Job No: 53979 Proof Event: 19 Black Line Level: 3 Park Communications Ltd Alpine Way London E6 6LA
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Fidelity Japan Trust PLC
|
Annual Report 2024
FIDELITY
JAPAN TRUST
PLC
Annual Report for the year ended 31 December 2024
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Objective and Overview
The Company aims to achieve long-term capital
growth by investing predominantly in equities
and related securities of Japanese companies.
Fidelity Japan Trust PLC uses its local presence to fully
exploit the investment opportunities in Japan.
The Portfolio Manager, Nicholas Price, follows a rigorous
bottom-up stock selection approach, with the aim of
identifying companies where the market is underestimating
or mis-pricing future growth, and unearthing companies
at an early stage of their development. This means that
he typically finds more opportunities among smaller and
medium-sized companies, where lower levels of analyst
coverage provide greater scope for mispricing.
A unique part of the Portfolio Manager’s approach
is spotting signs of change, specifically in terms of
fundamentals, business environment, market sentiment
and valuations. Therefore, the investment team are
constantly scrutinising the Company’s investments, trimming
outperformers and recycling into new opportunities.
Ultimately, the Portfolio Manager seeks to add value
through detailed research and a consistent ‘growth at a
reasonable price’ investment approach. Fidelity’s local and
global proprietary research capabilities are a key pillar in
the Company’s investment process.
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At a Glance
Fidelity Japan Trust PLC
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Annual Report 2024
2019
2020
2021
2022
2023
2024
Net Asset Value per Ordinary Share Total Return
1
+24.8%
+36.6%
+12.2%
+1.8%
-1.8%
Year ended 31 December
-24.3%
2019
2020
2021
2022
2023
2024
Ordinary Share Price Total Return
1
+24.6%
+3.9%
+39.4%
+12.3%
-5.7%
Year ended 31 December
NB
THE DATA IN THE
CHART HAS BEEN
ALTERED SO THAT
THE BARS ARE
REPRESENATIVE OF
THE VALUES AT THE
REQUEST OF THE
CUSTOMER.
-28.1%
2019
2020
2021
2022
2023
2024
+14.6%
+9.5%
+2.0%
+10.0%
Year ended 31 December
Reference Index (in sterling terms)
2
+13.3%
-4.1%
1 Alternative Performance Measures. See page 79.
2 The Reference Index is the TOPIX Total Return Index (in sterling terms).
Total Return Performance (%)
10 years ended
31 December 2024
5 years ended
31 December 2024
3 years ended
31 December 2024
1 year ended
31 December 2024
-1.8
-5.7
+10.0
-16.6
-23.8
+5.9
-1.4
+33.5
+19.4
+146.4
+142.4
+140.0
NAV per ordinary share
Ordinary share price
Reference Index (in sterling terms)
1
1
The Reference Index changed on 22 May 2018 from the Russell Nomura Mid/Small-Cap Index (in sterling terms) to the TOPIX Total Return Index (in sterling terms).
Sources: Fidelity and Datastream.
Past performance is not a guide to future returns.
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2024 2023
Assets at 31 December
Total portfolio exposure
1
£287.0m £317.4m
Shareholders’ funds £231.4m £257.8m
Total portfolio exposure in excess of shareholders’ funds
(Gearing – see page 16)
2
24.0% 23.1%
Net Asset Value (NAV) per ordinary share
2
200.78p 204.46p
Share Price and Discount data at 31 December
Ordinary share price at the year end 174.50p 185.00p
year high 185.00p 186.00p
year low 152.50p 152.50p
Discount at the year end
2
13.1% 9.5%
Results for the year to 31 December – see page 58
Revenue return per ordinary share
2
2.17p 2.17p
Capital (loss)/return per ordinary share
2
(8.43p) 19.33p
Total (loss)/return per ordinary share
2
(6.26p) 21.50p
Ongoing charges ratio for the year to 31 December
2, 3
1.03% 0.99%
Variable management fee credit (0.20%) (0.15%)
Ongoing charges ratio including variable management fee for the year to 31 December
2
0.83% 0.84%
1 The total exposure of the investment portfolio, including exposure to the investments underlying the long Contracts for Difference. See page 16.
2 Alternative Performance Measures.
3 Ongoing charges ratio (excluding finance costs and taxation) as a percentage of the average net asset values for the reporting year (prepared in accordance with
guidance issued by the Association of Investment Companies). A definition of the ongoing charges ratio is in the Glossary of Terms on page 89.
Summary of Results
As at 31 December 2024
Shareholders’ Funds
£231.4m
Market Capitalisation
£201.1m
Capital Structure
Ordinary Shares of 25 pence held outside of Treasury
115,257,714
Summary of the key aspects of the
Investment Policy
The Portfolio Manager typically focuses on those companies
primarily listed on Japanese stock exchanges whose growth
prospects are not fully recognised by the market (“growth at a
reasonable price”). The Portfolio Manager is not restricted in
terms of size or industry of the underlying entities in which he
invests.
The Company can hold cash or invest in cash equivalents,
including money market instruments, and is also able to use
derivatives for efficient portfolio management, gearing and
investment purposes.
The Portfolio Manager must work within the guidelines set out in
the Investment Policy.
The Company operates a variable management fee
arrangement, details of which is calculated by comparing
performance relative to the Reference Index (in sterling terms).
Annual Report 2024
|
Fidelity Japan Trust PLC
Job No: 53979 Proof Event: 19 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA
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01
Annual Report 2024
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Fidelity Japan Trust PLC
STRATEGYFINANCIAL GOVERNANCEINFORMATION FOR SHAREHOLDERS
Contents
Strategy
Chairman’s Statement 02
Portfolio Manager’s Review 05
Attribution Analysis 10
Spotlight on the Top 10 Holdings 11
Portfolio Listing 13
Distribution of the Portfolio 17
Unlisted Investments 18
ESG Ratings 21
Ten Year Record 22
Summary of Performance Charts 23
Strategic Report 24
Governance
Board of Directors 34
Directors’ Report 35
Corporate Governance Statement 39
Directors’ Remuneration Report 43
Statement of Directors’ Responsibilities 46
Report of the Audit Committee 47
Financial
Independent Auditor’s Report 51
Income Statement 58
Statement of Changes in Equity 59
Balance Sheet 60
Notes to the Financial Statements 61
Alternative Performance Measures 79
Financial Calendar and Annual General Meeting 80
Information for Shareholders
Notice of Meeting 81
Shareholder Information 85
Data Protection 87
Glossary of Terms 88
Alternative Investment Fund Manager’s Disclosure 91
Chairman’s Statement
Read more on pages 02 to 04
Portfolio Manager’s Review
Read more on pages 05 to 09
Ten Year Record
Read more on page 22
Spotlight on the Top 10 Holdings
Read more on pages 11 and 12
Ordinary Share Price as at 31 December
2022
2023
2024
164.75p
185.00p
174.50p
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Fidelity Japan Trust PLC
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Annual Report 2024
Discount Management, Share Repurchases and
TreasuryShares
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 Treasury, at a cost of £18,857,000. This
represented 8.0% of the issued share capital of the Company as
at 31December 2024 and added 1.3% to the NAV total return
for the year. Subsequent to the year end and up to the latest
practicable date of this report, the Company has repurchased
a further 1,532,679 shares at a cost of £2,676,000. Historically,
shares bought back were held in Treasury and could be issued
at a later date should the share price move to a premium to NAV
per ordinary share. As the number of shares held in Treasury
equated to 15% of the issued share capital by 20 January 2025,
shares repurchased since then have been cancelled.
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 21 May
2025, the Board is seeking to renew the annual authority to
repurchase up to 14.99% of the Company’s shares, to be either
cancelled or held in Treasury, as it has done each year previously.
A sustained reduction in the discount of the Company is only
likely if broad investor interest in Japan continues to increase and
the investment performance recovers. Meanwhile, the Board and
the Manager will continue their efforts to raise the Company’s
profile and promote the investment opportunities in the Japanese
equity market.
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 lower 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.
Chairman’s Statement
I am pleased to present the Annual Report of Fidelity Japan
Trust PLC for the year ended 31 December 2024. However, it
is disappointing to report that it proved to be another difficult
year for the investment style of the Company notwithstanding a
positive return for the overall market. The TOPIX Total Return Index
(the Reference Index) rose by 10.0% over the year in sterling
terms. By comparison, the Company’s net asset value (NAV) fell
by 1.8% over the year and the share price fell by 5.7% reflecting
a widening in the discount at which the shares are traded. This
now means that the three and five year returns for the Company
are disappointingly behind the Index and have also lagged
competitor funds.
The Company has an all-cap mandate and Nicholas Price,
your Portfolio Manager, is not constrained by size or style and
can invest across the range of Japanese companies. However,
the decision to be overweight in small and mid-cap growth
companies, where research is rewarded and where Nicholas
and the highly experienced Fidelity team have historically found
many of the best opportunities, contributed significantly to the
underperformance. The change in interest rates damaged
valuations in this part of the market and there were some flaws in
stock-picking, as evidenced by the disappointing earnings results
from some of the companies involved in the factory automation
sector.
Illustrative of the challenges of being a growth orientated
manager in Japan, it is interesting to note that the MSCI Japan
Value Index has risen by 42.2% in sterling terms over the three
years to 31 December while the MSCI Japan Growth Index has
fallen by 3.7% over the same period.
David Graham, Chairman
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Annual Report 2024
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Fidelity Japan Trust PLC
STRATEGYFINANCIAL GOVERNANCEINFORMATION FOR SHAREHOLDERS
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 Japan
remains lacklustre.
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 on
page 8 and also on pages 18 to 20.
Due Diligence Trip
As detailed in the half-yearly report for the six months ended
30 June 2024, the Board was pleased to undertake a due
diligence trip to Japan last June, spending time with the
investment management and analyst teams and meeting some
of the Company’s investments with them. The visit was invaluable
in terms of giving the Board an understanding of the depth of
analyst resources supporting the Portfolio Manager, reinforcing
the continued confidence of the Board in Fidelity, Nicholas and
the investment team around him, and underscoring our belief that
the Company will benefit when there is a market rotation back
into growth orientated stocks and some of the medium-sized and
smaller companies held in the portfolio.
Board of Directors
As covered in the 2023 Annual Report, Dominic Ziegler retired
from the Board at the May 2024 AGM after nine years of
excellent service. Seiichi Fukuyama joined the Board as a non-
executive Director with effect from 1 March 2024 and was elected
by shareholders at the AGM in May 2024. There have been no
other changes to the Board over the year. All five Directors will
be standing for re-election at the AGM on 21 May 2025 and
their biographies can be found on page 34. Between them they
have a wide range of appropriate skills and experience and the
diversity of perspectives necessary to form a balanced Board for
the Company.
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. Nicholas Price will be making a presentation,
considering the year under review, and outlining the opportunities
in the market and prospects for the year ahead. The Board
and Nicholas will be very happy to answer questions from
shareholders attending both in person and virtually. Japanese
refreshments will be served to attendees, and we look forward to
seeing many of you there.
Further details of the AGM are set out on page 80 and in the
Notice of Meeting on pages 81 to 84.
Portfolio Manager Change and Continuation Vote
The Board has recently been notified that the Portfolio Manager,
Nicholas Price, plans to retire at the end of this calendar year
after a 30 year career with Fidelity in Japan. His Assistant
Portfolio Manager, Ying Lu, will become the Company’s Portfolio
Manager with effect from 1 October 2025. Nicholas will continue
to work with Ying until the end of the year. Ying has been
working closely with Nicholas for the past three years and so
we do not expect any change in the approach to the investment
management of the Company.
The Board continues to believe that the Fidelity investment team
in Japan is one of the best resourced in the industry. We also
believe that we will see a reversion to a market environment
where the investment style of the Fidelity team will once again
generate the significant outperformance that we have seen
in the past and particularly the years ended 2019 and 2020.
Illustrating how quickly things can change, it is worth noting that
in December 2024 alone, the NAV of the Company rose by 5.2%
and the share price by 5.8% against an Index increase of 0.9%.
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 Treasury) following the three years to 31 December 2027. The
tender will be at a price close to NAV.
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 May 2028.
Articles of Association
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.
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Fidelity Japan Trust PLC
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Annual Report 2024
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
Directors’ Report at page 38.
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 Japan, most notably being the recent US$47 billion bid for
convenience store operator 7-Eleven by the Canadian company
that owns rival retailer Circle K.
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.
David Graham
Chairman
26 March 2025
Chairman’s Statement continued
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Annual Report 2024
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Fidelity Japan Trust PLC
STRATEGYFINANCIAL GOVERNANCEINFORMATION FOR SHAREHOLDERS
Portfolio Manager’s Review
Question
The performance for the year under
review has remained challenging given
the positive headlines of recovery in
Japan. Why is that and what were the key
drivers of the Japanese stock market?
Answer
It is disappointing to report to our shareholders on another year
of poor performance against favourable headlines in Japan
and the country being in a new bull market, driven by corporate
governance reforms, a weak yen boosting profits and increasing
activist and private equity involvement creating a more dynamic
market for corporate control. On why the Company could not
capture this beta, I would say that being on the ground in Japan,
my bottom-up approach tends to focus on relatively lesser-known
growth companies, often mid-caps with strong business models,
new technology companies or those having strong positions
in emerging growth markets. By buying these companies at
cheap valuations, I am aiming to find future drivers of long-term
performance for the Company. However, the short-term attention
of the market since the 2023 implementation of the Tokyo Stock
Exchange (TSE) reforms has been on low price-to-book ratio,
ex-growth and old economy large-cap companies, often with
large cash balances, which can be persuaded into doing large
buybacks and increasing leverage. As this drives up short-term
shareholder returns, there has been a large allocation of capital
and market capitalisation away from growth areas of the market
to companies that do not need that capital. Thereby, while most
of the companies in the portfolio have executed well in terms of
profit growth, the valuation contraction in the mid-cap segment
of the portfolio has meant that the premium paid historically for
sustainable mid-term higher return and growth companies has
been effectively wiped out, at least temporarily.
Question
What were the key contributors and
detractors for the performance of the
Company in the year to 31 December
2024?
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 China, where a combination of internal
initiatives and macro factors are supporting a pickup in demand.
In Japan, strong sales growth, underpinned by successful new
products, and price hikes are leading to lower discounts and
higher profit margins. Sanrio is a Japanese entertainment
Nicholas Price was appointed
as Portfolio Manager of
Fidelity Japan Trust PLC on
1 September 2015. He joined
Fidelity Investments Japan in
1993 as a research analyst. He
became a portfolio manager
in 1999 and has since been
managing a number of
Japanese equity portfolios on
behalf of both Japanese and
international clients.
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Fidelity Japan Trust PLC
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Annual Report 2024
company that sells ‘Hello Kitty and friends’ merchandise and
operates ‘Hello Kitty’ theme parks. The company is ideally placed
to capture the structural growth of the Japanese character
intellectual property (IP) market and its strategies in the licensing
business are working very well in both North America and China,
which contributed to an improvement in its overall profitability.
Sanrio recently upgraded its full-year guidance and I expect
the company to deliver double-digit profit growth over the next
two to three years, justifying its valuation premium. Recruit
Holdings, a global media and staffing company, made progress
in improving the monetisation of its online job-matching platform
“Indeed” and that helped to offset slowing job openings in the
US. The company’s commitment to enhancing capital efficiency
and increasing shareholder returns provided further share price
support. Among financials, mega bank Mizuho Financial Group
reported fiscal 2024 interim results that exceeded consensus
forecasts due to a combination of higher interest rates, growth in
non-interest income and the unwinding of cross shareholdings.
The company announced a share buyback and dividend hike
alongside its earnings release, and as a relative laggard it is
starting to catch up with its peers in terms of earnings and stock
price performance.
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, Hiroshi Kurosawa. Despite the change in management,
we expect the company’s efforts to expand capacity and
maximise its existing crematorium facilities to support future
earnings growth. Given the largely predictable nature of the
funeral business cash flows, we believe that it is substantially
undervalued versus other similar listed businesses. Bicycle
component maker Shimano negatively revised its full-year profit
forecasts due to currency losses. However, inventory adjustments
were expected to finish by year-end and demand in key markets
is set to normalise.
The ten highest stock contributors and detractors to the NAV total
return on a relative basis are shown on page 10.
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 Japan, I have also added to financials names
such as Sompo Holdings and Mizuho Financial Group. This
has created a better sectoral balance in the portfolio, while
maintaining an 80% (ungeared) active money ratio but having
around half of the portfolio in larger caps. In this way, I anticipate
that we will be able to deliver better performance in a large-cap
dominated market and still maintain the ability to outperform
strongly when the market favours stocks further down the market-
cap scale through our core bottom-up stock picking process.
Question
Tokyo Stock Exchange (TSE) initiatives
for corporate reform have initially been
concentrated in large-cap companies.
What are your expectations for growth
names and mid-cap companies in 2025?
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.
Portfolio Manager’s Review continued
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Annual Report 2024
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Fidelity Japan Trust PLC
STRATEGYFINANCIAL GOVERNANCEINFORMATION FOR SHAREHOLDERS
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.
Forward price-to-earnings (PER) multiples (x)
Jan-14
Jun-14
TOPIX fwd PER (x)
Core 30 fwd PER (x)
Mid 400 fwd PER (x)
Source: Fidelity International, Bloomberg as of 31 December 2024.
Nov-14
Apr-15
Sep-15
Feb-16
Jul-16
May-17
Oct-17
Mar-18
Aug-18
Jan-19
Jun-19
Apr-20
Sep-20
Feb-21
Jul-21
Dec-21
May-22
Oct-22
Mar-23
Aug-23
Jan-24
Jun-24
Dec-24
8
10
12
14
16
18
20
22
24
Dec-16
Price-to-book (PBR) multiples (x)
Jan-14
Jun-14
TOPIX PBR (x)
Core 30 PBR (x)
Mid 400 PBR (x)
Source: Fidelity International, Bloomberg as of 31 December 2024.
Nov-14
Apr-15
Sep-15
Feb-16
Jul-16
May-17
Oct-17
Mar-18
Aug-18
Jan-19
Jun-19
Apr-20
Sep-20
Feb-21
Jul-21
Dec-21
May-22
Oct-22
Mar-23
Aug-23
Jan-24
Jun-24
Dec-24
0.8
0.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
Dec-16
Nov-19
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 Henry
Kravis, Japan has more than 3x the number of listed subsidiaries
than the US and more than half of the listed companies trade
below book. There is also an increased focus on the need to
accelerate the unwinding of cross shareholdings. In a historically
overcapitalised market, where there is a clear drive to improve
capital efficiency and restructure balance sheets, this trend of de-
equitisation is positive for the mid-to-long term outlook.
Value of announced share buybacks (JPY trn)
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Source: Fidelity International, Recof, QUICK as of 31 December 2024
Note: value of share buybacks is on a fiscal year basis.
0
2
4
6
8
10
12
14
16
18
Number of M&A Deals
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
In - in
Source: Fidelity International, Recof, QUICK as of 31 December 2024
Note: value of share buybacks is on a fiscal year basis.
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
In - out
Out - in
Total
Job No: 53979 Proof Event: 19 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA
Customer: Fidelity Project Title: FJT Annual Report T: 0207 055 6500 F: 020 7055 6600
08
Fidelity Japan Trust PLC
|
Annual Report 2024
Question
What engagements did you conduct over
the year?
Answer
In 2024, the engagement team in Tokyo, led by our Head
of Engagement, conducted 100 meetings (in addition to our
fundamental research meetings), covering 22 names held by the
Company. Against a backdrop of increasing governance reform
under the auspices of the TSE, the majority of the engagements
were focused on governance, capital allocation and long-term
strategy.
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 Uyemura, a niche mid-cap chemicals
company focused on cutting edge plating for printed wiring
boards and electronic components used in smartphones and
cars, to follow up on an earlier meeting in 2023. The company
has high margins, strong cashflow generation capabilities, and
large cash balances, but a low third-party rating and low capital
efficiency are impacting its valuation. The company has shown
tangible progress and enhanced its governance checks, for
example by creating a nomination & renumeration committee, as
well as increasing buybacks. We believe that Uyemura’s initiatives
are better than disclosed and with time and enhancements to
their disclosure, this can improve further.
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
Portfolio Manager’s Review continued
Job No: 53979 Proof Event: 19 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA
Customer: Fidelity Project Title: FJT Annual Report T: 0207 055 6500 F: 020 7055 6600
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Annual Report 2024
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Fidelity Japan Trust PLC
STRATEGYFINANCIAL GOVERNANCEINFORMATION FOR SHAREHOLDERS
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 GO Inc, the largest taxi ride hailing app
in Japan with 75% market share, which is growing rapidly and
recently announced an exclusive tie up with Waymo in self-driving
taxis in Japan.
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
January 2019 to January 2022, the Company’s cumulative relative
return was up by 45% but from January 2022 to December 2024
it was down by 35% relative to the market, giving up most of
the gains from the previous three years. In the first period, an
overweight exposure to the cyclical technology sector, which
enjoyed a post-COVID boom, and bottom-up stock selection
generally added a lot of value. The main detractors were more
expensive internet-related names, which did well at the beginning
of the pandemic but declined afterward especially as valuation
multiples came down.
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: China-related
factory automation (FA) companies and small-cap internet-related
names that experienced a contraction in their valuation multiples.
Where are we now with this? For the names that I continued to
hold in the internet space, such as Raksul, the valuations are in
line with the market despite their much higher earnings growth
rates, so the upside/downside risks are now skewed to the
upside. Similarly, for FA names such as MISUMI Group, most of
them have re-oriented their businesses away from China over the
last two years to other Asian countries, and to the US, and are
growing again. They remain under-owned and offer an attractive
risk-reward balance for 2025.
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 Harmonic Drive
Systems.
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.
Nicholas Price
Portfolio Manager
26 March 2025
Job No: 53979 Proof Event: 19 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA
Customer: Fidelity Project Title: FJT Annual Report T: 0207 055 6500 F: 020 7055 6600
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Fidelity Japan Trust PLC
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Annual Report 2024
Attribution Analysis
Analysis of NAV total return for the year ended 31 December 2024 %
Impact of:
Index +10.0
Index Gearing +2.0
Stock Selection -12.9
Portfolio Gearing -1.1
Share Repurchases +1.3
Expenses -0.8
Cash Holding -0.3
NAV total return for the year ended 31 December 2024 -1.8
Ten Highest Contributors (on a relative basis)
Company and Sector
Portfolio
Average
Weight
%
Index
Average
Weight
%
Contribution
to Relative
Return
%
Ryohin Keikaku (Retail Trade) +5.0 +0.1 +1.9
Sanrio (Wholesale Trade) +1.2 +0.1 +1.1
Recruit Holdings (Services) +2.6 +1.6 +0.9
Mizuho Financial Group (Banks) +4.0 +1.1 +0.9
Yonex (Other Products) +2.4 0.0 +0.9
Maruwa (Glass & Ceramic Products) +1.6 0.0 +0.5
Kyushu Electric Power (Electric Power & Gas) +0.6 +0.1 +0.5
RORZE (Machinery) +0.7 0.0 +0.4
Tokyo Electron (Electric Appliances) +3.4 +1.7 +0.4
Nippon Telegraph & Telephone (Information & Communication) 0.0 +1.3 +0.3
Ten Highest Detractors (on a relative basis)
Company and Sector
Portfolio
Average
Weight
%
Index
Average
Weight
%
Contribution
to Relative
Return
%
Mitsui High-tec (Electric Appliances) +2.6 0.0 -2.0
Harmonic Drive Systems (Machinery) +3.0 0.0 -1.4
Kosaido Holdings (Other Products) +1.9 0.0 -1.2
Shimano (Transportation Equipment) +1.7 +0.3 -1.0
NOF (Chemicals) +3.7 +0.1 -0.9
Mitsubishi Electric (Electric Appliances) +1.5 +0.7 -0.9
Osaka Soda (Chemicals) +5.3 0.0 -0.8
Sunwels (Services) +0.6 0.0 -0.8
Hitachi (Electric Appliances) +0.8 +2.1 -0.8
Mitsubishi UFJ Financial Group (Banks) 0.0 +2.5 -0.7
Source: Fidelity.
Job No: 53979 Proof Event: 19 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA
Customer: Fidelity Project Title: FJT Annual Report T: 0207 055 6500 F: 020 7055 6600
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Annual Report 2024
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Fidelity Japan Trust PLC
STRATEGYFINANCIAL GOVERNANCEINFORMATION FOR SHAREHOLDERS
Spotlight on the Top 10 Holdings
as at 31 December 2024
(based on Portfolio Exposure expressed as a percentage of Shareholders’ Funds)
Recruit Holdings
Industry: Services (Portfolio Exposure: 7.4%)
Recruit Holdings, headquartered in Tokyo, is a global leader in human resource technology.
Thecompany offers integrated HR solutions, media marketing and temporary staffing
services. It operates two US businesses, Indeed (an online job search engine) and Glassdoor
(acompany information site), acquired in 2012 and 2018, respectively and has a successful
track record in the US job market. The demand for staffing and recruitment services in Japan
remains strong, particularly as the country faces demographic challenges such as an ageing
population and labour shortages.
Ryohin Keikaku
Industry: Retail Trade (Portfolio Exposure: 6.9%)
Ryohin Keikaku operates the MUJI brand of general merchandise stores, with over 600 stores
in Japan and seven based in the UK. While the domestic MUJI business continues to expand
thanks to ongoing robust sales in health & beauty and household goods, MUJI business
in China, despite uncertainties in the Chinese economy, has started to recover through
constant improvements in product development, marketing and omni-channels and inventory
management.
Mizuho Financial Group
Industry: Banks (Portfolio Exposure: 5.7%)
Mizuho Financial Group is one of the three mega banks in Japan with high reliance on
corporate and commercial banking businesses, backed by the long-term franchise coming
from the former IBJ (The Industrial Bank of Japan). Structural changes in the Bank of Japan’s
monetary policy (rising interest rate environment) are likely to lead to earnings growth on the
back of the expansion of lending/deposit spreads. Positive shareholder returns in the form of
dividend increases and share buybacks are expected to support the share price. The valuation
is the most attractive among the three mega banks and global peers.
Osaka Soda
Industry: Chemicals (Portfolio Exposure: 5.0%)
Osaka Soda is a chemicals company that has transformed its business portfolio from highly
cyclical commodity products to more specialised and niche products. Since 2010, Osaka Soda
has expanded its healthcare business and has established a dominant market position in
purification materials that are key to the production of GLP-1 and insulin drugs. With GLP-1
drugs expanding into obesity treatments, the company is well positioned to meet the rapid
demand growth from global pharmaceuticals companies. Finally, its net cash balance sheet
offers scope for higher shareholder returns.
