Final Results

RNS Number : 2176U

Nippon Active Value Fund PLC

01 April 2021

Nippon Active Value Fund plc

LEI: 213800JOFEGZJYS21P75

Final Results

The Board of Nippon Active Value Fund plc (the "Company" or "NAVF") is pleased to announce the Company's final results for the period ending 31 December 2020.

Enquiries:

Tom Daish / Sylvanus Cofie

PraxisIFM Fund Services (UK) Limited

020 4513 9260

ANNUAL REPORT FOR THE PERIOD FROM INCORPORATION ON 22 OCTOBER 2019 TO 30 DECEMBER 2020

LEI: 213800JOFEGZJYS21P75

Investment objective, financial information and performance summary

Investment Objective

The investment objective of the Company is to provide Shareholders with attractive capital growth through the active management of a focussed portfolio of quoted companies which have the majority of their operations in, or revenue derived from, Japan and that have been identified by the Investment Adviser as being undervalued.

Financial Information

	At
	31 December 2020

Net assets (millions)	£117.0

Net asset value ("NAV") per Ordinary Share ("Share") - (pence) ¹	113.58p
Share price - (pence)	106.50p

Share price discount to NAV ²	6.23%
Ongoing charges ²	1.60%

Performance Summary

	For the period to
	31 December 2020
	% change
NAV total return per Share ^2,3	+13.6
Share price total return per Share ^2,3	+6.5
MSCI Japan Small Cap index (sterling terms)	+8.04

1 This is measured on a cum income basis.

2 These are Alternative Performance Measures ("APMs"). An APM is a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework. Definition of these and other APMs used in this report, together with how these APMs have been calculated are disclosed in the Annual Report.

3 Total returns are stated in GBP sterling, including dividend reinvested. These are based on the period from the Company's launch date

(commencement of operations) on 22 February 2020 to 31 December 2020, with both starting NAV per Ordinary Share and share price of 100p.

Source: Bloomberg

Chairman's Statement

Overview of the period

It is with great pleasure that I present the first annual report of Nippon Active Value Fund plc ("the Company" or "NAVF"), covering the period from the Company's incorporation on 22 October 2019 to 31 December 2020 ("the Period"). On

21 February 2020, the Company's shares were admitted to the Specialist Fund Segment of the Main Market of the London

Stock Exchange. On the same day, trading of the Ordinary Shares commenced on the London Stock Exchange.

Initial Public Offer ("IPO") subscriptions to the Company totalled £103 million. By the end of the period, net assets had risen to £117 million, representing a net asset value ("NAV") of 113.58 pence per share, a rise of 13.6% since IPO. The closing share price at the period end was 106.50 pence, trading at a discount of 6.23% to NAV.

Our Investment Adviser, Rising Sun Management ("RSM"), were able to take advantage of falling markets in the first half of the Company's reporting period in building the Company's initial positions. Their strategy is to identify companies trading at significant discounts to book value, with high cash or cash equivalents on their balance sheets. Most targets are expected to be relatively small companies and in the second half of the period lower trading volumes and short-term market volatility slowed the rate of investment a little. At the period end, the Company had invested approximately 85.0% of the IPO proceeds in 20 holdings. The Company has continued to add steadily to its positions since the end of the period.

Dividend

The Company's intention is to achieve its returns primarily through capital appreciation. As such, no specific dividend policy has been established and any distributions will be made entirely at the discretion of the Board, taking into consideration the requirement to ensure the Company's compliance with the rules relating to and maintaining the Company's investment trust status.

The Board is pleased to have declared on 26 March 2021, the Company's inaugural dividend for the period of 0.85 pence per Ordinary Share. The dividend will be payable on 30 April 2021 to Shareholders who appear on the register by close of business on 9 April 2021, with an ex-dividend date of 8 April 2021. The Board will not target a dividend for future years but will substantially pay out distributable income for any particular period by way of dividend.

The impact of the COVID-19 pandemic on our service providers

As I reported in the interim report, all of our key service providers successfully adjusted their working practices to accommodate the working from home requirements that were implemented in response to the COVID-19 pandemic. The

Board has received assurances from the Alternative Investment Fund Manager ("AIFM"), RSM and Company Secretary that the management of the portfolio and the strong controls environment of all our third-party providers have continued as normal and that no issues have been identified.

Engagement with investee companies is central to our Investment Adviser's strategy. With Japan's borders essentially closed since April 2020, their meetings with companies have by necessity moved to a 'virtual' format. Encouragingly, RSM have been able to schedule meetings without significant problems, other than occasionally unsociable time slots for the attendees based outside Japan.

Foreign Exchange and Foreign Trade Act ("FEFTA")

As I reported at the interim stage, the Japanese Government amended the FEFTA in 2020, with revisions taking full effect from June last year. The amended FEFTA has expanded the list of companies in Designated Business Sectors deemed to have some bearing on national security. Foreign investors in those industries are required to notify the Bank of Japan when their holdings reach certain thresholds. In the case of the most sensitive industries, prior notification of investment is mandatory. There are also restrictions on the types of proposals that foreign investors can submit to the AGMs of companies in Designated Business Sectors.

The amended regulations had only minimal impact on RSM's initial list of target investments. The Company's AIFM and Investment Adviser were able to implement procedures to ensure that the Company complies with the new filing requirements in a timely manner. I am happy to report that these have been proceeding smoothly and that our Investment Adviser is confident that their ability to implement the strategy set out in our Prospectus has not been affected.

Corporate Governance

The Board has procedures in place to ensure that the Company complies with the Association of Investment Companies Code of Corporate Governance, which was revised in 2019 to incorporate revisions to the Financial Reporting Council's UK

Corporate Governance Code issued in 2018. Further details can be found in the Annual Report.

Annual General Meeting ("AGM")

Your Company's first AGM is scheduled for 12 May 2021. At the time of writing, it is still not possible to allow shareholder attendance at AGMs because of the current UK COVID-19 Regulations. Arrangements have been made for shareholders to attend by video conference, further details of which are contained in the Notice of Meeting in the Annual Report.

However, the Board strongly encourages all Shareholders to exercise their votes by completing their proxy forms and welcomes questions for the Board or the Investment Adviser either by writing to the Company Secretary using details provided in the Annual report or emailing navfcosec@praxisifm.com.

Gearing

The Company may, once the IPO proceeds have been fully invested, introduce borrowings primarily in the form of bank loans or other bank credit facilities. The Company may maintain gearing at a level which the Directors, the AIFM and RSM consider to be appropriate and borrow an amount not exceeding 20 per cent. of the Company's NAV at the time of drawdown. There was no gearing during the period under review and as at the period end. Further information on the Company's gearing policy is disclosed in the Annual Report.

Outlook

The Company seeks to take advantage of the corporate governance reforms in Japan introduced over the past fifteen years.

The Abe government implemented regulations encouraging companies to establish goals for returns on equity, for reducing cross shareholdings in unrelated businesses and for increasing pay-outs to shareholders. We believe Abe's successor, Prime Minister Suga, remains committed to continuing governance improvements. Last year the Tokyo Stock Exchange announced that it will reorganise Index constituents in April 2022 and will take into account compliance with corporate governance regulations when determining inclusion in the premium indices.

My Board colleague, Alicia Ogawa, Director of the Project of Japanese Corporate Governance and Stewardship at the Columbia Business School in New York has highlighted recent trends in Japanese corporate governance in more detail below.

RSM focusses on companies that have excess capital over and above that required for the operation of their business and seeks to persuade companies to distribute excess cash to shareholders by repurchasing their shares in the market or paying out larger cash dividends. Their engagement with management has begun in earnest and the results of their discussions are beginning to be apparent in the Company's portfolio returns. The Investment Adviser's Report gives some case studies of investments made and the results of engagement with the holdings that have been disclosed to the market.

The Board remain confident of the potential of significant returns from the Company's current investments and the prospects for identifying attractive targets for reinvesting the proceeds of any disposals. RSM will continue to seek out undervalued opportunities with the potential to unlock value to all Shareholders, a strategy which we believe can generate positive absolute returns in a range of market environments.

