Annual Financial Report

Schroder Japan Trust PLC

06 October 2026

 

6 October 2026

SCHRODER JAPAN TRUST PLC

(the "Company")

ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 31 JULY 2026

Schroder Japan Trust plc announces its financial results for the year ended 31 July 2026

Highlights

·      For the financial year to 31 July 2026, the Company's net asset value (NAV) per share total return increased by 41.2%, while its Benchmark, the TOPIX Total Return Index, rose by 29.3%.

·      Over the same period, the Company's share price produced a total return of 49.0%. 

·      Over three years, the Company has returned 23.1% on an annualised basis, compared to 16.4% from the Index.

·      Following the adoption of an enhanced dividend policy, the Company has over the last year paid out 4% of its average NAV.

·      We continue to believe that the long-term investment case for Japan remains compelling, underpinned by reforms aimed at enhancing corporate value creation and shareholder returns.

Investor Presentation

The Company's Investment Managers are hosting an annual results presentation for investors on Tuesday, 6 October 2026 at 2.00 p.m. Investors can register for the event at:  https://www.schroders.events/SJG26

Philip Kay, Chair of Schroder Japan Trust plc commented:

"Masaki Taketsume, supported by his team of experienced research analysts, has now managed the Company's portfolio for seven years and has outperformed the Company's Benchmark by an impressive 47.7% over that period. The current environment is particularly well suited to active stock pickers, and, given Masaki's disciplined and proven approach, we are confident in the opportunity that lies ahead for the Company's shareholders."

The Company's Report and Financial Statements for the year ended 31 July 2026 are also being published in hard copy format and an electronic copy will shortly be available to download from the Company's website: www.schroders.com/sjg. 

The Company has submitted a copy of its Annual Financial Report to the National Storage Mechanism and it will shortly be available for inspection at:

 https://data.fca.org.uk/#/nsm/nationalstoragemechanism     

Enquiries:

Katherine Fyfe Schroder Investment Management Limited	020 7658 6000
Charlotte Banks Schroder Investment Management Limited	020 7658 6000

Chair's Statement

"For the year under review, the Company's share price produced a total return of 49.0%."

Performance

I am pleased to report that for the year under review, the Company's share price produced a total return of 49.0%. The Company's net asset value (NAV) increased by 41.2%, outperforming its Benchmark (TOPIX Total Return Index) which rose by 29.3%, while the average discount to NAV during the period was 8.3%, compared to an average of 11.7% during the year to 31 July 2025.

Performance was driven by a combination of favourable market conditions and the Investment Manager's astute stock selection. Japan's equity market benefited from continued corporate governance reform, a return to sustained wage growth and inflation, and an improving political backdrop following the formation of a new coalition government under Prime Minister Takaichi. Against this backdrop, the portfolio's focus on undervalued, well-positioned businesses - particularly among smaller and mid-sized companies, where valuation anomalies remain more pronounced - continued to deliver strong returns. Further detail on the drivers of performance and the portfolio's positioning can be found in the Investment Manager's Review starting on page 8.

Enhanced dividend policy

Following the adoption of an enhanced dividend policy, the Company has over the last year paid out 4% of its average NAV. Dividends are now declared quarterly based on the trailing 12-month average NAV and the Board will continue with this approach. The shares of the Company had, as at 31 July 2026, a dividend yield of 3.25% which was significantly higher than any other Japanese investment trust.

Discount management

The Company's discount at the start of the period was 12.8% and ended at 8.3%. The Company's three-year average discount was 10.0%, and the one-year average discount was 8.3% during that period.

The Board exercised its buy-back authority over the period to acquire 1,750,001 shares to be held in treasury, at an average discount of 10.7%.

Conditional tender offer

The Company announced a new conditional tender offer mechanism in June 2024. Under this arrangement, if the Investment Manager fails to deliver at least Benchmark performance over the five years from 31 July 2024, a tender offer for 25% of issued share capital at NAV less costs will be proposed. The Investment Manager outperformed the Benchmark by 20.8% during the first two years of the assessment period.

Gearing

Throughout the period, the Investment Manager actively geared the portfolio by using contracts for difference ("CFDs"). The gearing level was 13.4% at the start of the period and ended at 11.9%. The Investment Manager typically targets a gearing range of between 10% and 17.5%. Gearing had a positive effect on performance during the year. The Company's gearing continues to operate within its pre-agreed limit of 25% of net asset value.

Board changes

Angus Macpherson stepped down from the Board in July this year. Following a review of the Board's balance of skills and experience, the Board has decided to commence a search for an additional director. An independent external search consultancy have been appointed to facilitate the recruitment process, with the aim of identifying a suitable candidate before the end of the year.

Full biographical details of Board members can be found on pages 36 and 37.

Company awards

I am pleased to confirm that the Company has recently been awarded Boring Money's Investment Trust Rated badge, recognising trusts that combine strong investment credentials with clear and effective communication for retail investors.

The Company has also been shortlisted for the following upcoming awards:

•     Investment Week's Investment Company of the Year Awards - nominated in the Single Country (Developed Markets) category; and

•     Citywire's Investment Trust Awards - nominated in the Japanese Equities category.

Schroders combination with Nuveen

On 22 September 2026, Schroders plc announced that all antitrust and regulatory approval conditions relating to Nuveen's recommended acquisition of Schroders had been satisfied or waived. The transaction became effective on 1 October 2026 following satisfaction of the remaining conditions, including court sanction and associated procedural steps.