Keyence
Industry: Electric Appliances (Portfolio Exposure: 4.3%)
Keyence is a leading supplier of sensors, measuring systems, laser markers, microscopes and
machine vision systems worldwide. Keyence stands as a beacon of innovation and excellence
in the realm of industrial automation. Renowned for its commitment to innovative technology,
Keyence is not simply selling products but providing solutions that solve clients’ problems in the
everyday manufacturing process. The company’s presence in major markets worldwide allows it to
tap into diversified industries, mitigate industry cyclicality and deliver long-term sustainable growth
and high profitability.
Job No: 53979 Proof Event: 19 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA
Customer: Fidelity Project Title: FJT Annual Report T: 0207 055 6500 F: 020 7055 6600
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Fidelity Japan Trust PLC
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Annual Report 2024
MISUMI Group
Industry: Wholesale Trade (Portfolio Exposure: 4.1%)
MISUMI Group manufactures and distributes factory automation and metal die components.
The company is unique for its QCT model, which aims to deliver high quality (Q) at low cost
(C) with reliable, quick delivery times (T). With a vast portfolio of over 30 million products, the
company is the leading component provider supporting the global manufacturing industry.
For the coming year, MISUMI’s profits are expected to recover due to increased demand for
auto and semiconductors in Japan and China. Global manufacturing activities also continue to
recover, and the company can deliver sustainable growth over the long-term.
Sony Group
Industry: Electric Appliances (Portfolio Exposure: 3.9%)
Sony Group is an entertainment conglomerate and the global leader in console gaming
(PlayStation) and complementary metal oxide semiconductor (CMOS) image sensors. It is also
well-known as a major player in the music and motion picture business. Sony’s main unit-based
business, the gaming and network segment, is entering a positive phase as PlayStation hits the
heart of its cycle and this leads to greater software and network driven revenue. The CMOS
business continues to recover with an improvement to the inventory cycle while the company also
works out its own yield issues.
Ajinomoto
Industry: Foods (Portfolio Exposure: 3.6%)
Ajinomoto engages in a broad range of businesses, from foods based on its amino acid
technology to electronic materials and pharmaceuticals. It has a high share of the global
market in umami seasonings, electronic materials and amino acids for pharmaceuticals. A
long-term growth opportunity arises from its healthcare businesses with a multi-year horizon as
next generation pharmaceutical therapies progress to the commercial stage. With a boost from
management’s pro-active stance on shareholder returns such as dividend increases and share
buybacks, the company is expected to achieve top-class capital efficiency in the food sectors.
Riken Keiki
Industry: Precision Instruments (Portfolio Exposure: 3.6%)
Riken Keiki is a leading producer of industrial gas detection and alarm equipment and has
strong links with customers in the electronics and semiconductor industries. Top line growth
and especially sales of new equipment are key given the recurring revenues that come from
the maintenance and replacement of gas detection equipment. Increasing investment in
semiconductor and lithium-ion battery plants in Japan and overseas is expected to drive
futuredemand.
Sompo Holdings
Industry: Insurance (Portfolio Exposure: 2.8%)
Sompo Holdings is a major property & casualty (P&C) insurer in Japan and implements business
strategies in core businesses of domestic P&C, life insurance, nursing care and overseas
insurance. The company has a solid track record of providing comprehensive insurance products
and services to individuals, businesses and other organisations. Sompo has been focusing on
expanding its global presence through strategic partnerships and acquisitions. The company
has good earnings visibility due to the acceleration of strategic share divestment, loss ratio
improvement in the P&C business and an increase in share buybacks boosting the return on
equity.
Spotlight on the Top 10 Holdings continued
as at 31 December 2024
(based on Portfolio Exposure expressed as a percentage of Shareholders’ Funds)
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Annual Report 2024
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Fidelity Japan Trust PLC
STRATEGYFINANCIAL GOVERNANCEINFORMATION FOR SHAREHOLDERS
Portfolio Listing
as at 31 December 2024
The Portfolio Exposures shown below and on pages 14 to 16 measure exposure to market price movements as a result of owning shares
and derivative instruments. The Fair Value is the actual value of the portfolio and is the value shown on the Balance Sheet. Where
a Contract for Difference (CFD) is held, the Fair Value reflects the profit or loss on the contract since it was opened and is based on
how much the share price of the underlying share has moved. Where the Company only holds shares, the Fair Value and the Portfolio
Exposure will be the same.
2024 2023
Fair Value Portfolio Exposure Portfolio Exposure
Company Sector £’000 £’000 %
1
£’000 %
1
Exposures – shares unless otherwise stated
Recruit Holdings (shares and long CFD) Services 10,244 17,206 7.4 1,017 0.4
Ryohin Keikaku (shares and long CFD) Retail Trade 5,078 15,907 6.9 15,069 5.8
Mizuho Financial Group Banks 13,130 13,130 5.7 7,594 3.0
Osaka Soda Chemicals 11,468 11,468 5.0 16,523 6.4
Keyence (long CFD) Electric Appliances 146 9,966 4.3 10,601 4.1
MISUMI Group (shares and long CFD) Wholesale Trade 3,596 9,559 4.1 11,436 4.4
Sony Group Electric Appliances 9,030 9,030 3.9 1,906 0.7
Ajinomoto (shares and long CFD) Foods 1,705 8,344 3.6 – –
Riken Keiki Precision Instruments 8,231 8,231 3.6 8,178 3.2
Sompo Holdings Insurance 6,561 6,561 2.8 – –
Ten largest exposures (2023: £117,252,000
representing portfolio exposure of 45.5%) 69,189 109,402 47.3
Yonex Other Products 6,461 6,461 2.8 4,747 1.8
Harmonic Drive Systems Machinery 6,211 6,211 2.6 9,451 3.7
Asoview Unlisted 6,114 6,114 2.6 5,740 2.2
Hitachi Electric Appliances 6,013 6,013 2.6 – –
Olympus (shares and long CFD) Precision Instruments 2,522 4,954 2.1 – –
DeNA (shares and long CFD) Services 1,513 4,628 2.0 – –
C. Uyemura Chemicals 4,500 4,500 1.9 5,318 2.1
Toyota Industries Transportation Equipment 4,387 4,387 1.9 – –
Miura Machinery 4,384 4,384 1.9 – –
Sanrio Wholesale Trade 4,368 4,368 1.9 2,053 0.8
Kotobuki Spirits Foods 4,231 4,231 1.8 4,582 1.8
Maruwa Glass & Ceramics Products 4,158 4,158 1.8 3,236 1.3
Fujikura Nonferrous Metals 4,129 4,129 1.8 – –
Kosaido Holdings Other Products 4,024 4,024 1.7 6,257 2.4
Mitsui High-tec Electric Appliances 3,883 3,883 1.7 8,430 3.3
Seven & i Holdings (shares and long CFD) Retail Trade 695 3,868 1.7 – –
Raksul Information & Communication 3,845 3,845 1.7 3,654 1.4
Job No: 53979 Proof Event: 19 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA
Customer: Fidelity Project Title: FJT Annual Report T: 0207 055 6500 F: 020 7055 6600
14
Fidelity Japan Trust PLC
|
Annual Report 2024
2024 2023
Fair Value Portfolio Exposure Portfolio Exposure
Company Sector £’000 £’000 %
1
£’000 %
1
Mitsubishi Electric (shares and long CFD) Electric Appliances 150 3,811 1.6 – –
Hoya Precision Instruments 3,601 3,601 1.6 685 0.3
Suzuki Motor Transportation Equipment 3,491 3,491 1.5 1,697 0.7
KeePer Technical Laboratory Services 3,471 3,471 1.5 4,341 1.7
Inforich Services 3,443 3,443 1.5 2,203 0.9
Giftee Information & Communication 3,224 3,224 1.4 3,631 1.4
Credit Saison Other Financing Business 3,028 3,028 1.3 1,618 0.6
GO Inc Unlisted 2,905 2,905 1.3 2,487 1.0
NOF (long CFD) Chemicals 5 2,886 1.2 13,859 5.4
Central Automotive Products Wholesale Trade 2,871 2,871 1.2 3,687 1.4
Dentsu Soken Information & Communication 2,869 2,869 1.2 2,492 1.0
Nintendo Other Products 2,736 2,736 1.2 – –
Rohto Pharmaceutical Pharmaceutical 2,687 2,687 1.2 2,023 0.8
Mizuno Other Products 2,587 2,587 1.1 – –
m-up Information & Communication 2,462 2,462 1.1 2,406 0.9
Hoshizaki Machinery 2,459 2,459 1.1 – –
Shimano (shares and long CFD) Transportation Equipment 566 2,405 1.0 – –
Fujitsu Electric Appliances 2,038 2,038 0.9 – –
SoftBank Group Information & Communication 2,009 2,009 0.9 – –
Studyplus Unlisted 1,960 1,960 0.8 2,110 0.8
SEMITEC Electric Appliances 1,729 1,729 0.7 1,777 0.7
Fuji Electric Electric Appliances 1,653 1,653 0.7 – –
iYell Unlisted 1,652 1,652 0.7 2,189 0.8
A&D Holon Holdings Precision Instruments 1,571 1,571 0.7 1,508 0.6
Noritsu Koki Precision Instruments 1,565 1,565 0.7 – –
Premium Group Other Financing Business 1,542 1,542 0.7 – –
Simplex Holdings Information & Communication 1,513 1,513 0.7 1,630 0.6
Seiko Group Corporation Precision Instruments 1,445 1,445 0.6 – –
RS Technologies Metal Products 1,421 1,421 0.6 1,186 0.5
Dexerials Chemicals 1,403 1,403 0.6 – –
gremz Electric Power & Gas 1,324 1,324 0.6 – –
Tokyo Ohka Kogyo Chemicals 1,190 1,190 0.5 – –
Portfolio Listing continued
Job No: 53979 Proof Event: 19 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA
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Annual Report 2024
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Fidelity Japan Trust PLC
STRATEGYFINANCIAL GOVERNANCEINFORMATION FOR SHAREHOLDERS
2024 2023
Fair Value Portfolio Exposure Portfolio Exposure
Company Sector £’000 £’000 %
1
£’000 %
1
PAL Group Holdings Retail Trade 1,125 1,125 0.5 – –
Okamoto Industries Rubber Products 1,088 1,088 0.5 899 0.3
Shin-Etsu Chemical Chemicals 1,056 1,056 0.5 4,148 1.6
Shibaura Electronics Electric Appliances 1,045 1,045 0.5 2,295 0.9
Moneytree Unlisted 1,042 1,042 0.5 1,832 0.7
Relo Group Services 1,018 1,018 0.4 – –
Spiber Unlisted 1,014 1,014 0.4 1,011 0.4
GNI Group Pharmaceutical 992 992 0.4 – –
Transaction Other Products 962 962 0.4 – –
SharingTechnology Information & Communication 955 955 0.4 – –
Tokyotokeiba Services 922 922 0.4 1,477 0.6
Daikin Industries Machinery 861 861 0.4 – –
Photosynth Information & Communication 852 852 0.4 1,240 0.5
Arealink Real Estate 829 829 0.4 – –
AZ-Com Maruwa Holdings Land Transportation 757 757 0.3 1,292 0.5
Rigaku Holdings Precision Instruments 727 727 0.3 – –
Plus Alpha Consulting Information & Communication 669 669 0.3 2,786 1.1
AirTrip Services 633 633 0.3 1,532 0.6
Yoriso Unlisted 631 631 0.3 1,034 0.4
K&O Energy Group Mining 584 584 0.3 – –
Katitas Real Estate 581 581 0.3 – –
Jinushi Real Estate 573 573 0.2 – –
Management Solutions Services 560 560 0.2 1,736 0.7
Integral
Securities & Commodity
Futures 553 553 0.2 845 0.3
Tokyo Seimitsu Precision Instruments 533 533 0.2 2,974 1.2
Kyoritsu Maintenance Services 467 467 0.2 – –
Tamron Precision Instruments 460 460 0.2 628 0.2
IDOM Wholesale Trade 418 418 0.2 – –
Bengo4.com Services 335 335 0.1 682 0.3
Kinden Construction 220 220 0.1 – –
Total Portfolio (including long CFDs) 229,659 286,973 124.0
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Fair Value and Portfolio Exposure of Investments as at 31 December 2024
2024 2023
Fair Value Portfolio Exposure Portfolio Exposure
£’000 £’000 %
1
£’000 %
1
Investments (Note 9 - see pages 68 and 69) 228,344 228,344 98.7 253,843 98.5
Derivative instruments assets - long CFDs
(Note 10 - see page 69) 1,457 50,375 21.8 41,568 16.1
Derivative instruments liabilities – long CFDs
(Note 10 – see page 69) (142) 8,254 3.5 21,953 8.5
Total Portfolio (including long CFDs) 229,659 286,973 124.0 317,364 123.1
Shareholders’ Funds 231,413 257,793
Gearing
2
24.0% 23.1%
1 Portfolio Exposure is expressed as a percentage of Shareholders’ Funds.
2 Gearing is the amount by which the Portfolio Exposure exceeds Shareholders’ Funds expressed as a percentage of Shareholders’ Funds.
Portfolio Listing continued
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Fidelity Japan Trust PLC
STRATEGYFINANCIAL GOVERNANCEINFORMATION FOR SHAREHOLDERS
Distribution of the Portfolio
as at 31 December 2024
Sector
2024
1
Total
%
2024
2
Index
%
2023
1
Total
%
Electric Appliances 16.9 17.6 20.8
Services 14.0 5.1 11.9
Precision Instruments 10.0 2.4 5.6
Chemicals 9.7 5.2 18.9
Retail Trade 9.1 4.6 10.8
Information & Communication 8.1 7.6 9.0
Wholesale Trade 7.4 6.8 7.1
Other Products 7.2 2.7 5.1
Unlisted 6.6 – 6.3
Machinery 6.0 5.6 8.4
Banks 5.7 8.5 4.4
Foods 5.4 3.1 1.8
Transportation Equipment 4.4 7.9 0.7
Insurance 2.8 3.3 0.3
Other Financing Business 2.0 1.2 1.8
Glass & Ceramics Products 1.8 0.7 1.9
Nonferrous Metals 1.8 0.8 0.9
Pharmaceutical 1.6 4.3 0.8
Real Estate 0.9 1.8 –
Metal Products 0.6 0.5 1.2
Electric Power & Gas 0.6 1.3 1.3
Rubber Products 0.5 0.6 0.7
Land Transportation 0.3 2.2 0.5
Mining 0.3 0.2 –
Securities & Commodity Futures 0.2 0.9 0.3
Construction 0.1 2.1 0.9
Textiles & Apparels – 0.4 1.6
Fishery, Agriculture & Forestry – 0.1 0.1
Iron & Steel – 0.8 –
Marine Transportation – 0.7 –
Oil & Coal Products – 0.5 –
Air Transportation – 0.3 –
Pulp & Paper – 0.1 –
Warehousing & Harbor Transportation Services – 0.1 –
124.0 100.0 123.1
1 Portfolio Exposure is expressed as a percentage of Shareholders’ Funds.
2 TOPIX Total Return Index (in sterling terms), the Company’s Reference Index.
The table below details the Distribution of the Portfolio based on Portfolio Exposure which measures the
exposure of the portfolio to market price movements as a result of owning shares and derivatives instruments.
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The Company has shareholder authority to invest up to 20% of its
assets in securities which are not listed on any stock exchange or
traded on the Jasdaq market. However, for the time being, the
Board believes that it is prudent to limit the proportion held in
such companies to a maximum of 10% at the time of any further
investment.
The Directors believe that the ability to invest in unlisted securities
is a differentiating factor for the Company and can be a source
of additional investment performance. It allows the Portfolio
Manager to take advantage of the growth trajectory of early-
stage companies before they potentially become listed on the
TSE Prime or Growth market segments. This can offer good
opportunities for patient and long-term investors.
In the reporting year, no new investments were made in unlisted
securities and none from those held in the portfolio listed on the
TSE Prime or Growth market segments.
At the year end, the Company had seven unlisted investments
representing 6.6% of net assets (2023: seven unlisted companies
representing 6.3% of net assets).
Overview of the Unlisted Investments Valuation Process
Unlisted investments in the Company’s portfolio are held at fair
value, which is defined as the value that would be paid for a
holding in an open-market transaction. The Manager’s Fair Value
Committee (FVC), which is independent of the Portfolio Manager,
provides recommended fair values to the Directors.
Twice yearly, ahead of the Company’s interim and its year end,
the Company’s Audit Committee receives a detailed presentation
from the FVC, Fidelity’s unlisted investments specialist and Kroll
(independent third party valuers), in order to satisfy itself that
the unlisted investments are carried at an appropriate value in
accordance with Accounting Policy Note 2 (j) on page 63 at the
balance sheet date. The external Auditor attends the unlisted
valuations meeting ahead of the Company’s year end.
The work completed by the Audit Committee on the unlisted
investments is set out in its report on page 49.
Workings of the Fair Value Committee
The valuation of each unlisted investment is set by the Manager’s
FVC and includes input from the analysts covering the securities,
Fidelity’s unlisted investments specialist and also advised upon
by the independent third-party valuers, Kroll.
Kroll, as independent valuers, undertake a detailed review
of each of the unlisted investments on a quarterly basis. The
Board is provided with the quarterly updates from the FVC,
which includes recommendations from the analysts’ and
Fidelity’s unlisted investments specialist, enabling the Board to
have oversight of and to have confidence in Fidelity’s process.
Outside of the normal quarterly cycle, the unlisted investments
are monitored daily for trigger events such as funding rounds
or news affecting fundamentals which may require the FVC to
adjust the valuation price as soon as the Fidelity analyst has
been consulted. In addition to this, the unlisted investments are
monitored on a weekly basis within a comparable movement
model. If the average movement of the selected proxies is +/-
15%, a revaluation of the relevant investment is considered.
Unlisted Investments
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Fidelity Japan Trust PLC
STRATEGYFINANCIAL GOVERNANCEINFORMATION FOR SHAREHOLDERS
Unlisted companies held in the Company’s portfolio as at 31 December 2024
(based on Portfolio Exposure expressed as a percentage of Shareholders’ Funds).
Asoview
(Purchased: December 2021) (Portfolio Exposure: 2.6%)
Asoview is an online platform that provides booking services for tours, attractions and
activities/experiences. It is also Japan’s leading leisure B2B marketplace for travel agents.
Asoview is in partnership with more than 10,000 businesses nationwide and in 2024 its
cumulative number of members exceeded ten million. While Japan’s tourism and leisure
industry continues to grow, it is facing rising costs and labour shortages. Through the provision
of digital transformation (DX) solutions for travel and leisure businesses, Asoview helps to drive
operational efficiencies and provide high-quality services to consumers. By using consumers’
behavioural data, it can effectively forecast demand and manage ticket inventory.
GO Inc
(Purchased: November 2023) (Portfolio Exposure: 1.3%)
GO Inc is the number one ride hailing company in Japan. It has a significant lead over
competitors in terms of access to taxis. This creates strong and lasting competitive advantages
in the ride hailing industry, which is still in the early stages of digitalisation. GO has delivered
robust growth in its core ride hailing business since its inception, and revenue per ride has
steadily increased as it has rolled out additional charges to improve its monetisation. It also
has steady cash generating businesses such as advertising that subsidise its high-growth
segments, a factor that enhances its overall financial profile.
Studyplus
(Purchased: June 2022) (Portfolio Exposure: 0.8%)
Studyplus operates Japan’s leading learning management platform for high school students
and associated services for educational institutions. The Studyplus app helps students to stay
motivated by visualising their learning records and enabling them to connect with friends
who are pursuing the same study goals via Social Networking Services (SNS). It also utilises
its proprietary cluster data to drive advertisement revenue. Through Studyplus for School, the
company provides a learning management platform with various functions to monitor and
appraise students’ progress.
iYell
(Purchased: December 2021) (Portfolio Exposure: 0.7%)
iYell is a mortgage broker fintech start-up company that uses the power of technology to
support the mortgage loan process. It operates Japan’s No.1 cloud-based mortgage platform,
which helps to drive business efficiencies for financial institutions and real estate companies,
and effectively source the optimum mortgage for consumers. In Japan, the real estate and
mortgage industries suffer from low labour productivity and iYell is promoting the digital
conversion of analogue procedures and operations.
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Annual Report 2024
Moneytree
(Purchased: April 2020) (Portfolio Exposure: 0.5%)
Moneytree operates a personal finance app that enables individuals to manage multiple
financial services (bank accounts, credit cards, investments, e-money, etc.) in one convenient
place and provides a cloud-based account book to simplify household finances. In the
corporate sector, Moneytree LINK is an industry-leading data platform that supports business
innovation through the use of financial data and links with application programming interfaces
(APIs) to generate efficiencies and create new business models. It also provides digital
dashboards for small to medium-sized enterprises (SMEs) that simplify accounting procedures.
Spiber
(Purchased: September 2021) (Portfolio Exposure: 0.4%)
Spiber manufactures Brewed Protein materials. Fibres, films and other types of materials are
manufactured through the fermentation of plant-based ingredients. This new class of material
is created using Spiber’s proprietary technology platform that enables customised designs and
molecular engineering of nature-inspired protein polymers. These materials offer alternative
solutions to a wide range of conventional animal-based and synthetic materials for various
purposes, including textiles applications for the apparel industry.
Yoriso
(Purchased: July 2021) (Portfolio Exposure: 0.3%)
Yoriso is an online funeral planning platform that provides comprehensive end-of-life services
that aim to ease people’s anxieties through the use of technology. The company offers a
one-stop solution for funerals, memorial services, Buddhist altars and inheritance planning.
At Yoriso Cloud, it also provides cloud-based services for funeral companies through the
digitalisation of obituary information. Demographic trends and the rising penetration of online
contracts are driving growth in the funeral market, and the company’s comprehensive offering
and mass marketing strategy are strengthening its standing.
Unlisted Investments continued
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Fidelity Japan Trust PLC
STRATEGYFINANCIAL GOVERNANCEINFORMATION FOR SHAREHOLDERS
The charts below show a breakdown of the underlying stocks in the Company’s portfolio using MCSI and Fidelity International’s own ESG
ratings. In the first chart, Fidelity’s analysts rate stocks in their coverage universe on a five scale rating from A (best) to E (worst) and are
based on the net asset value of holdings excluding cash, liquidity funds and derivatives, and rebased to 100%. In the second chart, MSCI
rates issuers on a AAA to CCC scale according to their exposure to industry specific ESG key issues and their ability to manage those
issues relative to peers. Fidelity’s proprietary sustainability ratings system leverages its internal research and interactions with issuers.
The ratings are designed to generate a forward-looking and holistic assessment of ESG risks and opportunities based on sector specific
performance indicators.
As can be seen from the MSCI ESG ratings chart, the Company has a larger percentage of unrated companies. This is because MSCI
covers the larger-cap companies whereas the Company has several small and mid-cap exposures that are given formal ESG coverage by
Fidelity earlier than by MSCI. It is anticipated that as disclosures improve, the efforts of Japanese companies to address ESG concerns
are likely to become more widely recognised, leading to higher ESG scores and more investor capital.
Fidelity ESG Ratings (%)
MSCI ESG Ratings (%)
Portfolio %
Reference Index %
0
5
10
15
20
25
30
35
0
5
10
15
20
25
30
35
40
45
A
AAA AA A BBB BB B CCC Not
Rated
B C D E Not
Rated
Portfolio %
Reference Index %
Sources: Fidelity International and MSCI ESG Research as at 31 December 2024. Portfolio = Fidelity Japan Trust PLC. Reference Index = TOPIX.
ESG Ratings
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Annual Report 2024
Ten Year Record
For the year ended
31 December 2024 2023 2022 2021 2020 2019 2018 2017 2016 2015
Assets
Total portfolio exposure (£m)
1
287.0 317.4 285.5 380.4 381.3 295.4 216.0 264.1 206.9 135.3
Shareholders’ funds (£m) 231.4 257.8 236.4 312.7 308.8 252.5 187.5 222.5 166.4
2
116.0
NAV per ordinary share (p)
3
200.78 204.46 182.24 240.73 236.53 189.55 138.77 164.10 122.37 101.56
Gearing
Gearing (%)
3
24.0 23.1 20.8 21.6 23.5 17.0 15.2 18.7 24.3 16.6
Share Price and Discount data
Ordinary share price (p) 174.50 185.00 164.75 229.00 220.50 177.00 127.00 151.50 101.50 86.75
Discount to NAV %
3
13.1 9.5 9.6 4.9 6.8 6.6 8.5 7.7 17.1 14.6
Revenue and Costs
Revenue return/(loss) per ordinary
share (p)
3
2.17 2.17 1.46 1.61 1.56 0.29 (0.07) (0.22) 0.07 (0.14)
Ongoing charges ratio (excluding
variable management fee) (%)
3
1.03 0.99 0.99 0.90 0.94 0.98 1.10 1.31 1.46 1.52
Variable management fee
(credit)/charge (%) (0.20) (0.15) (0.03) 0.20 0.10 (0.15) (0.04) n/a n/a n/a
Ongoing charges ratio
(including the variable management fee) (%)
3
0.83 0.84 0.96 1.10 1.04 0.83 1.06 1.31 1.46 1.52
Performance Total Returns
NAV per ordinary share (%)
3
-1.8 +12.2 -24.3 +1.8 +24.8 +36.6 -15.4 +34.1 +20.5 +24.6
Ordinary share price (%)
3
-5.7 +12.3 -28.1 +3.9 +24.6 +39.4 -16.2 +49.3 +17.0 +20.5
Reference Index (in sterling terms) (%)
4
+10.0 +13.3 -4.1 +2.0 +9.5 +14.6 -8.3 +17.5 +22.0 +19.4
1 The total exposure of the investment portfolio, including exposure to the investments underlying the long CFDs.
2 The issue of ordinary shares from the exercise of subscription share rights contributed £19.5 million to the increase in shareholders’ funds.
3 Alternative Performance Measures.
4 The Reference Index changed on 22 May 2018 from the Russell Nomura Mid/Small-Cap Index (in sterling terms) to the TOPIX Total Return Index (in sterling terms).
Sources: Fidelity and Datastream.
Past performance is not a guide to future returns.
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Fidelity Japan Trust PLC
STRATEGYFINANCIAL GOVERNANCEINFORMATION FOR SHAREHOLDERS
Summary of Performance Charts
NAV and ordinary share price for ten years to 31 December 2024
174.50p
200.78p
Sources: Fidelity and Datastream.
Ordinary share price
NAV per ordinary share
30
50
70
90
110
130
150
170
190
210
230
250
270
290
Dec 22 Dec 23Dec 14 Dec 15 Dec 16 Dec 17 Dec 18 Dec 19 Dec 21Dec 20
Dec 24
Ordinary share price discount to NAV at year end for ten years to 31 December 2024 (%)
Sources: Fidelity and Datastream.
