Schroder. Tokyo Fund. Final Report and Accounts February 2018

Transcription

1 Schroder Tokyo Fund Final Report and Accounts February 2018

2 Contents Schroder Tokyo Fund Fund Information Investment objective and policy Financial highlights Fund information Ongoing charges figure Review of Investment Activities Risk Profile Risk and reward indicator Specific risks Statement of the Manager s Responsibilities Report of the Trustee Independent Auditors Report to the Unitholders of Schroder Tokyo Fund Comparative Tables Portfolio Statement Summary of Portfolio Transactions Largest purchases Largest sales Statement of Total Return Statement of Change in Net Assets Attributable to Unitholders Balance Sheet Notes to the Accounts Accounting policies Net capital gains Revenue Expenses Taxation Distributions Fair value hierarchy Debtors Other creditors Contingent liabilities Related party transactions Unit classes Derivative and other financial instruments Direct transaction costs Units in issue reconciliation Counterparty exposure Remuneration Distribution Table Final distribution for the year ended 28 February Final distribution for the period ended 28 February Corporate unitholders (unaudited) Equalisation General Information Authorisation Other information Collectively these comprise the Manager s report.

3 Fund Information Investment objective and policy The Schroder Tokyo Fund (the fund ) aims to provide capital growth by investing in equity and equity related securities of Japanese companies. The fund invests at least 80% of its assets in equity and equity related securities of Japanese companies. Investments are made based on Japan s economic strengths, such as its manufacturing industry (in particular on those parts of it that are demonstrating an ability to exploit newly emerging technology) and on sectors benefiting from structural change in the economy. The fund may also invest in collective investment schemes, warrants and money market instruments, and hold cash. The fund may use derivatives with the aim of reducing risk or managing the fund more efficiently. With effect from 23 October 2017 the fund s Investment objective and policy changed, previously it was: The fund s investment objective is to achieve capital appreciation through participation in the growth of the Japanese economy. Investment will be based primarily on Japan s economic strengths, such as its manufacturing industry (in particular on those parts of it that are demonstrating an ability to exploit newly emerging technology) and on sectors benefiting from structural change in the economy. Investment will be in directly held transferable securities. The fund may also invest in collective investment schemes, warrants and money market instruments. 3

4 Fund Information (continued) Financial highlights Selling price % change A Income units p p 6.27 A Accumulation units p p 6.67 GBP Hedged A Income units 76.11p 67.43p GBP Hedged A Accumulation units 76.24p 67.67p GBP Hedged L Income units 77.32p GBP Hedged L Accumulation units 77.35p 67.91p GBP Hedged Z Income units 76.90p 68.34p GBP Hedged Z Accumulation units 79.45p 69.89p H Income units 84.17p 79.09p 6.42 H Accumulation units 87.01p 80.75p 7.75 L Income units 84.93p 79.82p 6.40 L Accumulation units 87.44p 81.28p 7.58 S Income units 88.03p 82.69p 6.46 Z Income units p 99.95p 6.35 Z Accumulation units p p Final distribution per Z Income unit p p The performance of a hedged unit class may differ from other unit classes of the fund because the return on unhedged unit classes is based on both the performance of the fund s investments and the performance of the portfolio currency relative to sterling whereas the return on a hedged unit class is based only on the performance of the fund s investments. 4

5 Fund Information (continued) Fund information Launch date 1 March 1989 Launch price 80.65p per A Income unit Launch date 11 May 2011 Launch price Launch date 1 July 2013 Launch price 81.46p per A Accumulation unit 50.00p per Z Income unit 50.00p per Z Accumulation unit Launch date 1 October 2013 Launch price 50.00p per GBP Hedged A Income unit 50.00p per GBP Hedged A Accumulation unit 50.00p per GBP Hedged Z Income unit 50.00p per GBP Hedged ZAccumulation unit 50.00p per L Income unit Launch date 6 January 2014 Launch price 50.00p per L Accumulation unit 50.00p per H Income unit 50.00p per H Accumulation unit Launch date 31 January 2014 Launch price Launch date 9 May 2014 Launch price 50.00p per S Income unit Launch date 16 June 2017 Launch price 50.00p per GBP Hedged L Accumulation unit 68.58p per GBP Hedged L Income unit Interim Final Accounting dates 31 August 28 February Revenue allocation date 30 April 5