Rosemary Morgan

Chairman

31 March 2021

Japanese Corporate Governance Update

Progress on corporate governance in Japan and unlocking of corporate value

Investors with a long experience of Japanese capital markets will recognise the key feature of the traditional Japanese business model - a bank-centric system of corporate finance, characterised by a system of cross shareholdings between customers, banks, suppliers, and other related entities. These cross shareholdings created an insular bubble in which the members of the 'extended family' were accountable only to each other, and whose primary goal was the preservation of the status quo. True financial investors were ignored. Prime Minister Abe identified this system as the key factor holding back the profitability and productivity of Japanese companies, and introduced the Stewardship Code in 2014, quickly followed by the Corporate Governance Code in 2015. These were sets of rules defining ways in which investors should hold managements accountable, and ways in which corporations should be more transparent and receptive to outsiders.

Both the return on equity for the MSCI Japan index and the level of Nikkei 225 have roughly doubled since then, no doubt in large part due to these initiatives. Nevertheless, on many standard measures of capital efficiency and return, Japan still lags other developed markets. The good news is that the government continues to introduce new rules and standards which are prodding companies to improve shareholder value for all investors as follows:

• The Japanese Ministry of Economy, Trade and Industry (METI) released a white paper in July 2020 requiring that company boards conduct a data-based annual review of their portfolio of operations, and to be prepared to identify business units not covering their cost of capital.

• The Corporate Governance Code was revised in 2018 to ask for disclosure of cross-shareholdings; it also required companies to engage with shareholders. A Financial Services Agency committee is currently in session to develop an agenda for the next revision of the Code and is expected to announce its list of key topics this Spring. Its

recommendations for new revisions are expected to include: more rigorous standards for board director independence and ESG disclosures; greater transparency on dividend policy; and strict guidelines on governance of listed subsidiaries, among other proposals.

• The Stewardship Code was revised in 2017 in order to require that asset managers disclose the votes they cast at annual shareholder meetings.

• The Corporate Office Decree on Disclosure of Corporate Details was revised in 2019 to stipulate more expansive disclosure of companies' shareholdings in their annual reports. Companies must now disclose the 60 largest holdings they own; previously the requirement was the top 30. They must also provide a rationale for such holdings.

• In June 2019, in anticipation of an increase in management buyouts and public companies taking over their listed subsidiaries, the Japanese Ministry of Economy, Trade and Industry published the first changes to its mergers and acquisition guidelines in more than a decade. The aim is to increase protection of minority shareholder's rights in such transactions.

• We are already in the middle of a public comments period on proposals to aggressively re-vamp the Tokyo Stock Exchange, expected to begin in 2022. The most noteworthy change will be to do away with the TSE-1, and to create a new "Prime" section, which will include only those companies with superior governance and low levels of cross-shareholdings. These initiatives were made possible by a change in public opinion about the traditional ways in which Japanese companies have been run. Perception of shareholder activism in Japan is indeed changing - activists are no

longer assumed to be evil destroyers of Japanese tradition but are often now regarded as a force for the general good.

The number of shareholder proposals reached record numbers in 2019 and although this activity was impacted by the

COVID-19 pandemic, proposals in 2020 remained at high levels. More importantly, it has been widely reported that a large portion of activist interventions take the form of private negotiations. The number of public proxy fights is not a good indicator of the degree to which Japanese companies are becoming aware of the necessity of listening to their shareholders, and of responding to them.

There have been some recent headline cases of a small number of Japanese companies who have tried to avoid pressure from shareholders. But the far broader trend is unmistakable and relentless: Japanese companies are now becoming more and more subject to the discipline of the market, and a number of firms are embracing these new trends in a pro-active way. Such firms realize that the influence of outsiders may help spur value creation and technological progress. Investors can partner with these firms in producing new value for all stakeholders.

Alicia Ogawa

Director

31 March 2021

Investment Adviser's Report

Overview

Despite what has been an extraordinary year by any measure, 2020 has proved to be a remarkable testament to the resilience of financial markets generally. Many stock markets around the world, particularly those in the US and, more narrowly, in the technology sector, have enjoyed genuinely storming start to the year. In Japan, the main Nikkei 225 index was up 16.01% while the MSCI Japanese Smaller Companies index managed 6.84% for the calendar year to 31 December 2020.

By comparison, from the Company's launch on 22 February 2020 to the end of December 2020, net assets, including income, had grown from the £103 million raised at launch to £117 million, while the NAV per Share had reached 113.58p from the 100.00p par value at which initial subscriptions were made. We do not measure the Company's performance against any specific metric or index, but it is worth noting that these returns were more than that of the MSCI Japanese Smaller Companies index with a return in sterling terms of 8.04% over the same period. Over the same period, NAVF's Share price reached 106.50p, trading at a discount of 6.23% to NAV, which we believe represented a lack of liquidity as much as a lack of interest. By period end, 85% of the IPO funds had been put to work with a Price/Earnings ratio of 11.9x and an enterprise value to the earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) of 3.5x.

A factsheet giving further detail of the composition of the portfolio by industry sector, as well as value metrics across all NAVF's holdings is published at the end of each month and is available, together with quarterly market commentaries on our activities, on NAVF's website: www.nipponactivevaluefund.com.

The portfolio was initially constructed of 20 names and virtual meetings with management were held with the majority, as well as activist engagement commencing, initially with three of them. By period end, the 5% of outstanding issued share capital threshold, beyond which a filing is required by the Japanese Financial Instruments and Exchange Act rules (known as FEFTA), had been exceeded with respect to four of NAVF's holdings: Ebara Jitsugyo, Sakai Ovex, Nihon Denkei and in conjunction with Earle 1927 LLC (a Special Purpose Vehicle formed specifically for this target), Intage Holdings. In each case, the relevant filing was made, and given the requirement to update these at further 1% increments to each position, we have since declared amassing more than 6% in Sakai Ovex and Intage Holdings.

Activism and portfolio rationalisation

As with any portfolio, we are happier with some of the holdings than we are with others. We have decided to sell two of the portfolio positions, albeit for different reasons. The first is so illiquid from a trading perspective that it has proved impossible to assemble a meaningful holding. The second stock, although technically very inexpensive and offering tremendous potential for value to be extracted, is run by a management team that will, we believe, be immune to our blandishments to change direction. Exiting the first will have a negligible effect on the Company's NAV while the sale process of the other was begun at broadly a 45% profit. We welcome the additional firepower these sales will afford and continue to review options for its deployment.

Our discussions with various Private Equity investment funds, both domestic and international, has continued. However, the failure of one of our preferred partners to become involved in the strategic opportunity created by our engagement with Sakai Ovex (see below) is a timely reminder of the reluctance of this class of investor to be seen to act aggressively and without management's blessing. We have begun discussions with the Board and The Northern Trust Company ('NT') to put in place credit lines to provide some leverage as envisioned in the Company's prospectus. As of the date of this report, we expect to agree an overdraft facility with NT. As cash depletes (see below), we will still be able to act opportunistically and approach the Board for permission to borrow knowing that hard to secure credit lines are in place.

Our preferred methodology to gain the attention of our investee companies has been to hold introductory, and unfortunately, given the times, virtual meetings. These are then followed up with letters suggesting where we see weaknesses in the individual company's structure and/or business operations and making recommendations as to how the interests of all stakeholders might be closer aligned financially. To date, we have sent letters to three companies. Those to

Ebara Jitsugyo and Sakai Ovex have already enjoyed some success (discussed below) and we have included case studies of these two businesses prepared by our analysts in Tokyo with this report.

Environmental Social Governance (ESG)

Although the 20 companies in our portfolio were not selected specifically on their ESG credentials, some, such as Ebara Jitsugyo, are already heavily engaged in environmental business areas, actively contributing to the 'green' and 'sustainability' sectors. The key component of the ESG agenda that is most pertinent to RSM/NAVF's activities relates to portfolio companies' adherence to the corporate governance rules and recommendations promulgated over several years, since the Shareholder Stewardship Code first appeared in 2014, by the Abe and now the Suga governments. The central tenet of our activist argument is that it is only by embracing corporate governance change, especially with regard to Board structure and review, the appointment of independent directors and the enthusiastic allocation of appropriate stock incentives to both senior management and employees generally, that a genuine focus on efficient capital allocation and the better alignment of financial and ethical interests of all stakeholders can be achieved.