Further details are available on the Schroders website: https://www.schroders.com/en/global/indivi dual/nuveenoffer/  

AGM and shareholder engagement

The Company's Annual General Meeting (AGM) will be held slightly earlier this year and is scheduled for Friday, 6 November 2026 at 1.00pm at 1 London Wall Place, London EC2Y 5AU.

We invite shareholders to attend the Company's AGM in person. This year, alongside the Investment Manager's presentation, Non-Executive Director and Bloomberg's UK Money Editor-at-large Merryn Somerset Webb will interview Masaki Taketsume in person in a lively discussion covering topics such as corporate governance, active value investing and the changing dynamics of the Japanese macroeconomic landscape.

Sake and light refreshments will be served after the meeting, providing an opportunity to continue the conversation with fellow shareholders and the Company's directors and representatives.

Shareholders wishing to follow the AGM proceedings but choosing not to attend in person, will be able to view proceedings live and ask questions (but not vote) through conferencing software. Details on how to register, together with access details, will be available shortly on the Company's website: www.schroders.com/japantrust, or by contacting the Company Secretary at: [e-mail]

For shareholders who are unable to attend the AGM or those that are joining electronically, it is strongly encouraged to submit their proxy votes in advance of the meeting, so they are registered and recorded at the AGM. Proxy votes can be lodged in advance of the AGM either by post or electronically. Detailed instructions are included in the Notes to the Notice of Annual General Meeting on pages 76 and 77.

Ahead of the AGM there will also be a separate webinar on Tuesday, 6 October 2026 and shareholders are encouraged to sign up on the Company's website to hear from the Investment Manager and ask questions. Shareholders can also sign up using this link: https://www.schroders.events/SJG26

Outlook

Although the strong rise in Japanese equities over the past year might suggest that valuations are no longer as compelling as they once were, we continue to believe that the structural case for investing in Japan remains robust. Japan introduced a revised Corporate Governance Code in July 2026 that places greater emphasis on helping companies create sustainable long-term value for shareholders, rather than simply meeting regulatory requirements. A key focus is ensuring that companies use their capital more effectively, which can support higher returns for investors.

At the same time, a more sustainable cycle of wage growth and stronger domestic demand is helping to support economic activity in Japan. Together, these trends should provide a positive backdrop for corporate earnings, dividend growth and shareholder returns over the coming years.

Masaki Taketsume, supported by his team of experienced research analysts (who, like him, are based in Tokyo), has now managed the Company's portfolio for seven years and has outperformed the Company's Benchmark by an impressive 47.7% over that period. The current environment is particularly well suited to active stock pickers, and, given Masaki's disciplined and proven approach, we are confident in the opportunity that lies ahead for the Company's shareholders.

Philip Kay

Chair

5 October 2026

Investment Managers' Report

"Over three years, the Company has now returned 23.1% on an annualised basis, which compares favourably to the 16.4% return from the index."

Overview

The Japanese stock market rose strongly during the period under review, reaching all-time highs before experiencing a late-period rotation away from some of the technology stocks that had led the advance. Returns for UK investors were reduced by yen weakness but remained substantial in sterling terms.

For the financial year to 31 July 2026, the Company's net asset value per share total return increased by 41.2%, while its Benchmark, the TOPIX Total Return Index, rose by 29.3%. Over three years, the Company has now returned 23.1% on an annualised basis, which compares favourably to the 16.4% return from the index.

Recent performance drivers

Japanese equities advanced strongly over the year, although the path was volatile. Softer US economic data and expectations of Federal Reserve (Fed) interest rate cuts supported global risk appetite, while Japan's economy continued to grow and inflation remained positive. Corporate earnings were resilient despite tariff uncertainty, helped by pricing power and cost control. Corporate governance reform also remained an important support, with share buybacks and dividends at high levels and management teams continuing to place increasing emphasis on return on equity (ROE), capital allocation, the unwinding of cross-shareholdings and business portfolio rationalisation.

Domestic political developments also added momentum. Prime Minister Ishiba's resignation in September 2025 was followed by Sanae Takaichi's election as leader of the Liberal Democratic Party (LDP) and appointment as prime minister the following month, at the head of a new LDP-Japan Innovation Party coalition. Markets viewed this positively, with greater political stability and an increased likelihood of policies focused on defence, digitalisation and growth investment. The LDP's decisive election victory in February 2026 reinforced these expectations. Meanwhile, the Bank of Japan (BOJ) continued to normalise monetary policy, leading to higher domestic bond yields, which were generally supportive for financial companies.

The advance was interrupted in March, when conflict involving the US, Israel and Iran drove oil prices higher and raised stagflation fears, but equities quickly rebounded as ceasefire hopes grew.

Value stocks outperformed growth stocks over much of the period, smaller companies provided a modest tailwind, and gearing contributed positively alongside stock selection.

Generative AI remained a key market theme, benefiting companies linked to AI data-centre investment, including semiconductor equipment, advanced materials, IC package substrates and optical components. However, as investors became more concerned about returns on large-scale AI spending and elevated valuations, the broader market rally became increasingly concentrated in a relatively small number of leading AI-related stocks, while concerns over disruption weighed on software and IT services. We maintained exposure through companies where we believe competitive advantages and operating leverage remain underappreciated.