6 Fund Information (continued) Ongoing charges figure For the year For the year For the year to to to A Income units 1.66% 1.66% 1.66% A Accumulation units 1.66% 1.66% 1.66% GBP Hedged A Income units 1.76% % % GBP Hedged A Accumulation units 1.76% % % GBP Hedged L Income units 0.94% 1 2 GBP Hedged L Accumulation units 0.94% % % GBP Hedged Z Income units 1.01% % % GBP Hedged Z Accumulation units 1.01% % % H Income units 0.66% 0.66% 0.66% H Accumulation units 0.66% 0.66% 0.66% L Income units 0.84% 0.84% 0.84% L Accumulation units 0.84% 0.84% 0.84% S Income units 0.54% 0.54% 0.54% Z Income units 0.91% 0.91% 0.91% Z Accumulation units 0.91% 0.91% 0.91% 1 The Ongoing charges figure includes the hedging programme cost of 0.10%. 2 The Ongoing charges figure is annualised based on the fees incurred during the accounting period. 3 The Ongoing charges figure includes the hedging programme cost of 0.10%. This has been disclosed for comparative purposes, previously this cost was charged to the unit class but was excluded from the Ongoing charges figure since the launch of the unit class. 6

7 Review of Investment Activities From 28 February 2017 to 28 February 2018, the price of Z Accumulation units on a selling price to selling price basis rose 7.48%. In comparison, the Tokyo Stock Exchange First Sector Index generated a total return of 11.36% 1 in sterling terms. 1 Source: Thomson Reuters Datastream. Japanese equities rose strongly, with the sharpest gains being made in the fourth quarter of 2017, as investors were encouraged by Prime Minister Abe s victory in the snap general election called in October. This raised the prospect of a further period of political stability and a continuation of current fiscal and monetary policies. However, the return for a sterling based investor was restricted by a weakening of the yen over the period as a whole. The fund lagged the market, partly as a result of a negative contribution from KDDI, a major telecommunication group. The shares fell sharply in December, in line with other stocks in the sector, as news emerged of a possible new competitor for their mobile network. There was also a negative impact on relative performance from Sony, which is not held in the fund, but rose sharply in November after releasing strong quarterly results. Some of these negatives were offset by consistently strong performance of Disco, a manufacturer of precision equipment for the semiconductor industry, which continued to see strong orders from customers. The fund also benefited from the holding in Sankyu, a small cap logistics and plant engineering specialist, which reported better than expected profits. Overall corporate profits are responding well to the ongoing gradual improvement in the domestic economy and, looking ahead, conditions should remain favourable for the equity market. In the absence of any unexpected policy error, the major risks to share prices appear to be external, especially given the recent increase in protectionist rhetoric from the US administration. Please remember that past performance is not a guide to future performance and it might not be repeated. The value of investments and the revenue from them may go down as well as up and investors may not get back the amount originally invested. Because of this, you are not certain to make a profit on your investments and you may lose money. Fund Manager: Andrew Rose Joined Schroders in 1981 Investment career commenced in 1981 Currently a Japanese equity fund manager, based in London Previously, Andrew was Schroders Head of Japanese Equities from 2001 until 2006 in Tokyo. From 1999 he was based in London as Joint Head of the Japanese Equity team, with overall responsibility for smaller company investment in Japan. In 1996 Andrew was seconded to Schroders Japan office as Senior Investment Officer. He worked in London from 1987, responsible for managing Japanese equity investments for European clients. He was based in the Tokyo office from 1984, working as a Japanese equity analyst. Andrew s investment career began in 1981 upon joining Schroders, also as a Japanese equity analyst Degree in Japanese & Politics, University of Sheffield. Postgraduate degree in International Economics, Kobe University, Japan 7

8 Risk Profile Risk and reward indicator The risk and reward indicator changed from 6 to 5 with effect from 19 February 2018 for A Income units, A Accumulations units, GBP Hedged L Income units, H Income units, H Accumulations units, L Income units, L Accumulations units, S Income units, Z Income units and Z Accumulations units. GBP Hedged A Income units, GBP Hedged A Accumulation units, GBP Hedged L Accumulation units, GBP Hedged Z Income units and GBP Hedged Z Accumulation units remained at 6. There is a difference between unit classes caused by the technical nature of the calculation of the risk and reward indicator. The risk category was calculated using historical performance data and may not be a reliable indicator of the fund s future risk profile. The fund is in this category because it can take higher risks in search of higher rewards and its price may rise and fall accordingly. The fund s risk category is not guaranteed to remain fixed and may change over time. A fund in the lowest category does not mean a risk free investment. Specific risks The fund invests in assets which are exposed to currencies other than sterling. For non-hedged unit classes exchange rates may cause the value of overseas investments and the revenue from them to rise or fall. There is no guarantee that the hedging strategy applied in hedged unit classes will entirely eliminate the adverse effects of changes in exchange rates between the base currency and the portfolio currency. In addition, it should be noted that hedging transactions will be entered into whether or not the currency of a hedged unit class is declining or increasing in value in relation to the base currency or portfolio currency. Hedged unit classes aim to provide investors with a return correlated to the portfolio currency performance of the fund by reducing the effect of exchange rate fluctuations between the base currency and the portfolio currency. As it is not possible to legally segregate unit classes liabilities from those of other unit classes in the fund, there is a risk that, in certain limited circumstances, the hedging transactions undertaken in relation to a hedged unit class could result in liabilities which might affect the net asset value of the other unit classes in the fund. 8