-25
-20
-15
-10
-5
0
5
10
2024202320222021202020192018201720162015
-14.6
-17.1
-7.7
-8.5
-6.6
-4.9
-9.6
-6.8
-9.5
-13.1
Year End
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Annual Report 2024
Strategic Report
The Directors have pleasure in presenting the Strategic Report of
the Company. The Chairman’s Statement and Portfolio Manager’s
Review on pages 2 to 9 also form part of the Strategic Report.
Business and Status
The Company carries on business as an investment company
and has been accepted as an approved investment trust by
HM Revenue & Customs under Sections 1158 and 1159 of the
Corporation Tax Act 2010, subject to the Company continuing to
meet eligibility conditions. The Directors are of the opinion that
the Company has conducted its affairs in a manner which will
satisfy the conditions for continued approval.
The Company is registered as an investment company under
Section 833 of the Companies Act 2006 and its ordinary shares
are listed and traded on the London Stock Exchange. It is not a
close company and has no employees.
INVESTMENT OBJECTIVE AND POLICY
Objective
The Company’s objective is to achieve long-term capital growth
by investing predominantly in equities and related securities of
Japanese companies.
Strategy
In order to achieve this objective, the Company operates as an
investment company and has an actively managed portfolio of
investments consisting of Japanese companies. As an investment
company, it is able to gear the portfolio and the Board takes the
view that long-term returns for shareholders can be enhanced by
using gearing in a carefully considered and monitored way.
As part of the strategy, the Board has delegated the
management of the portfolio and certain other services to the
Manager (FIL Investment Services (UK) Limited). The Portfolio
Manager aims to achieve a total return on the Company’s
assets over the longer-term in excess of the Reference Index,
the TOPIX Total Return Index, as expressed in sterling terms. The
stock selection approach adopted by the Portfolio Manager
is considered to be well suited to achieving the Company’s
objective. The Board recognises that investing in equities is
a long-term process and, given the cyclicality of the markets,
expects that the Company’s returns to shareholders will vary from
year-to-year.
The Company’s objective, strategy and principal activity have
remained unchanged throughout the year ended 31 December
2024.
Investment Management Philosophy, Style and Process
The Investment Manager follows a consistent “growth at a
reasonable price” investment style and approach which involves
identifying companies in all areas of the market whose growth
prospects are not fully recognised by other investors. This
investment process utilises Fidelity’s research capability in Japan
as well as the broader global research network. This approach
is anchored in the belief that a rigorous, bottom-up approach to
active management can identify companies where the market is
underestimating or mis-pricing their future growth potential.
Investment Policy
The Company will primarily invest in companies which are listed
on Japanese stock exchanges. The portfolio is selected by
the Investment Manager on the basis of its assessment of the
fundamental value available in individual situations and with a
typical focus on those companies whose growth prospects are
not fully recognised by the market (“growth at a reasonable
price”). Whilst the Company’s overall exposure to individual
companies and industry sectors is monitored, the portfolio is not
restricted in terms of size or industry, although certain investment
restrictions apply in order to attempt to diversify risk.
Investment restrictions
In order to diversify the Company’s portfolio, the Board has set
the following investment guidelines for the Portfolio Manager.
These guidelines and their impact are monitored on a daily basis
and reported regularly to the Board:
• A maximum of 7.5% in the aggregate of all securities of any
one company or other investment entity (10% for any group
of companies) at the time of purchase. This is further limited
to 12% of the Company’s equity portfolio based on the latest
market value.
• A maximum of 20% of its assets (at the time of acquisition)
in securities which are not listed on any stock exchange
or traded on the Jasdaq market. The Company would
not normally make any such investment except where the
Manager expects that the securities would shortly become
registered for trading on the OTC market or become listed
on a Japanese stock market.
• A maximum of 30% of its assets (at the time of acquisition) in
equity related and debt instruments other than shares. The
Company may also invest in derivatives for efficient portfolio
management to protect the portfolio against market risk.
Any such investment would normally be at a low level as the
Company invests primarily in shares.
• A maximum of 15% of the Company’s total assets may be
invested in the securities of other investment trust companies.
• The maximum that the Company can hold in cash, or invest
in cash equivalents, including money market instruments,
is limited to 25% of the total value of the Company’s gross
assets. This limit will not include any amounts required
as collateral to cover unrealised losses on derivatives. In
practice the cash position will normally be much lower.
Gearing
The Company’s policy is to be geared in the expectation that
long-term investment returns will exceed the cost of gearing. This
gearing is obtained through the use of Contracts for Difference
(CFDs) to obtain exposure to Japanese equities selected by
the Portfolio Manager. The effect of gearing is to magnify
the consequence of market movements on the portfolio. If
the portfolio value rises, the NAV will be positively impacted.
Conversely if it falls, the NAV will be adversely impacted.
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Fidelity Japan Trust PLC
STRATEGYFINANCIAL GOVERNANCEINFORMATION FOR SHAREHOLDERS
The aggregate exposure of the Company to Japanese
equities, whether held directly or through CFDs, will not exceed
shareholders’ funds by more than 30% at the time any CFD is
entered into or a security acquired. The Board also intends that
the exposure will not exceed shareholders’ funds by more than
40% at any other time unless exceptional circumstances exist.
The level of gearing is reviewed regularly by the Board and the
Portfolio Manager. Currently, the Portfolio Manager has discretion
to be up to 25% geared. At the year end the Company was 24.0%
geared (2023: 23.1%).
Performance
The Company’s performance for the year ended 31 December
2024, including a summary of the year’s activities, and indications
on trends and factors that may impact the future performance
of the Company are included in the Chairman’s Statement and
the Portfolio Manager’s Review on pages 2 to 9. The Attribution
Analysis is on page 10. The Portfolio Listing and Distribution of
the Portfolio are on pages 13 to 17 and the Ten Year Record and
Summary of Performance Charts are on pages 22 and 23.
Results
The Company’s results for the year ended 31 December 2024
are set out in the Income Statement on page 58. The revenue
return was 2.17 pence and the capital loss was 8.43 pence,
giving a total loss of 6.26 pence per ordinary share. As the
Revenue Reserve is in deficit, the Directors do not recommend the
payment of a dividend.
Key Performance Indicators
The Key Performance Indicators (KPIs) used to determine the
performance of the Company and which are comparable to
those reported by other investment companies are set out in
the table below. The Board’s intention is for the NAV and share
price to outperform the Reference Index and outperform the
peer group of investment companies investing in the Japanese
stockmarket.
Year ended
31 December
2024
%
Year ended
31 December
2023
%
NAV per ordinary share total
return
1
-1.8 +12.2
Share price total return
1
-5.7 +12.3
Reference Index (in sterling terms)
total return +10.0 +13.3
Discount to NAV
1
13.1 9.5
Ongoing charges ratio (including
the variable management fee)
1,2
0.83 0.84
1 Alternative Performance Measures.
2 The Board regularly considers the costs of running the Company to ensure they
are reasonable and competitive.
Sources: Fidelity and Datastream.
As can be seen by the NAV and share price total returns in the
table above, the Company’s performance has suffered from the
significant rotation out of growth stocks and into value stocks.
Further details are in the Chairman’s Statement and Portfolio
Manager’s Review on pages 2 to 9.
In addition to the KPIs set out in the table above, the Board
regularly reviews the Company’s performance against its peer
group of investment companies. Long-term performance of the
Company is shown in the Ten Year Record and the Summary of
Performance Charts on pages 22 and 23.
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 Alternative Investment Fund
Manager (FIL Investment Services (UK) Limited/the “Manager”), has
developed a risk matrix which, as part of the risk management and
internal controls process, identifies the key existing and emerging
risks and uncertainties that the Company faces. These are set out on
the following pages.
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 UK corporate
governanceobligations.
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Annual Report 2024
The Board considers the risks listed below and on pages 27 to 29 as the principal risks and uncertainties faced by the Company.
Principal Risks Mitigation
Geopolitical Risk
Geopolitical risk is the potential for political, socio-economic and
cultural events, trends and developments to have an adverse effect
on the Company’s assets. In Asia, the key geopolitical risks stem
from China and the tensions with the United States over trade and
the future of Taiwan; and the potential of North Korean aggression
and its impact on the region. In addition, there is threat from
the new administration of President Trump that significant tariffs
may be introduced on certain Japanese imports, including autos.
Elsewhere, there is increased global economic uncertainty from the
ongoing war in Ukraine and continued conflict in the Middle East.
The Board is provided with a detailed investment review which
covers material economic, market and legislative changes at
each Board meeting as well as receiving periodic updates from
economic and political commentators in the region.
Although it is unclear how long the war in Ukraine and the
temporary ceasefire in the Middle East conflict will last amid
evolving foreign policies for crisis talks sparked by President
Trump’s administration, the direct impact for Japan is not
significant. The impact on the Company’s portfolio of holdings
is also relatively limited. However, the ramifications of a global
downturn could have a significant impact on the Japanese
economy.
The Portfolio Manager’s Review on pages 5 to 9 provides
further detail on some of the risk factors.
Investment Performance and Gearing Risks
The portfolio is actively managed and performance risk is
inherent in the investment process. The achievement of the
Company’s investment performance objective relative to the
market requires the taking of risk, such as strategy, asset
allocation and stock selection, and may lead to NAV and share
price underperformance compared to the Reference Index.
The portfolio has unlisted investments which, by their very
nature, involve a higher degree of valuation and performance
uncertainties, liquidity risks and possible delays in listing until
market conditions are favourable.
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
acceptable risk/reward profile. The emphasis is on long-term
results as the Company is more exposed to volatility in the
shorter-term.
The Board closely monitors the valuations of the unlisted
investments through the Manager’s Fair Value Committee,
which includes input from Fidelity’s analysts covering the
unlisted companies as well as Fidelity’s unlisted investments
specialist. In addition, advice is obtained from a third-party
valuation specialist company (Kroll). Details of the unlisted
investments valuation process is on page 18. The Board sets
limits and guidelines for the Portfolio Manager 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 of loan facilities or
to use CFDs to invest in equities. The principal risk is that the
Portfolio Manager may fail to use gearing effectively. Other risks
are that the cost of gearing may be too high or that the term of
the gearing is inappropriate in relation to market conditions.
The Company gears through the use of long CFDs which
are currently cheaper than bank loans and provide greater
flexibility. The Board regularly considers the level of gearing
and gearing risk and sets limits within which the Portfolio
Manager must operate.
Natural Disaster Risk
Japan is extremely vulnerable to earthquakes and tsunamis.
Depending on the magnitude of such events, positions in the
portfolio may be affected. The Manager could also be impacted
from an operational perspective if the epicentre is in or near Tokyo.
Whilst natural disasters cannot be averted, the Board is
comfortable that the Manager has a robust business continuity
plan in place.
Strategic Report continued
Job No: 53979 Proof Event: 19 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA
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STRATEGYFINANCIAL GOVERNANCEINFORMATION FOR SHAREHOLDERS
Principal Risks Mitigation
Market, Economic and Currency Risks
The Company’s assets consist mainly of listed securities.
Therefore, its principal risks include market related risks such as
market downturn, interest rate movements, deflation/inflation
and exchange rate movements. The Portfolio Manager’s
success or failure to protect and increase the Company’s assets
against this background is core to the Company’s continued
success.
Most of the Company’s assets and income are denominated
in yen. However, the functional currency of the Company in
which it reports its results is sterling. Consequently, it is subject
to currency risk on exchange rate movements between the yen
and sterling.
These risks are somewhat mitigated by the Company’s
investment trust structure which means no forced sales will
need to take place to deal with any redemptions. Therefore,
investments can be held over a longer time horizon.
Risks to which the Company is exposed in the market risk
category are included in Note 16 to the Financial Statements
on pages 71 to 77 together with summaries of the policies for
managing these risks.
It is the Company’s policy not to hedge against currency
risks. Further details can be found in Note 16 to the Financial
Statements on pages 71 to 77.
Competition Risks and Marketplace Threats
There are increased threats facing the Company within
the current market environment of increased mergers and
acquisitions activity. Other external pressures include the
Company’s ability to maintain and grow the business, and a
loss of shareholders if the demand for investment trusts decline
and the demand for passive funds and holistic/digital finance
offerings continue to increase.
The Board, the Company’s Broker and Manager closely
monitor industry activity and the peer group, and an annual
review of strategy is undertaken by the Board, to ensure
that the Company continues to offer a relevant product to
shareholders.
Discount Control and Demand Risks
There is a risk that the Company’s shares trade at a persistent
and significant discount to the NAV.
There is a risk that the demand for the Company’s shares may
fall due to poor performance, changes in investor sentiment
and attitudes towards investment in Japan.
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 price, NAV and discount
volatility are monitored daily by the Manager and the
Company’s Broker and considered by the 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 through good performance and an
active investor relations program. The Board reviews analysis
of the shareholder register at each Board meeting which
allows the Board to monitor the relevance of the Company’s
mandate to shareholders and remain abreast of market
sentiment.
Key Person Risk
The loss of the Portfolio Manager or other key individuals could
lead to potential performance, operational or regulatory issues.
There is a risk that the Manager has an inadequate succession
plan for key individuals, particularly the Portfolio Manager with
stock selection expertise in Japanese markets.
The Manager identifies key dependencies which are then
addressed through succession plans. Fidelity has succession
plans in place for portfolio managers. The Board meets
regularly with the Portfolio Manager and key members of
the investment team to gauge any dissatisfaction or potential
flight risk. The investment team in Japan work closely in a
collaborative manner and fully understand the investment
approach of the Portfolio Manager.
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Principal Risks Mitigation
Legislation, Taxation and Regulatory Risks
There is a risk that the changes in legislation, taxation,
regulation or other external influence that require changes to
the nature of the Company’s business.
A breach of Section 1158 of the Corporation Tax Act 2010 by
the Company 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 concerns around
investment cost disclosures and its impact in the industry.
Regulatory changes for investment companies are monitored
regularly by the Board and managed through active
engagement with regulators and trade bodies by the
Manager and also by the AIC.
The Government and regulator have announced a temporary
exemption for investment companies from the EU cost
disclosure requirements.
Business Continuity Risk
There continues to be increased focus from financial
services regulators around the world on the contingency
plans of regulated financial firms. The top risks globally are
cybersecurity, geopolitical events, outages, fire events and
natural disasters. There are also ongoing risks from the war in
Ukraine and conflict in the Middle East, specifically regarding
cyberattacks and the potential loss of power and/or broadband
services.
The Company relies on a number of third-party service
providers, principally the Registrar, Custodian and Depositary.
They are all subject to a risk-based programme of risk oversight
and internal audits by the Manager and their own internal
controls reports are received by the Board on an annual basis
and any concerns are investigated.
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 clients, including
the Board, and has an appropriate control environment in
place. The Manager has provided the Board with assurance
that the Company has appropriate operational resilience and
business continuity plans and the provision of services has
continued to be supplied without interruption.
Risks associated with these services are generally rated as
low, but the financial consequences could be serious, 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 third-party service providers have also confirmed the
implementation of appropriate measures to ensure no
business disruption.
Strategic Report continued
Job No: 53979 Proof Event: 19 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA
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STRATEGYFINANCIAL GOVERNANCEINFORMATION FOR SHAREHOLDERS
Principal Risks Mitigation
Cybercrime and Information Security Risks
The operational risk and business impact from heightened
external levels of cybercrime and the risk of data loss is
significant. Cybercrime threats evolve rapidly. A cyberattack
could result in the loss of confidential information or cause a
significant disruption to the Company’s operations. Risks also
remain due to military conflicts and geopolitical tensions,
including the war in Ukraine and conflict in the Middle East and
the trend to more working from home following the pandemic.
These primarily relate to phishing, ransomware, remote
access threats, extortion and denial-of-services attacks, threats
from highly organised criminal networks and sophisticated
ransomware operators.
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 continuously re-assessed by
Fidelity’s information security teams and risk frameworks are
continuously enhanced with the implementation of additional
tools and processes, including improvements to existing
ones. Fidelity has dedicated cybersecurity and technology
teams which provide continuous oversight, regular awareness
updates and best practice guidance. The Board receives
regular updates from the Manager in respect of the type and
possible scale of cyberattacks.
The Manager has dedicated detect and respond resources
specifically to monitor the cyber threats associated within
the workplace and there are a number of mitigating actions
in place, including control strengthening, 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.
Environmental, Social and Governance (ESG)
Risks
There is a risk that the value of the assets of the Company are
negatively impacted by ESG related risks, including climate
change risk from extreme weather events. Japan has a material
exposure to earthquakes. This may impact global supply chains
for companies and customers.
ESG risks also include investor expectations and how the
Company is positioned from a marketing perspective.
Whilst Fidelity considers ESG factors in its investment decision-
making process, the Company does not carry the label.
ESG integration is carried out at the fundamental research
analyst level within its investment teams, primarily through
Fidelity’s Proprietary Sustainability Rating which is designed
to generate a forward-looking and holistic assessment of
a company’s ESG risks and opportunities based on sector-
specific key performance indicators. The Portfolio Manager
may consider the effects of ESG when making investment
decisions. ESG ratings of the companies within the Company’s
portfolio compared to ESG ratings of the companies within
the Company’s portfolio compared to the MSCI ratings are
provided on page 21.
Continuation Vote
A continuation vote takes place every three years and the next continuation vote will take place at the AGM on 21 May 2025. There
is a risk that shareholders do not vote in favour of continuation of the Company during periods when performance of the Company’s
NAV and the share price is poor. This is addressed in further detail in the Going Concern Statement on page 35.
Job No: 53979 Proof Event: 19 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA
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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 21 May 2025.
The Company underperformed the Reference Index over the five
year reporting period to 31 December 2024, with a NAV total
return of +5.9% and a share price total return of -1.4% compared
to the Reference Index total return of +33.5%. The Board regularly
reviews the investment policy and considers whether it remains
appropriate and, as discussed in the Chairman’s Statement,
the Board believes that the Fidelity team will recover this
underperformance.
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 which can be found on page 35, and
includes detail of the material uncertainty on the outcome of the
continuation vote at the AGM on 21 May 2025.
This statement has been prepared assuming the continuation
votes in the May 2025 and May 2028 AGMs will be passed and
that the unconditional tender offer, post 31 December 2027,
is not taken up by a majority of shareholders. Details of the
unconditional tender offer are outlined on page 3.
Strategic Report continued
Job No: 53979 Proof Event: 19 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA
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STRATEGYFINANCIAL GOVERNANCEINFORMATION FOR SHAREHOLDERS
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 (FIL Investment Services (UK)
Limited) and other third-party professional service providers. The
Board considers that the interest of these stakeholders is aligned
with the Company’s objective of delivering long-term capital
growth to investors, in line with the Company’s stated objective
and strategy, while providing the highest standards of legal,
regulatory and commercial conduct.
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 pages 24 and 25.
The Board receives regular reports from the Company’s Broker
which covers market activity, how the Company compares with its
peers in the Japan sector on performance, discount and share
repurchase activity, an analysis of the Company’s share register
and market trends.
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 FIL Investments International,
Beech Gate, Millfield Lane, Tadworth, Surrey KT20 6RP or via
the Company Secretary at the same address or by email at
investmenttrusts@fil.com.
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 Treasury when market conditions permitted in order to
reduce discount volatility. Since the year ended 31 December
2024 and up to the latest practicable date of this report,
a further 1,532,679 ordinary shares were repurchased into
Treasury and for cancellation;
• 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 Tokyo in June 2024;
and
• The Board discussed the uncertainty in relation to the
continuation vote and the proposal of a tender offer with
Stifel Nicolaus Europe Limited, the Company’s Broker, and
the Manager, including market precedents and approaches
in relation to continuation votes.
Board Diversity
The Board carries out any candidate search against a set of
objective criteria and on the basis of merit, with due regard
for the benefits of diversity on the Board, including gender and
ethnicity. The Board has taken into consideration the FCA’s UK
Listing Rules requirements (UKLR 6.6.6(9), (10) and (11)) regarding
the targets on board diversity that:
• at least 40% of individuals on the Board are women;
• at least one senior Board position (chairman, chief executive
officer (CEO), senior independent director or chief financial
officer (CFO)) is held by a woman; and
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Annual Report 2024
• at least one board member should be from a non-white
ethnic background, as defined by the Office of National
Statistics criteria.
The Board considers that as an externally managed investment
trust, with no CEO or CFO, the Chairman of the Company,
the Senior Independent Director and Chairman of the Audit
Committee to be senior positions.
As required by the FCA Listing Rules, the Company’s reporting
against these targets is set out in the tables below. The data was
collected on a self-identifying basis. As at 31 December 2024
and up to the date of this report, the target of 40% of women on
the Board, the target of at least one senior Board position held
by a woman and for at least one individual to be from a minority
ethnic background have been met.
Gender Reporting
Number
of Board
Members
Percentage of
the Board
Number of
Senior Board
Positions
(Chair, Senior
Independent
Director and
Committee
Chair)
Men 3 60% 2
Women 2 40% 1
Ethnic Background Reporting
Number
of Board
Members
Percentage of
the Board
Number of
Senior Board
Positions
(Chair, Senior
Independent
Director and
Committee
Chair)
White British
or other White
(including minority
white groups) 3 60% 3
Asian 2 40% 0
CORPORATE AND SOCIAL RESPONSIBILITY
Environmental, Social and Governance (“ESG”) in the
Investment Process
The Board has contracted with the Manager to provide the
Company with investment management and administrative
services. The Board believes that ESG considerations are
an important input into the assessment of the value of its
investments. The investment universe is undergoing significant
structural change and is likely to be impacted by increasing
regulation as a result of climate change and other social and
governance factors. The Board is committed to reviewing how
the Manager applies ESG factors in the investment process.
The Fidelity group of companies (including the Manager and
Investment Manager) sets out its commitment to responsible
investing and provides a copy of its detailed Responsible
Investing at www.fidelity.co.uk/sustainable/sustainability-at-
fidelity.
Socially Responsible Investment
The Manager’s primary objective is to produce superior financial
returns for the Company’s shareholders. It believes that high
standards of Corporate Social Responsibility (CSR) make good
business sense and have the potential to protect and enhance
investment returns.
Corporate Engagement
The Board believes that the Company should, where appropriate,
take an active interest in the affairs of the companies in which
it invests and that it should exercise its voting rights at their
general meetings. It delegates the responsibility for corporate
engagement and shareholder voting to the Investment Manager
which updates the Board on any issues and activities. These
activities are reviewed regularly by the Manager’s stewardship
team.
Streamlined Energy and Carbon Reporting (SECR)
As an investment company with all its activities outsourced to
third parties, the Company’s own direct environmental impact is
minimal. The Company has no premises, consumes no electricity,
gas or diesel fuel and consequently does not have a measurable
carbon footprint. The Company is categorised as a low energy
user (less than 40MWH) under the Streamlined Energy & Carbon
Reporting regulations and therefore is not required to disclose
any energy and carbon information in this Annual Report.
Task Force on Climate-Related Financial Disclosures (TCFD)
Product reports of Task Force on Climate-related Financial
Disclosures (TCFD) can be obtained via the Additional Information
section on the Company’s website at from the Manager’s website
at www.fidelity.co.uk/japan.
Strategic Report continued
Job No: 53979 Proof Event: 19 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA
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STRATEGYFINANCIAL GOVERNANCEINFORMATION FOR SHAREHOLDERS
Criminal Finances Act 2017
The Company is subject to the Criminal Finances Act 2017 and
follows a zero-tolerance policy to tax evasion and its facilitation.
The Directors are fully committed to complying with all legislation
and appropriate guidelines designed to prevent tax evasion
and the facilitation of tax evasion in the jurisdictions in which
the Company, its service providers, counterparties and business
partners operate.
Bribery Act 2010
The Company is committed to carrying out business fairly,
honestly and openly. The Board recognises the benefits this has
for reputation and business confidence. The Board, the Manager,
the Manager’s employees and others acting on the Company’s
behalf, are expected to demonstrate high standards of behaviour
when conducting business.
The Board acknowledges its responsibility for the implementation
and oversight of the Company’s procedures for preventing
bribery, and the governance framework for training,
communication, monitoring, reporting and escalation of
compliance together with enforcing actions as appropriate. The
Board has adopted a zero-tolerance policy in this regard.
Future Developments
Some trends likely to affect the Company in the future are also
common to many investment companies together with the impact
of regulatory change and emerging risks. The factors likely to
affect the Company’s future development, performance and
position are set out in the Chairman’s Statement and the Portfolio
Manager’s Review on pages 2 to 9.
On Behalf of the Board
David Graham
Chairman
26 March 2025
Job No: 53979 Proof Event: 19 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA
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Board of Directors
David Graham
Chairman
(since 18 May 2021)
Appointed 22 May 2018
A
M
N
David Graham is a non-executive Director and Chairman of the Audit
Committee of JPMorgan China Growth & Income plc and non-executive
Director of Templeton Emerging Markets Investment Trust plc. He
was born in Japan and is a Chartered Accountant who had a career
in investment management, firstly as a Japanese and Asian Fund
Manager with Lazards in London, Hong Kong and Tokyo and then
with BlackRock (and predecessor companies, Merrill Lynch Investment
Managers and Mercury Asset Management) building businesses
and managing client relationships across Japan, Asia Pacific, Europe,
Middle East and Africa.
Sarah MacAulay
Senior Independent Director
(since 10 October 2019)
Appointed 22 May 2018
A
M
N
Sarah MacAulay is Chair of Schroder Asian Total Return Investment
Company plc and is also a non-executive director of Baillie Gifford
China Growth Trust plc and of Bellevue Healthcare Trust plc. Until
March 2024, she was Chair of JP Morgan Multi-Asset Growth & Income
plc and senior independent director of abrdn China Investment
Company Ltd. She was a director of Baring Asset Management (Asia)
Limited in Hong Kong and Asian Investment Manager at Kleinwort
Benson and Eagle Star in London. She has over twenty years of Asian
investment management experience based both in London and Hong
Kong, managing institutional assets and unit trusts.
David Barron
Chairman of the Audit Committee
(since 18 May 2021)
Appointed 20 October 2020
A
M
N
David Barron is Chairman of Dunedin Income Growth Investment
Trust and of Baillie Gifford European Growth Trust plc. He is also a
non-executive Director of BlackRock American Income Trust plc. He
is a Chartered Accountant. Previously he was Chief Executive Officer
of Miton Group plc, Head of Investment Trusts at JP Morgan Asset
Management, a non-executive Director of Artemis Alpha Trust plc and
a Director of the Association of Investment Companies.
