held in the portfolio to list in 2025.
Question
There are many geopolitical uncertainties in 2025. What will you be focusing on in the year ahead?
Answer
Turning to the outlook for 2025, there are many geopolitical uncertainties and unknowns, so I am focusing stock selection based on individual company’s self-reliance and growth drivers, and where the market is substantially mis-pricing the growth potential.
Ryohin Keikaku
, which runs the MUJI brand, is one such stock. Under a new management team, it has substantially transformed its marketing and development and internal management systems, and with successful products starting to emerge, it has substantial room to increase profitability as it
ramps up changes to its supply chain management. Our internal estimates are substantially ahead of the street and the stock trades at around half the multiple of its domestic counter parts such as Fast Retailing (Uniqlo) despite faster growth, leaving significant upside potential for the stock in the year ahead. Another example is
Recruit Holdings
, which owns a job platform called “Indeed”. The key catalyst for Recruit as a dominant global job platform with pricing power is to raise its take rate from the current low 1% to 2-3% over the mid-term, which would substantially boost its earnings outlook versus consensus. Among mega-cap financials, insurer
Sompo Holdings
with better balance sheet management is offering an 8% total shareholder return and remains very discounted to its global and domestic peers.
Within the mid-cap space, many double-digit growers – such as Kosaido Holdings (funerals), Mizuno (sports) and Premium Group (auto finance) – are all trading at deeply discounted price-to-earnings valuations and are potential sources of future performance as their earnings growth continues to come through. One top active position is Osaka Soda whose performance was poor in 2024 after strong gains in 2023. We think the market is underestimating the potential of its silica gel which is used in the GLP-1 market for obesity drugs. The company will also benefit when generics start to appear from 2026 and massively increase the size of the branded drugs market.
I would also add that I expect some of the unlisted companies held in the portfolio to list in 2025, which may offer some upside versus their current assessed valuations. In particular, I would highlight the position in
Question
The Company’s underperformance compared to the Reference Index this year and over the longer-term is disappointing for shareholders. What have been the key drivers and what are your expectations for the coming months?
Answer
What can we learn from looking at past performance? From
Turning to the second period, bottom-up stock selection was broadly negative, as was sector selection (especially being underweight in banks and insurance). In terms of stock selection, there were two main buckets of underperformance:
In this second period and looking specifically at 2024 performance, stock selection was negatively impacted by weaker sentiment towards the FA space and the recovery potential for names such as
Harmonic Drive Systems
, as well as
Mitsui High-tec
in the automobile sector. These factors negated the strong
performance of some of the unique names in the portfolio, such as
Sanrio
(anime characters) and
Yonex
(sports equipment). Our analysis shows that most of the underperformance was due to temporary one-off issues and that the companies are already recovering as we enter 2025. As such, they are worthwhile retaining to enjoy a large upside potential to mid-term earnings from hybrid cars for
Mitsui High-tec
and a recovery in the robot market and the growth of humanoid robots for
As detailed above, reorientating the portfolio further towards an all-cap focus, I have increased the Company’s positions in high-conviction names such as Ryohin Keikaku (MUJI) and Olympus (endoscopes) by using the proceeds from selling some of the older poorly performing positions ( Kansai Paint and Oriental Land ) and some profit taking in strong performers ( Tokyo Electron and other semiconductor-related names), and combined with a more diversified sector allocation, I am confident that this will pay off in better performance in 2025.
Portfolio Manager
Strategic Report
Principal Risks and Uncertainties and Risk Management
As required by provisions 28 and 29 of the 2018 UK Corporate Governance Code, the Board has a robust ongoing process for identifying, evaluating and managing the principal risks and uncertainties faced by the Company, including those that could threaten its business model, future performance, solvency or liquidity. The Board, with the assistance of the
The Manager also has responsibility for risk management for the Company. It works with the Board to identify and manage the principal and emerging risks and uncertainties and to ensure that the Board can continue to meet its
The Board considers the risks listed below as the principal risks and uncertainties faced by the Company.
Principal Risks Mitigation
The Board is provided with a detailed
investment review which covers material
Geopolitical Risk economic, market and legislative changes
Geopolitical risk is the potential for at each Board meeting as well as
political, socio-economic and cultural receiving periodic updates from economic
events, trends and developments to have and political commentators in the
an adverse effect on the Company’s region.
assets. In Asia , the key geopolitical
risks stem from China and the tensions Although it is unclear how long the war
with the United States over trade and in Ukraine and the temporary ceasefire
the future of Taiwan ; and the potential in the Middle East conflict will last
of North Korean aggression and its amid evolving foreign policies for
impact on the region. In addition, crisis talks sparked by President
there is threat from the new Trump’s administration, the direct
administration of President Trump that impact for Japan is not significant. The
significant tariffs may be introduced impact on the Company’s portfolio of
on certain Japanese imports, including holdings is also relatively limited.
autos. Elsewhere, there is increased However, the ramifications of a global
global economic uncertainty from the downturn could have a significant impact
ongoing war in Ukraine and continued on the Japanese economy.
conflict in the Middle East .
The Portfolio Manager’s Review above
provides further detail on some of the
risk factors.
The Portfolio Manager is responsible for
actively monitoring the portfolio
selected in accordance with the asset
allocation parameters and seeks to
ensure that individual stocks meet an
Investment Performance and Gearing acceptable risk/reward profile. The
Risks emphasis is on long-term results as the
The portfolio is actively managed and Company is more exposed to volatility in
performance risk is inherent in the the shorter-term.
investment process. The achievement of
the Company’s investment performance The Board closely monitors the
objective relative to the market valuations of the unlisted investments
requires the taking of risk, such as through the Manager’s Fair Value
strategy, asset allocation and stock Committee, which includes input from
selection, and may lead to NAV and Fidelity’s analysts covering the
share price underperformance compared unlisted companies as well as Fidelity’s
to the Reference Index. unlisted investments specialist. In
addition, advice is obtained from a
The portfolio has unlisted investments third-party valuation specialist company
which, by their very nature, involve a (Kroll). Details of the unlisted
higher degree of valuation and investments valuation process is in in
performance uncertainties, liquidity the Annual Report. The Board sets limits
risks and possible delays in listing and guidelines for the Portfolio Manager
until market conditions are favourable. as to how much of the Company’s net
assets can be held in unlisted
securities. The limit approved by
shareholders is 20% of net assets. As at
31 December 2024 , the Company’s unlisted
investments represented 6.6% of net
assets.
The Company has the option to make use The Company gears through the use of
of loan facilities or to use CFDs to long CFDs which are currently cheaper
invest in equities. The principal risk than bank loans and provide greater
is that the Portfolio Manager may fail flexibility. The Board regularly
to use gearing effectively. Other risks considers the level of gearing and
are that the cost of gearing may be too gearing risk and sets limits within
high or that the term of the gearing is which the Portfolio Manager must
inappropriate in relation to market operate.
conditions.
Natural Disaster Risk
Japan is extremely vulnerable to
earthquakes and tsunamis. Depending on Whilst natural disasters cannot be
the magnitude of such events, positions averted, the Board is comfortable that
in the portfolio may be affected. The the Manager has a robust business
Manager could also be impacted from an continuity plan in place.
operational perspective if the
epicentre is in or near Tokyo .
Market, Economic and Currency Risks
The Company’s assets consist mainly of These risks are somewhat mitigated by
listed securities. Therefore, its the Company’s investment trust structure
principal risks include market related which means no forced sales will need to
risks such as market downturn, interest take place to deal with any redemptions.
rate movements, deflation/inflation and Therefore, investments can be held over
exchange rate movements. The Portfolio a longer time horizon.
Manager’s success or failure to protect
and increase the Company’s assets Risks to which the Company is exposed in
against this background is core to the the market risk category are included in
Company’s continued success. Note 16 to the Financial Statements
below together with summaries of the
Most of the Company’s assets and income policies for managing these risks.
are denominated in yen. However, the
functional currency of the Company in It is the Company’s policy not to hedge
which it reports its results is against currency risks. Further details
sterling. Consequently, it is subject can be found in Note 16 to the Financial
to currency risk on exchange rate Statements below.
movements between the yen and sterling.