For example, Ibiden, a leading manufacturer of IC package substrates - the specialised materials that connect a chip to its circuit board - performed strongly as the market increasingly recognised its dominant position in substrates for the advanced processing chips used in AI data centres.

Meanwhile, JX Advanced Metals also performed strongly, reflecting growing acknowledgement of its dominant market share in certain high-end semiconductor materials used in AI-related applications, including optical components and advanced ICs. Rigaku contributed positively as demand for its semiconductor-related X-ray measurement technologies increased, further supported by a strategic alliance with Onto Innovation.

Japan's continued transition from deflation to inflation, supported by a recovery in economic growth and government policy, also created a more favourable environment for domestic industries facing supply constraints. In areas where labour shortages have tightened supply-demand conditions, companies with relatively strong supply capacity have been able to raise prices, gain market share and improve margins. Infroneer, a general construction company, benefited from this dynamic through improved pricing alongside strong construction orders, which led to solid earnings growth and improved shareholder returns.

Corporate reform remained an important stock-specific driver. The market generally rewarded companies for improving capital allocation, reducing exposure to non-core assets and increasing shareholder distributions. For example, Rohm, a mid-cap semiconductor company, showed a strong share price recovery and contributed positively to performance, as management's efforts to improve capital discipline and reduce costs aligned with a cyclical rebound in demand. This reinforces our conviction that corporate governance reforms are now broadening well beyond large cap stocks.

By contrast, concerns that generative AI could weaken existing business models affected several holdings. For example, IT consulting company Nomura Research Institute and media business LY Corporation saw valuation pressure despite stable near-term earnings. In contrast, where AI-related disruption appears to be having a tangible impact on operations, we have acted accordingly, selling WingArc1st due to concerns that parts of its business intelligence software offering are vulnerable to AI-driven substitution.

Meanwhile, Asahi Group Holdings, Japan's largest brewer, detracted from performance after a cyberattack disrupted operations and increased near-term uncertainty. NOF, a specialty chemicals business, also underperformed after earnings fell short of expectations due to lower demand for the high-purity raw materials it supplies for advanced drug-delivery systems. In both cases, we judged the weakness to be temporary and retained the holdings.

Our lack of exposure to several large-cap AI and semiconductor businesses also detracted from performance during the stock-market rally's most concentrated phases. For example, Advantest (semiconductor test equipment), SoftBank Group (telecoms/investment conglomerate), Tokyo Electron (semiconductor equipment) and Murata Manufacturing (electronic components) all rose as investors favoured clear AI beneficiaries. We continue to prefer companies offering a better balance between long-term growth and attractive valuation.

Portfolio strategy

We continue to find a broad range of undervalued opportunities, many of which have credible paths to better returns through management action. These are typically classified within the portfolio as "market misperception" stocks - this remains our largest investment category, accounting for approximately 40% of assets, with companies such as the industrial and technology business Hitachi, the specialty chemicals company Asahi Kasei and the postal and financial services group Japan Post, benefiting from sustainable improvements in earnings or capital efficiency that are not yet fully reflected in valuations. Asahi Kasei is a good example. More disciplined capital allocation and business portfolio management have strengthened its competitive positions in specialty pharmaceuticals, medical devices and niche semiconductor materials, but the market continues to price the shares as a generic, diversified chemicals company. We believe that characterisation is now out of date. These businesses should support relatively stable and higher-quality earnings growth in the years ahead, which is not yet adequately reflected in the valuation.

Almost 30% of the portfolio is invested in "market oversights" stocks, including the component manufacturers Hirose Electric, Niterra and Kohoku Kogyo. These are highly competitive businesses whose strengths can be overlooked because they are smaller than global peers or operate in specialist niches. Hirose Electric supplies high-performance connectors - the components that link circuit boards, cables and devices together - along with test interface products used to check chips and equipment during manufacturing. We expect the company's earnings outlook to improve as industrial machinery and semiconductor equipment demand recovers, while recent M&A (merger and acquisition) activity expands its growth opportunities. The company should also benefit from price increases, a stabilisation in gold and other material costs and rising demand for AI-related products such as probe pins - fine metal contacts used to test chips before they are packaged and shipped. In our view, these drivers are not yet adequately reflected in its valuation.

Around 10% of the portfolio is in "short-term overreaction" stocks, including HR and recruitment platform Recruit, video games developer Capcom and food packaging business FP Corp. These companies have strong franchises and structural growth opportunities, but their shares have been marked down because of temporary concerns. Capcom owns globally recognised games franchises such as Resident Evil and Monster Hunter. Its repeat-sales model and the expansion of its PC user base in emerging markets should support steady growth. We initiated a position after a weak reception for the latest Monster Hunter title removed its usual valuation premium, which we believe can be reinstated as remedial measures support sales and new titles help to diversify earnings.

The balance of the portfolio is invested in what we consider to be best-in-class operators, including the megabank Sumitomo Mitsui Financial Group, diversified financial services provider Orix and the automotive business Toyota Motor. These companies combine strong competitive positions with disciplined management and attractive valuations.

From a sector perspective, this positioning results in a bias towards Services, Chemicals, Construction and Information & Communication. As is typical, the portfolio retains a tilt towards value stocks and is well-exposed to small and mid-sized companies, where research coverage is thinner and valuation anomalies are more frequent. At year end, the portfolio held 66 companies and net gearing was 11.9%.