Ebara Jitsugyo, Sakai Ovex and developments since year-end

The first few months of 2021 have been busy. We have continued to realise positions in the two stocks we decided to sell. The price of the more liquid counter has come down as we sold into the bid and we have decided to retain a 1% holding to give us the ability to ask questions and, perhaps, make proposals at the forthcoming AGM. Increasing sales proceeds coupled with a reasonable start to the year for the Japanese mid-cap sector, initially caused NAVF's cash reserves to rise again to above 15% of the portfolio's overall value. RSM's Management Committee has continued to meet frequently and has resolved to accelerate the purchasing of several of the favourite targets, either by increasing the number of shares we intend to accumulate or by raising our maximum prices on those that have moved beyond our earlier limits. This has brought available cash back down to approximately 10% as of the date of this report and this will continue to fall as we put it to work. One lesson learnt early is that the efficacy of our approach to managements is in direct correlation to the size of NAVF's holdings - the more leverage we have, the more we are taken seriously. It has been good to have additional firepower to deploy on our original ideas, most of which continue to offer undiminished promise and scope for capital allocation reform.

Two of the companies in which NAVF has assembled its largest positions, both over 6% of total equity capital, are Ebara Jitsugyo (EJ) and Sakai Ovex (SO). The managements of both have chosen to engage with us and hear our arguments, both written (SO has been the recipient of three letters, EJ two) and multiple meetings, whether over Zoom, or, in the case of my colleague Kazutaka Mizuochi's visit to SO's HQ in Fukui Prefecture, in person. The results have been mixed but encouraging.

EJ's business has been performing well throughout the pandemic and this has allowed management to raise forecasts in its last two quarterly updates. In our letters, and given the Company's manifest ability to afford them, we have been advocating increased dividends and share buy-backs. It is gratifying that, so far, the dividend has been raised from yen 60 a share, first to yen 100 and then to yen 110. We continue our dialogue with management and expect more good news soon. EJ is about to announce its future dividend pay-out ratio policy at the forthcoming AGM and, although we do not expect their complete acceptance of RSM's recommendations (which should be put to the meeting), there can be no doubt that we have begun a journey together. Since NAVF was launched and we first started buying EJ, the stock is up almost 250%.

SO is even more gratifying. Our third letter to the Company in late November 2020 proposed SO undertake a Management Buy-out (MBO) to be organised by NAVF in conjunction with one or more of our Private Equity house friends. The suggested price was yen 2,350 per share, a 12% premium to the then market level. In response, Mr Matsuki, SO's President, launched his own tender for the whole Company with the backing and advice of Mizuho Securities on 9 February 2021. The tender price was yen 2,850, though after the announcement of the intention to delist the Company, the shares traded consistently above this level, resulting in Mr Matsuki increasing the offer price to 3000. NAVF agreed to tender all its shares (6.06%

of the market capitalisation) into the offer giving an approximately 38% profit against our average purchase price. On 24 March 2021, Mr Matsuki announced that his tender offer has failed, falling 3.5% short of the 67% target. RSM continues its dialogue with SO's management and still expect to see developments in the company's ownership in the coming months. RSM has recently sent first letters to another couple of target companies.

Below case studies have been provided for of both EJ and SO.

CASE STUDY 1 : Ebara Jitsugyo (6328 JP)

Ebara Jitsugyo ("Ebara") manufactures pumps and other water handling equipment for industrial applications and municipal utilities. It is a very "green" business with growing sales in wastewater treatment and environmental remediation as well as a stable after-market niche in traditional supplies for plumbing and heating and ventilating systems. The company outsources much of its manufacturing to third parties and, as such, enjoys a very high return on invested capital because of its design capability.

Given its high return on capital and reasonable valuation, we began purchasing shares in Ebara Jitsugyo back in February 2020. With no debt and a large amount of surplus cash on the balance sheet (roughly equivalent to the company's market capitalization of just under £90 million at the time), we felt Ebara could easily improve shareholder returns through one or more simple capital allocation decisions.

After a series of conversations with management, we proposed that they consider a buyout of the public shareholders. This would give public shareholders an exit at a price much higher than any that the stock had reached in recent years and would spread ownership of the equity across the employee base. In the event, the company's management elected to remain publicly traded; but they agreed with us that they should do more to reward shareholders.

Last Autumn, they announced a substantial increase (more than 60%) in the annual dividend and this had an immediate effect on the share price. In addition, in the past month, the company has announced a further 40% increase in the dividend and committed to maintaining a consistent payout ratio.

Whilst we believe that there is still more the company can do to reward shareholders (it still retains a very large cash balance, for instance) we are gratified that the share price has increased dramatically (by more than 130%) and has now climbed to a level where the price is closer to reflecting the intrinsic value of the company.

CASE STUDY 2 : Sakai Ovex (3408 JP)

Sakai Ovex is a small-cap (£128 million) provincial company in the textile industry. The company provides finishing and dyeing services to larger textile manufacturers, engages in some textile trading and has a growing business in the

manufacture of control systems for factories. More recently, it has started a joint-venture with its largest customer, Tokyo

Rayon, to provide textiles to Chinese manufacturers, most notably the Chinese production facilities of Fast Retailing, which owns the Uniqlo brand.

We identified Sakai Ovex as a consistently profitable company that had accumulated significant financial assets on its balance sheet, had virtually no debt and no large controlling shareholder. (The Chairman, owning less than one percent of the equity, is the only employee with a significant stake in the business.) This is precisely the profile of the sort of Japanese company that NAVF believes is a candidate for financial restructuring to enhance value for all shareholders. With £57 million of net surplus financial assets on its balance sheet and stable profits of £13 million, it was clear that Sakai Ovex had multiple options that it could employ to improve returns for shareholders.

We began purchasing our stake in the company last Spring and engaged with the management through a series of virtual meetings followed up by letters with suggestions of how they might restructure the balance sheet, either through a large share repurchase programme or a one-time capital payout or a succession of enhanced dividends. We also offered to help them structure a management buyout of the public shareholders to provide equity ownership for all employees. This proposal was formalized and publicly announced in both London and Tokyo in late November last year.

Our recommendations were received politely, although it did not appear that we were making much impact on management's thinking at first. Then, somewhat to our surprise, in December 2020, the Chairman contacted us with a proposal that he would lead a buyout of the company with the help of Mizuho Securities (a large Japanese investment bank). Rising Sun's President, Mizuochi-sensei immediately went to visit the Chairman and helped him shape his proposed buyout. In exchange for our support, NAVF was offered the opportunity to participate in the new private company, Sakai Textiles, which would be the successor to the public company. NAVF, for a tiny investment, was offered preferred shares, convertible under certain circumstances, into nine percent of the new entity.

Unfortunately, the transaction was not fully subscribed, but we are hopeful that this experience will be the harbinger of other such opportunities for NAVF. Our engagement with SO would have led to a much higher stock price for all shareholders, would solve the problem that small companies in Japan face of possible demotion to the second section of the stock market, and would result in more members of management owning stock in the new private company, always one of our stated objectives. We feel that NAVF played a very constructive role in what should have been a successful outcome for all parties if the Company's MBO proposal had been successfully executed. RSM continues its dialogue with SO.

Rising Sun Management Limited

31 March 2021

Portfolio Sectors Breakdown

As at 31 December 2020

Top ten holdings by sector

	Percentage of
	net assets (%)

Consulting	11.7

Mining	9.8

Engineering	9.6

Industrial	7.0

Industrial	6.7

Industrial	6.3

Industrial	5.1

Industrial	5.1

Finance	4.9

Pharmaceutical	3.1

Top ten holdings	69.3

Other net assets	30.7

Total	100.0

Portfolio characteristics

Equity Investments	88%
Price/Book	0.95
Adjusted Price/Book	0.69
Price/Earnings	11.9x
EV/EBITDA	3.5
Net Cash/Mkt Cap	24.3%
Adjusted Cash/Mkt Cap	38.3%
Net Working Capital/Market Cap	56.1%

Investment Policy, Results and Other Information

Investment objective

Investment policy

The Company will invest in a highly concentrated portfolio of shares issued by quoted companies which have the majority of their operations in, or revenue derived from Japan, and which the Investment Adviser deems attractive and undervalued and typically where (i) cash constitutes a significant proportion of the investee company's market capitalisation; and (ii) the relevant company has no controlling or majority shareholders.

The Board will not set any limits on sector weightings or stock selection within the portfolio. The Board will apply the following restrictions on the size of its investments:

• not more than 30 per cent. of the Gross Asset Value at the time of investment will be invested in the securities of a single issuer (such restriction does not, however, apply to investment of cash held for working capital purposes and pending investment or distribution in near cash equivalent instruments including securities issued or guaranteed by a government, government agency or instrumentality of any EU or OECD Member State or by any supranational authority of which one or more EU or OECD Member States are members); and

• the value of the four largest investments at the time of investment will not constitute more than 75 per cent. of the Gross Asset Value.