9 Risk Profile (continued) The fund invests solely in the securities of a particular country. There may be a greater risk than investing in funds that hold securities in a range of countries. The fund may invest in a wide range of derivatives in order to meet its investment objectives. For these reasons, the purchase of units should not normally be regarded as a short term investment. 9

10 Statement of the Manager s Responsibilities The Financial Conduct Authority s Collective Investment Schemes sourcebook (COLL) requires the Manager to prepare accounts for each annual and half yearly accounting period, in accordance with United Kingdom Generally Accepted Accounting Practice, which give a true and fair view of the financial position of the fund and of its net revenue and the net capital gains on the property of the fund for the year. In preparing the accounts the Manager is required to: select suitable accounting policies and then apply them consistently; comply with the disclosure requirements of the Statement of Recommended Practice (SORP) for UK Authorised Funds issued by the Investment Management Association (IMA (now the Investment Association (IA))) in May 2014; follow generally accepted accounting principles and applicable accounting standards; prepare the accounts on the basis that the fund will continue in operation unless it is inappropriate to do so; keep proper accounting records which enable it to demonstrate that the accounts as prepared comply with the above requirements; make judgements and estimates that are prudent and reasonable. The Manager is responsible for the management of the fund in accordance with its Trust Deed, the Prospectus and the COLL, and for taking reasonable steps for the prevention and detection of fraud, error and non-compliance with law or regulations. The Manager s report and accounts for the year ended 28 February 2018 were signed on 9 May 2018 on behalf of the Manager by: J.A. Walker-Hazell Directors P. Chislett 10

11 Report of the Trustee Statement of the Trustee s responsibilities in respect of the Scheme and report of the Trustee to the unitholders of the Schroder Tokyo Fund ( the fund ) for the year ended 28 February 2018 The Trustee of the Schroder Tokyo Fund must ensure that the fund is managed in accordance with the Financial Conduct Authority s Collective Investment Schemes Sourcebook, the Financial Services and Markets Act 2000, as amended, (together the regulations ), the Trust Deed and Prospectus (together the Scheme documents ) as detailed below. The Trustee must in the context of its role act honestly, fairly, professionally, independently and in the interests of the fund and its investors. The Trustee is responsible for the safekeeping of all custodial assets and maintaining a record of all other assets of the fund in accordance with the regulations. The Trustee must ensure that: the fund s cash flows are properly monitored and that cash of the fund is booked in cash accounts in accordance with the regulations; the sale, issue, repurchase, redemption and cancellation of units are carried out in accordance with the regulations; the value of units of the fund are calculated in accordance with the regulations; any consideration relating to transactions in the fund s assets is remitted to the fund within the usual time limits; the fund s income is applied in accordance with the regulations; and the instructions of the Authorised Fund Manager ( the Manager ), which is the UCITS Management Company, are carried out (unless they conflict with the regulations). The Trustee also has a duty to take reasonable care to ensure that the fund is managed in accordance with the regulations and the Scheme documents of the fund in relation to the investment and borrowing powers applicable to the fund. 11

12 Report of the Trustee (continued) Having carried out such procedures as we considered necessary to discharge our responsibilities as Trustee of the fund, it is our opinion, based on the information available to us and the explanations provided, that, in all material respects the fund, acting through the Manager: (i) has carried out the issue, sale, redemption and cancellation, and calculation of the price of the fund s units and the application of the fund s income in accordance with the regulations and the Scheme documents of the fund; and (ii) has observed the investment and borrowing powers and restrictions applicable to the fund in accordance with the regulations and the Scheme documents of the fund. J.P. Morgan Europe Limited Trustee Bournemouth 21 March