Competition Risks and Marketplace
Threats
There are increased threats facing the
Company within the current market The Board, the Company’s Broker and
environment of increased mergers and Manager closely monitor industry
acquisitions activity. Other external activity and the peer group, and an
pressures include the Company’s ability annual review of strategy is undertaken
to maintain and grow the business, and by the Board, to ensure that the Company
a loss of shareholders if the demand continues to offer a relevant product to
for investment trusts decline and the shareholders.
demand for passive funds and
holistic/digital finance offerings
continue to increase.
The market value of the Company’s shares
and its discount to NAV are factors
which are not wholly within the Board’s
total control. The Company’s share
Discount Control and Demand Risks price, NAV and discount volatility are
There is a risk that the Company’s monitored daily by the Manager and the
shares trade at a persistent and Company’s Broker and considered by the
significant discount to the NAV. Board regularly. The Board endeavours to
exercise some short-term influence over
the discount through share repurchases,
but it can prove challenging if market
sentiment is not supportive of Japanese
equities.
The demand for shares is influenced by
the appeal of Japanese markets and
There is a risk that the demand for the through good performance and an active
Company’s shares may fall due to poor investor relations program. The Board
performance, changes in investor reviews analysis of the shareholder
sentiment and attitudes towards register at each Board meeting which
investment in Japan . allows the Board to monitor the
relevance of the Company’s mandate to
shareholders and remain abreast of
market sentiment.
Key Person Risk The Manager identifies key dependencies
The loss of the Portfolio Manager or which are then addressed through
other key individuals could lead to succession plans. Fidelity has
potential performance, operational or succession plans in place for portfolio
regulatory issues. There is a risk that managers. The Board meets regularly with
the Manager has an inadequate the Portfolio Manager and key members of
succession plan for key individuals, the investment team to gauge any
particularly the Portfolio Manager with dissatisfaction or potential flight
stock selection expertise in Japanese risk. The investment team in Japan work
markets. closely in a collaborative manner and
fully understand the investment approach
of the Portfolio Manager.
Legislation, Taxation and Regulatory
Risks
There is a risk that the changes in
legislation, taxation, regulation or
other external influence that require Regulatory changes for investment
changes to the nature of the Company’s companies are monitored regularly by the
business. Board and managed through active
engagement with regulators and trade
A breach of Section 1158 of the bodies by the Manager and also by the
Corporation Tax Act 2010 by the Company AIC.
could lead to a loss of investment
trust status, resulting in the Company
being subject to tax on capital gains.
Recently, there have been increased The Government and regulator have
concerns around investment cost announced a temporary exemption for
disclosures and its impact in the investment companies from the EU cost
industry. disclosure requirements.
The Manager continues to take all
necessary and reasonable steps to assure
operational resilience and to meet its
regulatory obligations, assess its
ability to continue operating and the
steps it needs to take to support its
Business Continuity Risk clients, including the Board, and has an
There continues to be increased focus appropriate control environment in
from financial services regulators place. The Manager has provided the
around the world on the contingency Board with assurance that the Company
plans of regulated financial firms. The has appropriate operational resilience
top risks globally are cybersecurity, and business continuity plans and the
geopolitical events, outages, fire provision of services has continued to
events and natural disasters. There are be supplied without interruption.
also ongoing risks from the war in
Ukraine and conflict in the Middle Risks associated with these services are
East, specifically regarding generally rated as low, but the
cyberattacks and the potential loss of financial consequences could be serious,
power and/or broadband services. including reputational damage to the
Company. These are mitigated through
operational resilience frameworks and
subject to a risk-based programme of
risk oversight and internal audits by
the Manager. The Manager’s internal
controls reports are received by the
Board on an annual basis and any
concerns are investigated.
The Company relies on a number of
third-party service providers,
principally the Registrar, Custodian
and Depositary. They are all subject to The third-party service providers have
a risk-based programme of risk also confirmed the implementation of
oversight and internal audits by the appropriate measures to ensure no
Manager and their own internal controls business disruption.
reports are received by the Board on an
annual basis and any concerns are
investigated.
The Manager’s technology risk management
teams have developed and implemented a
number of initiatives and controls in
order to provide enhanced mitigating
protection to this ever-increasing
threat, and also potentially addressing
the risks of AI. The risks are
Cybercrime and Information Security continuously re-assessed by Fidelity’s
Risks information security teams and risk
The operational risk and business frameworks are continuously enhanced
impact from heightened external levels with the implementation of additional
of cybercrime and the risk of data loss tools and processes, including
is significant. Cybercrime threats improvements to existing ones. Fidelity
evolve rapidly. A cyberattack could has dedicated cybersecurity and
result in the loss of confidential technology teams which provide
information or cause a significant continuous oversight, regular awareness
disruption to the Company’s operations. updates and best practice guidance. The
Risks also remain due to military Board receives regular updates from the
conflicts and geopolitical tensions, Manager in respect of the type and
including the war in Ukraine and possible scale of cyberattacks.
conflict in the Middle East and the
trend to more working from home The Manager has dedicated detect and
following the pandemic. These primarily respond resources specifically to
relate to phishing, ransomware, remote monitor the cyber threats associated
access threats, extortion and within the workplace and there are a
denial-of-services attacks, threats number of mitigating actions in place,
from highly organised criminal networks including control strengthening,
and sophisticated ransomware operators. geo-blocking and phishing mitigants,
combined with enhanced resilience and
recovery options.
The Company’s third-party service
providers are also subject to oversight
and provide assurances and have similar
control measures in place to detect and
respond to cyber threats and activity.
Whilst Fidelity considers ESG factors in
its investment decision-making process,
Environmental, Social and Governance the Company does not carry the label.
(ESG) Risks ESG integration is carried out at the
There is a risk that the value of the fundamental research analyst level
assets of the Company are negatively within its investment teams, primarily
impacted by ESG related risks, through Fidelity’s Proprietary
including climate change risk from Sustainability Rating which is designed
extreme weather events. Japan has a to generate a forward-looking and
material exposure to earthquakes. This holistic assessment of a company’s ESG
may impact global supply chains for risks and opportunities based on
companies and customers. sector-specific key performance
indicators. The Portfolio Manager may
ESG risks also include investor consider the effects of ESG when making
expectations and how the Company is investment decisions. ESG ratings of the
positioned from a marketing companies within the Company’s portfolio
perspective. compared to ESG ratings of the companies
within the Company’s portfolio compared
to the MSCI ratings are provided in the
Annual Report.
Continuation Vote
A continuation vote takes place every three years and the next continuation vote will take place at the AGM on
Emerging Risks
The Audit Committee continues to identify any new emerging risks and take any action necessary to mitigate their potential impact. The risks identified are placed on the Company’s risk matrix and graded appropriately. This process, together with the policies and procedures for the mitigation of existing and emerging risks, is updated and reviewed regularly in the form of comprehensive reports by the Audit Committee. The Board determines the nature and extent of any risks it is willing to take in order to achieve the Company’s strategic objectives.
Climate change, which refers to a large scale shift in the planet’s weather patterns and average temperatures, continues to be a key emerging as well as a principal risk confronting asset managers and their investors. Globally, climate change effects are already being experienced in the form of changing weather patterns. Extreme weather events can potentially impact the operations of investee companies, their supply chains and their customers. The Board notes that the Manager includes ESG considerations, including climate change, into the Company’s investment process. The Board will continue to monitor how this may impact the Company as a risk to investment valuations and potentially affect shareholder returns.
The Board, together with the Manager, is also monitoring the emerging risks posed by the rapid advancement of artificial intelligence (AI) and technology and how it may threaten the Company’s activities and its potential impact on the portfolio and investee companies. AI can provide asset managers powerful tools, such as enhancing data analysis risk management, trading strategies, operational efficiency and client servicing, all of which can lead to better investment outcomes and more efficient operations. However, with these advances in computing power that will impact society, there are risks from its increasing use and manipulation with the potential to harm, including a heightened threat to cybersecurity.