The Company will not be constrained by any index benchmark in its asset allocation.

Additionally, while the Company intends that the majority of its investments will be in quoted companies, it may also make investments in unquoted companies and the Company may become invested in unquoted companies as a result of corporate actions or commercial transactions undertaken by quoted companies. The Company will only make investments in unquoted companies in order to maintain or improve its position in relation to a business which operated through a quoted entity at the time of the Company's initial investment in that business. In any event, the Company will only make an investment in an unquoted company if the aggregate interest of the Company in unquoted companies at the time of such investment is not more than 10 per cent. of the Net Asset Value of the Company at that time.

This will mean that, if a quoted portfolio company is delisted or an unquoted investment is revalued with the effect of increasing the Company's interest in unquoted investments to above 10 per cent. of the Company's Net Asset Value at that time, the Company will not be in breach of its investment policy and will not have to divest itself of any unquoted investments. However, while the Company's interest in unquoted investments remains above 10 per cent. of its Net Asset Value, the Company will not be able to make any further investments in unquoted companies.

Investment restrictions

There will be no restrictions placed on the market capitalisation of investee companies, but it is expected that the portfolio will be weighted towards small cap companies with market capitalisations of up to US$1 billion. Once fully invested, the portfolio is expected to have up to 20 holdings although there is no guarantee that this will be the case and it may contain a lesser or greater number of holdings at any time.

The Company intends to acquire large minority stakes of typically 4.9 to 25.0 per cent. in each investee company.

Nevertheless, in certain limited circumstances the Company may acquire a larger stake in an investee company if the investment case so warrants. The Company will not, however, acquire any stake which could cause a change in its status as an investment trust under Chapter 4 of Part 24 of the Corporation Tax Act 2010. The Company intends to have invested substantially all of the proceeds of the Issue within six months of the date of First Admission.

The Company will comply with the following investment restrictions for so long as they remain requirements of the Listing Rules (relevant elements of which the Company has voluntarily undertaken to comply):

· neither the Company, nor any of its subsidiaries will conduct any trading activity which is significant in the context of the Group as a whole;

· no more than 10 per cent., in aggregate, of the value of the total assets of the Company will be invested in other listed closed-ended investment funds; and

· the Company must, at all times, invest and manage its assets in a way which is consistent with its object of spreading investment risk and in accordance with the published investment policy.

Treasury policy

Until the Company is fully invested, and pending re-investment or distribution of cash receipts, the Company will invest in cash, cash equivalents, near cash instruments and money market instruments.

The Company expects to maintain any non-operational cash balances in Japanese yen.

The Company may also use derivatives for gearing and efficient portfolio management purposes.

Gearing Policy

The Company does not have a borrowing facility but may, in the future, use borrowings and other gearing to seek to enhance investment returns at a level (not exceeding 20 per cent of the Company's net assets calculated at the time of drawdown) which the Directors, the AIFM and Rising Sun consider to be appropriate. It is expected that gearing will primarily comprise bank borrowings, public bond issuance or private placement borrowings, although overdraft or revolving credit facilities may be used to increase acquisition and cash flow flexibility. The Company expects all debt to be denominated in Japanese yen.

Hedging Policy

Although the Company does not currently intend to enter into any arrangements to hedge its underlying currency exposure to investments denominated in Japanese yen, it may in future, at its discretion, enter into currency hedging arrangements using futures, forwards, swaps or other derivative instruments.

Dividend policy

The Company's intention is to look to achieve its results primarily through capital appreciation. As such, no specific dividend policy has been established and any distributions will be made entirely at the discretion of the Board.

Distribution policy

The Company believes that the substantial undervaluation of Japanese equities, coupled with an activist strategy designed to unlock underlying value should allow the Company to achieve significant investment results over time. Given the nature of this strategy, however, it is possible that such returns could be "lumpy" and unpredictable. Accordingly, the Company will target results primarily through capital appreciation. No specific dividend policy will be established in the first instance and any distributions will be made entirely at the discretion of the Board. Notwithstanding the foregoing, the Company will make such distributions as may be required to ensure compliance with the rules relating to investment trusts.

Key performance indicators ("KPIs")

The Board measures the Company's success in attaining its investment objective by reference to the following KPIs:

(i) Long-term capital growth

The Board considers the NAV and Share price total return figures to be the best indicator of performance over time and this therefore is the main indicator of performance used by the Board. The NAV and Share price total return from the Company's inception to 31 December 2020 was 13.6% and 6.5% respectively.

(ii) Revenue return per Share

The Company's revenue return per Ordinary Share based on the weighted average number of shares in issue during the period was 1.23p.

(iii) Discount/premium to NAV

The discount/premium relative to the NAV per Share represented by the share price is closely monitored by the Board. The Share price closed at a 6.23% discount to the NAV as at 31 December 2020.

(iv) Control of the level of ongoing charges

The Board monitors the Company's operating costs carefully. Based on the Company's average net assets for the period ended 31 December 2020, the Company's ongoing charges figure calculated in accordance with the AIC methodology was 1.60%.

Risks and Risk Management

Principal and emerging risks and uncertainties

The Company has carried out a robust assessment of its principal and emerging risks and the procedures in place to identify any emerging risks are described below.

Procedures to identify principal or emerging risks

The Board regularly reviews the Company's risk matrix and focusses on ensuring that the appropriate controls are in place to mitigate each risk. The experience and knowledge of the Board is important, as is advice received from the Board's service providers, specifically the AIFM, who is responsible for the risk and portfolio management services and outsources the portfolio management to the Investment Adviser. The following is a description of the work that each service provider highlights to the Board on a regular basis.

1. Investment Adviser: the Investment Adviser provides a report to the Board at least quarterly or periodically as required on industry trends, insight to future challenges in the Japanese equity sector including the regulatory, political and economic changes likely to impact the sector;

2. Alternative Investment Fund Manager ('AIFM'): following advice from the Investment Adviser and other service providers, the AIFM maintains a register of identified risks including emerging risks likely to impact the Company;

3. Broker: provides advice periodically specific to the Company on the Company's sector, competitors and the investment company market whilst working with the Board and Investment Adviser to communicate with shareholders;

4. Company secretary and auditor: briefs the Board on forthcoming legislation/regulatory change that might impact on the Company. The auditor also has specific briefings at least annually;

5. Association of Investment Companies (AIC): The Company is a member of the AIC, which provides regular technical updates as well as drawing members' attention to forthcoming industry and regulatory issues.

Procedure for oversight

The Board is responsible for the management of risks faced by the Company. The principal and emerging risks, together with a summary of the processes and internal controls used to manage and mitigate risks where possible are outlined below.

Risk	Risk Mitigation

The Company may not meet its	The Investment Adviser has a well-defined investment strategy and process
investment objective.	which is regularly and rigorously reviewed by both the independent Board of
	Directors and the AIFM.
	The Investment Adviser has a contract in place which defines the duties
	and responsibilities of the Investment Adviser and has safeguards in place
	including provisions for the termination of the agreement upon 12 months'
	notice, not to be served within the first 4 years from First Admission.
	The Investment Adviser has stated that it will run a diversified portfolio and
	the Board reviews the composition of the portfolio and its performance of
	the Company at each Board meeting. A review of transactions is performed
	at each quarterly Board meeting.
	Management Accounts, and Income and expense forecasts are reviewed at
	the quarterly Board meetings.
	The Investment Adviser sends the Board its monthly newsletter/factsheet
	and an investment report on a quarterly basis.
	The Board considers the Investment Adviser and the AIFM's appointment on
	an annual basis.

Board fails to monitor whether there		The Investment Adviser provides individual company updates on both
is style drift within the investment		existing and target holdings regularly. These updates include key metrics
process.		that allow the Board to monitor whether these companies are consistent
		with the original investment thesis.
		Details of the portfolio composition are also provided regularly to allow
		the Board to see if the portfolio construction is consistent with investment
		guidelines.

The Company's Shares trade at a		The Investment Adviser, AIFM and Broker review market conditions on an
discount to Net Asset Value.		ongoing basis.
		Shares may trade to their Net Asset Value through further issues and buy-
		backs, as appropriate.
		Discount protection mechanism in place whereby the Board will consider
		whether, in light of prevailing market conditions, the Company should
		purchase its own shares.