Top 5 contributors and detractors

12 months to 31 July 2026

	Portfolio	Benchmark	Portfolio	Benchmark	Total
Top 5 contributors	weight	weight	return	return	effect
IBIDEN	1.9%	0.2%	375%	381%	3.2%
Fujikura	2.8%	0.6%	124%	126%	2.7%
JX Advanced Metals Corp	1.7%	0.2%	295%	299%	2.3%
Nintendo	0.0%	1.3%	0%	-43%	1.4%
Rigaku Holdings	1.3%	0.0%	150%	151%	1.2%

	Portfolio	Benchmark	Portfolio	Benchmark	Total
Top 5 detractors	weight	weight	return	return	effect
Advantest	0.0%	1.4%	0%	192%	-1.3%
Mitsubishi UFJ Financial Group	0.0%	3.4%	0%	62%	-1.1%
Asahi Group Holdings	1.9%	0.2%	-17%	-17%	-1.0%
Murata Manufacturing	0.0%	0.9%	0%	210%	-1.0%
LY Corp	1.1%	0.1%	-24%	-24%	-0.9%

Portfolio activity

During the year, we initiated positions in Capcom, Yokogawa Electric (industrial automation and measurement), THK (precision motion components), PayPay (mobile payments), Asahi Kasei, Hirose Electric and Raiznext (plant engineering and maintenance). Yokogawa Electric and Asahi Kasei were added as market misperception opportunities. At Yokogawa Electric, we expect revenue growth to accelerate as global investment in gas infrastructure increases and higher-margin services become a larger part of the business mix. At Asahi Kasei, more disciplined capital allocation and portfolio management should support steady earnings growth and a re-rating as the market recognises the quality of its healthcare and specialty materials businesses.

We also participated in the PayPay initial public offering as a market oversight opportunity. Its leading position in QR-code payments creates network effects that should support user growth, higher spend per customer and improving profitability through scale. More recently, we added Hirose Electric and Raiznext. We expect Hirose to benefit from recovering end markets, margin improvement and expanding AI-related test applications, while Raiznext should benefit from better price pass-through, refinery upgrading work and an attractive dividend yield.

In terms of disposals, we sold TPR (auto parts), Tazmo (semiconductor equipment), Toyota Industries (forklifts and auto parts), Kuraray (specialty chemicals), WingArc1st and Miura (industrial boilers). The reasons varied - in some cases, industry uncertainty or weaker earnings reduced our confidence in the original thesis, in others, expected catalysts had not developed as anticipated. Toyota Industries was sold following a bid approach from Toyota Fudosan, with its shares trading above the proposed takeover price amid pressure from activist investors for a better offer. Meanwhile, the position in Miura was exited as difficulties integrating the acquired Cleaver-Brooks boiler services business led to repeated downgrades. We used the proceeds to build positions in opportunities where the balance of valuation, earnings visibility and company-specific improvement look more attractive.

Outlook

We continue to believe that the Japanese equity market offers long-term investors one of the most attractive opportunities available globally. The strong rise over the past year means that headline valuations are no longer as appealing as they were, and near-term returns are likely to be more dependent on earnings growth than on further broad-based multiple expansion. Even so, several developments unique to Japan should continue to support corporate profitability, capital efficiency and shareholder returns.

At the heart of the investment case is the continued deepening of corporate governance reform. The emphasis has moved beyond higher dividends and share buybacks towards more fundamental changes in capital allocation and business structure. Companies are unwinding cross-shareholdings, consolidating listed subsidiaries, disposing of non-core assets and investing more selectively in businesses with attractive returns. These actions should support higher ROE and a more efficient use of capital across an increasingly broad range of companies, including many smaller businesses that remain under-researched.

Japan's domestic economy also continues to show signs of structural improvement. Positive inflation, rising wages and persistent labour shortages are increasingly encouraging companies to raise prices, invest in productivity and improve operational efficiency. Business investment remains robust, and the Takaichi administration's focus on public-private investment, economic security and support for growth industries should provide additional momentum. A more durable cycle of wage growth, consumption and investment would represent a significant change from the deflationary environment that dominated the previous three decades.

Therefore, over the medium- to long-term, we believe that improvements in ROE and efforts to raise Japan's potential growth rate, supported by favourable policy measures, are likely to contribute to equity valuation expansion, leading to solid equity market return combined with corporate earnings growth.

More globally, the Fed has scope to support the US economy through lower interest rates, and resilient demand in the US and other major markets would help Japanese corporate earnings.

There are, however, important risks. Higher food, energy and other living costs remain a burden for households, while the scale and funding of more expansionary fiscal policies will be closely scrutinised by bond and currency markets. The sharp increase in long-term interest rates during the period highlighted the importance of maintaining confidence in fiscal discipline. A policy mix that is perceived as insufficiently credible could create volatility across Japanese equities, government bonds and the yen.

However, while both short- and long-term interest rates in Japan have risen, they remain low in absolute terms, and real interest rates are still at accommodative levels. As a result, there has so far been relatively little negative impact on the broader domestic economy. In fact, the positive effects appear to have been more significant, particularly for sectors such as banks, where profitability had previously been held back by the negative interest rate policy. For the Company, the impact of higher interest rates, including on the cost of gearing, has also remained limited.