13 Independent Auditors Report to the Unitholders of Schroder Tokyo Fund Report on the audit of the financial statements Opinion In our opinion, Schroder Tokyo Fund s financial statements: give a true and fair view of the financial position of the fund as at 28 February 2018 and of the net revenue and the net capital gains on its scheme property for the year then ended; and have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, and applicable law), the Statement of Recommended Practice for UK Authorised Funds, the Collective Investment Schemes sourcebook and the Trust Deed. We have audited the financial statements, included within the Final Report and Accounts (the Annual Report ), which comprise: the balance sheet as at 28 February 2018; the statement of total return and the statement of change in net assets attributable to unitholders for the year then ended; the notes to the financial statements, which include a description of the significant accounting policies, and the distribution tables. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) ( ISAs (UK) ) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors 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 remained independent of the fund in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the Financial Reporting Council s (FRC) Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. 13

14 Independent Auditors Report to the Unitholders of Schroder Tokyo Fund (continued) Conclusions relating to going concern We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to report to you when: the Manager s use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or the Manager has not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the fund s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the fund s ability to continue as a going concern. Reporting on other information The other information comprises all of the information in the Annual Report other than the financial statements and our Auditors Report thereon. The Manager is responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon. In connection with our audit of the financial statements, 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 audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities. Manager s Report In our opinion, the information given in the Manager s Report for the financial year for which the financial statements are prepared is consistent with the financial statements. 14

15 Independent Auditors Report to the Unitholders of Schroder Tokyo Fund (continued) Responsibilities for the financial statements and the audit Responsibilities of the Manager for the financial statements As explained more fully in the Statement of the Manager s Responsibilities set out on page 10, the Manager is responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The Manager is also responsible for such internal control as they 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 Manager is responsible for assessing the fund 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 Manager either intend to wind up or terminate the fund, or have no realistic alternative but to do so. Auditors 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 Auditors Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the FRC s website at: This description forms part of our Auditors Report. Use of this report This report, including the opinions, has been prepared for and only for the fund s unitholders as a body in accordance with paragraph of the Collective Investment Schemes sourcebook and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. 15

16 Independent Auditors Report to the Unitholders of Schroder Tokyo Fund (continued) Other required reporting Opinion on matter required by the Collective Investment Schemes sourcebook In our opinion, we have obtained all the information and explanations we consider necessary for the purposes of the audit. Collective Investment Schemes sourcebook exception reporting Under the Collective Investment Schemes sourcebook we are also required to report to you if, in our opinion: proper accounting records have not been kept; or the financial statements are not in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility. PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Edinburgh 9 May

17 Comparative Tables A Income units Financial year to 28 February p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (5.63) (4.77) (4.11) Return after operating charges* Distributions 1 (0.95) (1.25) (0.18) Closing net asset value *after direct transaction costs of Performance Return after charges (%) Other information Closing net asset value ( 000 s) 119, , ,924 Closing number of units 33,650,405 46,454,223 54,152,016 Operating charges (%) Direct transaction costs (%)** (0.01) 2 (0.01) 2 (0.02) 2 Prices Highest buying price (p) Lowest selling price (p)

18 Comparative Tables (continued) A Accumulation units Financial year to 28 February p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (5.86) (4.93) (4.25) Return after operating charges* Distributions 1 (1.00) (1.26) (0.18) Retained distributions Closing net asset value *after direct transaction costs of Performance Return after charges (%) Other information Closing net asset value ( 000 s) 466, , ,229 Closing number of units 125,767, ,368, ,937,438 Operating charges (%) Direct transaction costs (%)** (0.01) 2 (0.01) 2 (0.02) 2 Prices Highest buying price (p) Lowest selling price (p)

19 Comparative Tables (continued) GBP Hedged A Income units Financial year to 28 February p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges (8.79) Operating charges (1.27) (1.04) (1.16) Return after operating charges* (9.95) Distributions 1 (0.44) Nil 3 Nil 3 Closing net asset value *after direct transaction costs of Performance Return after charges (%) (15.02) Other information Closing net asset value ( 000 s) Closing number of units 60,431 66,173 64,068 Operating charges (%) Direct transaction costs (%)** (0.01) 2 (0.01) 2 (0.02) 2 Prices Highest buying price (p) Lowest selling price (p) There was no distribution as the total amount distributable was below de minimis. 19