Board fails to monitor the Company's		The Investment Adviser is continually in touch with the market and target
ability to build the Portfolio.		companies, allowing it to adjust accordingly.
		The Investment Adviser will inform the AIFM and Board as soon as they are
		aware of any issues.

Board fails to monitor the execution		If the Investment Adviser considers the opportunity to be appropriate after
of the Investment Process.		their extensive due diligence process, the Investment Adviser will send
		an initial recommendation to the Board and AIFM, to consider the target
		company.
		Upon approval of a target company by the Board and AIFM, the Investment
		Adviser will send a formal recommendation, outlining the rationale for the
		recommendation, along with the size of investment and forward to the AIFM
		for consideration.
		Upon receipt of approval from the AIFM, the Investment Adviser will arrange
		execution.
		The Board regularly carry out Investment Process reviews of the Investment
		Adviser.

Cyber Security risks could potentially		Cyber security policies and procedures are implemented by the Company's
lead to breaches		key service providers.
		The AIFM has cyber essentials accreditation, which is reviewed on a
		continuous basis.
		Penetration testing is carried out by the AIFM and Administrator every year.

Failure to provide notification		The Investment Adviser is tasked with notifying the AIFM at time of trade
of FEFTA/FOREX, FIEA threshold		whenever a deal has caused the holding to surpass a threshold.
clearances along with required		Filing is delegated to third party specialist Hibiya-Nakata, the Company's
information to Hibiya-Nakata to allow
for timely filing with the appropriate		Tokyo-based legal advisor.

regulatory bodies.		The AIFM performs their own weekly review of these limits against a
		portfolio that is reconciled to both the Investment Adviser and Custody
		records.
		Once a deal has surpassed a threshold, the AIFM continue to provide Hibiya-
		Nakata with any subsequent trades to ensure their records can be as up
		to date as possible, this will allow them to act quickly in the event that a
		subsequent threshold is passed.

It may be difficult for Shareholders			Secondary market liquidity can be improved by strong investor
to realise their investment and there			communications and having active brokers and market makers. The Broker
may not be a liquid market in the			monitors and reports to the Board as soon as they are aware of any issues.
Company's Shares.			Funding liquidity to satisfy redemption rights is not applicable, as the

			Company is a closed ended fund.

A corporate action is missed and the			The Custodian (Northern Trust) and Investment Adviser monitor such
Company suffers a consequential loss.			actions.
			Northern Trust is a very large and experienced global custodian and
			produces a controls report which is reported to the Board.

Viability Statement

The continuation of the Company is subject to the approval of Shareholders in 2025 and every second AGM thereafter. The Directors have assessed the viability of the Company for the period to 31 December 2023 (the "Period"). The Board believes that the Period, being approximately three years, is an appropriate time horizon over which to assess the viability of the

Company, particularly when taking into account the nature of the Company's investment strategy and the principal risks outlined above. Based on this assessment, the Directors have a reasonable expectation that the Company will be able to continue to operate and to meet its liabilities as they fall due over the Period.

In their assessment of the prospects of the Company, the Board considered each of the principal and emerging risks and uncertainties set out above and the liquidity and solvency of the Company. The Board also considered the Company's income and expenditure projections and the fact that the majority of the Company's investments comprise reasonably realisable securities, which could, if necessary, be sold to meet the Company's funding requirements including buying back shares in order for the Company's discount control policy to be achieved. Portfolio changes, market developments, level of premium/discount to NAV and share buybacks/share issues are discussed at quarterly Board meetings. The internal control framework of the Company is subject to a formal review on at least an annual basis.

The level of the ongoing charges is dependent to a large extent on the level of net assets. The Company's income from investments and cash realisable from the sale of its investments provide substantial cover to the Company's operating expenses, and any other costs likely to be faced by the Company over the Period of their assessment.

This assessment has included a detailed review of the market and operational risks associated with the COVID-19 pandemic, and the ongoing economic impact of measures introduced to combat its spread, which were also discussed in depth with the Investment Adviser and continually monitored by the Board throughout the year. The Investment Adviser and other key service providers have provided regular updates on operational resilience in light of the pandemic. The Board is satisfied that the key service providers have the ability to continue their operations efficiently in a remote or virtual working environment.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable laws and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. Additionally, the Financial Conduct Authority's Disclosure Guidance and Transparency Rules require the Directors to prepare the financial statements in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates which are reasonable and prudent;

• state whether international accounting standards in conformity with the requirements of the Companies Act 2006 and

International Financial Reporting Standards ("IFRS") adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union 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 also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and Article 4 of the IAS Regulation.

The Directors are responsible for the maintenance and integrity of the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' confirmation statement

The Directors, whose names and functions have been disclosed in the Corporate Governance section of this report, each confirm to the best of their knowledge that:

• the Company financial statements, which have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and

• this Directors' Report includes a fair review of the development and performance of the business and position of the

Company, together with a description of the principal risks and uncertainties that it faces.

Having taken advice from the Audit Committee, the Directors consider that the Annual Report and financial statements taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company's position and performance, business model and strategy.

For and on behalf of the Board

Rosemary Morgan

Chair

31 March 2021

Statement of Comprehensive Income

For the period from incorporation on

22 October 2019 to 31 December 2020

Period ended 31 December 2020

		Revenue	Capital	Total
	Note	£'000	£'000	£'000

Gains on investments	3	-	15,737	15,737

Income	4	1,996	-	1,996

Foreign exchange losses		-	(2,070)	(2,070)

Investment adviser fees	5	(157)	(626)	(783)

Other operational expenses	6	(725)	34	(691)

Profit before taxation		1,114	13,075	14,189

Taxation	7	(202)	-	(202)

Profit and comprehensive income for the period		912	13,075	13,987

Earnings per Ordinary Share - Basic and diluted (pence)	8	1.23p	17.61p	18.84p

There is no other comprehensive income and therefore the return for the period is also the total comprehensive income for the period.

The total column of the above statement is the profit and loss account of the Company. All revenue and capital items in the above statement derive from continuing operations.

Both the supplementary revenue and capital columns are both prepared under guidance from the Association of

Investment Companies ("AIC").

The notes form part of these financial statements.

Statement of Financial Position

At 31 December 2020

		31 December
		2020
	Note	£'000

Non-current assets

Investments at fair value through profit or loss	3	102,905

Current assets

Cash and cash equivalents		12,645

Trade and other receivables	9	1,707

		14,352

Current liabilities

Trade and other payables	10	(271)

		(271)

Net current assets		14,081

Net assets		116,986

Capital and reserves attributable to Shareholders

Share capital	11	1,030

Share premium		101,970

Capital reserve		13,074

Revenue reserve		912

Total equity		116,986

NAV per Ordinary Share (pence)	12	113.58p

Approved by the Board of Directors and authorised for issue on 31 March 2021 and signed on their behalf by:

Chetan Ghosh

Director

Nippon Active Value Fund plc is incorporated in England and Wales with registration number 12275668.

The notes form part of these financial statements.

Statement of Changes in Equity

For the period from incorporation on

22 October 2019 to 31 December 2020

		Share	Share	Capital	Revenue
		capital	premium	reserve	reserve	Total
	Note	£'000	£'000	£'000	£'000	£'000

Balance at 22 October 2019		-	-	-	-	-

Issue of Ordinary Shares	11	1,030	101,970	-	-	103,000

Profit for the period		-	-	13,074	912	13,986

Balance at 31 December 2020		1,030	101,970	13,074	912	116,986

The Company's distributable reserves consist of the capital reserve attributable to realised capital profits and revenue reserve.

The notes form part of these financial statements.

Statement of Cash Flows

For the period from incorporation on

22 October 2019 to 31 December 2020

		Year ended
		31 December
		2020
	Note	£'000

Operating activities cash flows

Profit before taxation*		14,189

Adjustment for:

Gains on investments	3	(15,737)

Increase in trade and other receivables		(372)

Increase in trade and in other payables		149

Tax withheld on overseas income	7	(202)

Net cash flow used in operating activities		(1,973)

Investing activities cash flows

Purchases of investments		(88,840)

Sales of investments		458

Net cash flow used in investing activities		(88,382)

Financing activities cash flows

Issue of Ordinary Share capital	11	103,000

Net cash flow from financing activities		103,000

Increase in cash and cash equivalents		12,645

Cash and cash equivalents at the beginning of the period		-

Cash and cash equivalents at the end of the period		12,645

* Cash inflow from dividends received for the period is £1,531,000

The notes form part of these financial statements.

