Job No: 101776 Proof Event: 22 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA

Customer: Schroders Project Title: Japan Trust Annual Report T: 0207 055 6500 F: 020 7055 6600

Job No: 101776 Proof Event: 22 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA

Customer: Schroders Project Title: Japan Trust Annual Report T: 0207 055 6500 F: 020 7055 6600

We believe the Japanese equity market ultimately acts efficiently in

reflecting the intrinsic value of companies. In the short to medium

term, however, considerable inefficiencies are frequently evident

in individual stocks. These inefficiencies provide repeatable

opportunities to identify and invest in undervalued stocks, with

term, with value being realised as the market gradually reflects

their true value more efficiently.

Portfolio holdings tend to fall into three categories of inefficiency:

1. Market misperception – companies with self-improving

2. Market oversight – undervalued companies, especially

weighting given to each of these segments evolves over time,

but a reasonable exposure to each category ensures a good

level of diversification for the portfolio as a whole. Meanwhile,

the approach tends to result in a bias towards value stocks

smaller companies, as well as an overall focus on quality.

1

The term “value stocks” refers to shares that appear to trade at a lower price than justified by company fundamentals, such as dividends, earnings, sales and book value.