Other emerging risks may continue to evolve from unforeseen geopolitical and economic events.
VIABILITY STATEMENT
In accordance with provision 31 of the 2018 UK Corporate Governance Code, the Directors have assessed the prospects of the Company over a longer period than the twelve month period required by the “Going Concern” basis. The Company is an investment trust with the objective of achieving long-term capital growth. The Board considers that five years is an appropriate investment horizon to assess the viability of the Company, although the life of the Company is not intended to be limited to this or any other period.
In making an assessment on the viability of the Company, the Board has considered the following:
· The ongoing relevance of the investment objective in prevailing market conditions;
· The Company’s level of gearing;
· The Company’s NAV and share price performance compared to its Reference Index;
· The principal and emerging risks and uncertainties facing the Company and their potential impact as set out above;
· The future demand for the Company’s shares;
· The Company’s share price discount to the NAV;
· The liquidity of the Company’s portfolio;
· The level of income generated by the Company;
· Future income and expenditure forecasts; and
·
The Company will offer its shareholders a continuation vote at the AGM on
The Company underperformed the Reference Index over the five year reporting period to
The Board has 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 next five years based on the following considerations:
· The Investment Manager’s compliance with the Company’s investment objective and policy, its investment strategy and asset allocation;
· The portfolio mainly comprises readily realisable securities which can be sold to meet funding requirements if necessary; and
· The ongoing processes for monitoring operating costs and income which are considered to be reasonable in comparison to the Company’s total assets.
In preparing the Financial Statements, the Directors have considered the impact of climate change as detailed above. The Board has also considered the impact of regulatory changes and unforeseen market events and how this may affect the Company.
In addition, the Directors’ assessment of the Company’s ability to operate in the foreseeable future is included in the Going Concern Statement below, and includes detail of the material uncertainty on the outcome of the continuation vote at the AGM on
This statement has been prepared assuming the continuation votes in
Going Concern Statement
The Directors have considered the Company’s investment objective, risk management policies, liquidity risk, credit risk, capital management policies and procedures, the nature of its portfolio and its expenditure and cash flow projections. The Directors, having considered the liquidity of the Company’s portfolio of investments (being mainly securities which are readily realisable) and the projected income and expenditure, are satisfied that the Company is financially sound and has adequate resources to meet all of its liabilities and ongoing expenses and continue in operational existence for the foreseeable future. The Board has, therefore, concluded that the Company has adequate resources to continue to adopt the going concern basis for the period to
The Company, in accordance with the provisions of its Articles of Association, is subject to a continuation vote by shareholders at the Annual General Meeting on
The prospects of the Company over a period longer than twelve months can be found in the Viability Statement above.
PROMOTING THE SUCCESS OF THE COMPANY
Under Section 172(1) of the Companies Act 2006, the Directors of a company must act in a way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to the likely consequences of any decision in the long-term; the need to foster relationships with the Company’s suppliers, customers and others; the impact of the Company’s operations on the community and the environment; the desirability of the Company maintaining a reputation for high standards of business conduct; and the need to act fairly as between members of the Company.
As an externally managed investment company, the Company has no employees or physical assets, and a number of the Company’s functions are outsourced to third parties. The key outsourced function is the provision of investment management services by the Manager, but other professional service providers support the Company by providing administration, custodial, banking and audit services. The Board considers the Company’s key stakeholders to be the existing and potential shareholders, the externally appointed Manager (
The Board, with the Portfolio Manager, sets the overall investment strategy and reviews this on a regular basis. In order to ensure good governance of the Company, the Board has set various limits on the investments in the portfolio, whether in the maximum size of individual holdings, the use of derivatives, the level of gearing and others. These limits and guidelines are regularly monitored and reviewed and are set out in the Annual Report.
The Board receives regular reports from the Company’s Broker which covers market activity, how the Company compares with its peers in the
The Board places great importance on communication with shareholders. The Annual General Meeting provides the key forum for the Board and the Portfolio Manager to present to the shareholders on the Company’s performance and future plans and the Board encourages all shareholders to attend in person or virtually and raise any questions or concerns. The Chairman and other Board members are available to meet shareholders as appropriate. Shareholders may also communicate with Board members at any time by writing to them at the Company’s registered office at
The Portfolio Manager meets with major shareholders, potential investors, stock market analysts, journalists and other commentators throughout the year. These communication opportunities help inform the Board in considering how best to promote the success of the company over the long-term.
The Board seeks to engage with the Manager and other service providers and advisers in a constructive and collaborative way, promoting a culture of strong governance, while encouraging open and constructive debate, in order to ensure appropriate and regular challenge and evaluation. This aims to enhance service levels and strengthen relationships with service providers, with a view to ensuring shareholders’ interests are best served, by maintaining the highest standards of commercial conduct while keeping cost levels competitive.
Whilst the Company’s direct operations are limited, the Board recognises the importance of considering the impact of the Company’s investment strategy on the wider community and environment. The Board believes that a proper consideration of ESG issues aligns with the Company’s objective to deliver long-term capital growth, and the Board’s review of the Manager includes an assessment of its ESG approach.
In addition to ensuring that the Company’s investment objective was being pursued, key decisions and actions taken by the Board during the reporting year, and up to the date of this report, have included:
·
Authorising the repurchase of 10,828,535 ordinary shares into
· Meeting with the Company’s key shareholders during the reporting year;
· The decision to hold a hybrid AGM in 2024 (and again this year) in order to make it more accessible to those shareholders who are unable to or prefer not to attend in person;
·
Meeting with the Portfolio Manager and the investment team during the Board’s Due Diligence trip to
·
The Board discussed the uncertainty in relation to the continuation vote and the proposal of a tender offer with
Statement of 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 period. Under that law, the Directors have elected to prepare the Financial Statements in accordance with
In preparing these Financial Statements, the Directors are required to:
· Select suitable accounting policies in accordance with Section 10 of FRS 102 and then apply them consistently;
· Make judgements and accounting estimates that are reasonable and prudent;
· Present information, including accounting policies, in a fair and balanced manner that provides relevant, reliable, comparable and understandable information;
·
State whether applicable
· 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 to enable them to ensure that the Company and Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, a Directors’ Report, a Corporate Governance Statement and a Directors’ Remuneration Report which comply with that law and those regulations.
The Directors have delegated the responsibility for the maintenance and integrity of the corporate and financial information included on the Company’s pages of the Manager’s website at
www.fidelity.co.uk/japan
to the Manager. Visitors to the website need to be aware that legislation in the
The Directors confirm that to the best of their knowledge:
·
The Financial Statements, prepared in accordance with
· The Annual Report, including 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 it faces; and
· The Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company’s performance, business model and strategy.
The Statement of Directors’ Responsibility was approved by the Board on
Chairman
FINANCIAL STATEMENTS
Income Statement for the year ended
Year ended 31 December 2024 Year ended 31 December 2023
Revenue Capital Total Revenue Capital Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
(Losses)/gains 9 – (11,906) (11,906) – 12,376 12,376
on investments
Gains on
derivative 10 – 3,028 3,028 – 14,299 14,299
instruments
Income 3 4,095 – 4,095 4,218 – 4,218
Investment
management 4 (330) (847) (1,177) (344) (1,018) (1,362)
fees
Other expenses 5 (764) (13) (777) (708) (4) (712)
Foreign
exchange – (233) (233) – (642) (642)
losses
--------------- --------------- --------------- --------------- --------------- ---------------
Net return/
(loss) on
ordinary
activities 3,001 (9,971) (6,970) 3,166 25,011 28,177
before finance
costs and
taxation
Finance costs 6 (39) (158) (197) (27) (106) (133)
--------------- --------------- --------------- --------------- --------------- ---------------
Net return/
(loss) on
ordinary 2,962 (10,129) (7,167) 3,139 24,905 28,044
activities
before
taxation
Taxation on
return on 7 (356) – (356) (347) – (347)
ordinary
activities
--------------- --------------- --------------- --------------- --------------- ---------------
Net return/
(loss) on
ordinary 2,606 (10,129) (7,523) 2,792 24,905 27,697
activities
after taxation
for the year
========= ========= ========= ========= ========= =========
Return/(loss)
per ordinary 8 2.17p (8.43p) (6.26p) 2.17p 19.33p 21.50p
share
========= ========= ========= ========= ========= =========
The Company does not have any other comprehensive income. Accordingly, the net return/(loss) on ordinary activities after taxation for the year is also the total comprehensive income for the year and no separate Statement of Comprehensive Income has been presented.