Myra Chan
Director
Appointed 17 October 2022
A
M
N
Myra Chan was a Sales Director and Member of the Sustainability
Committee at Aubrey Capital Management Limited headquartered in
Scotland, Edinburgh. She has over 25 years of investment experience
primarily based in Hong Kong, having worked as an Institutional Broker
at HSBC Securities, an Investment Counsellor / Private Banker at Citi
Private Bank and Head of Structured Products Distribution at JPMorgan
Securities Asia Limited. She was also non-executive Director of a long-
short Asian equity fund managed by Tiburon Partners in London. She
is a CFA and graduated from the International Christian University of
Tokyo. She is currently a research student in the Institute of Sustainable
Resources at University College London.
Seiichi Fukuyama
Director
Appointed 1 March 2024
A
M
N
Seiichi Fukuyama was Chairman of Standard Life Investments in Asia
between 2010 and 2018 developing their re-entry strategy for Asia
and their start-up strategy for Japan. Prior to that, he spent 20 years at
BlackRock in a variety of senior leadership, management and business
development roles in London, Taipei, Hong Kong and Tokyo, including
President of BlackRock Japan between 2004 and 2007.
Committee membership key
A
Audit
M
Management Engagement
N
Nomination
Committee Chair
All Directors are non-executive Directors and all are independent.
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Fidelity Japan Trust PLC
INFORMATION FOR SHAREHOLDERS FINANCIAL STRATEGYGOVERNANCE
Directors’ Report
The Directors have pleasure in presenting their report and the
audited Financial Statements of the Company for the year ended
31 December 2024.
The Company was incorporated in England and Wales as a
public limited company on 10 February 1994 under the registered
number 2885584 and was launched as an investment trust on
15March 1994.
Management Company
FIL Investment Services (UK) Limited (FISL) is the Company’s
appointed Alternative Investment Fund Manager (the AIFM/
Manager). FISL, as the Manager, has delegated the portfolio
management of assets and the role of the company secretary to
FIL Investments International (the “Investment Manager”).
The Alternative Investment Fund Management and Secretarial
Services Agreement (the “Management Agreement”) will continue
unless and until terminated by either party giving to the other
not less than six months’ notice in writing. However, it may be
terminated without compensation if the Company is liquidated
pursuant to the procedures laid down in the Articles of Association
of the Company. The Management Agreement may also be
terminated forthwith as a result of a material breach of the
Management Agreement or on the insolvency of the Manager
or the Company. In addition, the Company may terminate the
Management Agreement by sixty days’ notice if the Manager
ceases to be a subsidiary of FIL Limited.
FIL Limited has no beneficial interest in the shares of the Company
(2023: same).
The Board reviews the Management Agreement at least annually
and details are included in the Corporate Governance Statement
on page 41.
Management Fee
Since 1 July 2018, the Company has had a Variable Management
Fee (VMF) arrangement which comprises a base fee based on net
assets and a positive or negative variable element. The base fee is
0.70% of net assets per annum.
The variable fee of +/-0.20% is based on the Company’s NAV
per share performance relative to the TOPIX Total Return Index
(in sterling terms) (the Company’s Reference Index). The VMF
element is calculated daily by referencing the performance of the
Company’s NAV to the performance of the Reference Index on a
three year rolling basis. The variable element of the fee increases
or decreases 0.033% for each percentage point of the three year
NAV per ordinary share outperformance or underperformance over
the Index to a maximum of +0.20% or a minimum of -0.20%. The
maximum fee the Company will pay is 0.90% of nets assets or in the
case of underperformance, it can fall as low as 0.50%. The VMF is
accrued daily and paid monthly.
The total management fee for the year ended 31 December
2024 was £1,177,000 (2023: £1,362,000) as detailed in Note 4 on
page 65. This was made up of a base fee of £1,648,000 (2023:
£1,721,000) and, due to the performance of the Company’s NAV
against the Reference Index calculated daily on a three year rolling
basis, a credit of £471,000 (2023: credit of £359,000).
The Board
All Directors served on the Board throughout the year ended
31December 2024.
A brief description of all serving Directors as at 31 December
2024 is shown on page 34 and indicates their qualifications for
Board membership.
Directors’ and Officers’ Liability Insurance
In addition to the benefits enjoyed under the Manager’s global
Directors’ and Officers’ liability insurance arrangements, the
Company maintains additional insurance cover for its Directors’
under its own policy as permitted by the Companies Act 2006.
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
31 March 2026 which is at least twelve months from the date of
approval of the Financial Statements. This conclusion also takes
into account the Board’s assessment of the ongoing risks of
earthquakes in Japan, the war in Ukraine, the Middle East conflict
and significant market and geopolitical events and possible impact
from regulatory change.
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 21 May 2025. The Directors, having
considered the performance of the Company over the last three
years, the level of discount and the recently announced changes
in portfolio management responsibilities, believe it is difficult to
determine whether shareholders will vote in favour of continuation.
There is therefore a material uncertainty over the outcome of
the continuation vote. Despite this, the Directors believe that the
preparation of the Financial Statements on a going concern basis
remains appropriate.
The prospects of the Company over a period longer than twelve
months can be found in the Viability Statement on page 30.
Auditor’s Appointment
A resolution to reappoint Ernst & Young LLP as Auditor to the
Company will be proposed at the AGM on 21 May 2025.
Disclosure of Information to the Company’s Auditor
As required by Section 418 of the Companies Act 2006, each
Director in office as at the date of this Annual Report confirms
that:
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Annual Report 2024
a) so far as each Director is aware, there is no relevant audit
information of which the Company’s Auditor is unaware; and
b) each Director has taken all the steps that ought to have
been taken as a Director to make himself/herself aware of
any audit information, and to establish that the Company’s
Auditor is aware of that information.
Corporate Governance
The Corporate Governance Statement forms part of this report
and can be found on pages 39 to 42.
Registrar, Custodian and Depositary Arrangements
The Company has appointed MUFG Corporate Markets (name
changed from Link Group on 20 January 2025) as its Registrar to
manage the Company’s share register; JPMorgan Chase Bank
as its Custodian, which is primarily responsible for safeguarding
the Company’s assets; and J.P. Morgan Europe Limited as its
Depositary, which is primarily responsible for oversight of the
custody of investment funds and the protection of investors’
interests. Fees paid to these service providers are disclosed in
Note 5 on page 66.
Share capital
The Company’s share capital comprises ordinary shares of
25pence each which are fully listed on the London Stock
Exchange. As at 31 December 2024, the share capital of the
Company was 136,161,695 ordinary shares (2023: 136,161,695)
of which 20,903,981 shares (2023: 10,075,446) are held in
Treasury. Shares in Treasury do not have voting rights, therefore,
the total number of ordinary shares with voting rights was
115,257,714 (2023: 126,086,249).
Premium/Discount Management: Enhancing Shareholder
Value
The Board recognises the importance of the relationship between
the Company’s share price and the NAV per share and monitors
this closely. It seeks authority from shareholders each year to
issue shares at a premium or to repurchase shares at a discount
to the NAV, either for cancellation or for holding in Treasury. The
Board will exercise these authorities if deemed to be in the best
interests of shareholders at the time. Further details of the Board’s
discount management policy can be found in the Chairman’s
Statement on page 2.
Share Issues
No ordinary shares were issued in the year to 31 December 2024
(2023: nil) and none have been issued since the year end and as
at the date of this report.
The authorities to issue shares and to disapply pre-emption rights
expire at the AGM on 21 May 2025 and resolutions to renew
these authorities will be put to shareholders at this AGM.
Share Repurchases
In the reporting year, 10,828,535 (2023: 3,615,644) ordinary
shares were repurchased for holding in Treasury. This represented
8% of issued share capital. Since the year end and up to
21 January 2025, a total of 525,744 ordinary shares have been
repurchased into Treasury. From 21 January 2025 and up to the
date of this report, a total of 1,006,935 ordinary shares have
been repurchased for cancellation.
The authority to repurchase ordinary shares expires at the AGM
on 21 May 2025 and a resolution to renew the authority to
repurchase shares, either for cancellation or to buy into Treasury,
will be put to shareholders at this AGM.
Substantial Share Interests
As at 31 December 2024 and 28 February 2025, notification had
been received that the shareholders listed in the table below
held more than 3% of the voting share capital of the Company.
Additional Information Required in the Directors’ Report
Information on proposed dividends, financial instruments and the
disclosure on Streamlined Energy and Carbon Reporting (SECR)
is set out in the Strategic Report on pages 24 to 33.
Shareholders
28 February
2025
%
31 December
2024
%
City of London Investment Management 22.01 21.30
Lazard Asset Management 11.21 10.75
Allspring Global Investments 10.34 10.30
1607 Capital Partners 8.06 8.48
Fidelity Platform Investors 6.63 6.70
Hargreaves Lansdown 5.60 5.85
Wesleyan Assurance 4.59 4.54
Interactive Investor 4.34 4.38
Directors’ Report continued
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Fidelity Japan Trust PLC
INFORMATION FOR SHAREHOLDERS FINANCIAL STRATEGYGOVERNANCE
ANNUAL GENERAL MEETING –
WEDNESDAY, 21 MAY 2025 AT 12 NOON
THIS SECTION IS IMPORTANT AND REQUIRES YOUR
IMMEDIATE ATTENTION.
If you are in any doubt as to the action you should take, you
should seek advice from your stockbroker, bank manager,
solicitor or other financial adviser authorised under the
Financial Services and Markets Act 2000.
The AGM of the Company will be held at 12 noon on
Wednesday, 21 May 2025 at Fidelity’s offices at 4 Cannon
Street, London EC4M 5AB (nearest tube stations are St. Paul’s or
Mansion House) and virtually via the online Lumi AGM meeting
platform. Full details of the meeting are given in the Notice of
Meeting on pages 81 to 84. Light Japanese refreshments will be
served after the meeting.
The Notice of Meeting and related papers are sent to
shareholders at least 20 working days before the AGM.
For those shareholders who would prefer not to attend in person,
we will live-stream the formal business and presentations of the
meeting online.
Nicholas Price, the Portfolio Manager, will be making a
presentation to shareholders discussing performance of the past
year and the prospects for the year to come. He and the Board
will be very happy to answer any questions that shareholders
may have. Copies of the Portfolio Manager’s presentation can
be requested by email at investmenttrusts@fil.com or in writing
to the Company Secretary at FIL Investments International,
Beech Gate, Millfield Lane, Lower Kingswood, Tadworth,
SurreyKT206RP.
Properly registered shareholders joining the AGM virtually will be
able to vote on the proposed resolutions. Please see Note 9 to
the Notes to the Notice of Meeting on page 83 for details on how
to vote virtually. Investors viewing the AGM online will be able
to submit live written questions to the Board and the Portfolio
Manager and these will be addressed on their behalf at an
appropriate juncture during the meeting.
Further information and links to the Lumi platform may be found
on the Company’s website www.fidelity.co.uk/japan. On the
day of the AGM, in order to join electronically and ask questions
via the Lumi platform, shareholders will need to connect to the
website https://web.lumiagm.com.
We urge shareholders to vote and make use of the proxy form
provided. Please note that investors on platforms such as
Fidelity Personal Investing, Hargreaves Lansdown, Interactive
Investor or AJ Bell Youinvest will need to request attendance at
the AGM in accordance with the policies of your chosen
platform. They may request that you submit electronic votes in
advance of the meeting. If you are unable to obtain a unique IVC
and PIN from your nominee or platform, we will also welcome
online participation as a guest. Once you have accessed
https://web.lumiagm.com from your web browser on a tablet
or computer, you will need to enter the Lumi Meeting ID which
is 117598418. You should then select the ‘Guest Access’ option
before entering your name and who you are representing, if
applicable. This will allow you to view the meeting and ask
questions but you will not be able to vote.
Fidelity Platform Investors – Voting at AGMs
If you hold your shares in the Company through the Fidelity
Platform, then Fidelity passes on to you the right to vote on the
proposed resolutions at the Company’s AGM. Fidelity Platform
Investors are advised to vote online via the Broadridge Service
(a company that specialises in investor voting facilities). Investors
can sign up to this facility via their Fidelity Investor Account.
Proxy Voting
MUFG Corporate Markets, the Registrar, has a paperless proxy
voting process. However, for ease of voting, we are sending
a paper Proxy Form to all shareholders who hold shares on
the main share register. This will assist shareholders to vote in
advance of the meeting should they decide not to attend in
person.
If you have sold, transferred or otherwise disposed of all your
shares in the Company, you should pass this document, together
with any accompanying documents, as soon as possible to the
purchaser or transferee, or to the stockbroker, bank or other
agent through whom the sale or transfer was effected, for
onward transmission to the purchaser or transferee.
At the AGM on 21 May 2025, resolutions will be proposed
relating to the items of business set out in the Notice of Meeting
on pages 81 and 82, including the items of special business
summarised below and on the next page.
Authority to Allot Shares
Resolution 10 is an ordinary resolution and provides the Directors
with a general authority to allot securities in the Company
up to an aggregate nominal value of £1,689,434. If passed,
this resolution will enable the Directors to allot a maximum of
6,757,736 ordinary shares which represents approximately 5%
of the issued ordinary share capital of the Company (including
Treasury shares) as at 26 March 2024, and to impose any limits
or restrictions and make any arrangements which they consider
necessary or appropriate to deal with Treasury shares, fractional
entitlements, record dates, legal, regulatory or practical problems
in, or under the laws of, any territory or any other matter.
The Directors would not intend to use this power unless they
considered that it was in the interests of shareholders to do so.
Any shares issued would be at NAV per share or at a premium to
NAV per share.
Authority to Disapply Pre-Emption Rights
Resolution 11 is a special resolution disapplying pre-emption
rights and granting authority to the Directors, without the need
for further specific shareholder approval, to make allotments
of equity securities or sale of Treasury shares for cash up to
an aggregate nominal value of £1,689,434 (including Treasury
shares) (approximately 5% of the issued share capital of the
Company as at 26 March 2024 and equivalent to 6,757,736
ordinary shares).
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Authority to Repurchase Shares
Resolution 12 is a special resolution which renews the Company’s
authority to purchase up to 14.99% (17,047,380) of the ordinary
shares in issue (excluding Treasury Shares) on 26 March 2024,
either for immediate cancellation or for retention as Treasury
shares, at the determination of the Directors. Once shares are
held in Treasury, the Directors may only dispose of them in
accordance with the relevant legislation by subsequently selling
the shares for cash or by cancelling the shares. Purchases of
ordinary shares will be made at the discretion of the Directors
and within guidelines set from time-to-time by them in the light of
prevailing market conditions. Purchases will only be made in the
market at prices below the prevailing NAV per share.
Continuation Vote
Resolution 13 is an ordinary resolution regarding the continuation
of the Company as an investment trust for a further three years.
Proposed Changes to the Company’s Articles of Association
Resolution 14 is a special resolution regarding the adoption
of the New Articles of Association (“New Articles”) by the
Company.
Summarised below are the principal changes proposed to be
introduced through the adoption of the New Articles by the
Company. A copy of the proposed New Articles showing all the
changes as against the current Articles of Association is available
for inspection at www.fidelity.co.uk/japan, together with a copy
of the current Articles of Association and a ‘clean’ copy of the
New Articles (which do not highlight the amendments), from the
date of this report until the end of the AGM (and at the AGM
itself for the duration of the meeting and for at least 15 minutes
prior to the meeting). The documents are also available for
inspection at Simmons & Simmons LLP, Citypoint, 1 Ropemaker
Street, London, EC2Y 9SS until the close of the AGM.
Period to draw up and submit proposals following a
continuation vote
The Board considers it appropriate to extend the time period
within which proposals for the Company’s voluntary liquidation,
unitisation or other reorganisation must be drawn up and a
general meeting held at which they are submitted to members
in the event of an unsuccessful continuation vote (“Shareholder
Deadline”). The Shareholder Deadline is currently set at three
months after the date of the general meeting at which the
continuation vote is unsuccessful. The Board proposes that the
Shareholder Deadline be extended to six months from this
date. The Board considers that this extension is in line with
market practice and will allow the Board a more appropriate
period of time to consider, prepare and submit its proposals
to shareholders following the continuation vote. The new time
period, if approved, will apply in respect of the continuation vote
being put to this year’s AGM and all subsequent continuation
votes.
Clarificatory, administrative and technical changes
Various changes of a minor, clarificatory or technical nature
are not commented on separately. This includes in relation to
arrangements for validity of proxies, to provide for if there are too
few directors following retirements at annual general meetings
and clarifications in relation to hybrid general meetings to follow
how practice has developed. The Board does not however
have any plans at this stage to allow general meetings to be
held purely by electronic means, and so no provision has been
included in the New Articles to provide for fully virtual meetings.
Recommendation: The Board considers that each of
the resolutions is likely to promote the success of the
Company and is in the best interests of the Company and
its shareholders as a whole. The Directors unanimously
recommend that you vote in favour of the resolutions as they
intend to do in respect of their own beneficial holdings.
By Order of the Board
FIL Investments International
Secretary
26 March 2025
Directors’ Report continued
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Annual Report 2024
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Fidelity Japan Trust PLC
INFORMATION FOR SHAREHOLDERS FINANCIAL STRATEGYGOVERNANCE
Corporate Governance Statement
The Corporate Governance Statement forms part of the Directors’
Report. The Company is committed to maintaining high standards
of corporate governance. Accordingly, the Board has put in
place a framework for corporate governance which it believes
isappropriate for an investment company.
Corporate Governance Codes
The Board follows the principles and provisions of the UK
Corporate Governance Code (the “UK Code”) issued by the
Financial Reporting Council (the “FRC”) in July 2018 and the AIC’s
Code of Corporate Governance (the “AIC Code”) issued by the
Association of Investment Companies (the “AIC”) in February
2019. The AIC Code addresses the principles and provisions of
the UK Code. The FRC has confirmed that investment companies
which report against the AIC Code will meet their obligations
under the UK Code and paragraph 6.6.6R (6) of the UK Listing
Rules. This statement, together with the Statement of Directors’
Responsibilities on page 46, set out how the principles have
beenapplied.
The AIC Code can be found on the AIC’s website at www.theaic.
co.uk and the UK Code on the FRC’s website at www.frc.org.uk.
Statement of Compliance
The Company has complied with the recommendations of the
AICCode and the relevant provisions of the UK Code for the year
under review and up to the date of this Annual Report, except in
relation to the UK Code provisions relating to the role of the chief
executive, executive directors’ remuneration, and the need for an
internal audit function. The Board considers that these provisions
are not relevant to the position of the Company, as it is an
externally managed investment company and has no executive
directors, employees or internal operations. All of its day to day
management and administrative functions are delegated to
theManager.
THE BOARD
Board Composition
As at the date of this report, the Board, chaired by David
Graham, consists of five non-executive Directors.
The Directors believe that, between them, they have good
knowledge and wide experience of business in Japan, the
Asian region and of investment trusts, and that the Board has
an appropriate balance of skills, experience, independence and
knowledge of the Company and length of service to discharge
its duties and provide effective strategic leadership and proper
governance of the Company.
Sarah MacAulay is the Senior Independent Director and fulfils
the role of sounding board for the Chairman and intermediary
for the other Directors as necessary, and to act as a channel of
communication for shareholders in the event that contact through
the Chairman is inappropriate.
Biographical details of all serving Directors are on page 34.
Board Responsibilities
The Board has overall responsibility for the Company’s affairs
and for promoting the long-term success of the Company. All
matters which are not delegated to the Company’s Manager
under the Management Agreement are reserved for the Board’s
decision. Matters reserved for the Board and considered at
meetings include decisions on strategy, management, structure,
capital, share issues, share repurchases, gearing, financial
reporting, risk management, investment performance, share price
discount, corporate governance, Board appointments, and the
appointments of the Manager and the Company Secretary. The
Board also considers shareholder issues including communication
and investor relations.
All Directors are independent of the Manager and considered
to be free from any relationship which could materially interfere
with the exercise of their independent judgement. The Directors
are required to disclose all potential conflicts of interests as they
arise. The Board is satisfied that no conflicts have arisen in the
year under review.
All Directors are able to allocate sufficient time to the Company
to discharge their responsibilities fully and effectively. Each
Director is entitled to take independent professional advice,
atthe Company’s expense, in the furtherance of their duties.
Board Meetings
The Board considers that it meets sufficiently regularly to
discharge its duties effectively and the table on the next page
gives the attendance record for the meetings held in the
reporting year. The Portfolio Manager and key representatives
of the Manager also attend these meetings. Regular Board
meetings exclude ad hoc meetings for formal approvals or to
address any key issues which may have arisen.
Between these meetings there is regular contact with the
Manager and other meetings are arranged as necessary.
Additionally, Board Committees and sub-groups meet to pursue
matters referred to them by the Board and the Chairman is in
contact with the other Directors regularly without representatives
of the Manager being present.
In addition to the formal Board and Committee meetings, the
Board aims to undertake a due diligence trip to Japan each
year. On such trips, the Board meets with members of the Fidelity
investment team and management in Tokyo, market strategists
and commentators as well as the management of existing
and potential investee companies. The Board conducted a
due diligence trip during June 2024, details of which are in the
Chairman’s Statement on page 3.
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Board’s Attendance Record for the Reporting Year
Regular
Board
Meetings
Nomination
Committee
Meetings
Audit
Committee
Meetings
Management
Engagement
Committee
Meetings
David Graham 5/5 1/1 5/5 1/1
David Barron 5/5 1/1 5/5 1/1
Myra Chan 5/5 1/1 5/5 1/1
Seiichi Fukuyama 5/5 1/1 5/5 1/1
Sarah MacAulay 5/5 1/1 5/5 1/1
Dominic Ziegler
1
2/2 n/a 1/1 1/1
1 Retired on 22 May 2024.
Company Secretary
The Board has access to the advice and services of the Company
Secretary. The Company Secretary is responsible to the Board for
ensuring that Board procedures are followed and that applicable
rules and regulations are complied with.
Changes to the Board
Changes to the Board take place in accordance with the
Companies Act 2006, the Company’s Articles of Association and
the AIC Code. The Nomination Committee is responsible for
identifying and discussing possible candidates. However, any
proposal for a new Director is approved by the entire Board.
External consultants who have no connection with the Company
are used to identify potential candidates.
Director Training
Upon appointment to the Board, each Director receives a
full, formal and tailored induction. Directors are also regularly
provided with key information on the Company’s policies,
regulatory and statutory requirements and internal controls.
Changes affecting Directors’ responsibilities are advised to
the Board as they arise. Directors also regularly participate
in relevant training and industry seminars. Training and
development needs are considered as part of the annual Board
and Committees evaluation process.
Election and Re-Election of Directors
All newly appointed Directors stand for election by the
shareholders at the AGM following their appointment by the
Board. All other Directors are subject to annual re-election by
the shareholders. All Directors as at the date of this Annual
Report will be standing for re-election at this year’s AGM and are
listed, together with their biographical details, on page 34. The
terms and letters of appointment of Directors are available for
inspection at the registered office of the Company.
Board Evaluation
An annual evaluation of the Board, its Directors and its
Committees is undertaken. The Chairman leads the assessment
of the individual Directors’ contributions to the Board and the
Senior Independent Director is responsible for evaluating the
performance of the Chairman. The results of these evaluations
are discussed by the Board and the process is considered to
be constructive in terms of identifying areas for improving the
functioning and performance of the Board and its Committees
and action is taken on the basis of the results. The Board
considers tenure of individual Directors as one of the matters in
the evaluation process. The Board undertook an evaluation of its
own performance in November 2024. To facilitate this process,
the Boardforms system was used. This system enhanced the
quality of the review and resulted in output and recommendations
that are being used to improve the governance process. It was
determined that overall, the Board functioned well, with the right
balance of membership and skills.
Directors Remuneration and Share Interests
Details of Directors’ remuneration and their share interests are
disclosed in the Directors’ Remuneration Report on pages 44 and
45.
BOARD COMMITTEES
The Board has three Committees, as set out below and on the
next page, through which it discharges certain of its corporate
governance responsibilities. These are the Audit Committee,
the Management Engagement Committee and the Nomination
Committee. Terms of reference of each Committee are available
on the Company’s pages of the Manager’s website at
www.fidelity.co.uk/japan.
Audit Committee
The Audit Committee is chaired by David Barron and consists
of all of the Directors. The Chairman of the Board is also a
member of the Audit Committee as the Board believe that such
responsibility should be shared by all of the Directors. Full details
of the Audit Committee, including its roles and responsibilities,
are disclosed in the Report of the Audit Committee on pages 47
to 50.
Corporate Governance Statement continued
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Annual Report 2024
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Fidelity Japan Trust PLC
INFORMATION FOR SHAREHOLDERS FINANCIAL STRATEGYGOVERNANCE
Management and Engagement Committee
Composition
The Management Engagement Committee is chaired by David
Graham and consists of all of the Directors.
Role and Responsibilities
The Committee is charged with reviewing and monitoring the
performance of the Manager and for ensuring that the terms
of the Company’s Management Agreement remain competitive
and reasonable for shareholders. It meets at least once a year
and reports to the Board, making recommendations where
appropriate.
Manager’s Reappointment
Ahead of the AGM on 21 May 2025, the Committee has reviewed
the performance of the Manager and the current fee structure
and also that of its peers. Notwithstanding the retirement of
Nicholas Price, the Committee noted the Company’s long-term
performance record and the commitment, quality of the team
responsible for the Company and concluded that it was in the
interests of shareholders that the appointment of the Manager
should continue. Details of the fee structure for the year ended
31 December 2024 are in the Directors’ Report on page 35.
Nomination Committee
Composition
The Nomination Committee is chaired by David Graham and
consists of all of the Directors.
Role and Responsibilities
The Committee meets at least once a year and reviews the
composition, size and structure of the Board and makes
recommendations to the Board as appropriate. The Committee
is responsible for succession planning and it is charged with
nominating new Directors for consideration by the Board, and, in
turn, for approval by shareholders.
In respect of new Directors, the Committee carries out its
candidate search from the widest possible pool of talent with
due regard to the benefits of diversity, including a range of
skills, knowledge, experience, perspectives and backgrounds.
New Directors are appointed on the basis of merit. External
consultants, with no connection with the Company, are used
to identify potential candidates. This was the case for the
recruitment of Seiichi Fukuyama through the services of Nurole.
The Committee also considers the election and re-election
of Directors ahead of each AGM. For the forthcoming AGM,
it has considered the performance and contribution of each
Director and concluded that each Director seeking election and
re-election has been effective and continues to demonstrate
commitment to their roles. This has been endorsed by the Board,
which recommends their appointment and reappointment by
shareholders at the AGM on 21 May 2025.
ACCOUNTABILITY AND AUDIT
Financial Reporting
Set out on page 46 is a statement by the Directors of their
responsibilities in respect of the preparation of the Annual Report
and Financial Statements. The Auditor has set out its reporting
responsibilities within the Independent Auditor’s Report to the
Members on pages 51 to 57.
The Board has a responsibility to present fair, balanced and
understandable annual and half-yearly financial statements. All
financial statements are reviewed by the Audit Committee and
approved by the Board prior to their issue to ensure that this
responsibility is fulfilled.