Notes to the Accounts

1. GENERAL INFORMATION

The Company is a closed-ended investment company incorporated on 22 October 2019 in England and Wales with registered number 12275668 and registered as an investment company under Section 833 of the Companies Act 2006, as amended from time to time. The Company is an investment trust within the meaning of Chapter 4 of Part 24 of the Corporation Tax Act 2010, as amended. On 21 February 2020, the Company's shares were admitted to the Specialist Fund Segment of the Main Market of the London Stock Exchange. On the same day, trading of the Ordinary Shares commenced on the London Stock Exchange.

The principal activity of the Company is that of an investment trust company within the meaning of section 1158 of the Corporation Tax Act 2010.

International Fund Management Limited acts as the Company's Alternative Investment Fund Manager (the "AIFM") for the purposes of Directive 2011/61/EU on alternative investment fund managers ("AIFMD").

The Company's Investment Adviser is Rising Sun Management Limited. PraxisIFM Fund Services (UK) Limited (the "Administrator") provides administrative and company secretarial services to the Company under the terms of an administration agreement between the Company and the Administrator.

The Company's registered office is 1st Floor, Senator House, 85 Queen Victoria Street, London, EC4V 4AB.

2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES a) Basis of preparation

Statement of compliance

These financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and the applicable legal requirements of the Companies Act 2006. In addition to complying with international accounting standards in conformity with the requirements of the Companies Act 2006, the consolidated financial statements also comply with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

The financial statements have also been prepared as far as is relevant and applicable to the Company in accordance with the Statement of Recommended Practice ("SORP") issued in October 2019.

There are no comparatives as this is the Company's first accounting period.

Going Concern

The financial statements have been prepared on a going concern basis. In forming this opinion, the Directors have considered any potential impact of the COVID-19 pandemic on the going concern and viability of the Company. In making their assessment, the Directors have reviewed income and expense projections and the liquidity of the investment portfolio, and considered the mitigation measures which key service providers, including the Manager, have in place to maintain operational resilience particularly in light of COVID-19.

In arriving at their conclusion that the Company has adequate financial resources, the Directors were mindful that the Company had unrestricted cash of £12.6 million as at 31 December 2020. The Company's net assets at 31 December 2020 were £117.0 and total expenses for the period ended 31 December 2020 were £1.5 million, which represented approximately 1.6% of average net assets during the period. At the date of approval of this document, based on the aggregate of investments and cash held, the Company has substantial operating expenses cover. The Directors are satisfied that the Company has sufficient resources to continue to operate for the foreseeable future, a period of not less than

12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing these financial statements.

Use of estimates and judgements

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the year in which the estimates are revised and in any future periods affected. There have been no estimates, judgements or assumptions, which have had a significant impact on the financial statements for the year.

Basis of measurement

The financial statements have been prepared on the historical cost basis except for financial instruments at fair value through profit or loss, which are measured at fair value.

Functional and presentation currency

The financial statements are presented in sterling, which is the Company's functional currency. The Company's investments are denominated in Japanese yen. However, the Company's Shares are issued in sterling. In addition, substantial majority of the Company's expenses are paid in sterling. It is also expected that the Company's dividend shall be declared and paid in sterling. All financial information presented in sterling has been rounded to the nearest thousand pounds.

The Company is required to identify its functional currency, being the currency of the primary economic environment in which the Company operates. The Board, having regard to the currency of the Company's share capital and the predominant currency in which its shareholders operate, has determined that sterling is the functional currency. Sterling is also the currency in which the financial statements are presented.

New standards, interpretations and amendments adopted from 1 January 2020

A number of new standards, amendments to standards and interpretations are effective for the annual periods beginning after 1 January 2020. None of these are expected to have a significant effect on the measurement of the amounts recognised in the financial statements of the Company.

New standards, interpretations and amendments not yet effective

There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods, none of which is expected to have a significant effect on the measurement of the amounts recognised in the financial statements of the Company, hence the Company has decided not to adopt early.

The following amendments are effective for the period beginning 1 January 2022:

• Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);

• Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);

• Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and

• References to Conceptual Framework (Amendments to IFRS 3).

b) Significant accounting policies

The following accounting policies have been applied consistently throughout the reporting period.

Investments

Upon initial recognition investments are classified by the Company "at fair value through profit or loss". They are accounted for on the date they are traded and are included initially at fair value which is taken to be their cost. Subsequently quoted investments are valued at fair value, which is the bid market price, or if the bid price is unavailable, last traded price on the relevant exchange. Changes in the fair value of investments held at fair value through profit or loss and gains or losses on disposal are included in the capital column of the Statement of Comprehensive Income within "gains on investments". Investments are derecognised on the trade date of their disposal, which is the point where the Company transfers substantially all the risks and rewards of the ownership of the financial asset.

Taxation

Investment trusts which have approval under Section 1158 of the Corporation Tax Act 2010 are not liable for taxation on capital gains. The Company has successfully applied and has been granted approval as an Investment Trust by HMRC.

Irrecoverable withholding tax is recognised on any overseas dividends on an accruals basis using the applicable rate for the country of origin.

Segmental reporting

The Chief Operating Decision Maker, which is the Board, is of the opinion that the Company is engaged in a single segment of business. The financial information used by the Chief Operating Decision Maker to manage the Company presents the business as a single segment.

Dividends payable

Dividends to shareholders are recognised in the year of the ex-dividend date.

Income

Income includes investment income from financial assets at fair value through profit or loss and finance income. Investment income from financial assets at fair value through profit or loss is recognised in the Statement of Comprehensive Income within investment income when the Company's right to receive payments is established. Dividend income is presented gross of non-recoverable withholding taxes, which are disclosed separately in the Statement of Comprehensive Income.

Other income comprises interest earned on cash held on deposit. Other income is recognised on a receipt basis.

Expenses

All expenses are accounted for on an accrual basis. In respect of the analysis between revenue and capital items presented within the Statement of Comprehensive Income, the Investment Adviser's fees are split 20% to revenue and 80% to capital.

All other expenses are recognised as revenue.

Foreign currency

Transactions denominated in foreign currencies are translated into sterling at the exchange rates as at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the period end are reported at the rates of exchange prevailing at the period end. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss to capital or revenue in the Income Statement as appropriate. Foreign exchange movements on investments are included in the Income Statement within gains on investments.

Cash and cash equivalents

Cash and cash equivalents include deposits held at call with banks and other short-term deposits with original maturities of three months or less.

Trade and other payables

Trade and other payables are initially recognised at fair value, and subsequently re-measured at amortised cost using the effective interest method where necessary.

Nature and purpose of equity and reserves:

Share capital and share premium

Share capital represents the 1p nominal value of the issued share capital. Ordinary shares are classified as equity. Costs directly attributable to the issue of new shares (that would have been avoided if there had not been a new issue of new shares) are recognised against the value of the ordinary share premium.

The share premium account arose from the net proceeds of new shares and from the excess proceeds received on the sale of shares from treasury over the repurchase cost.

Capital reserve

The capital reserve represents the nominal value of shares repurchased for cancellation. Profits and losses achieved by selling investments, changes in fair value arising upon the revaluation of investments that remain in the portfolio and other capital expenditure are all charged to the capital column of the Statement of Comprehensive Income and allocated to the capital reserve.

The capital reserve reflects any:

• gains or losses on the disposal of investments;

• exchange movements of a capital nature;

• the increases and decreases in the fair value of investments which have been recognised in the capital column of the income statement; and

• expenses which are capital in nature.

Any gains in the fair value of investments that are not readily convertible to cash are treated as unrealised gains in the capital reserve.

Revenue reserve

The revenue reserve reflects all income and expenditure recognised in the revenue column of the income statement and is distributable by way of dividend.

The Company's distributable reserve consists of the share purchase reserve, the capital reserve and the revenue reserve.

3. INVESTMENTS

(a) Investment at fair value through profit or loss

	As at
	31 December 2020
	£'000

Listed on a recognised overseas exchange	102,905

Total	102,905

(b) Movements during the period ended 31 December 2020

	Period ended
	31 December 2020
	£'000

Investment purchases, at cost	88,873

Investment sales, at cost	(1,325)

Closing book cost	87,548

Investment holding gains	15,357

Closing valuation	102,905

Transaction costs on investment purchases for the period ended 31 December 2020 amounted to £89,000 and on investment sales for the period amounted to £2,000.