The total column of this statement represents the Income Statement of the Company. The revenue and capital columns are supplementary and presented for information purposes as recommended by the Statement of Recommended Practice issued by the AIC.
No operations were acquired or discontinued in the year and all items in the above statement derive from continuing operations.
The Notes below form an integral part of these Financial Statements.
Statement of Changes in Equity
for the year ended
Share Capital Total
Share premium redemption Other Capital Revenue shareholders’
capita account reserve reserve reserve reserve funds
Note £’000 £’000 £’000 £’000 £’000 £’000 £’000
Total
shareholders’ 34,041 20,722 2,767 40,382 165,416 (5,535) 257,793
funds at 31
December 2023
Repurchase of
ordinary 13 – – – (18,857) – – (18,857)
shares
Net
(loss)/return
on ordinary
activities – – – – (10,129) 2,606 (7,523)
after
taxation for
the year
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total
shareholders’ 34,041 20,722 2,767 21,525 155,287 (2,929) 231,413
funds at 31
December 2024
========= ========= ========= ========= ========= ========= =========
Total
shareholders’ 34,041 20,722 2,767 46,658 140,511 (8,327) 236,372
funds at 31
December 2022
Repurchase of
ordinary 13 – – – (6,276) – – (6,276
shares
Net return on
ordinary
activities – – – – 24,905 2,792 27,697
after
taxation for
the year
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total
shareholders’ 34,041 20,722 2,767 40,382 165,416 (5,535) 257,793
funds at 31
December 2023
========= ========= ========= ========= ========= ========= =========
The Notes below form an integral part of these Financial Statements.
Balance Sheet
as at
Company number 2885584
2024 2023
Notes £’000 £’000
Fixed assets
Investments 9 228,344 253,843
Current assets
Derivative instruments 10 1,457 1,216
Debtors 11 669 708
Cash collateral held with brokers 16 223 –
Cash at bank 1,897 3,073
--------------- ---------------
4,246 4,997
========= =========
Current liabilities
Derivative instruments 10 (142) (53)
Other creditors 12 (1,035) (994)
--------------- ---------------
(1,177) (1,047)
--------------- ---------------
Net current assets 3,069 3,950
========= =========
Net assets 231,413 257,793
========= =========
Capital and reserves
Share capital 13 34,041 34,041
Share premium account 14 20,722 20,722
Capital redemption reserve 14 2,767 2,767
Other reserve 14 21,525 40,382
Capital reserve 14 155,287 165,416
Revenue reserve 14 (2,929) (5,535)
--------------- ---------------
Total shareholders’ funds 231,413 257,793
========= =========
Net asset value per ordinary share 15 200.78p 204.46p
========= =========
The Financial Statements above and below were approved by the Board of Directors on
Chairman
The Notes below form an integral part of these Financial Statements.
Notes to the Financial Statements
1
Principal Activity
2
Accounting Policies
The Company has prepared its Financial Statements in accordance with
a) Basis of accounting
The Financial Statements have been prepared on a going concern basis and under the historical cost convention, except for the measurement at fair value of investments and derivative instruments.
The Directors have a reasonable expectation that the Company has adequate resources to continue its operations and meet its liabilities as they fall due up to
In accordance with the provisions of the Company’s Articles of Association, the Company is subject to a continuation vote by shareholders at the AGM on
As at the date of this report, due to the performance of the Company over the last three years, the level of discount and the recently announced changes in portfolio management responsibilities, it is not possible to determine with certainty that shareholders will vote in favour of continuation of the Company. In this regard, there is a material uncertainty over the outcome of the continuation vote, and whilst this may cast doubt on the likelihood of the Company continuing as a going concern, the Directors believe that the preparation of the Financial Statements on a going concern basis remains appropriate.
In preparing these Financial Statements, the Directors have considered the impact of climate change risk as an emerging and principal risk as set out above, and have concluded that there was no further impact of climate change to be taken into account as the investments are valued based on market pricing. In line with FRS 102, investments are valued at fair value, which for the Company are quoted bid prices for investments in active markets at the balance sheet date. Investments which are unlisted are priced using market-based valuation approaches. All investments therefore reflect the market participants view of climate change risk on t investments held by the Company.
The Company’s Going Concern Statement above takes account of all events and conditions up to
b) Significant accounting estimates, assumptions and judgements
The preparation of the Financial Statements requires the use of estimates, assumptions and judgements. These estimates, assumptions and judgements affect the reported amounts of assets and liabilities at the reporting date. While estimates are based on best judgement using information and financial data available, the actual outcome may differ from these estimates.
The key sources of estimation and uncertainty relate to the fair value of the unlisted investments.
Judgements
The Directors consider whether each fair value is appropriate following detailed review and challenge of the pricing methodology. The judgement applied in the selection of the methodology used (see Note 2 (j) below) for determining the fair value of each unlisted investment can have a significant impact upon the valuation.
Estimates
The key estimate in the Financial Statements is the determination of the fair value of the unlisted investments by the Manager’s Fair Value Committee (FVC), with support from the external valuer, for detailed review and appropriate challenge by the Directors. This estimate is key as it significantly impacts the valuation of the unlisted investments at the Balance Sheet date. When no recent prima or secondary transaction in the company’s shares have taken place, the fair valuation process involves estimation using subjective inputs that are unobservable (for which market data is unavailable). The estimates involved in the valuation process may include the following:
(i) The selection of appropriate comparable companies. Comparable companies are chosen on the basis of their business characteristics and growth patterns;
(ii) The selection of a revenue metric (either historical or forecast);
(iii) The selection of an appropriate illiquidity discount factor to reflect the reduced liquidity of unlisted companies versus their listed peers;
(iv) The estimation of the likelihood of a future exit of the position through an initial public offering (IPO) or a company sale;
(v) The selection of an appropriate industry benchmark index to assist with the valuation; and
(vi) The calculation of valuation adjustments derived from milestone analysis (i.e. incorporating operational success against the plans/forecasts of the business into the valuation).
As the valuation outcomes may differ from the fair value estimates a price sensitivity analysis is provided in Other Price Risk Sensitivity in Note 16 to illustrate the effect on the Financial Statements of an over or under estimation of fair value.
The risk of an over or under estimation of fair value is greater when methodologies are applied using more subjective inputs.
Assumptions
The determination of fair value by the FVC involves key assumptions dependent upon the valuation techniques used. The valuation process recognises that the price of a recent investment may be an appropriate starting point for estimating fair value. The Multiples approach involves subjective inputs and therefore presents a greater risk of over or under estimation, particularly in the absence of a recent transaction.
c) Segmental reporting
The Company is engaged in a single segment business and, therefore, no segmental reporting is provided.
d) Presentation of the Income Statement
In order to reflect better the activities of an investment company and in accordance with guidance issued by the AIC, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been prepared alongside the Income Statement. The net return/(loss) after taxation for the year is the measure the Directors believe appropriate in assessing the Company’s compliance with certain requirements set out in Section 1159 of the Corporation Tax Act 2010.
e) Income
Income from equity investments is accounted for on the date on which the right to receive the payment is established, normally the ex-dividend date. Overseas dividends are accounted for gross of any tax deducted at source. Amounts are credited to the revenue column of the Income Statement. Where the Company has elected to receive its dividends in the form of additional shares rather than cash, the amount of the cash dividend foregone is recognised in the revenue column of the Income Statement. Any excess in the value of the shares received over the amount of the cash dividend is recognised in the capital column of the Income Statement. Special dividends are treated as a revenue receipt or a capital receipt depending on the facts and circumstances of each particular case.