Risk Management and Internal Controls
The Board is responsible for the Company’s systems of risk
management and of internal controls and for reviewing their
effectiveness. The review takes place at least once a year. Such
systems are designed to manage rather than eliminate the risk
of failure to achieve business objectives and can only provide
reasonable, but not absolute, assurance against material
misstatement or loss.
The Board determines the nature and extent of any risks it is
willing to take in order to achieve its strategic objectives. It is
responsible for the design, implementation and maintenance of
controls and procedures to safeguard the assets of the Company
although these tasks have been delegated on a day-to-day basis
to the Manager. The system extends to financial, operational
and compliance controls and risk management. Clear lines of
accountability have been established between the Board and the
Manager. The Manager provides regular reports on controls and
compliance issues to the Audit Committee and the Board.
In carrying out its review, the Audit Committee has regard to the
activities of the Manager, the Manager’s compliance and risk
functions and the work carried out by the Company’s Auditor
relevant to the Company’s audit. It also includes consideration
of internal controls covered in similar reports issued by the other
service providers.
The Board, assisted by the Manager, has undertaken a rigorous
risk and controls assessment. This process also assists in
identifying any new emerging risks and the actions necessary to
mitigate their potential impact. The Board confirms that there is
an effective robust ongoing process in place to identify, evaluate
and manage the Company’s principal business and operational
risks, and that it has been in place throughout the year ended 31
December 2024 and up to the date of this report. This process is
in accordance with the FRC’s “Risk Management, Internal Control
and Related Financial Business Reporting” guidance.
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The Board has reviewed the need for an internal audit
function and has determined that the systems and procedures
employed by the Manager, which are subject to inspection by
the Manager’s internal and external audit processes, provide
sufficient assurance that a sound system of internal controls
is maintained to safeguard shareholders’ investments and
the Company’s assets. An internal audit function, specific to
the Company is, therefore, considered unnecessary. The Audit
Committee meets the Manager’s internal audit representative
at least once a year. It receives a summary of the Manager’s
externally audited internal controls report on an annual basis.
Whistle-Blowing Procedure
Part of the Manager’s role in ensuring the provision of a good
service pursuant to the Management Agreement, includes
the ability for employees of Fidelity to raise concerns through
a workplace concerns escalation policy (or “whistle-blowing
procedure”). Fidelity has advised the Board that it is committed
to providing the highest level of service to its customers and to
applying the highest standards of quality, honesty, integrity and
probity. The aim of the policy is to encourage employees and
others working for Fidelity to assist the Company in tackling fraud,
corruption and other malpractice within the organisation and in
setting standards of ethical conduct. Accordingly, this policy has
been endorsed by the Board.
Responsibility as an Institutional Shareholder
The Board has adopted the Manager’s Principles of Ownership
in relation to investments. These Principles include the pursuit
of an active investment policy through portfolio management
decisions, voting on resolutions at general meetings and
maintaining a continuing dialogue with the management of
investee companies. Fidelity International is a signatory to
the UK Stewardship Code which sets out the responsibilities
of institutional shareholders and agents. Further details of the
Manager’s Principles of Ownership and voting may be found at
www.fidelity.co.uk.
Relations with Shareholders
Communication with shareholders is given a high priority by
the Board and it liaises with the Manager and the Company’s
broker who are in regular contact with the Company’s major
institutional investors to canvass shareholder opinion and to
communicate its views to shareholders. All Directors are made
aware of shareholders’ concerns and the Chairman, the Senior
Independent Director and, where appropriate, other Board
Directors, are available to meet with shareholders to discuss
strategy and governance. In addition, the Portfolio Manager
also meets with major shareholders and investors in the UK
and Tokyo. The Board regularly monitors the shareholder
profile of the Company and receives regular reports from the
Manager on meetings attended with shareholders and any
concerns raised in such meetings. The Board aims to provide
the maximum opportunity for dialogue between the Company
and its shareholders. If any shareholder wishes to contact a
member of the Board directly, they should either email the
Company Secretary at investmenttrusts@fil.com or in writing at
FIL Investments International, Beech Gate, Millfield Lane, Lower
Kingswood, Tadworth, Surrey KT20 6RP. The Company Secretary
will attend to any enquiries promptly and ensure that they are
directed to the Chairman, Senior Independent Director or the
Board as a whole, as appropriate.
The Board encourages all shareholders to attend the Company’s
AGM on 21 May 2025 details of which can be found on page 80.
Full details of the Notice of Meeting are on pages 81 to 84.
Voting Rights in the Company’s Shares
Every person entitled to vote on a show of hands has one vote.
On a poll, every shareholder who is present in person or by
proxy or representative has one vote for every ordinary share
held. At general meetings, all proxy votes are counted and,
except where a poll is called, proxy voting is reported for each
resolution after it has been dealt with on a show of hands. The
proxy voting results are disclosed on the Company’s pages of the
Manager’s website at www.fidelity.co.uk/japan.
Articles of Association
Any changes to the Company’s Articles of Association must be
made by special resolution.
On Behalf of the Board
David Graham
Chairman
26 March 2025
Corporate Governance Statement continued
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INFORMATION FOR SHAREHOLDERS FINANCIAL STRATEGYGOVERNANCE
Directors’ Remuneration Report
The Directors’ Remuneration Report for the year ended 31
December 2024 has been prepared in accordance with the
Large & Medium sized Companies & Groups (Accounts &
Reports) (Amendment) Regulations 2013 (the “Regulations”).
As the Board is comprised entirely of non-executive Directors
and has no chief executive and employees, many parts of the
Regulations, in particular those relating to chief executive officer
pay and employee pay, do not apply and are therefore, not
disclosed in this report.
An ordinary resolution to approve the Directors’ Remuneration
Report will be put to shareholders at the AGM on 21 May 2025.
The Company’s Auditor is required to audit certain sections of
this report and where such disclosures have been audited, the
specific section has been indicated as such. The Auditor’s opinion
is included in its report on pages 51 to 57.
Directors’ Remuneration
The annual fee structure with effect from 1 January 2025 is as
follows:
Role:
1 January
2025
£
1 January
2024
£
Chairman 44,250 43,000
Senior Independent Director 34,000 30,500
Chairman of the Audit Committee 37,000 36,000
Director 31,500 30,500
Remuneration policy
The Company’s Articles of Association limit the aggregate fees
payable to each Director to £50,000 per annum. Subject to this
overall limit, it is the Board’s policy to determine the level of
Directors’ fees having regard to the time spent by them on the
Company’s affairs; the level of fees payable to non-executive
directors in the industry generally; the requirement to attract
and retain individuals with suitable knowledge and experience;
and the role that individual Directors fulfil. Other than fees and
reasonable out-of-pocket expenses incurred in attending to the
affairs of the Company, the Directors are not eligible for any
performance related pay or benefits, pension related benefits,
share options, long-term incentive schemes, or other taxable
benefits. The Directors are not entitled to exit payments and are
not provided with any compensation for loss of office.
The level of Directors’ fees is determined by the whole Board.
Directors do not vote on their own fees. The Board reviews the
Company’s Remuneration Policy and implementation on an
annual basis. Reviews are based on information provided by
the Company’s Manager and research from third parties and it
includes information on the fees of other similar investment trusts.
No Director has a service contract with the Company. New
Directors are provided with a letter of appointment which,
amongst other things, provides that their appointment is subject
to the Companies Act 2006 and the Company’s Articles of
Association. Copies of the Directors’ letters of appointment are
available at each of the Company’s AGMs and can be obtained
from the Company’s registered office.
In common with most investment trusts there is no Chief Executive
Officer and there are no employees.
The Company’s remuneration policy will apply to new Board
members, who will be paid the equivalent amount of fees as
current Board members.
Voting on the Remuneration Policy
The Remuneration Policy (the “Policy”), as set out above, was
approved at the AGM on 24 May 2023 with 99.74% of votes cast
in favour, 0.23% of votes cast against and 0.03% of votes withheld.
The Policy has been followed throughout the year ended 31
December 2024 and up to the date of this report. The next vote
will be put to shareholders at the AGM in May 2026 and the
votes cast will be disclosed on the Company’s pages of the
Manager’s website at www.fidelity.co.uk/japan.
Voting on the Directors’ Remuneration Report
At the AGM held on 24 May 2024, 99.85% of votes were cast in
favour of the Directors’ Remuneration Report for the year ended
31 December 2023, 0.14% of votes were cast against and 0.01%
of votes were withheld.
The Directors’ Remuneration Report for the year ended 31
December 2024 will be put to shareholders at the AGM on 21
May 2025, and the votes cast will be disclosed on the Company’s
pages of the Manager’s website at www.fidelity.co.uk/japan.
Single Total Figure of Remuneration
The single total aggregate Directors’ remuneration for the year
ended 31 December 2024 was £183,415 (2023: £169,012). This
includes expenses incurred by Directors in attending to the affairs
of the Company and which are considered by HMRC to be
taxable expenses. Information on individual. Directors’ fees and
expenses are disclosed in the table on the next page.
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Remuneration of Directors
2025 2024 2024 2024 2023 2023 2023
Projected
fees
Fees
(Audited)
Taxable
Expenses
(Audited)
Total
(Audited)
Fees
(Audited)
Taxable
Expenses
(Audited)
Total
(Audited)
(£) (£) (£) (£) (£) (£) (£)
David Graham 44,250 43,000 – 43,000 40,000 – 40,000
David Barron 37,000 36,000 – 36,000 33,000 – 33,000
Myra Chan 31,500 30,500 – 30,500 29,000 – 29,000
Seiichi Fukuyama
1
31,500 25,472 – 25,472 n/a n/a n/a
Sarah MacAulay 34,000 30,500 – 30,500 29,000 – 29,000
Dominic Ziegler
2
n/a 12,043 5,900 17,943 29,000 9,012 38,012
Total 178,250 177,515 5,900 183,415 160,000 9,012 169,012
1 Appointed on 1 March 2024.
2 Retired on 22 May 2024.
Five year change comparison in Directors’ Remuneration
The table below shows the change in Directors’ fees over the last
five years.
Director 2024 2019 Change (%)
Chairman 43,000 35,000 +22.9
Audit Committee Chairman 36,000 26,500 +35.8
Senior Independent
Director/Director 30,500 24,000 +27.1
Expenditure on Directors’ Remuneration and Distributions to
Shareholders
As the Company currently pays no dividends, the Directors do
not consider that it is relevant to present a table showing this
information. The total fees paid to Directors is shown in the table
above.
Performance
The Company’s objective is to achieve long-term capital growth by investing predominantly in equities and related securities of
Japanese companies. The graph below shows the performance of the Company’s NAV, share price and the Reference Index (in
sterling terms) over ten years to 31 December 2024.
Total return performance for the ten years to 31 December 2024
+142.4%
+146.4%
+140.0%
Ordinary share price
Reference Index
NAV per ordinary share
75
100
125
150
175
200
225
250
275
300
325
350
375
Dec 14 Dec 15 Dec 16 Dec 17 Dec 18 Dec 19 Dec 21 Dec 22Dec 20
Rebased to 100.
Sources: Fidelity and Datastream.
Past performance is not a guide to future returns.
Dec 23 Dec 24
Directors’ Remuneration Report continued
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INFORMATION FOR SHAREHOLDERS FINANCIAL STRATEGYGOVERNANCE
Directors’ Interest in the Company’s Ordinary Shares
Although there is no requirement for the Directors to hold shares in the Company, shareholdings by Directors are encouraged.
The interests of the Directors and their connected persons in the ordinary shares of the Company are shown below. All of the
shareholdings are beneficial.
Directors’ Shareholdings (Audited)
31 December
2024
31 December
2023
Change
during year
David Graham 78,489 78,489 –
David Barron 19,366 19,366 –
Myra Chan – – –
Seiichi Fukuyama
1
11,000 n/a 11,000
Sarah MacAulay
1
228,340 181,340 47,000
Dominic Ziegler
2
n/a 24,045 –
1 Purchase of shares.
2 Retired on 22 May 2024.
All shareholdings remain unchanged as at the date of this report.
On Behalf of the Board
David Graham
Chairman
26 March 2025
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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 UK Generally Accepted Accounting Practice (UK Accounting
Standards and applicable law), including Financial Reporting
Standard FRS 102: The Financial Reporting Standard applicable
in the UK and Republic of Ireland (FRS 102). Under company
law, the Directors must not approve the Financial Statements
unless they are satisfied that they give a true and fair view of the
state of affairs of the Company and of the profit or loss for the
reporting period.
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 UK Accounting Standards, including
FRS 102, have been followed, subject to any material
departures disclosed and explained in the Financial
Statements; and
• Prepare the Financial Statements on the going concern
basis, unless it is inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any
time, the financial position of the Company and 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 UK
governing the preparation and dissemination of the Financial
Statements may differ from legislation in their own jurisdictions.
The Directors confirm that to the best of their knowledge:
• The Financial Statements, prepared in accordance with UK
Generally Accepted Practice, including FRS 102, give a true
and fair view of the assets, liabilities, financial position and
loss of the Company;
• 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 26 March 2025 and signed on its behalf by:
David Graham
Chairman
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Fidelity Japan Trust PLC
INFORMATION FOR SHAREHOLDERS FINANCIAL STRATEGYGOVERNANCE
Report of the Audit Committee
I am pleased to present the formal report of the Audit Committee
(the “Committee”) to shareholders.
The primary responsibilities of the Committee are to ensure
the integrity of the Company’s financial reporting, the
appropriateness of the risk management and internal controls
processes (see pages 41 and 42 for further details) and the
effectiveness of the independent audit process and how this has
been assessed for the year ended 31 December 2024.
Composition
The members of the Committee are myself as Chairman and all
of the other Directors. David Graham is also a member of the
Committee because the Board believes it is appropriate for all
Directors to have such responsibility. All Committee members
are independent non-executive Directors and collectively have
sufficient recent and relevant financial experience to discharge
their responsibilities fully.
The Committee’s performance is evaluated annually as part of
the overall Board evaluation process.
Role and Responsibilities of the Committee
The Committee’s authority and duties are clearly defined in its
terms of reference and are available on the Company’s pages
of the Manager’s website at www.fidelity.co.uk/japan. These
duties include:
• Establishing with the Auditor the nature and scope of the
audit, reviewing the Auditor’s quality control procedures
and reporting, the effectiveness of the audit process and
the Auditor’s independence and objectivity with particular
regard to the provision of non-audit services;
• Responsibility for making recommendations on the
appointment, reappointment and removal of the Auditor;
• Reviewing the effectiveness of the Company’s risk
management and internal controls systems (including
financial, operational and compliance controls) and
considering the scope and obtaining sufficient assurance
of the work undertaken by the Manager’s internal audit
function;
• Monitoring the integrity of the Company’s Half-Yearly and
Annual Report and Financial Statements to ensure that they
are fair, balanced and understandable;
• Reviewing the existence and performance of controls
operating in the Company, including the reviews of internal
controls reporting provided in relation to its service
providers; and
• Reviewing the relationship with and the performance of third
party service providers (such as the Registrar, Custodian and
Depositary).
Meetings and Business Considered by the Committee
Since the date of the last Annual Report (26 March 2024), the Committee has met five times and the Auditor attended three of these
meetings.
The following matters were reviewed at each Committee meeting.
• The Company’s risk management and internal controls framework;
• The Company’s compliance with its investment policy limits;
• The methodology for reaching the fair value of unlisted investments;
• The Depositary’s oversight reporting; and
• The Company’s revenue and expenses forecasts and its Balance Sheet.
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In addition, the following matters were considered at these meetings:
June 2024
• Detailed review of the valuations of the Company’s unlisted investments with the
Manager’s Fair Value Committee, including the Manager’s unlisted specialist, and the
independent valuer, Kroll (see further details on the next page).
July 2024
• The Half-Yearly Report and Financial Statements and recommendation of its approval to
the Board.
• Going Concern Statement.
• The Committee’s Terms of Reference.
November 2024
• The Auditor’s audit plan for the Company’s year ending 31December 2024, including the
proposed audit fee.
• Review of Fidelity’s Internal Audit reporting, including review of the Internal Audit plan.
• Review of the Manager’s Risk Management Process Document.
• Review of the Manager’s detailed risk matrix and mitigating controls.
• Review of emerging risks and risk assessment.
• Audit Tender timeline and process.
• The Committee’s Terms of Reference.
December 2024
• Detailed review of the valuations of the Company’s unlisted investments with the Manager’s
Fair Value Committee, including the Manager’s unlisted specialist, and the independent
valuer, Kroll. See further details on the next page.
March 2025
• The Auditor’s findings from the audit of the Company.
• The Auditor’s performance, independence and reappointment.
• Compliance with Corporate Governance and regulatory requirements.
• The Annual Report and Financial Statements and recommendation of its approval to the
Board following a review and conclusion by the Committee that they are Fair, Balanced
and Understandable.
• The Viability Statement and the Going Concern Statements, including an assessment of
the impact of earthquakes in Japan, the ongoing war in Ukraine, the Middle East conflict,
significant market and geopolitical events and regulatory changes, and also consideration
of the upcoming continuation vote.
• Cybersecurity reporting and the controls in place to mitigate the risks of potential threats
and attacks.
• Review of Fidelity’s AAF Reports (assurance reports on internal controls).
• Review of outsourced third party service providers control reports.
Annual Report and Financial Statements
The Annual Report and Financial Statements are the responsibility of the Board and the Statement of Directors’ Responsibilities can be
found on page 46. The Committee advises the Board on the form and content of the Annual Report and Financial Statements, any issues
which may arise in relation to these and any specific areas which require judgement.
Report of the Audit Committee continued
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Fidelity Japan Trust PLC
INFORMATION FOR SHAREHOLDERS FINANCIAL STRATEGYGOVERNANCE
Summarised below are the most significant issues considered by the Committee in respect of the Company’s Financial Statements and
how these were addressed.
Recognition of
investment income
Investment income is recognised in accordance with Accounting Policy Note 2 (e) on page 62.
The Manager provided detailed revenue forecasts and the Committee reviewed and sought
explanations for any significant variances to these forecasts. The Committee also considered
the allocation of special dividends between revenue and capital and the reasons for the
classification of these special dividends. The Committee reviewed the internal audit and the
compliance monitoring reports received from the Manager, including an additional internal
controls report (“AAF report”) prepared by PricewaterhouseCoopers LLP on behalf of the
Manager, to satisfy itself that adequate systems were in place for properly recording the
Company’s investment income. The Committee also reviewed the reports provided by the
Auditor on its work on the recognition of investment income, including the allocation of special
dividends.
Valuation, existence
and ownership of
listed investments
(including derivatives
investments)
The valuation of listed investments (including derivatives investments) is in accordance with
Accounting Policy Notes 2 (j) and 2 (k) on pages 63 and 64. The Committee took comfort from
the Depositary’s regular oversight functions that investment related activities were conducted
in accordance with the Company’s investment policy. The Committee received reports from the
Manager, the Depositary and an additional AAF report prepared by PricewaterhouseCoopers
LLP on behalf of the Manager which concluded that controls around the valuation, existence
and ownership of investments operate effectively. The Committee also reviewed the reports
provided by the Auditor on its work on the valuation, existence and ownership of the
Company’s investments, including the derivatives investments.
Valuation of the
unlisted investments
The Manager as the AIFM, is authorised and responsible for performing the valuation of
the assets in the Company’s portfolio, including the unlisted investments. The valuation of
unlisted investments is in accordance with Accounting Policy Notes 2 (b) and 2 (j) on pages
61 to 64. The valuation of the unlisted investments is proposed by the Manager’s Fair Value
Committee (FVC) to the Audit Committee, who in turn reports these to the Board to ensure that
the Directors are satisfied that the process that the FVC adopts in recommending the valuation
is rigorous, reasonable and independent. The reporting received from the FVC includes
recommendations from Kroll, an external company that provides global financial information
and services. It includes detailed input from the Fidelity analysts covering the unlisted
companies and also Fidelity’s unlisted investments specialist who provides further insight. The
Committee reviews the proposed valuation methodologies for all of the unlisted investments in
order to gain comfort on the proposed valuations.
In addition, the Auditor reviewed the valuations of the unlisted investments in the Company’s
portfolio and reported its findings at the March 2025 Audit Committee meeting.
Independence and Effectiveness of the Audit Process
Ernst & Young LLP acted as the Company’s Auditor for the year
ended 31 December 2024.
With regard to the independence of the Auditor, the Committee
reviewed:
• The Auditor’s arrangements for managing any conflicts of
interest;
• The fact that no non-audit services were provided to the
Company in the reporting year and up to the date of this
report; and
• The statement by the Auditor that it remains independent
within the meaning of the regulations and its professional
standards.
With regard to the effectiveness of the audit process, the
Committee reviewed:
• The fulfilment by the Auditor of the agreed audit plan,
including the audit team and approach to significant risks;
• The audit findings report issued by the Auditor on the audit
of the Annual Report and Financial Statements for the year
ended 31 December 2024; and
• Feedback from the Manager on the audit of the Company.
The Committee concluded that the Auditor continues to remain
independent and the audit process remains effective.
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Auditor’s Appointment
Ernst & Young LLP was appointed as the Company’s Auditor on
12 May 2016 following a formal audit tender process in 2015.
The Committee has reviewed the Auditor’s independence and
the effectiveness of the audit process prior to recommending its
reappointment for a further year. The Auditor is required to rotate
audit partners every five years and this is the second year that
the current Audit Partner, Sarah Langston, has been in place. The
Committee will continue to review the Auditor’s appointment each
year to ensure that the Company continues to receive an optimal
level of service. There are no contractual obligations that restricts
the Company’s choice of auditor.
Audit Tenure
The Company is required to conduct an audit tender process
every ten years and an audit tender will be completed in
2025. This process will be led by the Audit Committee who
will complete an assessment of external auditors’ proposals.
Following this assessment, a recommendation will be made to
the Board regarding whether a change of auditor should be
made.
Audit Fees
Fees paid to the Auditor for the audit of the Company’s Financial
Statements are disclosed in Note 5 on page 66. The audit fee for
the reporting year was £54,809 (2023: £53,213).
David Barron
Chair of the Audit Committee
26 March 2025
Report of the Audit Committee continued
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Fidelity Japan Trust PLC
GOVERNANCEINFORMATION FOR SHAREHOLDERS FINANCIAL STRATEGY
Independent Auditor’s Report to the Members
of Fidelity Japan Trust PLC
Opinion
We have audited the Financial Statements of Fidelity Japan
Trust PLC (“the Company”) for the year ended 31 December
2024 which comprise the Income Statement, the Statement of
Changes in Equity, the Balance Sheet and the related Notes 1
to 18, including a summary of significant accounting policies.
The financial reporting framework that has been applied in their
preparation is applicable law and United Kingdom Accounting
Standards including FRS 102 “The Financial Reporting Standard
applicable in the UK and Republic of Ireland” (United Kingdom
Generally Accepted Accounting Practice).
In our opinion, the Financial Statements:
• give a true and fair view of the Company’s affairs as at
31 December 2024 and of its loss for the year then ended;
• have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of
the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor’s responsibilities for the audit of the Financial Statements
section of our report. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We are independent of the Company in accordance with the
ethical requirements that are relevant to our audit of the Financial
Statements in the UK, including the FRC’s Ethical Standard as
applied to public interest entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the Company and we remain independent
of Company in conducting the audit.
Material uncertainty relating to going concern
We draw attention to Note 2 (a) in the financial statements, which
indicates that the Company will hold a continuation vote at the
May 2025 AGM. As stated in Note 2 (a), this event indicates
that a material uncertainty exists that may cast significant doubt
on the Company’s ability to continue as a going concern. Our
opinion is not modified in respect of this matter.
We draw attention to the Viability Statement in the Annual Report
on page 30, which indicates that one of the key assumptions to
the statement of viability is in respect of the material uncertainty
arising from the forthcoming continuation vote to be held at the
21 May 2025 AGM. Our opinion is not modified in respect of this
matter.
In auditing the Financial Statements, we have concluded that
the Directors’ use of the going concern basis of accounting in
the preparation of the Financial Statements is appropriate. Our
evaluation of the Directors’ assessment of the Company’s ability
to continue to adopt the going concern basis of accounting
included:
• Confirming our understanding of the Company’s going
concern assessment process by engaging with the Directors
and the Company Secretary to determine if all key factors
were considered in their assessment;
• Inspecting the Directors’ assessment of going concern,
including the revenue and expense forecast, for the period
to 31 March 2026 which is at least 12 months from the date
of approval of these Financial Statements. In preparing the
revenue and expense forecast, the Company has concluded
that it is able to continue to meet its ongoing costs as they
fall due;
• Reviewing the factors and assumptions, including the
impact of the current economic environment and other
significant events that could give rise to market volatility,
as applied to the revenue and expense forecast and the
liquidity assessment of the investments and determined,
through testing of the methodology and calculations, that the
methods, inputs and assumptions utilised are appropriate to
be able to make an assessment for the Company;
• Consideration of the mitigating factors included in the
revenue and expense forecast that are within the control
of the Company. We reviewed the Company’s assessment
of the liquidity of investments held and evaluated the
Company’s ability to sell those investments in order to
cover working capital requirements should revenue decline
significantly;
• Reviewing the minutes of meetings between the Directors
and certain shareholders about their intentions in relation to
the continuation vote and assessing the Directors’ analysis of
the responses they have received;
• Discussing with the Directors and considering whether any
other events or conditions, apart from the continuation
vote discussed in Note 2 (a), exist that, individually or
collectively, may cast significant doubt on the entity’s ability
to continue as a going concern and concluding that no such
circumstances exist; and
• Reviewing the Company’s going concern disclosures
included in the Annual Report in order to assess that the
disclosures were appropriate and in conformity with the
reporting standards.
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In relation to the Company’s reporting on how they have applied
the UK Corporate Governance Code, we have nothing material to
add or draw attention to in relation to:
• the Directors’ statement in the Financial Statements about
whether the Directors considered it appropriate to adopt the
going concern basis of accounting; and
• the Directors’ identification in the Financial Statements of the
material uncertainty related to the entity’s ability to continue
as a going concern over a period to 31 March 2026 which is
at least 12 months from when the Financial Statements are
authorised for issue.
Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report. However, because not all future events or
conditions can be predicted, this statement is not a guarantee as
to the Company’s ability to continue as a going concern.
Overview of our audit approach
Key audit matters
• Risk of incomplete or inaccurate revenue recognition, including the classification of special
dividends as revenue or capital items in the Income Statement
• Risk of incorrect valuation and resultant impact on the unrealised gains/(losses) of the
unlisted investments
• Risk of incorrect valuation of the listed investments or ownership of the entire investment
portfolio, including derivatives
Materiality
• Overall materiality of £2.31m which represents 1% of net asset value of the Company as at
31 December 2024
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and
our allocation of performance materiality determine our audit
scope for the Company. This enables us to form an opinion on
the Financial Statements. We take into account size, risk profile,
the organisation of the Company and effectiveness of controls,
the potential impact of climate change and changes in the
business environment when assessing the level of work to be
performed. All audit work was performed directly by the audit
engagement team.