	Period ended
	31 December 2020
	£'000

Realised gains on disposal of investments	471

Investment holding gains	15,357

Net transactions costs	(91)

Total gains on investments held at fair value	15,737

Fair Value Measurements of Financial Assets and Financial Liabilities

The financial assets and liabilities are either carried at their fair value, or the amount is a reasonable approximation of fair value (due from brokers, dividends receivable, accrued income, due to brokers, expense accruals and cash and cash equivalents).

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 as follows:

Level 1 - valued using quoted prices in active markets for identical assets.

Level 2 - valued by reference to valuation techniques using observable inputs including quoted prices.

Level 3 - valued by reference to valuation techniques using inputs that are not based on observable market data.

The valuation techniques for investments and derivatives used by the Company are explained in the accounting policies notes 2 (b and c).

The table below sets out fair value measurements using the Fair Value Hierarchy.

As at 31 December 2020	Level 1	Level 2	Level 3	Total
As at 31 December 2020	£'000	£'000	£'000	£'000

Assets:

Equity investments	102,905	-	-	102,905

Total	102,905	-	-	102,905

There were no transfers between levels during the period. There are no Level 2 or Level 3 investments as at 31 December 2020.

4. INCOME

	Period ended
	31 December 2020
	£'000

Income from investments:

Overseas dividends	1,996

Total	1,996

5. INVESTMENT ADVISER FEES

	Period ended
	31 December 2020
	£'000

Basic fee:

20% charged to revenue	157

80% charged to capital	626

Total	783

The Company's Investment Adviser is Rising Sun Management Ltd. The Investment Advisor is entitled, with effect from First Admission, to receive an annual fee from the Company 0.85% per annum of NAV.

6. OTHER EXPENSES

	Period ended
	31 December 2020
	£'000

Directors' fees	169

Administration fees	54

Auditor's remuneration	26

AIFM fees	60

Broker retainer fees	43

Custodian fees	65

D&O insurance	15

Marketing fees	16

Legal Fees	36

Regulatory Fees	23

Secretarial fees	47

Miscellaneous expenses	171

Other expenses - Revenue	725

Other expenses - Capital*	(34)

Total Other expenses	691

* This is in relation to the capital element of VAT recoverable on the Company's expenses from inception to 31 December 2020, upon successful registration and submission of a VAT return for the period. The revenue portion of the VAT recoverable in the amount of

£28,000 has been allocated to Miscellaneous expenses in the table above.

7. TAXATION

(a) Analysis of tax charge in the period:

	Period ended 31 December 2020
	Revenue	Capital	Total
	£'000	£'000	£'000

Overseas withholding tax	202	-	202

Total tax charge for the year (see note 7 (b))	202	-	202

(b) Factors affecting the tax charge for the period:

The tax charge assessed for the period to 31 December 2020 is lower than the Company's applicable rate of corporation tax of 19% (2019: 19%).

The differences are explained below:

	Period ended 31 December 2020
	Revenue	Capital	Total
	£'000	£'000	£'000

Profit before taxation	1,114	13,075	14,189

UK corporation tax at 19.00% (2019: 19.00%)	212	2,484	2,696

Effects of:

Overseas withholding tax suffered	202	-	202

Non-taxable overseas dividends	(379)	-	(379)

Capital gains not subject to tax	-	(2,597)	(2,597)

Movement in unutilised management expenses	167	113	280

Total tax charge	202	-	202

8. EARNINGS PER ORDINARY SHARE

Total return per Ordinary Share is based on the return on ordinary activities, including income, for the period after taxation of £13,987,000.

Based on the weighted average number of Ordinary Shares in issue for the period to 31 December 2020 of 74,244,852, the returns per share were as follows:

	As at 31 December 2020
	Revenue	Capital	Total

Return per Ordinary Share	1.23p	17.61p	18.84p

9. OTHER DEBTORS

	As at
	31 December 2020
	£'000

Accrued income	263

Sales for settlement	1,335

Other receivables	109

Total	1,707

10. OTHER CREDITORS

	As at
	31 December 2020
	£'000

Amounts falling due within one period:

Purchases for future settlement	122

Accrued expenses	149

Total	271

11. SHARE CAPITAL

Share capital represents the nominal value of shares that have been issued. The share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium.

	Period ended
	31 December 2020
	No. of shares	£'000

Issued & fully paid:

Opening balance as at 22 October 2019	-	-

Ordinary Shares of 1p each ('Ordinary Shares')	103,000,001	1,030
issued

Closing balance as at 31 December 2020	103,000,001	1,030

The Directors have been authorised to issue up to 400 million Shares.
Share capital movement during the period:
		Nominal value
	No. of shares	of shares

Allotted, issued & fully paid:

Opening balance as at 22 October 2019	-	-

Allotted upon Incorporation:

Ordinary Shares of 1p each ('Ordinary Shares')	1	0.01

Redeemable Preference Share	50,000	12,500.00

Allotted/redesignated following admission to
London Stock Exchange:

Redeemable Preference Shares re-designated into	(50,000)	(12,500.00)
Ordinary Shares

Ordinary Shares issued under the Initial Placing,	103,000,000	1,030,000.00
Offer for Subscription and Intermediaries Offer

Closing balance as at 31 December 2020	103,000,001	1,030,000.01

Rights attaching to the Ordinary Shares

Dividend rights: All Ordinary Shares are entitled to participate in dividends which the Company declares from time to time in respect of the Ordinary Shares, proportionate to the amounts paid or credited as paid on such Ordinary Shares.

Rights as respect to capital: On a winding-up or a return of capital, in the event that the Directors resolve to make a distribution to Shareholders, all Ordinary Shares are entitled to a distribution of capital in the same proportions as capital is attributable to them, after taking into account any net assets attributable to the C Shares in issue (if any).

Voting rights: Every Shareholder shall have one vote for each Ordinary Share held.

12. NET ASSET VALUE PER SHARE

Total equity and the net asset value ("NAV") per share attributable to the Ordinary Shareholders at the period end calculated in accordance with the Articles of Association were as follows:

	As at
	31 December 2020

Net Asset Value (£)	116,986,000

Ordinary Shares in issue	103,000,001

NAV per Ordinary Share	113.58p

13. DIVIDEND

The Board has declared an interim dividend of 0.85p per Ordinary share in respect of the period ended 31 December 2020,

which will be paid on 30 April 2021 to Shareholders on the register on 9 April 2021. The Board will not target a dividend for

future years but will substantially pay out distributable income for any particular period by way of dividend.

14. RELATED PARTY TRANSACTIONS Transactions with the Investment Adviser

The fees for the period are disclosed in note 5 and amounts outstanding at the period ended 31 December 2020 were £ nil.

Directors' fees and shareholdings

Directors' fees are payable at the rate of £27,000 per annum for each Director other than the Chairman, who is entitled to receive £35,000. The Chairman of the Audit Committee is also entitled to an additional fee of £3,000 per annum.

The Directors had the following shareholdings in the Company, all of which were beneficially owned.

	As at
	31 December 2020

Rosemary Morgan	40,000

Chetan Ghosh	40,000

Rachel Hill	80,000

Alicia Ogawa	25,000

Ayako Weissman	27,000

15. FINANCIAL INSTRUMENTS AND CAPITAL DISCLOSURES

Risk Management Policies and Procedures

As an investment trust the Company invests in equities for the long-term so as to secure its investment objective stated in the Annual Report. In pursuing its investment objective, the Company is exposed to a variety of risks that could result in either a reduction in the Company's net assets or a reduction of the profits available for dividends.

These risks include market risk (comprising currency risk, interest rate risk, and other price risk), liquidity risk, and credit risk, and the Directors' approach to the management of them is set out as follows.

The objectives, policies and processes for managing the risks, and the methods used to measure the risks, are set out below.

Market risk

Economic conditions

Changes in economic conditions in Japan (for example, interest rates and rates of inflation, industry conditions, competition, political and diplomatic events and other factors) and in the countries in which the Company's investee companies operate could substantially and adversely affect the Company's prospects.