20 Comparative Tables (continued) GBP Hedged A Accumulation units Financial year to 28 February p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges (8.66) Operating charges (1.25) (1.00) (1.13) Return after operating charges* (9.79) Distributions 1 (0.18) (0.29) (0.02) Retained distributions Closing net asset value *after direct transaction costs of Performance Return after charges (%) (14.79) Other information Closing net asset value ( 000 s) 2,283 5,314 6,150 Closing number of units 2,968,097 7,822,393 10,902,931 Operating charges (%) Direct transaction costs (%)** (0.01) 2 (0.01) 2 (0.02) 2 Prices Highest buying price (p) Lowest selling price (p)

21 Comparative Tables (continued) GBP Hedged L Income units 2018 Financial period to 28 February p per unit Change in net asset value Opening net asset value Return before operating charges 9.92 Operating charges (0.49) Return after operating charges* 9.43 Distributions 1 (0.78) Closing net asset value *after direct transaction costs of 0.01 Performance Return after charges (%) Other information Closing net asset value ( 000 s) 6,406 Closing number of units 8,294,778 Operating charges (%) 0.66 Direct transaction costs (%)** (0.01) 2 Prices Highest buying price (p) Lowest selling price (p) The unit class was launched on 16 June

22 Comparative Tables (continued) GBP Hedged L Accumulation units Financial year to 28 February p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges (8.42) Operating charges (0.68) (0.50) (0.56) Return after operating charges* (8.98) Distributions 1 (0.79) (0.78) (0.59) Retained distributions Closing net asset value *after direct transaction costs of Performance Return after charges (%) (13.77) Other information Closing net asset value ( 000 s) 68,973 65,638 69,175 Closing number of units 88,383,256 96,281, ,035,042 Operating charges (%) Direct transaction costs (%)** (0.01) 2 (0.01) 2 (0.02) 2 Prices Highest buying price (p) Lowest selling price (p)

23 Comparative Tables (continued) GBP Hedged Z Income units Financial year to 28 February p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges (8.64) Operating charges (0.73) (0.55) (0.63) Return after operating charges* (9.27) Distributions 1 (0.73) (0.74) (0.55) Closing net asset value *after direct transaction costs of Performance Return after charges (%) (13.95) Other information Closing net asset value ( 000 s) 45,827 68,462 97,667 Closing number of units 59,633, ,872, ,492,324 Operating charges (%) Direct transaction costs (%)** (0.01) 2 (0.01) 2 (0.02) 2 Prices Highest buying price (p) Lowest selling price (p)

24 Comparative Tables (continued) GBP Hedged Z Accumulation units Financial year to 28 February p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges (8.66) Operating charges (0.76) (0.56) (0.63) Return after operating charges* (9.29) Distributions 1 (0.76) (0.76) (0.55) Retained distributions Closing net asset value *after direct transaction costs of Performance Return after charges (%) (13.83) Other information Closing net asset value ( 000 s) 102, , ,264 Closing number of units 127,361, ,875, ,737,508 Operating charges (%) Direct transaction costs (%)** (0.01) 2 (0.01) 2 (0.02) 2 Prices Highest buying price (p) Lowest selling price (p)

25 Comparative Tables (continued) H Income units Financial year to 28 February p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (0.53) (0.45) (0.38) Return after operating charges* Distributions 1 (1.03) (0.98) (0.63) Closing net asset value *after direct transaction costs of Performance Return after charges (%) Other information Closing net asset value ( 000 s) 6,334 4,652 2,789 Closing number of units 7,550,425 5,932,015 4,911,250 Operating charges (%) Direct transaction costs (%)** (0.01) 2 (0.01) 2 (0.02) 2 Prices Highest buying price (p) Lowest selling price (p)

26 Comparative Tables (continued) H Accumulation units Financial year to 28 February p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (0.55) (0.46) (0.39) Return after operating charges* Distributions 1 (1.07) (1.00) (0.64) Retained distributions Closing net asset value *after direct transaction costs of Performance Return after charges (%) Other information Closing net asset value ( 000 s) 64,632 46,961 28,407 Closing number of units 73,626,487 57,928,447 48,988,744 Operating charges (%) Direct transaction costs (%)** (0.01) 2 (0.01) 2 (0.02) 2 Prices Highest buying price (p) Lowest selling price (p)

27 Comparative Tables (continued) L Income units Financial year to 28 February p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (0.68) (0.58) (0.49) Return after operating charges* Distributions 1 (0.90) (0.87) (0.54) Closing net asset value *after direct transaction costs of Performance Return after charges (%) Other information Closing net asset value ( 000 s) 271, ,950 71,676 Closing number of units 320,433, ,364, ,838,081 Operating charges (%) Direct transaction costs (%)** (0.01) 2 (0.01) 2 (0.02) 2 Prices Highest buying price (p) Lowest selling price (p)