Monetary policy will therefore require careful management. The BOJ has continued to normalise policy as inflation and wage growth have become more durable. At its meeting at the end of July, it left the policy rate unchanged but communicated a somewhat more 'hawkish' stance, increasing expectations that another rate increase could come earlier than previously anticipated. Gradual normalisation should be positive for the economy and financial companies, but an overly rapid tightening cycle could place pressure on interest-rate-sensitive sectors and domestic demand.

Externally, the outlook remains uncertain. Geopolitical tension in the Middle East could disrupt energy supplies and raise the price of commodities such as oil and naphtha, as well as their transportation costs - this would be particularly challenging for Japan which imports much of its energy. US trade policy and still-elevated tariff levels also remain potential headwinds for exporters and global growth.

The generative AI investment cycle is another area that warrants close attention. Demand for semiconductors, optical components and power infrastructure remains strong, but valuations in parts of the supply chain have become demanding. Investors are increasingly assessing whether data centre operators can earn adequate returns on their very large capital expenditure programmes, and whether AI will disrupt existing software and services business models. These questions are likely to keep market leadership volatile and create a wide dispersion between winners and losers.

From a valuation perspective, the aggregate market sits towards the upper end of its historical range, but this disguises substantial differences between individual stocks. The AI-related leaders typically command high premiums, but in our preferred hunting ground further down the market cap spectrum, we find many businesses trading at significant discounts. This disparity should reward detailed fundamental research and disciplined stock selection. It also gives us confidence that we can build a portfolio capable of delivering attractive total returns, even if the overall market advances more slowly.

To conclude, Japan combines improving corporate behaviour, a more supportive nominal growth environment and a broad range of under-appreciated businesses. Although geopolitical risks, fiscal concerns and elevated valuations in certain areas may keep volatility high, the structural case for Japanese equities remains intact.

In this environment, with such a wide range of valuations available across a deep opportunity set, Japan should be a market that rewards astute stock selection. With a proven, high-conviction approach and prudent use of gearing, we remain confident that our focus on companies with strong franchises, visible self-help potential and attractive valuations can continue to create additional value for the Company's shareholders.

Masaki Taketsume

Investment Manager

Schroder Investment Management Limited

5 October 2026

Risk Report

"The Board itself, and through its delegation to its Audit and Risk Committee, is responsible for the Company's system of risk management and internal control and for reviewing its effectiveness. The Board has adopted a detailed matrix of principal risks affecting the Company's business as an investment trust and has established associated policies and processes designed to manage and, where possible, mitigate those risks, which are monitored by the Audit and Risk Committee on an ongoing basis."

This system assists the Board in determining the nature and extent of the risks it is willing to take in achieving the Company's strategic objectives.

Risk assessment and internal controls review by the Board

Risk assessment includes consideration of the scope and quality of the systems of internal control operating within key service providers, and ensures regular communication of the results of monitoring by such providers to the Audit and Risk Committee, including the incidence of significant control failings or weaknesses that have been identified at any time and the extent to which they have resulted in unforeseen outcomes or contingencies that may have a material impact on the Company's performance or condition.

Although the Board believes that it has a robust framework of internal controls in place this can provide only reasonable, and not absolute, assurance against material financial misstatement or loss and is designed to manage, not eliminate, risk.

Both the principal risks and uncertainties and the monitoring system are also subject to robust review at least annually. The last assessment took place in March 2026.

During the year, the Board discussed and monitored a number of risks that could potentially impact the Company's ability to meet its strategic objectives. The Board receives updates from the Investment Manager, Company Secretary and other service providers on emerging risks that could affect the Company. The Board was mindful of the evolving global environment during the year; and the risks posed by volatile markets; geopolitical uncertainty; and inflation and corresponding interest levels which could affect the asset class. The Board noted that, globally there remains uncertainty surrounding potential changes to financial and public policy and in the US in particular.

No significant control failings or weaknesses were identified from the Audit and Risk Committee's ongoing risk assessment throughout the financial year and up to the date of this report. The Board is satisfied that it has undertaken a detailed review of the risks facing the Company and that the internal control environment continues to operate effectively.

Actions taken by the Board and, where appropriate, its Committees, to manage and mitigate the Company's principal risks and uncertainties are set out in the following table.

The "Change" column on the right highlights at a glance the Board's assessment of any increases or decreases in risk during the year after mitigation and management. The arrows show the risks as increased, decreased, or unchanged.