Sectoral diversification

The Company is not subject to restrictions on the amount it may invest in any particular sector. Although the portfolio is expected to be diversified in terms of sector exposures, the Company may have significant exposure to portfolio companies from certain sectors from time to time. As there is no hard limit on the amount the Company may invest in any sector

the entire Portfolio may, at certain times, be invested solely in one sector. Greater concentration of investments in any one sector may result in greater volatility in the value of the Company's investments and consequently its NAV and may materially and adversely affect the performance of the Company and returns to Shareholders.

Management of market risks

The Company is invested in a diversified portfolio of investments.

The Board will not set any limits on sector weightings or stock selection within the portfolio. The Board will apply the following restrictions on the size of its investments:

• not more than 30 per cent. of the Gross Asset Value at the time of investment will be invested in the securities of a single issuer; and

• the value of the four largest investments at the time of investment will not constitute more than 75 per cent. of the Gross Asset Value.

(i) Currency risks

The majority of the Company's assets will be denominated in a currency other than sterling (predominantly in Japanese yen) and changes in the exchange rate between sterling and Japanese yen may lead to a depreciation of the value of the

Company's assets as expressed in sterling and may reduce the returns to the Company from its investments and, therefore, negatively impact the level of dividends paid to Shareholders.

Management of currency risks

The Company does not currently intend to enter into any arrangements to hedge its underlying currency exposure to investment denominated in Japanese yen, although the Investment Adviser and the Board may review this from time to time.

Foreign currency exposures

An analysis of the Company's equity investments that are priced in a foreign currency is:

	As at
	31 December 2020
	£'000

Portfolio of investments: yen	102,905

Trade and other receivables: yen	1,598

Cash: yen	12,427

Total	116,930

Foreign currency sensitivity

If the Japanese yen had appreciated or depreciated by 10% as at 31 October 2019 then the value of the portfolio as at that date would have increased or decreased as shown below:

	Increase in	Decrease in
	Fair Value	Fair Value
	As at	As at
	31 December	31 December
	2020	2020
	£'000	£'000

Impact on portfolio - increase/(decrease)	5,145	(5,145)

Impact on NAV - increase/(decrease)	5,847	(5,847)

(ii) Interest rate risks

The Company is exposed to interest rate risk specifically through its cash holdings. Interest rate movements may affect the level of income receivable from any cash at bank and on deposits. The effect of interest rate changes on the earnings of the companies held within the portfolio may have a significant impact on the valuation of the Company's investments.

Management of interest rate risks

Prevailing interest rates are taken into account when deciding on borrowings.

Interest rate exposure

The exposure at 31 December 2020 of financial assets and liabilities to interest rate risk is shown by reference to floating interest rates - when the interest rate is due to be reset.

	As at
	31 December 2020
	£'000

Exposure to floating interest rates:

Floating rate on cash balance: yen	12,427

(iii) Price risks

Price risk includes changes in market prices, other than those arising from interest rate risk or currency risk, which may affect the value of equity investments.

Management of price risk

The Board meets on at least four occasions each year to consider the asset allocation of the portfolio and the risk associated with particular industry sectors. The investment management team has responsibility for monitoring the portfolio, which is selected in accordance with the Company's investment objective and seeks to ensure that individual stocks meet an acceptable risk/reward profile.

Price risk exposure

The Company's total exposure to changes in market prices at 31 December 2020 comprises its holdings in equity investments as follows:

	As at
	31 December
	2020
	(£'000)
Investments held at fair value through profit or loss	102,905

The effect on the portfolio of a 10.0% increase or decrease in the value of the loans would have resulted in an increase or decrease of £10,300,000.

Liquidity risks

The securities of small-to-medium-sized (by market capitalisation) companies may have a more limited secondary market than the securities of larger companies. Accordingly, it may be more difficult to effect sales of such securities at an advantageous time or without a substantial drop in price than securities of a company with a large market capitalisation and broad trading market. In addition, securities of small-to-medium-sized companies may have greater price volatility as they can be more vulnerable to adverse market factors such as unfavourable economic reports.

Management of liquidity risks

The Company's Investment Adviser monitors the liquidity of the Company's portfolio on a regular basis.

Liquidity risk exposure

The undiscounted gross cash outflows of the financial liabilities as at 31 December 2020, based on the earliest date on which payment can be required, were as follows:

	As at
	31 December 2020
	less than
	3 months

Trade and other payables	271

Total	271

Liquidity risk is minimised by holding sufficient liquid investments which can be readily realised to meet liquidity demands. The Company's liquidity risk is managed on a daily basis by the Investment Adviser in accordance with established policies and procedures in place. Liquidity risk is not significant as the majority of the Company's assets are investments in quoted equities that are readily realisable.

Credit risks

Cash and other assets held by the custodian

Cash and other assets that are required to be held in custody will be held by the custodian or its sub-custodians. Cash and other assets may not be treated as segregated assets and will therefore not be segregated from any custodian's own assets in the event of the insolvency of a custodian.

Cash held with any custodian will not be treated as client money subject to the rules of the FCA and may be used by a custodian in the course of its own business. The Company will therefore be subject to the creditworthiness of its

custodians. In the event of the insolvency of a custodian, the Company will rank as a general creditor in relation thereto and may not be able to recover such cash in full, or at all.

Management of credit risks

The Company has appointed Northern Trust Global Services Limited as its custodian. The credit rating of Northern Trust was reviewed at time of appointment and will be reviewed on a regular basis by the Investment Adviser and/or the Board.

The Investment Adviser monitors the Company's exposure to its counterparties on a regular basis and the position is reviewed by the directors at Board meetings.

In summary, the exposure to credit risk as at 31 December 2020 was as follows:

	As at
	31 December 2020

Cash at bank	12,645

Trade and other receivables	1,707

Total	14,352

Capital Management Policies and Procedures

The Company's capital management objectives are:

- to ensure that the Company will be able to continue as a going concern; and

- to provide dividend income combined with capital growth, mainly through investment in equities listed or quoted in

Japan.

The key performance indicators are contained in the strategic report in the Annual Report.

The Company is subject to several externally imposed capital requirements:

- As a public company, the Company has to have a minimum share capital of £50,000.

- In order to be able to pay dividends out of profits available for distribution by way of dividends, the Company has to be able to meet one of the two capital restriction tests imposed on investment companies by company law.

The Company's capital at 31 December 2020 comprises called-up share capital and reserves totalling £116,986,000. The Board regularly monitors, and has complied with, the externally imposed capital requirements.

16. POST PERIOD END EVENTS

There are no post period end events other than as disclosed in this Report.

Alternative Performance Measures ("APMs")

Discount

The amount, expressed as a percentage, by which the share price is less than the NAV per Ordinary Share.

As at 31 December 2020

NAV per Ordinary Share	a	113.58

Share price	b	106.5

Discount	(b÷a)-1	6.23%

Total return

A measure of performance that includes both income and capital returns. This takes into account capital gains and reinvestment of dividends paid out by the Company into its Ordinary Shares on the ex-dividend date.

Year end 31 December 2020		Share price	NAV

Opening at 21 February 2020 (pence)	a	100.0	100.0

Closing at 31 December 2020 (pence)	b	106.5	113.6

Discount	(c+d)	6.50%	13.60%

Ongoing charges

A measure, expressed as a percentage of average NAV, of the regular, recurring annual costs of running an investment company.

Year end 31 December 2020

Average NAV	a	106,722,593

Annualised expenses	b	1,707,968

Discount	(b÷a)	1.60%

FINANCIAL INFORMATION

This announcement does not constitute the Company's statutory accounts. The financial information is derived from the statutory accounts, which will be delivered to the registrar of companies and will be put forward for approval at the Company's Annual General Meeting. The auditors have reported on the accounts for the period ended 31 December 2020, their reports were unqualified and did not include a statement under Section 498(2) or (3) of the Companies Act 2006.

The Annual Report for the period ended 31 December 2020 was approved on 31 March 2021. It will be made available on the Company's website at https://www.nipponactivevaluefund.com/

The Annual Report will be submitted to the National Storage Mechanism and will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism

This announcement contains regulated information under the Disclosure Rules and Transparency Rules of the FCA.

ANNUAL GENERAL MEETING

The Annual General Meeting will be held on 12 May 2021, further details of which will be announced in due course.

31 March 2021

Secretary and registered office:

PraxisIFM Fund Services (UK) Limited

1st Floor, Senator House,

85 Queen Victoria Street,

London,

EC4V 4AB

For further information contact:

Brian Smith / Tom Daish

PraxisIFM Fund Services (UK) Limited

Tel: 020 4513 9260

END

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