Derivative instrument income received from dividends on long Contracts for Difference (CFDs) is accounted for on the date on which the right to receive the payment is established, normally the ex-dividend date. The amount net of tax is credited to the revenue column of the Income Statement.
f) Investment management fees and other expenses
Investment management fees and other expenses are accounted for on an accruals basis and are charged as follows:
· The base investment management fee is allocated 20% to revenue and 80% to capital to reflect the Company’s focus on capital growth to generate returns;
· The variable investment management fee is charged/credited to capital, as it is based on the performance of the net asset value per share relative to the Reference Index; and
· All other expenses are allocated in full to revenue with the exception of those directly attributable to share issues or other capital events.
g) Functional currency and foreign exchange
The functional and reporting currency of the Company is
h) Finance costs
Finance costs comprises interest on bank overdrafts and collateral and finance costs paid on long CFDs, which are accounted for o an accruals basis. Finance costs are allocated 20% to revenue and 80% to capital to reflect the Company’s focus on capital growth generate returns.
i) Taxation
The taxation charge represents the sum of current taxation and deferred taxation.
Current taxation is taxation suffered at source on overseas income less amounts recoverable under taxation treaties. Taxation is charged or credited to the revenue column of the Income Statement, except where it relates to items of a capital nature, in which c it is charged or credited to the capital column of the Income Statement. The Company is an approved
Deferred taxation is the taxation expected to be payable or recoverable on timing differences between the treatment of certain items for accounting purposes and their treatment for the purposes of computing taxable profits. Deferred taxation is based on tax rates have been enacted or substantively enacted when the taxation is expected to be payable or recoverable. Deferred tax assets are only recognised if it is considered more likely than not that there will be sufficient future taxable profits to utilise them.
j) Investments
The Company’s business is investing in financial instruments with a view to profiting from their total return in the form of income and cap growth. This portfolio of investments is managed and its performance evaluated on a fair value basis, in accordance with a documented investment strategy, and information about the portfolio is provided on that basis to the Company’s Board of Directors. Investments are measured at fair value with changes in fair value recognised in profit or loss, in accordance with the provisions of both Section 11 and Section 12 of FRS 102. The fair value of investments is initially taken to be their cost and is subsequently measured as follows:
· Listed investments are valued at bid prices, or last market prices, depending on the convention of the exchange on which they are listed: and
· Investments which are not quoted, or are not frequently traded, are stated at the best estimate of fair value. The Manager’s Fa Value Committee (FVC), which is independent of the Portfolio Manager’s team, and with support from the external valuer and Fidelity’s unlisted investments specialist, provides recommended fair values to the Directors. These are based on the principles outlined in Note 2 (b). The unlisted investments are valued at fair value following a detailed review and appropriate challenge by the Directors of the pricing methodology used by the FVC.
The techniques applied by the FVC when valuing the unlisted investments are predominantly market-based approaches. The market-based approaches are set out below and are followed by an explanation of how they are applied to the Company’s unlisted portfolio:
· Multiples;
· Industry Valuation Benchmarks; and
· Available Market Prices.
The nature of the unlisted investment will influence the valuation technique applied. The valuation approach recognises that the price of a recent investment, if resulting from an orderly transaction, generally represents fair value as at the transaction date and may b an appropriate starting point for estimating fair value at subsequent measurement dates. However, consideration is given to the fa and circumstances as at the subsequent measurement date, including changes in the market or performance of the investee comp Milestone analysis is used where appropriate to incorporate the operational progress of the investee company into the valuation. Consideration is also given to the input received from the Fidelity analyst that covers the company, Fidelity’s unlisted investments specialist and an external valuer. Additionally, the background to the transaction must be considered. As a result, various multiples-based techniques are employed to assess the valuations particularly in those companies with established revenues. An absence of relevant industry peers may preclude the application of the Industry Valuation Benchmarks technique and an absence of observable prices may preclude the Available Market Prices approach.
The unlisted investments are valued according to a three month cycle of measurement dates. The fair value of the unlisted investment will be reviewed before the next scheduled three monthly measurement date on the following occasions:
· At the year end and half year end of the Company; and
· Where there is an indication of a change in fair value (commonly referred to as ‘trigger’ events).
In accordance with the AIC SORP, the Company includes transaction costs, incidental to the purchase or sale of investments, within gains/(losses) on investments in the capital column of the Income Statement and has disclosed these costs in Note 9.
k) Derivative instruments
When appropriate, permitted transactions in derivative instruments are used. Some of the Company’s portfolio exposure to Japanese equities is achieved by investment in long CFDs. Long CFDs are classified as other financial instruments and are initially accounted and measured at fair value on the date the derivative contract is entered into and subsequently measured at fair value as follows:
· Long CFDs are the difference between the strike price and the value of the underlying shares in the contract.
l) Debtors
Debtors include securities sold for future settlement, accrued income, other debtors and prepayments incurred in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business, if longer) they are classified as current assets. If not, they are presented as non-current assets. They are recognised initially at fair value and, where applicable, subsequently measured at amortised cost using the effective interest rate method.
m) Cash collateral held with brokers
These are amounts held in segregated accounts on behalf of brokers as collateral against open derivative contracts. These are carried at amortised cost.
n) Other creditors
Other creditors include securities purchased for future settlement, investment management fees, other creditors and expenses accrued in the ordinary course of business. If payment is due within one year or less (or in the normal operating cycle of the business, if longer) they are classified as current liabilities. If not, they are presented as non-current liabilities. They are recognised initially at fair value and, where applicable, subsequently measured at amortised cost using the effective interest rate method.
o) Other reserve
The full cost of ordinary shares repurchased and held in
p) Capital reserve
The following are accounted for in the capital reserve:
· Gains and losses on the disposal of investments and derivative instruments;
· Changes in the fair value of investments and derivative instruments held at the year end;
· Foreign exchange gains and losses of a capital nature;
· Dividends receivable which are capital in nature;
· 80% of base investment management fees and finance costs;
· Variable investment management fees; and
· Other expenses which are capital in nature.
Technical guidance issued by the
3 INCOME
Year ended Year ended
31.12.24 31.12.23
£’000 £’000
Investment income
Overseas dividends 3,563 2,625
Derivative income
Dividends received on long CFDs 530 743
Other interest
Interest received on bank deposits 2 –
--------------- ---------------
Total income 4,095 4,218
========= =========
No special dividends have been recognised in capital during the reporting year (2023: £nil).
4 INVESTMENT MANAGEMENT FEES
Year ended 31 December 2024 Year ended 31 December 2023
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Investment
management 330 1,318 1,648 344 1,377 1,721
fees –
base
Investment
management – (471) (471) – (359) (359)
fees –
variable1
--------------- --------------- --------------- --------------- --------------- ---------------
330 847 1,177 344 1,018 1,362
========= ========= ========= ========= ========= =========
1 For the calculation of the variable management fee element, the Company’s NAV return was compared to the Reference Index return on a daily basis. The period u to assess the performance is on a rolling three year basis.
FII charges base investment management fees at an annual rate of 0.70% of net assets. In addition, there is a +/- 0.20% variation fee based on performance relative to the Reference Index over a three year rolling period. Fees are payable monthly in arrears and a calculated on a daily basis.
The base investment management fee has been allocated 80% to capital reserve in accordance with the Company’s accounting policies.
Further details of the terms of the Management Agreement are given in the Directors’ Report in the Annual Report.