Risk	Mitigation and management	Change during the year
Strategy and competitiveness		á â
Investment objective The Company's investment objectives may become out of line with the requirements of investors, resulting in a wide discount of the share price to underlying NAV per share. Unexpected, potentially catastrophic events whether man-made (conflict, poor trade relations for example) or natural disasters, whether arising from climate change, extreme weather events or pandemic disease could impact investment performance.	The appropriateness of the Company's investment remit is periodically reviewed and the success of the Company in meeting its stated objectives is monitored. Change during the year. The share price relative to NAV per share is monitored and the use of buy back authorities is considered on a regular basis. The marketing and distribution activity is actively reviewed. Proactive engagement with shareholders.
Cost base The Company's cost base could become uncompetitive, particularly in light of open-ended alternatives.	The ongoing competitiveness of all service provider fees is subject to periodic benchmarking against their competitors. Annual consideration of management fee levels.	á â
Investment		á â
Investment management The Manager's investment strategy, if inappropriate, may result in the Company underperforming the market and/or peer group companies, leading to the Company and its objectives becoming unattractive to investors.	Review of the Manager's compliance with its agreed investment restrictions, investment performance and risk against investment objectives and strategy; relative performance; the portfolio's risk profile; and whether appropriate strategies are employed to mitigate any negative impact of substantial changes in markets. Annual review of the ongoing suitability of the Manager is undertaken
Custody Safe custody of the Company's assets may be compromised through control failures by the depositary.	The depositary reports on safe custody of the Company's assets, including cash, and portfolio holdings independently reconciled with the Manager's records. The review of audited internal controls reports covering custodial arrangements is undertaken. Regular reports from the depositary on its activities, including matters arising from custody operations is received.	á â
Gearing and leverage The Company has the option to make use of loan facilities or to use CFDs to invest in equities. These arrangements increase the funds available for investment through borrowing. While this has the potential to enhance investment returns in rising markets, in falling markets the impact could be detrimental to performance.	Gearing is monitored daily and strict restrictions on borrowings are imposed: gearing continues to operate within pre-agreed limits so as not to exceed 25% of shareholders' funds. The Company now uses long CFDs which are currently cheaper than bank loans and provide greater flexibility.	á â
Compliance		á â
Accounting, tax and regulatory In order to continue to qualify as an investment trust, the Company must comply with the requirements of Section 1158 of the Corporation Tax Act 2010. Breaches of the UK Listing Rules, the Companies Act or other regulations with which the Company is required to comply, could lead to a number of detrimental outcomes.	The confirmation of compliance with relevant laws and regulations by key service providers is reviewed. Shareholder documents and announcements, including the Company's published annual report, are subject to stringent review processes. Procedures are established to safeguard against the disclosure of inside information.
Operational		á â
Service providers The Company has delegated certain functions to a number of service providers, principally the Manager, depositary and registrar. Failure of controls, and poor performance of any service provider could lead to disruption, reputational damage, or loss.	Service providers are appointed subject to due diligence processes and with clearly-documented contractual arrangements detailing service expectations. Regular reporting is provided by key service providers and monitoring of the quality of their services provided. The Directors also receive presentations from the Manager, depositary and custodian, and the registrar on an annual basis. Review of annual audited internal controls reports from key service providers, including confirmation of business continuity arrangements and IT controls, and follow up of remedial actions as required. In respect of the transition of depositary, custodian and fund administration services from HSBC to J.P. Morgan, a detailed transition plan was put in place, closely monitored by the Investment Manager via a Risks, Assumptions, Issues and Dependencies (RAID) log. The Board received quarterly progress updates on the transition, with the Audit and Risk Committee Chair acting as the primary point of contact between update cycles. As part of the year end audit process, Deloitte have reviewed the migration of data from HSBC to J.P. Morgan and tested that financial records were appropriately transferred.
Technology risks Disruption to the operations of the Company's service providers whether through inter alia, cyber attacks, failed software updates or data breaches, could impact the accurate reporting and monitoring of the Company's financial position and/or lead to loss of personal or confidential information.	Service providers report on cyber risk mitigation and management at least annually, which includes confirmation of business continuity capability in the event of a cyber attack.	á â

Statement of Directors' Responsibilities in respect of the Annual Report and Financial Statements

"The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law 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 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).

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the return or loss of the Company for that period. In preparing the financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• state whether applicable United Kingdom Accounting Standards, comprising FRS 102, have been followed, subject to any material departures disclosed and explained in the financial statements;

• make judgements and accounting estimates that are reasonable and prudent; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and the Directors' remuneration report comply with the Companies Act 2006.

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 Manager is responsible for the maintenance and integrity of the webpage dedicated to the Company. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' statement

Each of the Directors, whose names and functions are listed in the Board of Directors on pages 36 and 37 confirm that, to the best of their knowledge:

•   the Company financial statements, which have been 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), give a true and fair view of the assets, liabilities, financial position and profit of the Company;

•   the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces; and

•   that the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

On behalf of the Board

Philip Kay

Chair

5 October 2026

Statement of Comprehensive Income

for the year ended 31 July 2026

		2026			2025
		Revenue	Capital	Total	Revenue	Capital	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments held at fair value through profit or loss	2	-	112,746	112,746	-	12,834	12,834
Net gains on derivative contracts	10	-	20,576	20,576	-	2,080	2,080
Net foreign currency losses		-	(1,288)	(1,288)	-	(89)	(89)
Income from investments	3	10,372	-	10,372	10,383	-	10,383
Other interest receivable and similar income	3	53	-	53	66	-	66
Gross return		10,425	132,034	142,459	10,449	14,825	25,274
Management fee	4	(876)	(2,043)	(2,919)	(688)	(1,605)	(2,293)
Administrative expenses	5	(705)	-	(705)	(724)	-	(724)
Net return before finance costs and taxation		8,844	129,991	138,835	9,037	13,220	22,257
Finance costs	6	(186)	(434)	(620)	(116)	(272)	(388)
Net return before taxation		8,658	129,557	138,215	8,921	12,948	21,869
Taxation	7	(883)	-	(883)	(901)	-	(901)
Net return after taxation		7,775	129,557	137,332	8,020	12,948	20,968
Return per share (pence)	8	6.79	113.22	120.01	6.91	11.16	18.07

The "Total" column of this statement is the profit and loss account of the Company. The "Revenue" and "Capital" columns represent supplementary information prepared under guidance issued by the AIC. The Company has no other items of other comprehensive income, and therefore the net return after taxation is also the total comprehensive income/(loss) for the year.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year.