Climate change
Stakeholders are increasingly interested in how climate change
will impact the Company. The Company has determined that the
impact of climate change could affect the Company’s investments
and their valuations and potentially shareholder returns. These
are explained on pages 29 and 30 in the principal and emerging
risks section, which form part of the “Other information,” rather
than the audited Financial Statements. Our procedures on these
unaudited disclosures therefore consisted solely of considering
whether they are materially inconsistent with the Financial
Statements or our knowledge obtained in the course of the audit
or otherwise appear to be materially misstated, in line with our
responsibilities on “Other information”.
Our audit effort in considering the impact of climate change on
the Financial Statements was focused on the adequacy of the
Company’s disclosures in the Financial Statements as set out in
Note 2(a) and the conclusion 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 and therefore reflect the market participants view of climate
change risk on the investments held by the Company. Investments
which are unlisted are priced using market-based valuation
approaches. We also challenged the Directors’ considerations
of climate change in their assessment of viability and associated
disclosures. Based on our work we have not identified the impact
of climate change on the Financial Statements to be a key audit
matter or to impact a key audit matter.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the Financial
Statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due
to fraud) that we identified. These matters included those
which had the greatest effect on: the overall audit strategy, the
allocation of resources in the audit; and directing the efforts of
the engagement team. These matters were addressed in the
context of our audit of the Financial Statements as a whole,
and in our opinion thereon, and we do not provide a separate
opinion on these matters. In addition to the matter described
in the material uncertainty related to the going concern section,
we have determined the matters described below to be the key
audit matters to be communicated in our report.
Independent Auditor’s Report to the Members
of Fidelity Japan Trust PLC continued
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Fidelity Japan Trust PLC
GOVERNANCEINFORMATION FOR SHAREHOLDERS FINANCIAL STRATEGY
Risk Our response to the risk Key observations
communicated to the
Audit Committee
Risk of incomplete or
inaccurate revenue
recognition, including the
classification of special
dividends as revenue or
capital items in the Income
Statement
Refer to the Report of the Audit Committee
(page 49); Accounting Policies (page 62);
and Note 3 of the Financial Statements
(page 65).
The Company has reported revenue of
£4.09m (2023: £4.22m).
During the year, the Company received
special dividends amounting to £0.04m all
of which are classified as revenue (2023:
£0.04m all of which are classified as
revenue).
There is a risk of incomplete or inaccurate
recognition of revenue through the failure to
recognise proper income entitlements or to
apply an appropriate accounting treatment.
In addition to the above, the Directors
are required to exercise judgement in
determining whether income received in
the form of special dividends should be
classified as ‘revenue’ or ‘capital’ in the
Income Statement.
We performed the following procedures:
We obtained an understanding of the processes
and controls surrounding revenue recognition and
classification of special dividends by performing our
walkthrough procedures to evaluate the design and
implementation of controls;
For all dividends received and accrued, we
recalculated the income by multiplying the investment
holdings at the ex-dividend date, traced from the
accounting records, by the dividend rate as agreed
to an independent data vendor. We also agreed
all exchange rates to an external source and, for
a sample of dividends received and dividends
accrued, we agreed amounts to bank statements;
For all accrued dividends, we assessed whether the
dividend obligations arose prior to 31 December
2024 with reference to an external source;
To test completeness of recorded income, we tested
that all expected dividends for each of the investee
companies held during the year, had been recorded
as income with reference to an external source; and
For all investments held during the year, we
reviewed the type of dividends paid with reference
to an external data source to identify those which
were special dividends. There were no special
dividends above our testing threshold, however,
we have randomly selected one and assessed the
appropriateness of the Company’s classification as
either revenue or capital by reviewing the rationale
for the underlying distribution.
The results of
our procedures
identified no material
misstatements in
relation to the risk
of incomplete or
inaccurate revenue
recognition, including
the classification of
special dividends as
revenue or capital
items in the Income
Statement.
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Risk Our response to the risk Key observations
communicated to the
Audit Committee
Risk of incorrect valuation
and resultant impact on the
unrealised gains/(losses) of
the unlisted investments
Refer to the Report of the Audit Committee
(page 49); Accounting Policies (page 63);
and Note 9 of the Financial Statements
(pages 68 and 69).
At 31 December 2024 the Company held
seven unlisted investments with a total
value of £15.32m (2023: seven unlisted
investments with a total value of £16.40m).
We considered that the degree of
subjectivity, including the level of
management judgement and the risk that
the valuation does not reflect the most up to
date information, results in a fraud risk over
misstatement of the valuation of unlisted
investments.
The unlisted investments are approved
by the Manager’s Fair Value Committee
and these are reviewed and challenged
by the Directors. The Manager engages
Kroll to perform a valuation which is then
considered by the Manager’s Fair Value
Committee. The unlisted investment policy
applies methodologies consistent with the
International Private Equity and Venture
Capital Valuation guidelines (“IPEV”).
We performed the following procedures:
We obtained an understanding of the processes and
controls surrounding investment pricing and legal title
by performing walkthrough procedures to evaluate
the design and implementation of controls;
For a sample of unlisted investments held at the year
end, our specialist valuation team reviewed and
challenged the valuations. This included:
• Reviewing the latest valuation papers by Kroll,
a third-party service provider;
• Assessing whether the valuations have been
performed in line with the IPEV guidelines;
• Assessing the appropriateness of the data
inputs and challenging the assumptions used to
support the valuations; and
• Assessing other facts and circumstances, such as
market movement and comparative information,
that could have an impact on the fair market
value of the investments;
We obtained and assessed valuation papers,
including the assumptions and judgements in
determining the fair value of the unlisted investments
held by the Company at the year end;
Agreed the cost of the purchased and sold unlisted
investments to the supporting share purchase
and sale agreements, respectively and traced the
payments to bank statement;
Agreed 100% of exchange rates to a relevant
independent data vendor; and
We recalculated the unrealised gains/losses on
investments as at the year end using the book-cost
reconciliation.
The results of
our procedures
identified no material
misstatements in
relation to the risk of
incorrect valuation and
resultant impact on
the unrealised gains/
(losses) of the unlisted
investments.
Independent Auditor’s Report to the Members
of Fidelity Japan Trust PLC continued
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Customer: Fidelity Project Title: FJT Annual Report T: 0207 055 6500 F: 020 7055 6600
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Fidelity Japan Trust PLC
GOVERNANCEINFORMATION FOR SHAREHOLDERS FINANCIAL STRATEGY
Risk Our response to the risk Key observations
communicated to the
Audit Committee
Risk of incorrect valuation
of the listed investments
or ownership of the entire
investment portfolio, including
derivatives
Refer to the Report of the Audit Committee
(page 49); Accounting Policies (pages
63 and 64); and Notes 9 and 10 of the
Financial Statements (pages 68 and 69).
At 31 December 2024, the Company held
listed investments with a value of £213.03m
(2023: £237.44m). The Company also has
net derivative assets amounting to £1.32m
(net derivative assets 2023: £1.16m).
The valuation of the assets held in the
investment portfolio is the key driver of
the Company’s net asset value and total
return. Incorrect investment pricing, or a
failure to maintain proper legal title to the
investments held by the Company could
have a significant impact on the portfolio
valuation and the return generated for
shareholders.
The fair value of the listed investments and
derivatives is determined using quoted
market prices at close of business on the
reporting date.
We performed the following procedures:
We obtained an understanding of the processes and
controls surrounding investment pricing and legal title
by performing walkthrough procedures;
For all listed investments in the portfolio, we
compared the market prices and exchange rates
applied to an independent pricing vendor. For all
derivatives, we compared the market prices of the
underlying instrument to an independent pricing
vendor and agreed cost price to the Brokers’
confirmations. We recalculated the investment and
derivative valuations as at the year end;
We inspected the stale pricing report to identify
prices that had not changed and noted none; and
We compared the Company’s investment holdings as
at 31 December 2024 to independent confirmations
received directly from the Company’s Custodian and
Depositary. We agreed all year-end open derivative
positions to confirmations received independently
from the Company’s Brokers.
The results of
our procedures
identified no material
misstatements in
relation to the risk of
incorrect valuation of
the listed investments
or ownership of the
entire investment
portfolio, including
derivatives.
Our application of materiality
We apply the concept of materiality in planning and performing
the audit, in evaluating the effect of identified misstatements on
the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually
or in the aggregate, could reasonably be expected to influence
the economic decisions of the users of the Financial Statements.
Materiality provides a basis for determining the nature and extent
of our audit procedures.
We determined materiality for the Company to be £2.31m (2023:
£2.58m), which is 1% (2023: 1%) of Company’s net asset value.
We believe that net asset value provides us with materiality
aligned to the key measure of Company’s performance.
Performance materiality
The application of materiality at the individual account
or balance level. It is set at an amount to reduce to an
appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our
assessment of the Company’s overall control environment, our
judgement was that performance materiality was 75% (2023:
75%) of our planning materiality, namely £1.74m (2023: £1.93m).
We have set performance materiality at this percentage due to
our past experience of the audit that indicates a lower risk of
misstatements, both corrected and uncorrected.
Given the importance of the distinction between revenue and
capital for investment trusts, we have also applied a separate
testing threshold for the revenue column of the Income Statement
of £0.15m (2023: £0.16m) being 5% (2023: 5%) of revenue profit
before tax.
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Reporting threshold
An amount below which identified misstatements are considered
as being clearly trivial.
We agreed with the Audit Committee that we would report to
them all uncorrected audit differences in excess of £0.12m (2023:
£0.13m), which is set at 5% of planning materiality, as well as
differences below that threshold that, in our view, warranted
reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the
quantitative measures of materiality discussed above and in light
of other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in
the annual report other than the Financial Statements and our
Auditor’s report thereon. The Directors are responsible for the
other information contained within the annual report.
Our opinion on the Financial Statements does not cover the other
information and, except to the extent otherwise explicitly stated in
this report, we do not express any form of assurance conclusion
thereon.
Our responsibility is to read the other information and, in
doing so, consider whether the other information is materially
inconsistent with the Financial Statements or our knowledge
obtained in the course of the audit or otherwise appears to be
materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement
in the Financial Statements themselves. If, based on the work
we have performed, we conclude that there is a material
misstatement of the other information, we are required to report
that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act
2006
In our opinion the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the
audit:
• the information given in the Strategic Report and the
Directors’ Report for the financial year for which the Financial
Statements are prepared is consistent with the Financial
Statements; and
• the Strategic Report and Directors’ Report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Company
and its environment obtained in the course of the audit, we have
not identified material misstatements in the Strategic Report or
Directors’ Report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
• adequate accounting records have not been kept, or
returns adequate for our audit have not been received from
branches not visited by us; or
• the Financial Statements and the part of the Directors’
Remuneration Report to be audited are not in agreement
with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by
law are not made; or
• we have not received all the information and explanations
we require for our audit.
Corporate Governance Statement
We have reviewed the Directors’ statement in relation to going
concern, longer-term viability and that part of the Corporate
Governance Statement relating to the Company’s compliance
with the provisions of the UK Corporate Governance Code
specified for our review by the UK Listing Rules.
Aside from the impact of the matters disclosed in the material
uncertainty related to the going concern section, based on the
work undertaken as part of our audit, we have concluded that
each of the following elements of the Corporate Governance
Statement is materially consistent with the Financial Statements or
our knowledge obtained during the audit:
• Directors’ statement with regards to the appropriateness of
adopting the going concern basis of accounting and any
material uncertainties identified set out on page 35;
• Directors’ explanation as to its assessment of the Company’s
prospects, the period this assessment covers and why the
period is appropriate set out on page 30;
• Director’s statement on whether it has a reasonable
expectation that the Company will be able to continue in
operation and meets its liabilities set out on page 35;
• Directors’ statement on fair, balanced and understandable
set out on page 46;
• Board’s confirmation that it has carried out a robust
assessment of the emerging and principal risks set out on
page 25;
• The section of the annual report that describes the review
of effectiveness of risk management and internal control
systems set out on pages 41 and 42; and
• The section describing the work of the Audit Committee set
out on page 47.
Independent Auditor’s Report to the Members
of Fidelity Japan Trust PLC continued
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Fidelity Japan Trust PLC
GOVERNANCEINFORMATION FOR SHAREHOLDERS FINANCIAL STRATEGY
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement
set out on page 46, the Directors are responsible for the
preparation of the Financial Statements and for being satisfied
that they give a true and fair view, and for such internal control as
the Directors determine is necessary to enable the preparation
of Financial Statements that are free from material misstatement,
whether due to fraud or error.
In preparing the Financial Statements, the Directors are
responsible for assessing the Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless
the Directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial
Statements
Our objectives are to obtain reasonable assurance about
whether the Financial Statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue an Auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on
the basis of these Financial Statements.
Explanation as to what extent the audit was considered
capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect irregularities, including
fraud. The risk of not detecting a material misstatement due
to fraud is higher than the risk of not detecting one resulting
from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through
collusion. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and
detection of fraud rests with both those charged with governance
of the Company and management.
• We obtained an understanding of the legal and regulatory
frameworks that are applicable to the Company and
determined that the most significant are United Kingdom
Generally Accepted Accounting Practice, the Companies
Act 2006, the Association of Investment Companies Code
of Corporate Governance, the Association of Investment
Companies Statement of Recommended Practice, the
Listing Rules, the UK Corporate Governance Code, Section
1158 of the Corporation Tax Act 2010 and The Companies
(Miscellaneous Reporting) Regulations 2018.
• We understood how the Company is complying with those
frameworks through discussions with the Audit Committee
and Company Secretary and review of Board minutes and
the Company’s documented policies and procedures.
• We assessed the susceptibility of the Company’s Financial
Statements to material misstatement, including how fraud
might occur by considering the key risks impacting the
Financial Statements. We identified a fraud risk with respect
to the incomplete or inaccurate revenue recognition through
incorrect classification of special dividends as revenue or
capital items in the Income Statement and incorrect valuation
and resultant impact on the unrealised gains/(losses) of the
unlisted investments. Further discussion of our approach is
set out in the section on key audit matters above.
• Based on this understanding we designed our audit
procedures to identify non-compliance with such laws
and regulations. Our procedures involved review of the
reporting to the Directors with respect to the application of
the documented policies and procedures and review of the
Financial Statements to ensure compliance with the reporting
requirements of the Company.
A further description of our responsibilities for the audit
of the Financial Statements is located on the Financial
Reporting Council’s website at https://www.frc.org.uk/
auditorsresponsibilities. This description forms part of our
Auditor’s report.
Other matters we are required to address
• Following the recommendation from the Audit Committee, we
were appointed by the Company on 24 May 2016 to audit
the Financial Statements for the year ending 31 December
2016 and subsequent financial periods.
The period of total uninterrupted engagement including
previous renewals and reappointments is 9 years, covering
the years ending 31 December 2016 to 31 December 2024.
• The audit opinion is consistent with the additional report to
the Audit Committee.
Use of our report
This report is made solely to the Company’s members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might
state to the Company’s members those matters we are required
to state to them in an Auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and
the Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Sarah Langston
Senior Statutory Auditor
for and on behalf of Ernst & Young LLP
Statutory Auditor
London
26 March 2025
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Income Statement
for the year ended 31 December 2024
The Notes on pages 61 to 78 form an integral part of these Financial Statements.
Year ended 31 December 2024 Year ended 31 December 2023
Notes
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
(Losses)/gains on investments 9 – (11,906) (11,906) – 12,376 12,376
Gains on derivative instruments 10 – 3,028 3,028 – 14,299 14,299
Income 3 4,095 – 4,095 4,218 – 4,218
Investment management fees 4 (330) (847) (1,177) (344) (1,018) (1,362)
Other expenses 5 (764) (13) (777) (708) (4) (712)
Foreign exchange losses – (233) (233) – (642) (642)
Net return/(loss) on ordinary activities before finance
costs and taxation 3,001 (9,971) (6,970) 3,166 25,011 28,177
Finance costs 6 (39) (158) (197) (27) (106) (133)
Net return/(loss) on ordinary activities before taxation 2,962 (10,129) (7,167) 3,139 24,905 28,044
Taxation on return on ordinary activities 7 (356) – (356) (347) – (347)
Net return/(loss) on ordinary activities after taxation
for the year 2,606 (10,129) (7,523) 2,792 24,905 27,697
Return/(loss) per ordinary share 8 2.17p (8.43p) (6.26p) 2.17p 19.33p 21.50p
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.
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GOVERNANCEINFORMATION FOR SHAREHOLDERS FINANCIAL STRATEGY
Statement of Changes in Equity
for the year ended 31 December 2024
Note
Share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Other
reserve
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Total
shareholders’
funds
£’000
Total shareholders’ funds at
31 December 2023 34,041 20,722 2,767 40,382 165,416 (5,535) 257,793
Repurchase of ordinary shares 13 – – – (18,857) – – (18,857)
Net (loss)/return on ordinary activities after
taxation for the year – – – – (10,129) 2,606 (7,523)
Total shareholders’ funds at
31 December 2024 34,041 20,722 2,767 21,525 155,287 (2,929) 231,413
Total shareholders’ funds at
31 December 2022 34,041 20,722 2,767 46,658 140,511 (8,327) 236,372
Repurchase of ordinary shares 13 – – – (6,276) – – (6,276)
Net return on ordinary activities after
taxation for the year – – – – 24,905 2,792 27,697
Total shareholders’ funds at
31 December 2023 34,041 20,722 2,767 40,382 165,416 (5,535) 257,793
The Notes on pages 61 to 78 form an integral part of these Financial Statements.
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Balance Sheet
as at 31 December 2024
Company number 2885584
Notes
2024
£’000
2023
£’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 on pages 58 to 78 were approved by the Board of Directors on 26 March 2025 and were signed on its
behalf by:
David Graham
Chairman
The Notes on pages 61 to 78 form an integral part of these Financial Statements.
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GOVERNANCEINFORMATION FOR SHAREHOLDERS FINANCIAL STRATEGY
Notes to the Financial Statements
1 Principal Activity
Fidelity Japan Trust PLC is an Investment Company incorporated in England and Wales that is listed on the London Stock Exchange.
The Company’s registration number is 2885584, and its registered office is Beech Gate, Millfield Lane, Lower Kingswood, Tadworth,
Surrey KT20 6RP. The Company has been approved by HM Revenue & Customs as an Investment Trust under Section 1158 of the
Corporation Tax Act 2010 and intends to conduct its affairs so as to continue to be approved.
2 Accounting Policies
The Company has prepared its Financial Statements in accordance with UK Generally Accepted Accounting Practice (UK GAAP),
including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, issued by the Financial Reporting
Council (FRC). The Financial Statements have also been prepared in accordance with the Statement of Recommended Practice:
Financial Statements of Investment Trust Companies and Venture Capital Trusts (SORP) issued by the Association of Investment
Companies (AIC) in July 2022. The Company is exempt from presenting a Cash Flow Statement as a Statement of Changes in Equity is
presented and substantially all of the Company’s investments are highly liquid and are carried at market value.
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 31 March 2026 which is at least twelve months from the date of approval of these Financial
Statements. In making their assessment the Directors have reviewed income and expense projections, the liquidity of the investment
portfolio of the Company and considered the Company’s ability to meet liabilities as they fall due.
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 21 May 2025.
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 on pages 29 and 30, 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 the investments held by the Company.
The Company’s Going Concern Statement in the Directors’ Report on page 35 takes account of all events and conditions up to
31 March 2026 which is at least twelve months from the date of approval of these Financial Statements.
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 primary 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;
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2 Accounting Policies continued
(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
capitalevents.
g) Functional currency and foreign exchange
The functional and reporting currency of the Company is UK sterling, which is the currency of the primary economic environment
in which the Company operates. Although the Company invests in yen denominated investments, it has been determined that the
functional currency is UK sterling as the entity is listed on a sterling stock exchange in the UK, and its share capital is denominated
and its expenses are paid in UK sterling. Transactions denominated in foreign currencies are reported in UK sterling at the rate of
exchange ruling at the date of the transaction. Assets and liabilities in foreign currencies are translated at the rates of exchange ruling
at the Balance Sheet date. Foreign exchange gains and losses arising on translation are recognised in the Income Statement as a
revenue or a capital item depending on the nature of the underlying item to which they relate.
Notes to the Financial Statements continued
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GOVERNANCEINFORMATION FOR SHAREHOLDERS FINANCIAL STRATEGY
2 Accounting Policies continued
h) Finance costs
Finance costs comprises interest on bank overdrafts and collateral and finance costs paid on long CFDs, which are accounted for on
an accruals basis. Finance costs are allocated 20% to revenue and 80% to capital to reflect the Company’s focus on capital growth to
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 case
it is charged or credited to the capital column of the Income Statement. The Company is an approved Investment Trust under Section
1158 of the Corporation Tax Act 2010 and is not liable for UK taxation on capital gains.
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 that
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 capital
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 Fair
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
bythe 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 be
an appropriate starting point for estimating fair value at subsequent measurement dates. However, consideration is given to the facts
and circumstances as at the subsequent measurement date, including changes in the market or performance of the investee company.
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 investments
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).
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2 Accounting Policies continued
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 Treasury is charged to the other reserve.
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 Institute of Chartered Accountants in England and Wales in TECH 02/17BL, guidance on the
determination of realised profits and losses in the context of distributions under the Companies Act 2006, states that changes in
the fair value of investments which are readily convertible to cash, without accepting adverse terms at the Balance Sheet date, can
be treated as realised. Capital reserves realised and unrealised are shown in aggregate as capital reserve in the Statement of
Changes in Equity and the Balance Sheet. At the Balance Sheet date, the portfolio of the Company consisted of investments listed
on a recognised stock exchange and derivative instruments contracted with counterparties having an adequate credit rating, and
the portfolio was considered to be readily convertible to cash, with the exception of the level 3 investments which had unrealised
investment holding losses of £6,715,000 (2023: losses of £5,630,000). See Note 16 on pages 76 and 77 for further details on the
level3investments.
Notes to the Financial Statements continued
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GOVERNANCEINFORMATION FOR SHAREHOLDERS FINANCIAL STRATEGY
3 Income
Year ended
31.12.24
£’000
Year ended
31.12.23
£’000
Investment income
Overseas dividends 3,563 3,475
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
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Investment management fees – base 330 1,318 1,648 344 1,377 1,721
Investment management fees – variable
1
– (471) (471) – (359) (359)
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 used
to assess the performance is on a rolling three year basis.
FIL Investment Services (UK) Limited is the Company’s Alternative Investment Fund Manager and has delegated portfolio management
to FIL Investments International (FII). Both companies are Fidelity group companies.
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 are
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 on page 35.
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5 Other Expenses
Year ended
31.12.24
£’000
Year ended
31.12.23
£’000
Allocated to revenue:
AIC fees 19 18
Secretarial and administration fees payable to the Investment Manager 50 50
Custody fees 13 13
Depositary fees 22 24
Directors’ expenses 75 43
Directors’ fees
1
177 160
Legal and professional fees 67 70
Marketing expenses 175 166
Printing and publication expenses 63 61
Registrars’ fees 35 33
Other expenses 13 17
Fees payable to the Company’s Independent Auditor for the audit of the Financial Statements 55 53
764 708
Allocated to capital:
Legal and professional fees – unlisted investments 13 4
Other expenses 777 712
1 Details of the breakdown of Directors’ fees are provided in the Directors’ Remuneration Report on page 44.
6 Finance Costs
Year ended 31 December 2024 Year ended 31 December 2023
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Interest paid on long CFDs 37 150 187 24 94 118
Interest paid on collateral and deposits
1
2 8 10 3 12 15
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.
Notes to the Financial Statements continued
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GOVERNANCEINFORMATION FOR SHAREHOLDERS FINANCIAL STRATEGY
7 Taxation on Return/(Loss) on Ordinary Activities
Year ended
31.12.24
£’000
Year ended
31.12.23
£’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 UK corporation tax for an investment trust company of 25% (2023:
25%). A reconciliation of the standard rate of UK corporation tax to the taxation charge for the year is shown below:
Year ended
31.12.24
£’000
Year ended
31.12.23
£’000
Net (loss)/return on ordinary activities before taxation (7,167) 28,044
Net (loss)/return on ordinary activities before taxation multiplied by the standard rate of UK corporation
tax of 25% (2023: blended rate of 23.52%) (1,792) 6,596
Effects of:
Capital losses/(gains) not taxable
1
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 UK taxation on capital gains as it meets the HM Revenue & Customs criteria for an investment company set out in Section 1159 of the
Corporation Tax Act 2010.
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 not
been recognised as it is unlikely that there will be sufficient future profits to utilise these expenses.
The UK corporation tax rate increased from 19% to 25% from 1 April 2023. The rate of 25% has been applied to calculate the
unrecognised deferred tax asset for the current year (2023: 25%).
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8 Return/(loss) per Ordinary Share
Year ended
31.12.24
Year ended
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 Treasury during the year, as shown below:
£’000 £’000
Net revenue return on ordinary activities after taxation 2,606 2,792
Net capital (loss)/return on ordinary activities after taxation (10,129) 24,905
Net total (loss)/return on ordinary activities after taxation (7,523) 27,697
Number Number
Weighted average number of ordinary shares held outside of Treasury 120,169,404 128,843,583
9 Investments
2024
£’000
2023
£’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.
Notes to the Financial Statements continued
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GOVERNANCEINFORMATION FOR SHAREHOLDERS FINANCIAL STRATEGY
9 Investments continued
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
31.12.24
£’000
Year ended
31.12.23
£’000
Purchases transaction costs 69 57
Sales transaction costs 94 63
163 120
10 Derivative Instruments
Year ended
31.12.24
£’000
Year ended
31.12.23
£’000
Gains on derivative instruments
Gains on long CFD positions closed 2,876 12,874
Movement in investment holding gains on long CFDs 152 1,425
3,028 14,299
Derivative instruments recognised on the Balance Sheet
2024 2023
Fair value
£’000
Portfolio
exposure
£’000
Fair value
£’000
Portfolio
exposure
£’000
Derivative instrument assets – long CFDs 1,457 50,375 1,216 41,568
Derivative instrument liabilities – long CFDs (142) 8,254 (53) 21,953
1,315 58,629 1,163 63,521
11 Debtors
2024
£’000
2023
£’000
Securities sold for future settlement 372 361
Accrued income 199 249
Other debtors and prepayments 98 98
669 708
12 Other Creditors
2024
£’000
2023
£’000
Securities purchased for future settlement 383 438
Creditors and accruals 329 285
Amounts payable for repurchase of shares 323 271
1,035 994
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13 Share Capital
2024 2023
Number of
shares
Nominal
value
£’000
Number of
shares
Nominal
value
£’000
Issued, allotted and fully paid
Ordinary shares of 25 pence each held outside of Treasury
Beginning of the year 126,086,249 31,521 129,701,893 32,425
Ordinary shares repurchased into Treasury (10,828,535) (2,707) (3,615,644) (904)
End of the year 115,257,714 28,814 126,086,249 31,521
Issued, allotted and fully paid
Ordinary shares of 25 pence each held in Treasury
1
Beginning of the year 10,075,446 2,520 6,459,802 1,616
Ordinary shares repurchased into Treasury 10,828,535 2,707 3,615,644 904
End of the year 20,903,981 5,227 10,075,446 2,520
Total share capital 34,041 34,041
1 Ordinary shares held in Treasury carry no rights to vote, to receive a dividend or to participate in a winding up of the Company.