5 OTHER EXPENSES
Year ended Year ended
31.12.24 31.12.23
£’000 £’000
Allocated to revenue:
AIC fees 19 18
Secretarial and administration fees payable to 50 50
the Investment Manager
Custody fees 13 13
Depositary fees 22 24
Directors’ expenses 75 43
Directors’ fees1 177 160
Legal and professional fees 67 70
Marketing expenses 175 166
Printing and publication expenses 67 61
Registrars’ fees 35 33
Other expenses 13 17
Fees payable to the Company’s Independent
Auditor for the audit of the Financial 55 53
Statements
--------------- ---------------
764 708
--------------- ---------------
Allocated to capital:
Legal and professional fees – unlisted 13 4
investments
--------------- ---------------
Other expenses 777 712
========= =========
1 Details of the breakdown of Directors’ fees are provided in the Directors’ Remuneration Report in the Annual Report.
6 FINANCE COSTS
Year ended 31 December 2024 Year ended 31 December 2023
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Interest
paid on 37 150 187 24 94 118
long CFDs
Interest
paid on
collateral 2 8 10 3 12 15
and
deposits1
--------------- --------------- --------------- --------------- --------------- ---------------
39 158 197 27 106 133
========= ========= ========= ========= ========= =========
1 Due to negative interest rates during the current and prior year, the Company paid interest on its collateral and deposits.
Finance costs have been allocated 80% to capital reserve in accordance with the Company’s accounting policies.
7 TAXATION ON RETURN/(LOSS) ON ORDINARY ACTIVITIES
Year ended Year ended
31.12.24 31.12.23
£’000 £’000
a) Analysis of the taxation charge for the year
Overseas taxation 356 347
--------------- ---------------
Taxation charge for the year (see Note 7b) 356 347
========= =========
b) Factors affecting the taxation charge for the year
The taxation charge for the year is lower than the standard rate of
Year ended Year ended
31.12.24 31.12.23
£’000 £’000
Net (loss)/return on ordinary activities before (7,167) 28,044
taxation
--------------- ---------------
Net (loss)/return on ordinary activities before
taxation multiplied by the standard rate of UK (1,762) 6,596
corporation tax of 25% (2023: blended rate of
23.52%)
Effects of:
Capital losses/(gains) not taxable1 2,278 (6,123)
Income not taxable (891) (817)
Expenses not deductible 38 23
Excess management expenses not utilised 367 321
Overseas taxation 356 347
--------------- ---------------
Taxation charge for the year (see Note 7a) 356 347
========= =========
1
The Company is exempt from
c) Deferred taxation
A deferred taxation asset of £9,253,000 (2023: £8,886,000), in respect of excess expenses of £37,011,000 (2023: £35,543,000) has n been recognised as it is unlikely that there will be sufficient future profits to utilise these expenses.
The
8 RETURN/(LOSS) PER ORDINARY SHARE
Year ended Year ended
31.12.24 31.12.23
Revenue return per ordinary share 2.17p 2.17p
Capital (loss)/return per ordinary share (8.43p) 19.33p
--------------- ---------------
Total (loss)/return per ordinary share (6.26p) 21.50p
========= =========
The return/(loss) per ordinary share is based on the net return/(loss) on ordinary activities after taxation for the year divided by the weighted average number of ordinary shares held outside
£’000 £’000
Net revenue return on ordinary activities after 2,606 2,792
taxation
Net capital (loss)/return on ordinary activities (10,129) 24,905
after taxation
--------------- ---------------
Net total (loss)/return on ordinary activities (7,523) 27,697
after taxation
========= =========
Number Number
Weighted average number of ordinary shares held outside 120,169,404 128,843,583
of Treasury
========== ==========
9 INVESTMENTS
2024 2023
£’000 £’000
Listed investments 213,026 237,440
Unlisted investments 15,318 16,403
--------------- ---------------
Investments at fair value 228,344 253,843
========= =========
Opening book cost 244,383 242,067
Opening investment holding gains/(losses) 9,460 (11,387)
--------------- ---------------
Opening fair value 253,843 230,680
========= =========
Movements in the year
Purchases at cost 186,791 158,947
Sales – proceeds (200,384) (148,160)
(Losses)/gains on investments (11,906) 12,376
--------------- ---------------
Closing fair value 228,344 253,843
========= =========
Closing book cost 222,161 244,383
Closing investment holding gains 6,183 9,460
--------------- ---------------
Closing fair value 228,344 253,843
========= =========
The Company received £200,384,000 (2023: £148,160,000) from investments sold in the year. The book cost of these investments when they were purchased was £209,013,000 (2023: £156,631,000). These investments have been revalued over time and until they were sold any unrealised gain/(losses) were included in the fair value of the investments.
Investment transaction costs
Transaction cost incurred in the acquisition and disposal of investments, which are included in the (losses)/gains on investments above were as follows:
Year ended Year ended
31.12.24 31.12.23
£’000 £’000
Purchases transaction costs 69 57
Sales transaction costs 94 63
--------------- ---------------
163 120
========= =========
10 DERIVATIVE INSTRUMENTS
Year ended Year ended
31.12.24 31.12.23
£’000 £’000
Gains on derivative instruments
Gains on long CFD positions closed 2,876 12,874
Movement in investment holding gains on long 152 1,425
CFDs
--------------- ---------------
3,028 14,299
========= =========
Derivative instruments recognised on the Balance Sheet
2024 2023
Portfolio Portfolio
Fair value exposure Fair value exposure
£’000 £’000 £’000 £’000
Derivative
instrument 1,457 50,375 1,216 41,568
assets – long
CFDs
Derivative
instrument (142) 8,254 (53) 21,953
liabilities –
long CFDs
--------------- --------------- --------------- ---------------
1,315 58,629 1,163 63,521
========= ========= ========= =========
11 DEBTORS
2024 2023
£’000 £’000
Securities sold for future settlement 372 361
Accrued income 199 249
Other debtors and prepayments 98 98
--------------- ---------------
669 708
========= =========
12 OTHER CREDITORS
2024 2023
£’000 £’000
Securities purchased for future settlement 383 438
Creditors and accruals 329 285
Amounts payable for repurchase of shares 323 271
--------------- ---------------
1,035 994
========= =========
13 SHARE CAPITAL
2024 2023
Nominal Nominal
Number of value Number of value
shares £’000 shares £’000
Issued,
allotted
and fully
paid
Ordinary
shares of
25 pence
each held
outside of
Treasury
Beginning 126,086,249 31,521 129,701,893 32,425
of the year
Ordinary
shares
repurchased (10,828,535) (2,707) (3,615,644) (904)
into
Treasury
----------------- ----------------- ----------------- -----------------
End of the 115,257,714 28,814 126,086,249 31,521
year
========== ========== ========== ==========
Issued,
allotted
and fully
paid
Ordinary
shares of
25 pence
each held
in
Treasury1
Beginning 10,075,446 2,520 6,459,802 1,616
of the year
Ordinary
shares
repurchased 10,828,535 2,707 3,615,644 904
into
Treasury
----------------- ----------------- ----------------- -----------------
End of the 20,903,981 5,227 10,075,446 2,520
year
========== ========== ========== ==========
Total share 34,041 34,041
capital
========== ==========
1
Ordinary shares held in
The Company repurchased 10,828,535 ordinary shares (2023: 3,615,644 shares) and held them in
14 CAPITAL AND RESERVES
Share Capital Total
Share premium redemption Other Capital Revenue shareholders’
capital account reserve reserve reserve reserve funds
£’000 £’000 £’000 £’000 £’000 £’000 £’000
At 1
January 34,041 20,722 2,767 40,382 165,416 (5,535) 257,793
2024
Losses on
investments – – – – (11,906) – (11,906)
(see Note
9)
Gains on
derivative
instruments – – – – 3,028 – 3,028
(see Note
10)
Foreign
exchange – – – – (233) – (233)
losses
Investment
management – – – – (847) – (847)
fees (see
Note 4)
Other
expenses – – – – (13) – (13)
(see Note
5)
Finance
costs (see – – – – (158) – (158)
Note 6)
Revenue
return on
ordinary
activities – – – – – 2,606 2,606
after
taxation
for the
year
Repurchase
of ordinary – – – (18,857) – – (18,857)
shares (see
Note 13)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31
December 34,041 20,722 2,767 21,525 155,287 (2,929) 231,413
2024
========= ========= ========= ========= ========= ========= =========
Share Capital Total
Share premium redemption Other Capital Revenue shareholders’
capital account reserve reserve reserve reserve funds
£’000 £’000 £’000 £’000 £’000 £’000 £’000
At 1
January 34,041 20,722 2,767 46,658 140,511 (8,327) 236,372
2023
Gains on
investments – – – – 12,376 – 12,376
(see Note
9)
Gains on
derivative
instruments – – – – 14,299 – 14,299
(see Note
10)
Foreign
exchange – – – – (642) – (642)
losses
Investment
management – – – – (1,018) – (1,018)
fees (see
Note 4)