The notes on pages 61 to 72 form an integral part of these accounts.

Statement of Changes in Equity

for the year ended 31 July 2026

		Called-up		Capital	Warrant	Share
		share	Share	redemption	exercise	purchase	Capital	Revenue
		capital	premium	reserve	reserve	reserve	reserves	reserve	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 31 July 2024		11,845	7	656	3	80,718	249,597	8,062	350,888
Repurchase of the Company's own shares into treasury		-	-	-	-	(4,789)	-	-	(4,789)
Net return after taxation		-	-	-	-	-	12,948	8,020	20,968
Dividend paid in the year	9	-	-	-	-	-	(7,523)	(14,967)	(22,490)
At 31 July 2025		11,845	7	656	3	75,929	255,022	1,115	344,577
Repurchase of the Company's own shares into treasury		-	-	-	-	(5,379)	-	-	(5,379)
Net return after taxation		-	-	-	-	-	129,557	7,775	137,332
Dividend paid in the year	9	-	-	-	-	-	(5,533)	(8,330)	(13,863)
At 31 July 2026		11,845	7	656	3	70,550	379,046	560	462,667

The notes on pages 61 to 72 form an integral part of these accounts.

Statement of Financial Position

at 31 July 2026

		2026	2025
	Note	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	10	438,694	327,209
Current assets
Debtors	11	1,994	2,213
Cash at bank	11	26,288	17,028
Derivative financial instruments held at fair value through profit or loss	10	2,026	3,855
		30,308	23,096
Current liabilities
Creditors: amounts falling due within one year	12	(5,622)	(5,605)
Derivative financial instruments held at fair value through profit or loss	10	(713)	(123)
		(6,335)	(5,728)
Net current assets		23,973	17,368
Net assets		462,667	344,577
Capital and reserves
Called-up share capital	13	11,845	11,845
Share premium	14	7	7
Capital redemption reserve	14	656	656
Warrant exercise reserve	14	3	3
Share purchase reserve	14	70,550	75,929
Capital reserves	14	379,046	255,022
Revenue reserve	14	560	1,115
Total equity shareholders' funds		462,667	344,577
Net asset value per share (pence)	15	406.76	298.35

These accounts were approved and authorised for issue by the Board of Directors on 5 October 2026 and signed on its behalf by:

Philip Kay

Chair

The notes on pages 61 to 72 form an integral part of these accounts.

Registered in England and Wales as a public company limited by shares.

Company registration number: 02930057.

Notes to the Financial Statements

for the year ended 31 July 2026

1. Accounting Policies

(a) Basis of accounting

Schroder Japan Trust plc ("the Company") is registered in England and Wales as a public company limited by shares. The company's registered office is 1 London Wall Place, London EC2Y 5AU.

The financial statements are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice ("UK GAAP"), in particular in accordance with Financial Reporting Standard (FRS) 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland", and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" (the "SORP") issued by the Association of Investment Companies in July 2022. All of the Company's operations are of a continuing nature.

The financial statements have been prepared on a going concern basis under the historical cost convention, as modified by the revaluation of investments held at fair value through profit or loss. The Directors believe that the Company has adequate resources to continue operating for at least 12 months from the date of approval of these accounts. In forming this opinion, the Directors have taken into consideration: the controls and monitoring processes in place; the Company's level of debt and other payables; the level of operating expenses, comprising largely variable costs which would reduce pro rata in the event of a market downturn; and that the Company's assets comprise cash and readily realisable securities quoted in active markets. In forming this opinion, the Directors have also considered any potential impact of climate change, and the risk/impact of elevated and sustained inflation and interest rates on the viability of the Company. The Company has additionally performed stress tests which confirm that a 50% fall in the market prices of the portfolio would not affect the Board's conclusions in respect of going concern. Further details of Directors' considerations regarding this are given in the Chair's Statement, Portfolio Managers' Review, Going Concern Statement and the Viability Statement.

The Company has not presented a statement of cash flows, as it is not required for an investment trust which meets certain conditions; in particular that substantially all of the Company's investments are highly liquid and carried at market value.

The financial statements are presented in sterling and amounts have been rounded to the nearest thousand.

The accounting policies applied to these accounts are consistent with those applied in the accounts for the year ended 31 July 2025.

No significant judgements, estimates or assumptions have been required in the preparation of the accounts for the current or preceding financial year.

(b) Valuation of investments

The Company's business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. This portfolio of financial assets and derivative instruments is managed and its performance evaluated on a fair value basis, in accordance with a documented investment strategy and information is provided internally on that basis to the Company's Board of Directors. Accordingly, upon initial recognition, the investments are classified by the Company as "held at fair value through profit or loss". Investments are included initially at transaction price, excluding expenses incidental to purchase which are written off to capital at the time of acquisition. Subsequently, investments are valued at fair value, which are last traded prices as quoted on the Tokyo Stock Exchange.

The Contracts for Difference (CFD) held in the portfolio are valued based on the price of the underlying security or index which they are purchased to reflect. The fair value of the CFDs is the difference between the strike price and the underlying shares in the contract.