28 Comparative Tables (continued) L Accumulation units Financial year to 28 February p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (0.70) (0.58) (0.50) Return after operating charges* Distributions 1 (0.93) (0.88) (0.53) Retained distributions Closing net asset value *after direct transaction costs of Performance Return after charges (%) Other information Closing net asset value ( 000 s) 457, , ,879 Closing number of units 518,337, ,798, ,468,457 Operating charges (%) Direct transaction costs (%)** (0.01) 2 (0.01) 2 (0.02) 2 Prices Highest buying price (p) Lowest selling price (p)

29 Comparative Tables (continued) S Income units Financial year to 28 February p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (0.46) (0.38) (0.33) Return after operating charges* Distributions 1 (1.18) (1.11) (0.73) Closing net asset value *after direct transaction costs of Performance Return after charges (%) Other information Closing net asset value ( 000 s) 76,961 17,042 11,885 Closing number of units 87,829,415 20,805,036 20,041,897 Operating charges (%) Direct transaction costs (%)** (0.01) 2 (0.01) 2 (0.02) 2 Prices Highest buying price (p) Lowest selling price (p)

30 Comparative Tables (continued) Z Income units Financial year to 28 February p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (0.93) (0.78) (0.67) Return after operating charges* Distributions 1 (1.05) (1.02) (0.61) Closing net asset value *after direct transaction costs of Performance Return after charges (%) Other information Closing net asset value ( 000 s) 311, , ,906 Closing number of units 292,845, ,247, ,360,220 Operating charges (%) Direct transaction costs (%)** (0.01) 2 (0.01) 2 (0.02) 2 Prices Highest buying price (p) Lowest selling price (p)

31 Comparative Tables (continued) Z Accumulation units Financial year to 28 February p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (0.98) (0.82) (0.69) Return after operating charges* Distributions 1 (1.11) (1.06) (0.63) Retained distributions Closing net asset value *after direct transaction costs of Performance Return after charges (%) Other information Closing net asset value ( 000 s) 648, , ,241 Closing number of units 573,373, ,546, ,344,129 Operating charges (%) Direct transaction costs (%)** (0.01) 2 (0.01) 2 (0.02) 2 Prices Highest buying price (p) Lowest selling price (p) These figures have been rounded to 2 decimal places. 2 The amount received from dilution adjustments, that relate to direct transaction costs, is greater than the direct transaction costs incurred by the fund within the year. ** Direct transaction costs have been stated after deducting the proportion of the amounts collected from dilution adjustments. The Operating charges are calculated on an ex-post basis and as such may differ from the Ongoing charges figure where the Ongoing charges figure has been annualised for a unit class that has not been in existence for a full year. Please remember that past performance is not a guide to future performance and it might not be repeated. The value of investments and the revenue from them may go down as well as up and investors may not get back the amount originally invested. Because of this, you are not certain to make a profit on your investments and you may lose money. 31

32 Portfolio Statement Holding at Market Value % of net s assets Equities 99.45% (98.63%) Oil & Gas 1.81% (1.78%) JXTG Holdings 10,776,700 48, , Basic Materials 4.80% (5.04%) Dowa Holdings 765,000 20, Inabata 2,849,900 31, JFE Holdings 1,078,600 18, Nippon Shokubai 276,600 14, Nippon Soda 2,925,000 13, Sakata INX 2,054,600 19, T&K Toka 1,000,000 9, , Industrials 32.77% (29.63%) Advan 700,000 5, Disco 322,500 55, Enplas 340,000 9, Glory 533,100 14, Haseko 2,758,300 29, HI-LEX 2,370,100 47, Hitachi 6,475,000 35, Hitachi Transport System 1,892,100 34, IHI 430,700 10, Isuzu Motors 3,800,000 43, ITOCHU 1,884,200 26, JGC 2,299,400 38, Kintetsu World Express 670,000 9, Mitsubishi 190,800 3, Mitsubishi Electric 3,664,200 45, Mitsui 5,253,300 69, Mitsui OSK Lines 302,500 6, Murata Manufacturing 198,800 20, Nabtesco 775,000 24, Nidec 175,000 20, Nippon Thompson 3,485,500 20, Recruit Holdings 846,600 14, Sanki Engineering 1,513,800 12, Sankyu 1,731,000 61,