Other
expenses – – – – (4) – (4)
(see Note
5)
Finance
costs (see – – – – (106) – (106)
Note 6)
Revenue
return on
ordinary
activities – – – – – 2,792 2,792
after
taxation
for the
year
Repurchase
of ordinary – – – (6,276) – – (6,276)
shares (see
Note 13)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31
December 34,041 20,722 2,767 40,382 165,416 (5,535) 257,793
2023
========= ========= ========= ========= ========= ========= =========
The capital reserve balance at
15 NET ASSET VALUE PER ORDINARY SHARE
The calculation of the net asset value per ordinary share is based on the total shareholders’ funds divided by the number of ordinary shares held outside of
2024 2023
Total shareholders’ funds £231,413,000 £257,793,000
Ordinary shares held outside of Treasury at year end 115,257,714 126,086,249
Net asset value per ordinary share 200.78p 204.46p
=========== ============
It is the Company’s policy that shares held in
16 FINANCIAL INSTRUMENTS
Management of Risk
The Company’s investment activities in pursuit of its objective involve certain inherent risks. The Board confirms that there is an ongoing process for identifying, evaluating and managing the risks faced by the Company. The Board, with the assistance of the Manager, has developed a risk matrix which, as part of the internal control process, identifies the risks that the Company faces. Principal risks identified are: geopolitical; investment performance and gearing; natural disaster; market, economic and currency; competition and marketplace threats; discount control and demand; key person; legislation, taxation and regulatory; business continuity; cybercrime and information security; environmental, social and governance (ESG); and continuation vote. Risks are identified and graded in this process, together with steps taken in mitigation, and are updated and reviewed on an ongoing basis. These risks and how they are identified, evaluated and managed are shown in the Strategic Report above.
This note refers to the identification, measurement and management of risks potentially affecting the value of financial instruments. The Company’s financial instruments may comprise:
· Equity shares held in accordance with the Company’s investment objective and policies;
· Derivative instruments which comprise CFDs; and
· Cash, liquid resources and short-term debtors and creditors that arise from its operations.
The risks identified arising from the Company’s financial instruments are market price risk (which comprises interest rate risk, foreign currency risk and other price risk), liquidity risk, counterparty risk, credit risk and derivative instrument risk. The Board reviews and agrees policies for managing each of these risks, which are summarised below. These policies are consistent with those followed last year.
MARKET PRICE RISK
Interest rate risk
The Company finances its operations through its share capital and reserves. In addition, the Company has a geared exposure to Japanese equities through the use of long CFDs. The level of gearing is reviewed by the Board and the Portfolio Manager. The Company is exposed to a financial risk arising as a result of any increases in yen interest rates associated with the funding of the long CFDs.
Interest rate risk exposure
The values of the Company’s financial instruments that are exposed to movements in interest rates are shown below:
2024 2023
£’000 £’000
Exposure to financial instruments that bear
interest
Long CFDs – Portfolio exposure less fair value 57,314 62,358
--------------- ---------------
57,314 62,358
========= =========
Exposure to financial instruments that earn
interest
Cash collateral held with brokers 223 –
Cash at bank 1,897 3,073
--------------- ---------------
2,120 3,073
========= =========
Net exposure to financial instruments that bear 55,194 59,285
interest
========= =========
Foreign currency risk
The Company’s net return/(loss) on ordinary activities after taxation for the year and its net assets may be affected by foreign exchange movements because the Company has income and assets which are denominated in yen whereas the Company’s functional currency is
Three principal areas have been identified where foreign currency risk may impact the Company:
· Movements in currency exchange rates affecting the value of investments and long CFDs;
· Movements in currency exchange rates affecting short-term timing differences; and
· Movements in currency exchange rates affecting income received.
Currency exposure of financial assets
The currency exposure profile of the Company’s financial assets is shown below:
2024
Long
Investments exposure to
held at derivative Cash at
fair value instruments Debtors1 bank Total
Currency £’000 £’000 £’000 £’000 £’000
Japanese 228,344 58,629 794 1,897 289,664
yen
UK – – 98 – 98
sterling
--------------- --------------- --------------- --------------- ---------------
228,344 58,629 892 1,897 289,762
========= ========= ========= ========= =========
1 Debtors include cash collateral held with brokers.
2023
Long
Investments exposure to
held at derivative Cash at
fair value instruments Debtor bank Total
Currency £’000 £’000 £’000 £’000 £’000
Japanese 253,843 63,521 610 2,950 320,924
yen
UK – – 98 123 221
sterling
--------------- --------------- --------------- --------------- ---------------
253,843 63,521 708 3,073 321,145
========= ========= ========= ========= =========
Currency exposure of financial liabilities
The currency profile of the Company’s financial liabilities is shown below:
2024 2023
Other Other
creditors creditors
Currency £’000 £’000
Japanese yen 383 439
UK sterling 652 555
--------------- ---------------
1,035 994
========= =========
Other price risk
Other price risk arises mainly from uncertainty about future prices of financial instruments used in the Company’s business. It represents the potential loss the Company might suffer through holding market positions in the face of price movements. The Board meets quarterly to consider the asset allocation of the portfolio and the risk associated with particular industry sectors within the parameters of the investment objective. The Portfolio Manager is responsible for actively monitoring the existing portfolio selected in accordance with the overall asset allocation parameters described above and seeks to ensure that individual stocks also meet an acceptable risk/reward profile. Other price risks arising from derivative positions, mainly due to the underlying exposures, are estimated using Value at Risk and Stress Tests as set out in the Company’s internal Risk Management Process Document.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulties in meeting obligations associated with financial liabilities. The Company’s assets mainly comprise readily realisable securities and derivative instruments which can be sold easily to meet funding commitments if necessary. Short-term flexibility is achieved by the use of a bank overdraft, if required.
Liquidity risk exposure
At
Counterparty risk
Certain derivative instruments in which the Company may invest are not traded on an exchange but instead will be traded between counterparties based on contractual relationships, under the terms outlined in the International Swaps and Derivatives Association’s (ISDA) market standard derivative legal documentation. These are known as Over the Counter (OTC) trades. As a result, the Company is subject to the risk that a counterparty may not perform its obligations under the related contract. In accordance with the risk management process which the Investment Manager employs, this risk is minimised by only entering into transactions with counterparties which are believed to have an adequate credit rating at the time the transaction is entered into, by ensuring that formal legal agreements covering the terms of the contract are entered into in advance, and through adopting a counterparty risk framework which measures, monitors and manages counterparty risk by the use of internal and external credit agency ratings and by evaluating derivative instrument credit risk exposure.
Cash collateral
For derivative transactions, collateral is used to reduce the risk of both parties to the contract. Collateral is managed on a daily basis for all relevant transactions. At
Credit risk
Financial instruments may be adversely affected if any of the institutions with which money is deposited suffer insolvency or other financial difficulties. All transactions are carried out with brokers that have been approved by the Manager and are settled on a delivery versus payment basis. Limits are set on the amount that may be due from any one broker and are kept under review by the Manager. Exposure to credit risk arises on unsettled security transactions and long CFD contracts and cash at bank.