The Company repurchased 10,828,535 ordinary shares (2023: 3,615,644 shares) and held them in Treasury. The £18,857,000 (2023:
£6,276,000) cost of repurchase was charged to the Other reserve.
14 Capital and Reserves
Share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Other
reserve
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Total
shareholders’
funds
£’000
At 1 January 2024 34,041 20,722 2,767 40,382 165,416 (5,535) 257,793
Losses on investments (seeNote 9) – – – – (11,906) – (11,906)
Gains on derivative instruments
(see Note 10) – – – – 3,028 – 3,028
Foreign exchange losses – – – – (233) – (233)
Investment management fees
(seeNote 4) – – – – (847) – (847)
Other expenses (see Note 5) – – – – (13) – (13)
Finance costs (see Note 6) – – – – (158) – (158)
Revenue return on ordinary activities
after taxation for the year – – – – – 2,606 2,606
Repurchase of ordinary shares
(seeNote 13) – – – (18,857) – – (18,857)
At 31 December 2024 34,041 20,722 2,767 21,525 155,287 (2,929) 231,413
Notes to the Financial Statements continued
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GOVERNANCEINFORMATION FOR SHAREHOLDERS FINANCIAL STRATEGY
14 Capital and Reserves continued
Share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Other
reserve
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Total
shareholders’
funds
£’000
At 1 January 2023 34,041 20,722 2,767 46,658 140,511 (8,327) 236,372
Gains on investments (seeNote 9) – – – – 12,376 – 12,376
Gains on derivative instruments
(see Note 10) – – – – 14,299 – 14,299
Foreign exchange losses – – – – (642) – (642)
Investment management fees
(seeNote 4) – – – – (1,018) – (1,018)
Other expenses (see Note 5) – – – – (4) – (4)
Finance costs (see Note 6) – – – – (106) – (106)
Revenue return on ordinary activities
after taxation for the year – – – – – 2,792 2,792
Repurchase of ordinary shares
(seeNote 13) – – – (6,276) – – (6,276)
At 31 December 2023 34,041 20,722 2,767 40,382 165,416 (5,535) 257,793
The capital reserve balance at 31 December 2024 includes investment holding gains of £6,183,000 (2023: gains of £9,460,000) as
detailed in Note 9. See Note 2 (p) on page 64 for further details. The capital reserve is distributable by way of dividend. The revenue
reserve could be distributed by way of dividend if it were not in deficit.
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 Treasury.
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 Treasury will only be reissued at net asset value per ordinary share or at a premium to
net asset value per ordinary share and, therefore, shares held in Treasury have no dilutive effect.
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 on pages 25 to 30.
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16 Financial Instruments continued
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
lastyear.
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
£’000
2023
£’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 interest 55,194 59,285
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 UK sterling. The Company may also be subject to short-term exposure from exchange rate movements, for
example, between the date when an investment is purchased or sold and the date when settlement of the transaction occurs. The
Company does not hedge the sterling value of investments or other net assets priced in yen by the use of derivative instruments.
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.
Notes to the Financial Statements continued
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16 Financial Instruments continued
Currency exposure of financial assets
The currency exposure profile of the Company’s financial assets is shown below:
Currency
Investments
held at
fair value
£’000
Long
exposure to
derivative
instruments
£’000
Debtors
1
£’000
Cash at
bank
£’000
2024
Total
£’000
Japanese yen 228,344 58,629 794 1,897 289,664
UK sterling – – 98 – 98
228,344 58,629 892 1,897 289,762
1 Debtors include cash collateral held with brokers.
Currency
Investments
held at
fair value
£’000
Long
exposure to
derivative
instruments
£’000
Debtor
£’000
Cash at
bank
£’000
2023
Total
£’000
Japanese yen 253,843 63,521 610 2,950 320,924
UK sterling – – 98 123 221
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:
Currency
2024
Other
creditors
£’000
2023
Other
creditors
£’000
Japanese yen 383 439
UK sterling 652 555
1,035 994
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16 Financial Instruments continued
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 31 December 2024, the undiscounted gross cash outflows of the financial liabilities were all repayable within one year and
consisted of derivative instrument liabilities of £142,000 (2023: £53,000) and other creditors of £1,035,000 (2023: £994,000).
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 31 December 2024, £1,487,000 (2023: £1,775,000) was held by the brokers in cash denominated in
Japanese yen in a segregated collateral account on behalf of the Company, to reduce the credit risk exposure of the Company’s
net unrealised profits on derivative positions. This collateral comprised: J.P. Morgan Securities plc £nil (2023: £574,0000) and UBS
AG £1,487,000 (2023: £1,201,000). At 31 December 2024, £223,000 (2023: £nil) shown as cash collateral held with brokers on the
Balance Sheet, was held by the Company in a segregated collateral account to reduce the credit risk exposure of the Company’s
net unrealised losses on derivative positions. This collateral comprised of: J.P. Morgan Securities plc £223,000 (2023: £nil) in cash
denominated in Japanese yen.
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.
Notes to the Financial Statements continued
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16 Financial Instruments continued
RISK SENSITIVITY ANALYSIS
Interest rate risk sensitivity analysis
Based on the financial instruments held and interest rates at 31 December 2024, an increase of 0.25% in interest rates throughout
the year, with all other variables held constant, would have increased the Company’s net loss on ordinary activities after taxation for
the year and decreased the Company’s net assets by £138,000 (2023: decreased the net return and decreased the net assets by
£148,000). A decrease of 0.25% in interest rates throughout the year would have had an equal but opposite effect.
Foreign currency risk sensitivity analysis
Based on the financial instruments held and currency exchange rates at 31 December 2024, a 10% strengthening of the sterling
exchange rate against the yen, with all other variables held constant, would have increased the Company’s net loss on ordinary
activities after taxation for the year and decreased the Company’s net assets by £26,298,000 (2023: decreased the net return and
decreased the net assets by £29,134,000). A 10% weakening of the sterling exchange rate against the yen would have decreased
the Company’s net loss on ordinary activities after taxation for the year and increased the Company’s net assets by £32,142,000
(2023:increased the net return and increased the net assets by £35,609,000).
Other price risk – exposure to investments sensitivity analysis
Based on the listed investments held and share prices at 31 December 2024, an increase of 10% in share prices, with all other
variables held constant, would have decreased the Company’s net loss on ordinary activities after taxation for the year and increased
the Company’s net assets by £21,303,000 (2023: increased the net return and increased the net assets by £23,744,000). A decrease of
10% in share prices would have had an equal and opposite effect.
Based on the unlisted investments held and share prices at 31 December 2024, an increase of 10% in share prices, with all other
variables held constant, would have decreased the Company’s net loss on ordinary activities after taxation for the year and increased
the Company’s net assets by £1,532,000 (2023: increased the net return and increased the net assets by £1,640,000). A decrease of
10% in share prices would have had an equal and opposite effect.
Other price risk – net exposure to derivative instruments sensitivity analysis
Based on the long CFDs held and share prices at 31 December 2024, an increase of 10% in the share prices underlying the long
CFDs, with all other variables held constant, would have decreased the Company’s net loss on ordinary activities after taxation for
the year and increased the Company’s net assets by £5,863,000 (2023: increased the net return and increased the net assets by
£6,352,000). A decrease of 10% in share prices would have had an equal and opposite effect.
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) on pages 63 and 64, 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.
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16 Financial Instruments continued
Classification Input
Level 1
Valued using quoted prices in active markets for identical assets
Level 2
Valued by reference to inputs other than quoted prices included 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) on pages 63
and 64. The table below sets out the Company’s fair value hierarchy:
Financial assets at fair value through profit or loss
Level 1
£’000
Level 2
£’000
Level 3
£’000
2024
Total
£’000
Investments 213,026 – 15,318 228,344
Derivative instrument assets – 1,457 – 1,457
213,026 1,457 15,318 229,801
Financial liabilities at fair value through profit or loss
Derivative instrument liabilities – (142) – (142)
Financial assets at fair value through profit or loss
Level 1
£’000
Level 2
£’000
Level 3
£’000
2023
Total
£’000
Investments 237,440 – 16,403 253,843
Derivative instrument assets – 1,216 – 1,216
237,440 1,216 16,403 255,059
Financial liabilities at fair value through profit or loss
Derivative instrument liabilities – (53) – (53)
Notes to the Financial Statements continued
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GOVERNANCEINFORMATION FOR SHAREHOLDERS FINANCIAL STRATEGY
16 Financial Instruments continued
The table below sets out the fair value of the level 3 financial instruments, all of which are unlisted investments:
Name Business
Book cost
£’000
2024
Level 3
£’000
2023
Level 3
£’000
Asoview Online booking website for leisure facilities 6,602 6,114 5,740
GO Inc Japan’s largest ride-hailing company 2,378 2,905 2,487
Studyplus Online educational company 2,257 1,960 2,110
iYell Mortgage Fintech company 2,641 1,652 2,189
Moneytree Developer of personal asset management
applications 3,016 1,042 1,832
Spiber Bio-tech company 2,512 1,014 1,011
Yoriso Online funeral planning platform 2,627 631 1,034
End of the year 22,033 15,318 16,403
The valuation of all the unlisted investments at 31 December 2024 is based on the analysis of the company’s financial reports, the
macro-environment and benchmarking the position to a range of comparable market data. For more details on the technique applied
to the value of unlisted investments, see Note 2 (j) in the Accounting Policies section.
Movements in level 3 financial instruments during the year:
Year ended
31.12.24
Level 3
£’000
Year ended
31.12.23
Level 3
£’000
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 foreign exchange movement) (1,085) (3,995)
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 on page 60, 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 on page 24. The principal risks and their management are disclosed in the Strategic Report on
pages 25 to 30 and in Note 16 on page 71.
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18 Transactions with the Manager and Related Parties
FIL Investment Services (UK) Limited is the Company’s Alternative Investment Fund Manager and has delegated portfolio management
and the role of company secretary to FIL Investments International, the Investment Manager. Both companies are Fidelity group
companies.
Details of the current fee arrangements are given in the Directors’ Report on page 35 and in Note 4 on page 65. 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 on pages 44 and 45. 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 31 December 2024, Directors’ fees of £18,000 (2023: £18,000) were
accrued and payable.
Notes to the Financial Statements continued
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GOVERNANCEINFORMATION FOR SHAREHOLDERS FINANCIAL STRATEGY
Alternative Performance Measures
The Company uses the following as Alternative Performance Measures which are all defined in the Glossary of Terms on pages 88 to
90.
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 page.
Gearing
See the Fair Value and Portfolio Exposure of Investments table on page 16 for details of the Company’s gearing.
Net Asset Value (“NAV”) per Ordinary Share
See the Balance Sheet on page 60 and Note 15 on page 71 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 management fee 0.83% 0.84%
Revenue, Capital and Total Returns per Share
See the Income Statement on page 58 and Note 8 on page 68 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 impact
of the dividend reinvestments and the total returns for the years ended 31 December 2024 and 31 December 2023.
2024
Net asset
value per
ordinary
share
Ordinary
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%
2023
Net asset
value per
ordinary
share
Ordinary
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%
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Financial Calendar and Annual General
Meeting
The key dates in the Company’s calendar are:
31 December 2024
Financial Year End
March 2025
Announcement of the annual results for the year ended 31 December 2024
April 2025
Publication of the Annual Report
21 May 2025
Annual General Meeting
30 June 2025
Half-Year End
September 2025
Announcement of the Half-Yearly results for the six months to 30 June 2025
September 2025
Publication of the Half-Yearly Report
ANNUAL GENERAL MEETING (AGM) – WEDNESDAY, 21 MAY 2025 AT 12 NOON
The AGM of the Company will be held at 12 noon on Wednesday, 21 May 2025 at 4 Cannon Street, London EC4M 5AB (nearest
tube stations are St. Paul’s or Mansion House) and virtually via the online Lumi AGM meeting platform. Full details of the meeting
are given in the Notice of Meeting on pages 81 to 84.
For those shareholders who would prefer not to attend in person, we will live-stream the formal business and presentations of the
meeting online.
Nicholas Price, the Portfolio Manager, will be making a presentation to shareholders discussing the performance of the past year
and the prospects for the year to come. Nicholas and the Board will be very happy to answer any questions that shareholders may
have. Copies of the Portfolio Manager’s presentation can be requested by email at investmenttrusts@fil.com or in writing to the
Company Secretary at FIL Investments International, Beech Gate, Millfield Lane, Lower Kingswood, Tadworth, Surrey KT20 6RP.
Properly registered shareholders joining the AGM virtually will be able to vote on the proposed resolutions. Please see Note 9
to the Notes to the Notice of Meeting on page 83 for details on how to vote virtually. Investors viewing the AGM online will be
able to submit live written questions to the Board and the Portfolio Manager and these will be addressed on their behalf at an
appropriate juncture during the meeting.
Further information and links to the Lumi platform may be found on the Company’s website www.fidelity.co.uk/japan. On the
day of the AGM, in order to join electronically and ask questions via the Lumi platform, shareholders will need to connect to the
website https://web.lumiagm.com.
Please note that investors on platforms such as Fidelity Personal Investing, Hargreaves Lansdown, Interactive Investor or AJ Bell
Youinvest will need to request attendance at the AGM in accordance with the policies of your chosen platform. They may request
that you submit electronic votes in advance of the meeting. If you are unable to obtain a unique IVC and PIN from your nominee
or platform, we will also welcome online participation as a guest. Once you have accessed https://web.lumiagm.com from your
web browser on a tablet or computer, you will need to enter the Lumi Meeting ID which is 117598418. You should then select
the ‘Guest Access’ option before entering your name and who you are representing, if applicable. This will allow you to view the
meeting and ask questions, but you will not be able to vote.
Further information on how to vote across the most common investment platforms is available at the following link:
https://www.theaic.co.uk/how-to-vote-your-shares
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FINANCIAL GOVERNANCEINFORMATION FOR SHAREHOLDERS STRATEGY
Notice of Meeting
Notice is hereby given that the Annual General Meeting
of Fidelity Japan Trust PLC will be held at 4 Cannon Street,
London EC4M 5AB and virtually via the Lumi AGM meeting
platform on Wednesday, 21 May 2025 at 12 noon for the
following purposes:
1. To receive and adopt the Annual Report and Financial
Statements for the year ended 31 December 2024.
2. To re-elect Mr David Graham as a Director.
3. To re-elect Mr David Barron as a Director.
4. To re-elect Ms Myra Chan as a Director.
5. To re-elect Mr Seiichi Fukuyama as a Director.
6. To re-elect Ms Sarah MacAulay as a Director.
7. To approve the Directors’ Remuneration Report (excluding
the section headed “The Remuneration Policy” set out on
page 43 for the year ended 31 December 2024.
8. To reappoint Ernst & Young LLP as Auditor of the Company to
hold office until the conclusion of the next general meeting at
which financial statements are laid before the Company.
9. To authorise the Directors to determine the Auditor’s
remuneration.
To consider and, if thought fit, to pass the following special
business resolutions of which Resolutions 10 and 13 will be
proposed as ordinary resolutions and Resolutions 11, 12 and 14
as special resolutions.
Authority to Allot Ordinary Shares and Disapply Pre-Emption
Rights
Resolutions 10 and 11 will, if approved, authorise the Directors to
allot a limited number of ordinary shares (or to sell any ordinary
shares which the Company elects to hold in Treasury) for cash
without first offering such shares to existing ordinary shareholders
pro-rata to their existing holdings. The limit set by the Board is
5% of the number of ordinary shares of the Company (including
Treasury shares) in issue on 26 March 2025. The Directors will
only issue new ordinary shares, or dispose of ordinary shares
held in Treasury, under this authority to take advantage of
opportunities in the market as they arise and only if they believe
it is advantageous to the Company’s shareholders to do so. Any
ordinary shares held in Treasury would only be re-issued at Net
Asset Value (NAV) per share or at a premium to NAV per share.
This would ensure that the net effect of repurchasing and then
re-issuing the ordinary shares would enhance NAV per share.
10. THAT the Directors be and they are hereby generally and
unconditionally authorised in accordance with Section 551
of the Companies Act 2006 (the “Act”) to exercise all the
powers of the Company to allot shares in the Company or
to grant rights to subscribe for or to convert any securities
into shares in the Company (“relevant securities”) up to an
aggregate nominal amount of £1,689,434 (approximately
5% of the aggregate nominal amount of the issued share
capital of the Company (including Treasury shares) as at
26 March 2025) and so that the Directors may impose any
limits or restrictions and make any arrangements which they
consider necessary or appropriate to deal with Treasury
shares, fractional entitlements, record dates, legal, regulatory
or practical problems in, or under the laws of, any territory
or any other matter, such authority to expire at the conclusion
of the next Annual General Meeting (AGM) of the Company
or the date 15 months after the passing of this resolution,
whichever is the earlier, but so that this authority shall allow
the Company to make offers or agreements before the
expiry of this authority which would or might require relevant
securities to be allotted after such expiry as if the authority
conferred by this resolution had not expired. All previous
unexpired authorities are revoked, but without prejudice to
any allotment of shares or grant of rights already made,
offered or agreed to be made pursuant to such authorities.
11. THAT, subject to the passing of Resolution 10, as set out
above, the Directors be and they are hereby authorised,
pursuant to Sections 570-573 of the Act to allot equity
securities (as defined in Section 560 of the Act) for cash
pursuant to the authority given by the said Resolution 10
and/or to sell ordinary shares held by the Company as
Treasury shares for cash, as if Section 561 of the Act did not
apply to any such allotment or sale, provided that this power
shall be limited:
a) to the allotment of equity securities or sale of Treasury
shares up to an aggregate nominal amount of
£1,689,434 (approximately 5% of the aggregate nominal
amount of the issued share capital of the Company
(including Treasury shares) as at 26 March 2025); and
b) by the condition that allotments of equity securities or
sales of Treasury shares may only be made pursuant
to this authority at a price of not less than the NAV per
share,
and this power shall expire at the conclusion of the next AGM
of the Company or the date 15 months after the passing of
this Resolution, whichever is the earlier, save that this authority
shall allow the Company to make offers or agreements before
the expiry of this authority, and the Directors may allot equity
securities in relation to such an offer or agreement as if the
authority conferred by this Resolution had not expired.
Authority to Repurchase Ordinary Shares
Resolution 12 is a special resolution which, if approved, will
renew the Company’s authority to purchase up to 14.99% of the
number of ordinary shares in issue (excluding Treasury shares) on
26 March 2025, either for immediate cancellation or for retention
as Treasury shares, at the determination of the Board. Once
shares are held in Treasury, the Directors may only dispose of
them in accordance with the relevant legislation by subsequently
selling the shares for cash or cancelling the shares. Purchases of
ordinary shares will be made at the discretion of the Directors
and within guidelines set by them from time to time in the light
of prevailing market conditions. Purchases will only be made in
the market at prices below the prevailing NAV per share, thereby
resulting in an increased NAV per share.
12. THAT the Company be and is hereby generally and
unconditionally authorised in accordance with Section 701
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of the Companies Act 2006 (the “Act”) to make market
purchases (within the meaning of Section 693 of the Act)
of ordinary shares of 25 pence each (“the shares”) in the
capital of the Company provided that:
a) the maximum number of shares hereby authorised to be
purchased shall be 17,047,380;
b) the minimum price which may be paid for a share is
25pence;
c) the maximum price (excluding expenses) which may be
paid for each share is the higher of:
i) 5% above the average of the middle market
quotations for the shares as derived from the
London Stock Exchange Daily Official List for the five
business days preceding the date of purchase; and
ii) the higher of the price of the last independent
trade and the highest current independent
purchase bid on the London Stock Exchange at the
time the purchase is carried out;
d) the authority hereby conferred shall expire at the
conclusion of the next AGM of the Company unless such
authority is renewed prior to such time; and
e) the Company may make a contract to purchase shares
under the authority hereby conferred prior to the expiry
of such authority which will or may be executed wholly
or partly after the expiration of such authority and may
make a purchase of shares pursuant to any such contract.
Continuation of the Company
Resolution 13 is an ordinary resolution that relates to the
continuation of the Company.
13. THAT the Company continues to carry on business as an
investment trust.
Adoption of New Articles of Association
Resolution 14 is a special resolution that relates to the adoption
of new Articles of Association by the Company to make
changes in relation to the period for submitting proposals to
members following a continuation vote and other clarificatory,
administrative and technical changes, as described further in the
Directors’ Report on page 38.
14. THAT the draft Articles of Association produced to the
meeting and, for the purpose of identification, initialled by
the Chairman, be adopted as the Articles of Association of
the Company in substitution for, and to the exclusion of, the
existing Articles of Association of the Company with effect
from the passing of this resolution and with regard to Article
5(B), if applicable, in respect of the ordinary resolution
proposed at the meeting at which this resolution is passed
that the Company should continue as an investment trust.
By Order of the Board
FIL Investments International
Secretary
26 March 2025
Notes to the Notice of Meeting:
1. A member of the Company entitled to attend and vote at
the Annual General Meeting may appoint a proxy or proxies
to attend and to speak and vote instead of him. A member
may appoint more than one proxy in relation to the Annual
General Meeting provided that each proxy is appointed to
exercise the rights attached to a different share or shares
held by that member. A proxy need not be a member of
the Company. To appoint a proxy via the Investor Centre at
uk.investorcentre.mpms.mufg.com/Login, you will need to
log in to your Investor Centre account or register if you have
not previously done so. To register you will need your Investor
Code which can be found on your Form of Proxy.
2. A Form of Proxy is enclosed and must be returned to the
Registrar at the address on the form to arrive not later than
12:00 on Monday, 19 May 2025. Completion and return of the
form of proxy will not prevent a shareholder from subsequently
attending the meeting and voting in person or virtually if they
so wish.
3. To be effective, the instrument appointing a proxy, and any
power of attorney or other authority under which it is signed
(or a copy of any such authority certified notarially or in some
other way approved by the Directors), must be deposited with
the Company’s Registrar, PXS 1, MUFG Corporate Markets,
Central Square, 29 Wellington Street, Leeds LS1 4DL not less
than 48 hours before the time for holding the meeting or
adjourned meeting or, in the case of a poll taken more than
48 hours after it is demanded, not less than 24 hours before
the time appointed for the taking of the poll at which it is to
be used (in each case excluding non-business days).
4. In the case of joint holders, the vote of the senior who tenders
the vote shall be accepted to the exclusion of the votes of
the other joint holders and for this purpose, seniority shall
be determined by the order in which the names stand in the
Register of Members.
5. To appoint a proxy or to give or amend an instruction to a
previously appointed proxy via the CREST system, the CREST
message must be received by the issuer’s agent RA10 by
12:00 on Monday, 19 May 2025. For this purpose, the time
of receipt will be taken to be the time (as determined by the
timestamp applied to the message by the CREST Applications
Host) from which the issuer’s agent is able to retrieve the
message. After this time any change of instructions to a proxy
appointed through CREST should be communicated to the
proxy by other means. CREST Personal Members or other
CREST sponsored members and those CREST Members who
have appointed voting service provider(s) should contact their
CREST sponsor or voting service provider(s) for assistance with
appointing proxies via CREST. For further information on CREST
procedures, limitations and systems timings please refer to the
CREST Manual. We may treat as invalid a proxy appointment
sent by CREST in the circumstances set out in Regulation 35(5)
of the Uncertified Securities Regulations 2001. In any case your
proxy form must be received by the Company’s Registrar no
later than 12:00 on Monday, 19 May 2025.
Notice of Meeting continued
Notice of Meeting continued
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FINANCIAL GOVERNANCEINFORMATION FOR SHAREHOLDERS STRATEGY
6. Proxymity Voting – If you are an institutional investor you
may also be able to appoint a proxy electronically via the
Proxymity platform, a process which has been agreed by
the Company and approved by the Registrar. For further
information regarding Proxymity, please go to
www.proxymity.io. Your proxy must be lodged by no
later than 12:00 on Monday, 19 May 2025 in order to
be considered valid. Before you can appoint a proxy via
this process, you will need to have agreed to Proxymity’s
associated terms and conditions. It is important that you read
these carefully as you will be bound by them and they will
govern the electronic appointment of your proxy.
7. Unless otherwise indicated on the Form of Proxy, CREST voting,
Proxymity or any other electronic voting channel instruction,
the proxy will vote as they think fit or, at their discretion,
withhold from voting.
8. All members are entitled to attend and vote at the AGM
and ask questions. The right to vote at the meeting will be
determined by reference to the Register of Members as at
close of business on Monday, 19 May 2025. Shareholders
are urged to vote using the Form of Proxy provided or
electronically where permitted by your nominee or platform.
9. The Company is pleased to be able to offer facilities for
shareholders to attend, ask questions and vote at the AGM
electronically in real time should they wish to do so. The
details are set out below.
In order to join the AGM electronically and ask questions
via the platform, shareholders will need to connect to the
following site https://web.lumiagm.com. Lumi is available
as a mobile web client, compatible with the latest browser
versions of Chrome, Firefox, Edge and Safari and can be
accessed using any web browser, on a PC or smartphone
device.
Once you have accessed https://web.lumiagm.com from
your web browser on a tablet or computer, you will be asked
to enter the Lumi Meeting ID which is 117598418. You will
then be prompted to enter your unique 11 digit Investor Code
(“IVC”) including any leading zeros and ‘PIN’. Your PIN is
the last 4 digits of your IVC. This will authenticate you as a
shareholder.
Your IVC can be found on your share certificate or as
detailed on your proxy form. You can also obtain this by
contacting MUFG Corporate Markets, our Registrar, by calling
+44 (0) 371 277 1020*
Access to the AGM will be available from 30 minutes before
the meeting start time, although the voting functionality will
not be enabled until the Chairman of the meeting declares
the poll open. During the AGM, you must ensure you are
connected to the internet at all times in order to vote when the
Chairman commences polling on the Resolutions. Therefore,
it is your responsibility to ensure connectivity for the duration
of the AGM via your wi-fi. A user guide to the Lumi platform is
available on the Company’s pages of the Manager’s website
at: www.fidelity.co.uk/japan.