33 Portfolio Statement (continued) Holding at Market Value % of net s assets Industrials (continued) Shimadzu 1,300,500 24, SK Kaken 724,000 57, SMC 123,900 37, TDK 1,136,500 75, TECHNO ASSOCIE 1,472,200 13, , Consumer Goods 16.37% (16.25%) ABC-Mart 392,700 18, Bridgestone 2,581,300 83, Honda Motor 1,530,300 40, Japan Tobacco 640,000 13, JTEKT 1,140,300 12, Koito Manufacturing 965,000 48, Nintendo 24,000 8, Sapporo Holdings 545,900 11, Sekisui Chemical 2,827,300 38, Sumitomo Electric Industries 2,145,500 24, Toyota Motor 2,230, , Unipres 1,302,900 23, , Health Care 4.42% (4.35%) Astellas Pharma 2,043,600 21, Otsuka Holdings 1,157,700 42, Santen Pharmaceutical 3,801,300 44, Ship Healthcare Holdings 330,000 8, , Consumer Services 12.61% (13.77%) AT-Group 1,331,000 26, Central Japan Railway 270,000 36, Chubu-Nippon Broadcasting 1,162,100 6, Don Quijote Holdings 350,400 14, East Japan Railway 962,300 65, H2O Retailing 1,630,000 23, Izumi 569,900 27, Japan Airlines 2,092,200 58,

34 Portfolio Statement (continued) Holding at Market Value % of net s assets Consumer Services (continued) Nafco 1,089,000 14, Seven & i Holdings 1,177,100 35, Yamada Denki 5,410,600 24, , Telecommunications 5.18% (5.71%) KDDI 3,945,400 70, Nippon Telegraph & Telephone 1,966,300 66, , Utilities 0.20% (0.38%) Okinawa Electric Power 269,600 5, , Financials 17.21% (17.27%) 77 Bank 994,800 18, Fukuoka Financial Group 5,360,000 20, Hitachi Capital 1,400,000 26, Iida Group Holdings 1,359,700 18, Mitsubishi UFJ Financial Group 9,771,400 50, Mitsui Fudosan 1,459,700 25, Nomura Holdings 7,491,000 33, Nomura Real Estate Holdings 950,000 16, Sompo Holdings 1,443,400 40, Sumitomo Mitsui Financial Group 2,925,100 93, Suruga Bank 335,700 4, T&D Holdings 3,977,500 48, Tokai Tokyo Financial Holdings 3,216,500 17, Tokio Marine Holdings 1,250,000 42, , Technology 4.08% (4.45%) Canon 1,121,000 31, FUJIFILM Holdings 1,210,900 36, Fujitsu 7,657,000 33, Renesas Electronics 769,400 6, , Equities total 2,634,

35 Portfolio Statement (continued) Forward Foreign Currency Contracts (0.09)% ((0.12)%) Holding at Market Value % of net s assets Buy JPY 50,752,525 Sell GBP 339,807 28/03/2018 JPY 50,752, Sell JPY 33,377,878,896 Buy GBP 222,695,430 28/03/2018 GBP (222,695,430) (2,517) (0.09) Forward Foreign Currency Contracts total (2,514) (0.09) Portfolio of investments 2,632, Net other assets 16, Net assets attributable to unitholders 2,649, The comparative percentage figures in brackets are as at 28 February Unless otherwise stated, all securities are admitted to official stock exchange listings. 35

36 Summary of Portfolio Transactions Largest purchases Largest sales Cost For the year ended 28 February s Tokio Marine Holdings 38,652 Iida Group Holdings 21,922 Murata Manufacturing 20,924 Japan Tobacco 16,988 FUJIFILM Holdings 16,374 SMC 14,538 Glory 14,493 KDDI 12,873 Nomura Holdings 12,473 IHI 10,550 Proceeds For the year ended 28 February s Sompo Holdings 35,741 Hoya 20,998 Sumitomo Heavy Industries 15,982 SCREEN Holdings 14,987 HIS 13,327 Jafco 12,356 Disco 12,080 Haseko 11,576 TDK 11,169 Konica Minolta 10,141 36

37 Statement of Total Return For the year ended 28 February 2018 Income Notes 000 s 000 s 000 s 000 s Net capital gains 2 188, ,435 Revenue 3 53,933 51,356 Expenses 4 (26,696) (23,648) Net revenue before taxation 27,237 27,708 Taxation 5 (5,392) (5,133) Net revenue after taxation 21,845 22,575 Total return before distributions 210, ,010 Distributions 6 (22,167) (22,640) Change in net assets attributable to unitholders from investment activities 188, ,370 Statement of Change in Net Assets Attributable to Unitholders For the year ended 28 February s 000 s 000 s 000 s Opening net assets attributable to unitholders 2,380,096 2,006,228 Amounts receivable on issue of units 411, ,006 Amounts payable on cancellation of units (347,952) (611,082) 63,119 (280,076) Dilution adjustment 2,650 2,308 Change in net assets attributable to unitholders from investment activities 188, ,370 Retained distribution on Accumulation units 14,852 14,262 Unclaimed distributions 0 4 Closing net assets attributable to unitholders 2,649,006 2,380,096 37