Derivative instrument risk
The risks and risk management processes which result from the use of long CFDs are included within the risk categories disclosed above. Long CFDs are used by the Manager to gain unfunded long exposure to equity markets, sectors or single stocks. Unfunded exposure is exposure gained without an initial outflow of capital. The risk and performance contribution of long CFDs held in the Company’s portfolio is overseen by the Manager’s experienced, specialist derivative instruments team that uses portfolio risk assessment and construction tools to manage risk and investment performance.
RISK SENSITIVITY ANALYSIS
Interest rate risk sensitivity analysis
Based on the financial instruments held and interest rates at
Foreign currency risk sensitivity analysis
Based on the financial instruments held and currency exchange rates at
Other price risk – exposure to investments sensitivity analysis
Based on the listed investments held and share prices at
Based on the unlisted investments held and share prices at
Other price risk – net exposure to derivative instruments sensitivity analysis
Based on the long CFDs held and share prices at
Fair Value of Financial Assets and Liabilities
Financial assets and liabilities are stated in the Balance Sheet at values which are not materially different to their fair values. As explained in Notes 2 (j) and (k) above, investments and derivative instruments are shown at fair value. In the case of cash at bank, book value approximates to fair value due to the short maturity of the instruments.
Fair Value Hierarchy
The Company is required to disclose the fair value hierarchy that classifies its financial instruments measured at fair value at one of three levels, according to the relative reliability of the inputs used to estimate the fair values.
Classification Input
Level 1 Valued using quoted prices in active markets for identical assets
Valued by reference to inputs other than quoted prices included
Level 2 in level 1 that are observable (i.e. developed using market data)
for the asset or liability, either directly or indirectly
Level 3 Valued by reference to valuation techniques using inputs that are
not based on observable market data
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset. The valuation techniques used by the Company are explained in Notes 2 (j) and (k) above. The table below sets out the Company’s fair value hierarchy:
2024
Financial assets Level 1 Level 2 Level 3
at fair value £’000 £’000 £’000
through profit Total
or loss £’000
228,344
Investments 213,026 – 15,318
Derivative
instrument – 1,457 – 1,457
assets
--------------- --------------- --------------- ---------------
213,026 1,457 15,318 229,801
========= ========= ========= =========
Financial
liabilities at
fair value
through profit
or loss
Derivative
instrument – (142) – (142)
liabilities
========= ========= ========= =========
2023
Financial assets Level 1 Level 2 Level 3 Total
at fair value £’000 £’000 £’000 £’000
through profit
or loss
Investments 237,440 – 16,403 253,843
Derivative
instrument – 1,216 – 1,216
assets
--------------- --------------- --------------- ---------------
237,440 1,216 16,403 255,059
========= ========= ========= =========
Financial
liabilities at
fair value
through profit
or loss
Derivative
instrument – (53) – (53)
liabilities
========= ========= ========= =========
The table below sets out the fair value of the level 3 financial instruments, all of which are unlisted investments:
2024 2022
Book cost Level 3 Level 3
Name Business £’000 £’000 £’000
Online booking
Asoview website for 6,602 6,114 5,740
leisure
facilities
Japan’s largest
GO Inc ride-hailing 2,378 2,905 2,487
company
Online
Studyplus educational 2,257 1,960 2,110
company
iYell Mortgage Fintech 2,641 1,652 2,189
company
Developer of
Moneytree personal asset 3,016 1,042 1,832
management
applications
Spiber Bio-tech company 2,512 1,014 1,011
Online funeral
Yoriso planning 2,627 631 1,034
platform
--------------- --------------- ---------------
End of the year 22,033 15,318 16,403
========= ========= =========
The valuation of all the unlisted investments at
Year ended Year ended
31.12.24 31.12.23
Level 3 Level 3
Movements in level 3 financial instruments £’000 £’000
during the year:
Beginning of the year 16,403 18,933
Purchases at cost – 2,378
Sales proceeds – Innophys – (274)
Sales loss – Innophys – (639)
Movement in investment holding losses (including (1,085) (3,995)
foreign exchange movement)
--------------- ---------------
End of the year 15,318 16,403
========= =========
17 CAPITAL RESOURCES AND GEARING
The Company does not have any externally imposed capital requirements. The financial resources of the Company comprise its share capital and reserves, as disclosed in the Balance Sheet above, and its gearing which is achieved through the use of long CFDs Financial resources are managed in accordance with the Company’s investment policy and in pursuit of its objective, both of which are detailed in the Strategic Report in the Annual Report. The principal risks and their management are disclosed in the Strategic Report and in Note 16 above.
18 TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES
Details of the current fee arrangements are given in the Directors’ Report in the Annual Report and in Note 4 above. During the year, fees for portfolio management services of £1,177,000 (2023: £1,362,000) and secretarial and administration fees of £50,000 (2023: £50,000) were payable to FII. At the Balance Sheet date, net fees for portfolio management services of £97,000 (2023: £106,000) and secretarial and administration fees of £13,000 (2023: £13,000) were accrued and included in other creditors. FII also provides the Company with marketing services. The total amount payable for these services during the year was £175,000 (2023: £166,000). At the Balance Sheet date, marketing services of £87,000 (2023: £18,000) were accrued and included in other creditors.
Disclosures of the Directors’ interests in the ordinary shares of the Company and Directors’ fees and taxable expenses relating to reasonable travel expenses paid to the Directors are given in the Directors’ Remuneration Report in the Annual Report. In addition to the fees and taxable expenses disclosed in the Directors’ Remuneration Report, £13,000 (2023: £14,000) of Employers’ National Insurance Contributions was also paid by the Company. As at
ALTERNATIVE PERFORMANCE MEASURES
The Company uses the following as Alternative Performance Measures which are all defined in the Glossary of Terms in the Annual Report.
DISCOUNT/PREMIUM
The discount/premium is the difference between the net asset value (“NAV”) per ordinary share of the Company and the ordinary share price and is expressed as a percentage of the NAV per ordinary share. Details of the Company’s discount are on the Financial Highlights in the Annual Report.
GEARING
See the Fair Value and Portfolio Exposure of Investments table on in the Annual Report for details of the Company’s gearing.
NET ASSET VALUE (NAV) PER ORDINARY SHARE
See the Balance Sheet and Note 15 above for further details.
ONGOING CHARGES RATIO
The ongoing charges ratio is considered has been calculated in accordance with guidance issued by the AIC as the total of management fees and other expenses expressed as a percentage of the average net assets throughout the year.
2024 2023
Investment management fees (£’000) 1,648 1,721
Other expenses (£’000) 777 712
--------------- ---------------
Ongoing charges (£’000) 2,425 2,433
Variable management fee (£’000) (471) (359)
Average net assets (£’000) 235,249 245,972
Ongoing charges ratio 1.03% 0.99%
Ongoing charges ratio including variable 0.83% 0.84%
management fee
========= =========
REVENUE, CAPITAL AND TOTAL RETURN PER ORDINARY SHARE
See the Income Statement and Note 8 above for further details.
TOTAL RETURN PERFORMANCE
The tables below provide information relating to the NAV per ordinary share and the ordinary share price of the Company, the imp of the dividend reinvestments and the total returns for the years ended
Net asset
value per Ordinary
ordinary share
2024 share price
31 December 2023 204.46p 185.00p
31 December 2024 200.78p 174.50p
--------------- ---------------
Total return for the year -1.8% -5.7%
========= =========
Net asset
value per Ordinary
ordinary share
2023 share price
31 December 2022 182.24p 164.75p
31 December 2023 204.46p 185.00p
--------------- ---------------
Total return for the year +12.2% +12.3%
========= =========
The Annual Financial Report Announcement is not the Company's statutory accounts. The above results for the year ended
A copy of the Annual Report will shortly be submitted to the National Storage Mechanism and will be available for inspection at: www.morningstar.co.uk/uk/NSM
The Annual Report will be posted to shareholders later this month and additional copies will be available from the registered office of the Company and on the Company's website: www.fidelity.co.uk/japan where up to date information on the Company, including daily NAV and share prices, factsheets and other information can also be found.
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.
ENDS