If you wish to appoint a proxy other than the Chairman of the
meeting and for them to attend the virtual meeting on your
behalf, please submit your proxy appointment in the usual
way before contacting MUFG Corporate Markets on +44
(0) 371 277 1020* in order to obtain their IVC and PIN. It is
suggested that you do this as soon as possible and at least
48 hours (excluding non-business days) before the meeting.
If your shares are held within a nominee/platform and you
wish to attend the electronic meeting, you will need to contact
your nominee as soon as possible. Your nominee will need
to present a corporate letter of representation to MUFG
Corporate Markets, the Registrar, as soon as possible and
at least 72 hours (excluding non-business days) before the
meeting, in order that they can obtain for you your unique IVC
and PIN to enable you to attend the electronic meeting.
If you are unable to obtain a unique IVC and PIN from
your nominee or platform, we will also welcome online
participation as a guest. Once you have accessed
https://web.lumiagm.com from your web browser on a
tablet or computer, you will need to enter the
Lumi Meeting ID which is 117598418. You should then select
the ‘Guest Access’ option before entering your name and who
you are representing, if applicable. This will allow you to view
the meeting and ask questions but you will not be able to
vote.
* Lines are open from 09:00 to 17:30 Monday to Friday, excluding public
holidays in England and Wales. Calls are charged at the standard geographic
rate and will vary by provider. Calls outside the UK will be charged at the
applicable international rate.
10. Any person to whom this notice is sent who is a person
nominated under Section 146 of the Companies Act 2006 to
enjoy information rights (a “Nominated Person”) may, under
an agreement between him and the member by whom he
was nominated, have a right to be appointed (or to have
someone else appointed) as a proxy for the meeting. If a
Nominated Person has no such proxy appointment right
or does not wish to exercise it, he may, under any such
agreement, have a right to give instructions to the member
as to the exercise of voting rights. The statement of the rights
of members in relation to the appointment of proxies in
Note 1 above does not apply to Nominated Persons. The
right described in that paragraph can only be exercised by
members of the Company.
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11. If the Chairman, as a result of any proxy appointments, is
given discretion as to how the votes which are the subject
of those proxies are cast and the voting rights in respect of
those discretionary proxies, when added to the interests in the
Company’s securities already held by the Chairman, result in
the Chairman holding such number of voting rights that he has
a notifiable obligation under the Disclosure and Transparency
Rules, the Chairman will make the necessary notifications to
the Company and the Financial Conduct Authority. As a result,
any member holding 3% or more of the voting rights in the
Company who grants the Chairman a discretionary proxy in
respect of some or all of those voting rights and so would
otherwise have a notification obligation under the Disclosure
and Transparency Rules, need not make separate notification
to the Company and the Financial Conduct Authority.
12. Pursuant to Regulation 41 of the Uncertificated Securities
Regulations 2001, the Company has specified that to be
entitled to attend and vote at the AGM (and for the purpose
of determining the number of votes they may cast), members
must be entered on the Register of Members by close
of business on Monday, 19 May 2025. If the meeting is
adjourned then, to be so entitled, members must be entered
on the Register of Members by close of business on the day
two days before the time fixed for the adjourned meeting, or,
if the Company gives notice of the adjourned meeting, at any
other time specified in that notice.
13. As at 26 March 2025 (the latest practicable date prior to the
publication of this document), the Company’s issued share
capital consisted of 135,154,760 ordinary shares carrying one
vote each. The number of shares held by the Company in
Treasury was 21,429,725. Therefore, the total number of shares
with voting rights in the Company was 113,725,035.
14. Any corporation which is a member can appoint one or more
corporate representatives who may exercise on its behalf all
of its powers as a member provided that they do not do so in
relation to the same shares.
15. Shareholders and any proxies or representatives they appoint
understand that by attending the meeting they are expressly
agreeing that they are willing to receive any communications,
including communications relating to the Company’s securities,
made at the meeting.
16. It is possible that, pursuant to requests made by members of
the Company under Section 527 of the Companies Act 2006,
the Company may be required to publish on its website a
statement setting out any matter relating to the audit of the
Company’s accounts (including the Auditor’s report and the
conduct of the audit) that is to be laid before the AGM or
any circumstance connected with an Auditor of the Company
ceasing to hold office since the previous meeting at which
the Annual Report and Financial Statements were laid. The
Company may not require the Shareholders requesting any
such website publication to pay its expenses in complying
with such requests. Where the Company is required to place a
statement on a website under Section 527 of the Companies
Act 2006, it must forward the statement to the Company’s
Auditor not later than the time when it makes the statement
available on the website. The business which may be dealt
with at the AGM includes any statement that the Company has
been required under Section 527 of the Companies Act 2006
to publish on its website.
17. No Director has a service contract with the Company.
18. A copy of this notice and other information required by
Section 311A of the Companies Act 2006 is published on the
Company’s website at www.fidelity.co.uk/japan.
Registered office: Beech Gate, Millfield Lane, Lower Kingswood,
Tadworth, Surrey KT20 6RP.
Notice of Meeting continued
Job No: 53979 Proof Event: 19 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA
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FINANCIAL GOVERNANCEINFORMATION FOR SHAREHOLDERS STRATEGY
Investing in Fidelity Japan Trust PLC
Fidelity Japan Trust PLC is a company listed on the London
Stock Exchange and you can buy its shares through a platform,
stockbroker, share shop or bank. Fidelity also offers a range of
options, so that you can invest in the way that is best for you.
Details of how to invest and the latest Key Information Document
can be found on the Company’s pages on the Manager’s
website at: www.fidelity.co.uk/japan
CONTACT INFORMATION
Shareholders and Fidelity Platform Investors should contact the
appropriate administrator using the contact details given on this
page. Links to the websites of major platforms can be found
online at www.fidelity.co.uk/its
Shareholders on the main share register
Contact MUFG Corporate Markets, Registrar to Fidelity Japan
Trust PLC, Central Square, 29 Wellington Street, Leeds LS1 4DL.
Email: shareholderenquiries@cm.mpms.mufg.com
Telephone: 0371 664 0300 (calls are charged at the standard
geographic rate and will vary by provider. Calls outside the
United Kingdom will be charged at the applicable international
rate. Lines are open 9:00 – 17:30, Monday to Friday excluding
public holidays in England and Wales).
Details of individual shareholdings and other information can
also be obtained online from the Registrar’s Investor Centre at
uk.investorcentre.mpms.mufg.com/Login. Shareholders are
able to manage their shareholding online by registering for the
Investor Centre, a free and secure online access service. Facilities
include:
Account Enquiry – Shareholders can access their personal
shareholding, including share transaction history, dividend
payment history and obtain an up-to-date shareholding valuation.
Amendment of Standing Data – Shareholders can change
their registered postal address and add, change or delete
dividend mandate instructions. Shareholders can also download
forms such as change of address, stock transfer and dividend
mandates as well as buy and sell shares in the Company.
Should you have any queries in respect of the Investor Centre,
contact the helpline on 0371 664 0391 (calls are charged at
the standard geographic rate and will vary by provider. Calls
outside the United Kingdom will be charged at the applicable
international rate. Lines are open 9:00 – 17:30, Monday to Friday
excluding public holidays in England and Wales).
Fidelity Platform Investors
Contact Fidelity, using the freephone numbers given below, or by
writing to: UK Customer Service, Fidelity, PO Box 391, Tadworth
KT20 9FU.
Website: www.fidelity.co.uk
Private investors: call free on 0800 41 41 10, 9:00 – 18:00,
Monday to Saturday.
Financial advisers: call free on 0800 41 41 81, 8:00 – 18:00,
Monday to Friday.
General enquiries
General enquiries should be made to the Secretary at the
Company’s registered office: FIL Investments International,
Investment Trusts, Beech Gate, Millfield Lane, Lower Kingswood,
Tadworth, Surrey KT20 6RP.
Telephone: 0207 961 4240
Email: investmenttrusts@fil.com
Website: www.fidelity.co.uk/its
If you hold Fidelity Japan Trust PLC shares in an account provided
by Fidelity International, you will receive a report every six months
detailing all of your transactions and the value of your shares.
ShareGift
You may donate your shares to charity free of charge through
ShareGift. Further details are available at www.sharegift.org.uk.
Shareholder Information
Job No: 53979 Proof Event: 19 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA
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Managers and Advisors
Alternative Investment Fund Manager
(AIFM/the Manager)
FIL Investment Services (UK) Limited
Beech Gate
Millfield Lane
Lower Kingswood
Tadworth
Surrey
KT20 6RP
Investment Manager, Secretary and
Registered Office
FIL Investments International
Beech Gate
Millfield Lane
Lower Kingswood
Tadworth
Surrey
KT20 6RP
Email: investmenttrusts@fil.com
Banker and Custodian
JPMorgan Chase Bank
(London Branch)
125 London Wall
London
EC2Y 5AJ
Depositary
J.P.Morgan Europe Limited
25 Bank Street
London
E14 5JP
Financial Adviser and Stockbroker
Stifel Nicolaus Europe Limited
150 Cheapside
London
EC2V 6ET
Independent Auditor
Ernst & Young LLP
25 Churchill Place
London
E14 5EY
Lawyer
Simmons & Simmons LLP
1 Ropemaker Street
London
EC2Y 9SS
Registrar
MUFG Corporate Markets (name changed
from Link Group on 20 January 2025)
Central Square
29 Wellington Street
Leeds
LS1 4DL
Company Information
The Company was launched on 15 March 1994 with one warrant
attached to every five shares. The original subscription price was
£1 for each ordinary share of 25 pence each. On 11 November
2009, the Company issued subscription shares on a 1 for 5 basis
and these were all exercised by 28 February 2014. The Company
made another subscription share issue on 26 August 2014 on a
1for 5 basis and these were all exercised by 29 April 2016.
The Company is a member of the Association of Investment
Companies (AIC) from whom general information on investment
trusts can be obtained by telephoning 020 7282 5555 (email:
enquiries@theaic.co.uk).
Price Information
The share price of the Company is published daily in the
Financial Times under the heading “Investment Companies”.
It is also published in The Times and The Daily Telegraph. Price
and performance information is also available at
www.fidelity.co.uk/japan.
Investors can also obtain current price information by telephoning
Fidelity on 0800 41 41 10 (freephone) or FT Cityline on 0905
817 1690 (voice activated service) (calls are charged at 60p per
minute on a per second basis from a BT landline. Charges from
other telephone networks may vary). The Reuters code for Fidelity
Japan Trust PLC is FJV.L, the SEDOL is 0332855 and the ISIN is
GB0003328555.
Net Asset Value (NAV) Information
The NAV of the Company is calculated on a daily basis and
released to the London Stock Exchange on a daily basis.
UK Capital Gains Tax
All UK individuals under present legislation are permitted to
have £3,000 of capital gains in the current tax year 2024/2025
(2023/2024: £6,000) before being liable for capital gains tax.
Capital gains tax is charged at 18% and 24% dependent on the
total amount of taxable income.
Shareholder Information continued
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FINANCIAL GOVERNANCEINFORMATION FOR SHAREHOLDERS STRATEGY
General Data Protection Regulation (GDPR)
What personal data is collected and how it is used
The Company is an investment trust which is a public limited company and has certain regulatory obligations such as the
requirement to send documents to its Shareholders, for example, the Annual Report and other documents that relate to meetings
of the Company. The Company will, therefore, collect Shareholders’ personal data such as names, addresses and identification
numbers or investor codes and will use this personal data to fulfil its statutory obligations.
Any personal data collected will be kept securely on computer systems and in some circumstances on paper. Personal information
is kept secure in line with Fidelity’s Information Security policies and standards. If you are unhappy with how we have used your
personal data, you can complain by contacting the UK Data Protection Officer at Fidelity International, Beech Gate, Millfield Lane,
Lower Kingswood, Tadworth, Surrey KT20 6RP.
Sharing personal data
In order to assist the Company in meeting its statutory requirements, the Company delegates certain duties around the processing
of this data to its third party service providers, such as the Company’s Registrar and Printers. The Company has appointed
Fidelity to undertake marketing activities for the Company and their privacy statement can be found on the Company website at
https://investment-trusts.fidelity.co.uk/security-privacy/
The Company’s agreements with the third party service providers have been updated to be compliant with GDPR requirements.
The Company confirms to its Shareholders that their data will not be shared with any third party for any other purpose, such as for
marketing purposes. In some circumstances, it may be necessary to transfer shareholders’ personal data across national borders
to Fidelity Group entities operating in the European Economic Area (“EEA”). Where this does occur, the European standard of
protections will be applied to the personal data that is processed. Where personal data is transferred within the Fidelity group but
outside of the EEA, that data will subsequently receive the same degree of protection as it would in the EEA.
Retention period
Personal data will be kept for as long as is necessary for these purposes and no longer than legally permitted to do so.
Requesting access, making changes to personal data and other important information
Shareholders can access the information that the Company holds about them or ask for it to be corrected or deleted by contacting
Fidelity’s UK Data Protection Officer, Fidelity International, Beech Gate, Millfield Lane, Lower Kingswood, Tadworth, Surrey KT20 6RP.
Fair treatment of investors
The legal and regulatory regime to which the Company and the Directors are subject ensures the fair treatment of investors. The
Listing Rules require that the Company treats all shareholders of the same class of shares equally. In particular, the Directors have
certain statutory duties under the Companies Act 2006 with which they must comply. These include a duty upon each Director to
act in the way she or he considers, in good faith, would be most likely to promote the success of the Company for the benefit of its
members as a whole.
Data Protection
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Glossary of Terms
AAF Report
A report prepared in accordance with the Audit and Assurance
Faculty guidance issued by the Institute of Chartered Accountants
in England and Wales.
AIC
The Association of Investment Companies (“AIC”). The Company
is a member of the AIC.
AIF
Alternative Investment Fund (“AIF”). The Company is an AIF.
AIFM
Alternative Investment Fund Manager (“AIFM”). The Board has
appointed FIL Investment Services (UK) Limited to act as the
Company’s AIFM (the Manager).
AIFMD
The Alternative Investment Fund Managers’ Directive (“AIFMD”) is
a European Union Directive implemented on 22 July 2014.
Alternative Performance Measures
The Company uses the following Alternative Performance
Measures which are all defined in this Glossary of Terms:
• Discount/Premium;
• Gearing;
• Net Asset Value (NAV) per Ordinary Share;
• Ongoing Charges;
• Revenue, Capital and Total Returns; and
• Total Return Performance (Net Asset Value Total Return or
Share Price Total Return).
Capital Gains Tax (CGT)
The tax you may have to pay if you sell your shares at a profit.
Collateral
Assets provided as security for the unrealised gain or loss under
a Contract for Difference.
Contract For Difference (CFD)
A Contract for Difference is a derivative. It is a contract between
the Company and an investment house at the end of which the
parties exchange the difference between the opening price and
the closing price of an underlying asset of the specified financial
instrument. It does not involve the Company buying or selling the
underlying asset, only agreeing to receive or pay the movement
in its share price. A Contract for Difference allows the Company
to gain access to the movement in the share price by depositing
a small amount of cash known as collateral. The Company may
reason that the asset price will rise, by buying (“long” position)
or fall, by selling (“short” position). If the Company holds long
positions, dividends are received and interest is paid. If the
Company holds short positions, dividends are paid and interest is
received. The Company only uses “long” Contract for Difference.
Corporation Tax
The UK tax the Company may have to pay on its profits. As
an investment trust company, the Company is exempt from UK
corporation tax on its capital gains and does not pay tax on any
UK dividends. It can also offset expenses against any taxable
income, and consequently it is tax efficient for the Company.
Custodian
An entity that holds (as intermediary) the Company’s assets,
arranges the settlement of transactions and administers income,
proxy voting and corporate actions. The Company’s Custodian is
JPMorgan Chase Bank.
Depositary
An entity that oversees the custody, cash arrangements and other
AIFM responsibilities of the Company. The Company’s Depositary
is J.P. Morgan Europe Limited.
Derivatives
Financial instruments (such as futures, options and Contract
for Difference) whose value is derived from the value of an
underlying asset.
Discount
The Company’s shares are said to be trading at a discount when
its share price is lower than the net asset value per ordinary
share. It is shown as a percentage of the net asset value per
ordinary share.
Fair Value
The fair value is the best measure of the realisable value of
the investments, including derivatives, at a point in time and is
measured as:
• Listed investments – valued at bid prices or last market
prices as available, otherwise at published price quotations;
• Unlisted investments – valued using an appropriate
valuation technique in the absence of an active market; and
• Contracts for difference – valued as the difference
between the settlement price of the contract and the value
of the underlying shares in the contract (unrealised gains or
losses).
Fidelity International (Fidelity)
FIL Limited and its subsidiary group companies including FIL
Investment Services (UK) Limited and FIL Investments International
which act as AIFM, Secretary and Investment Manager.
Gearing
Gearing is the Total Portfolio Exposure in excess of Shareholders’
Funds. If assets rise in value, gearing magnifies the return to
ordinary shareholders. Correspondingly, if assets fall in value,
gearing magnifies that fall. Contracts for Difference are used as
a way of gaining exposure to the price movements of shares
without buying the underlying shares directly.
Investment Manager
FIL Investments International.
Job No: 53979 Proof Event: 19 Black Line Level: 4 Park Communications Ltd Alpine Way London E6 6LA
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FINANCIAL GOVERNANCEINFORMATION FOR SHAREHOLDERS STRATEGY
Independent Valuer
Kroll who provide an objective and independent assessment of
value of unlisted and hard to price assets.
Manager
FIL Investment Services (UK) Limited is the appointed Manager
under the Alternative Investment Fund Managers’ Directive
(“AIFMD”) and has delegated the portfolio management of
assets to the Investment Manager.
Net Assets or Net Asset Value (NAV)
Also described as “Shareholders’ funds”, net assets represent
the total value of the Company’s assets less the total value of its
liabilities. For valuation purposes it is common to express the net
asset value on a per ordinary share basis.
Net Asset Value per Ordinary Share
The net asset value divided by the number of ordinary shares in
issue.
Ongoing Charges Ratio (excluding the variable management
fee element)
Total operational expense (excluding finance costs and taxation)
incurred by the Company as a percentage of the average daily
net asset values for the reporting year.
Portfolio Exposure
The value of an underlying security or instrument to which
the Company is exposed, whether through direct or indirect
investment (including the economic value of the exposure in the
underlying asset of derivatives).
Pre-Emption Rights
Section 561 of the Companies Act 2006 provides that a company
offering a new issue of shares must first make an offer of these
shares, on the same or more favourable terms, in proportion
to the nominal value held to existing Shareholders. At each
Annual General Meeting, the Board seeks Shareholder approval
to disapply pre-emption rights provision, up to 10% of the
Company’s issued share capital.
Premium
The Company’s shares are said to be trading at a premium when
the share price of the Company is higher than the net asset value
per ordinary share. The premium is shown as a percentage of
the net asset value per ordinary share.
Reference Index
TOPIX Total Return Index (in sterling terms). Prior to 22 May
2018 it was the Russell Nomura Mid/Small-Cap Index (in sterling
terms). The Reference Index is the Company’s Benchmark Index.
Registrar
An entity that manages the Company’s shareholders register.
The Company’s Registrar is MUFG Corporate Markets (name
changed from Link Group on 20 January 2025).
Reserves
• Share premium account represents the amount by which
the proceeds from the issue of ordinary shares, on the
exercise of rights attached to subscription shares, exceeded
the nominal value of those ordinary shares. It is not
distributable by way of dividend and cannot be used to fund
share repurchases.
• Capital redemption reserve maintains the equity share
capital of the Company and represents the nominal value
of shares repurchased and cancelled. It is not distributable
by way of dividend and cannot be used to fund share
repurchases.
• Other reserve was created in 1999 when the share premium
account at the time was cancelled. It is not distributable by
way of dividend. It can be used to fund share repurchases.
• Capital reserve represents realised gains and losses on
investments and derivatives sold, unrealised increases and
decreases in the fair value of investments and derivatives
held and other income and costs recognised in the capital
column of the Income Statement. It can be used to fund
repurchases and it is distributable by way of dividend.
• Revenue reserve represents retained revenue losses
recognised in the revenue column of the Income Statement.
It could be distributable by way of dividend if it were not in
deficit.
Return
The return generated in a given period from investments:
• Revenue Return reflects the dividends and interest from
investments and other income net of expenses, finance costs
and taxation;
• Capital Return reflects the return on capital, excluding any
revenue return; and
• Total Return reflects the aggregate of revenue and capital
returns.
Share Repurchases (Share Buybacks)
A popular way for investment trust companies to return cash to
their shareholders is through offering to repurchase a proportion
of shares currently held. The Company seeks the permission of
shareholders to do so at its Annual General Meetings allowing
it to repurchase a proportion of their total shares (up to 14.99%)
in the market at prices below the prevailing net asset value per
ordinary share. This process is also used to enhance the net
asset value per ordinary share and to reduce the discount to net
asset value per ordinary share.
Shareholders’ Funds
Shareholders’ funds are also described as net asset value and
represent the total value of the Company’s assets less the total
value of its liabilities as shown in the balance sheet.
Total Portfolio Exposure
The total of fixed asset investments at fair value plus the fair
value of the underlying securities within the Contracts for
Difference.
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Total Return Performance
The return on the share price or net asset value per ordinary
share taking into account the rise and fall of share prices and the
dividends paid to Shareholders. Any dividends received by the
Shareholder are assumed to have been reinvested for additional
shares (for share price total return) or in the Company’s assets
(for net asset value total return).
Treasury Shares
Ordinary shares of the Company that have been repurchased
by the Company and not cancelled but held in Treasury. These
shares do not receive dividends, have no voting rights and are
excluded from the net asset value per ordinary share calculation.
Glossary of Terms continued
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FINANCIAL GOVERNANCEINFORMATION FOR SHAREHOLDERS STRATEGY
Alternative Investment Fund Manager’s
Disclosure
In compliance with the Alternative Investment Fund Manager’s Directive (AIFMD), the Board has appointed FIL Investment Services
(UK) Limited (FISL) as the Company’s Alternative Investment Fund Manager (AIFM). FISL has delegated the portfolio management and
company secretarial function to FIL Investments International. Details of the Management Agreement can be found in the Directors’
Report on page 35.
The table below and on the next page discloses information required by the Alternative Investment Fund Manager’s Regulations 2013.
Function AIFM Role and Responsibility AIFMD Disclosure
Investment
management
The AIFM provides portfolio management of
assets and investment advice in relation to the
assets of the Company. It has delegated this
function to FIL Investments International.
The Board remains responsible for setting the
investment strategy, investment policy and
investment guidelines and the AIFM operates
within these guidelines.
Details of the Company’s investment objective,
strategy and investment policy, including limits, are
on pages 24 and 25.
Risk
management
The AIFM has a responsibility for risk
management for the Company which is in
addition to the Board’s corporate governance
responsibility for risk management.
The Company has a Risk Management
Process Document which demonstrates that
risk management is separated functionally
and hierarchically from operating units and
demonstrates independent safeguards. The
Manager maintains adequate risk management
systems in order to identify, measure and monitor
all risks at least annually under the AIFMD. The
Manager is responsible for the implementation
of various risk activities such as risk systems, risk
profile, risk limits and testing.
The Board, as part of UK corporate governance,
remains responsible for the identification of
significant risks and for the ongoing review of the
Company’s risk management and internal control
processes.
The AIFM has an ongoing process for identifying,
evaluating and managing the principal risks faced
by the Company and this is regularly reviewed
by the Board. The Board remains responsible for
the Company’s system of risk management and
internal control, and for reviewing its effectiveness.
Further details can be found in the Strategic Report
on pages 25 to 30 and in Note 16 to the Financial
Statements on pages 71 to 77.
Valuation of
illiquid assets
The AIFMD requires the disclosure of the
percentage of the Alternative Investment Fund’s
assets which are subject to special arrangements
arising from their illiquid nature and any new
arrangements for managing the liquidity of the
Company.
As at the date of this report, none of the Company’s
assets were subject to special arrangements arising
from their illiquid nature.
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Function AIFM Role and Responsibility AIFMD Disclosure
Leverage
The Company uses leverage to increase its
exposure primarily to Japanese stock markets
and currently holds derivatives to achieve this. The
AIFM has set maximum levels of leverage that
are reasonable. It has implemented systems to
calculate and monitor compliance against these
limits and has ensured that the limits have been
complied with at all times.
There are two methods of calculating leverage
– the Gross Method which does not reduce
exposure for hedging; and the Commitment
Method which does reduce exposure for hedging.
The maximum leverage limits are 1.80 for the Gross
Method of calculating leverage and 1.50 for the
Commitment Method.
At 31 December 2024, leverage for both the Gross
Method and the Commitment Method was1.25.
Liquidity
management
The AIFM, in consultation with the Board,
maintains a liquidity management policy which is
considered at least annually.
No new arrangements for managing the liquidity of
the Company have been made. Further details can
be found in Note 16 on page 74.
Remuneration
of the AIFM
The AIFM operates under the terms of Fidelity
International’s Global Remuneration Policy.
This ensures that the AIFM complies with the
requirements of the FCA’s Remuneration Code
(SYSC19A); the AIFM Remuneration Code
(SYSC19B) and the BIPRU Remuneration Code
(SYSC19C).
Details of Fidelity International’s Global Remuneration
Policy can be found at www.fidelityinternational.
com/global/remuneration/default.page
EU Securities Financing Transactions Regulations (“SFTR”)
The following disclosure relates to the long contracts for difference (“CFDs”) held by the Company which may be considered Total
Return Swaps under the SFTR, which came into force on 12 January 2016.
As at 31 December 2024, all CFDs were contracted bilaterally with open maturities:
Broker
Fair Value
£000
Percentage
of
Net Assets
Collateral
held by the
broker
£000
Collateral
held by the
Company
£000
J.P. Morgan Securities plc (UK) (136) (0.06%) – 223
UBS AG (UK) 1,451 0.63% 1,487 –
The total return for the year ended 31 December 2024 from CFDs was a gain of £3,371,000.
Alternative Investment Fund Manager’s
Disclosure continued
Job No: 53979 Proof Event: 19 Black Line Level: 3 Park Communications Ltd Alpine Way London E6 6LA
Customer: Fidelity Project Title: FJT Annual Report T: 0207 055 6500 F: 020 7055 6600
Job No: 53979 Proof Event: 19 Black Line Level: 3 Park Communications Ltd Alpine Way London E6 6LA
Customer: Fidelity Project Title: FJT Annual Report T: 0207 055 6500 F: 020 7055 6600
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Fidelity Japan Trust PLC
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Annual Report 2024