38 Balance Sheet As at 28 February Notes 000 s 000 s Assets Investments 2,634,665 2,347,372 Current assets Debtors 8 10,171 17,784 Cash and bank balances 22,967 33,300 Total assets 2,667,803 2,398,456 Liabilities Investment liabilities (2,517) (2,811) Creditors Distributions payable (7,893) (6,568) Other creditors 9 (8,387) (8,981) Total liabilities (18,797) (18,360) Net assets attributable to unitholders 2,649,006 2,380,096 38

39 Notes to the Accounts 1 Accounting policies Basis of preparation The accounts have been prepared under the historical cost basis, as modified by the revaluation of investments, and in accordance with the SORP for UK Authorised Funds issued by the IMA in May 2014 and in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 102 (The Financial Reporting Standard Applicable in the UK and Republic of Ireland (FRS 102)). Revenue Dividends receivable from equity investments are recognised net of attributable tax credits and are credited to revenue when they are first quoted ex-dividend. Interest receivable from bank balances is accounted for on an accruals basis. Special dividends Special dividends are treated as revenue or capital depending on the facts of each particular case. Expenses Expenses of the fund are charged against revenue except for costs associated with the purchase and sale of investments which are allocated to the capital of the fund. The costs of establishing and maintaining the hedging programme for the hedged unit classes, the liabilities, expenses and charges directly attributable to a hedged unit class will be allocated to the capital of that specific hedged unit class. Taxation Corporation tax is provided for on the revenue liable to corporation tax less deductible expenses. The tax effect of different items of revenue or expenses is allocated between revenue and capital using the marginal basis. Deferred taxation is provided for on all timing differences that have originated but not reversed by the balance sheet date, other than those differences regarded as permanent. Any liability to deferred taxation is provided for at the average rate of taxation expected to apply. Deferred tax assets and liabilities are not discounted to reflect the time value of money. Distributions The revenue available for distribution is the total revenue earned by the fund, less deductible expenses and taxation charged to revenue. The revenue is distributed annually on 30 April to Income unitholders. For Accumulation units this revenue is not distributed but automatically reinvested in the fund and is reflected in the value of these units. 39

40 Notes to the Accounts (continued) Distributions which have remained unclaimed by unitholders for more than six years are credited to the capital property of the fund. Dilution adjustment In certain circumstances the Manager may apply a dilution adjustment on subscriptions and redemptions of units. If applied, the dilution adjustment is paid to the fund. See Prospectus for further details. Dilution adjustments include an estimate of dealing costs and the spread on underlying investments. The transactional revenue earned from the spread (the difference between the creation price and the cancellation price), to the extent that in respect of any Dealing Day subscriptions are netted off against redemptions has been paid by the Manager into the fund and is included within the dilution adjustment in the Statement of Change in Assets Attributable to Unitholders. In the prior year amounts receivable from the Manager were included under Debtors in the Notes to the Accounts and in the Balance Sheet. Valuation Listed investments of the fund have been valued at market value at 18:00 on the balance sheet date. Market value is defined by the SORP as fair value which generally is the bid value of each security. Forward foreign currency contracts Open forward foreign currency contracts are shown in the Portfolio Statement at market value and the net realised gains/(losses) are reflected under Net capital gains in the Notes to the Accounts and relate to the GBP hedged unit classes only. Foreign currencies Transactions in foreign currencies are translated into sterling at the exchange rate prevailing on the date of the transaction. Assets and liabilities valued in foreign currencies have been translated into sterling at the exchange rates prevailing at the balance sheet date and the net (losses)/gains are reflected under Net capital gains in the Notes to the Accounts. 40 GBP hedged unit classes Hedged unit classes allow the Manager to use currency hedging transactions to seek to minimise the effect of exchange rate fluctuations between the base currency and the portfolio currency of the fund. Currency hedging transactions include entering into over the counter currency forward contracts and foreign exchange agreements. Where undertaken, the effect of hedging will be reflected in the net asset value and therefore, in the performance of the relevant hedged unit class. Any benefits or losses of the hedging transactions will accrue to unitholders in that hedged unit class only.