Investments that are unlisted or not actively traded are valued using a variety of techniques to determine their fair value; all such valuations are reviewed by both the AIFM's Fair Value Pricing Committee and by the directors. No investments held at the current or comparative year end have been valued using other techniques. All purchases and sales are accounted for on a trade date basis.

(c) Accounting for reserves

Gains and losses on sales of investments and increases and decreases in the valuation of investments are included in the statement of comprehensive income and in capital reserves within "gains on investments held at fair value through profit or loss.

Gains and losses on sales of CFDs and increases and decreases in the valuation of CFDs are included in the statement of comprehensive income and in capital reserves within "net gains on derivative contracts.

Foreign exchange gains and losses on cash and deposit balances and unrealised exchange gains and losses on foreign currency loans are included in the statement of comprehensive income and in capital reserves.

(d) Income

Dividends receivable are recognised on the ex-dividend basis except where, in the opinion of the board, the dividend is capital in nature, in which case it is included in capital.

Overseas dividends are included gross of any withholding tax. CFD dividends are included net of any withholding tax.

Where the Company has elected to receive scrip dividends in the form of additional shares rather than in cash, the amount of the cash dividend foregone is recognised in revenue. Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital.

Deposit interest outstanding at the year end is calculated and accrued on a time apportionment basis using market rates of interest.

(e) Expenses

All expenses are accounted for on an accruals basis. Expenses are allocated wholly to the revenue column of the income statement with the following exceptions:

•   The investment management fee is allocated 30% to revenue and 70% to capital in line with the board's expected long-term split of revenue and capital return from the Company's investment portfolio.

•   Expenses incidental to the purchase or sale of an investment are charged to capital. These expenses are commonly referred to as transaction costs and mainly comprise brokerage commission. Details of transaction costs are given in note 10 on page 65.

(f) Finance costs

Finance costs, including collateral and finance costs paid on CFDs, any premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis using the effective interest method in accordance with FRS 102.

Finance costs are allocated 30% to revenue and 70% to capital in line with the board's expected long-term split of revenue and capital return from the Company's investment portfolio.

(g) Other financial instruments

Cash and cash equivalents may comprise cash at bank including bank overdrafts and demand deposits which are readily convertible to a known amount of cash and are subject to insignificant risk of changes in value.

Other debtors and creditors do not carry any interest, are short-term in nature and are accordingly stated at nominal value, with debtors reduced by appropriate allowances for estimated irrecoverable amounts.

Bank loans are classified as loans and are initially measured at fair value and subsequently measured at amortised cost. They are recorded at the proceeds received net of direct issue costs. Finance costs, including any premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis using the effective interest method.

(h) Taxation

The tax charge for the year is based on amounts expected to be received or paid.

Deferred tax is accounted for in accordance with FRS 102.

Deferred tax is provided on all timing differences that have originated but not reversed by the balance sheet date.

Deferred tax liabilities are recognised for all taxable timing differences but deferred tax assets are only recognised to the extent that it is probable that taxable profits will be available against which those timing differences can be utilised.

Tax relief is allocated to expenses charged to the capital column of the statement of comprehensive income on the "marginal basis". On this basis, if taxable income is capable of being entirely offset by revenue expenses, then no tax relief is transferred to capital.

Deferred tax is measured at the tax rate which is expected to apply in the periods in which the timing differences are expected to reverse, based on tax rates that have been enacted or substantively enacted at the accounting date and is measured on an undiscounted basis.

(i) Foreign currency

In accordance with FRS 102, the Company is required to determine a functional currency, being the currency in which the Company predominantly 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 and the currency in which the accounts are presented.

Transactions denominated in foreign currencies are converted at actual exchange rates as at the date of the transaction.

Monetary assets, liabilities and equity investments denominated in foreign currencies at the year end, are translated at the rates of exchange prevailing at the year end.

(j) Dividend payable

In accordance with FRS 102, the final dividend is included in the accounts in the year in which it is paid.

(k) Repurchase of Ordinary Shares

The costs of repurchasing Ordinary shares into treasury, including related stamp duty and transaction costs are taken directly to equity and reported through the Statement of Changes in Equity as a charge on the share purchase reserve. Share repurchase transactions are accounted for on a trade date basis.

The nominal value of Ordinary share capital repurchased and held in treasury remain in the called up share capital reserve.

2. Gains on investments held at fair value through profit or loss

	2026	2025
	£'000	£'000
Realised gains on sales of investments	38,670	19,386
Change in unrealised gains/(losses) on Investments at fair value through profit or loss	74,076	(6,552)
Gains on investments held at fair value through profit or loss	112,746	12,834

3. Income

	2026	2025
	£'000	£'000
Income from investments:
Overseas dividends	8,835	9,018
Derivative income
Dividends received on long CFDs	1,537	1,365
	10,372	10,383
Other interest receivable and similar income
Deposit interest	53	66
	10,425	10,449

4. Investment management fee

	2026			2025
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Management fee	876	2,043	2,919	688	1,605	2,293

The basis for calculating the investment management fee is set out in the Report of the Directors on page 39 and details of all amounts payable to the Manager are given in note 16 on page 67.

5. Administrative expenses

	2026	2025
	£'000	£'000
Administration expenses	390	411
Directors' fees1	177	181
Secretarial fee	90	90
Auditor's remuneration	48	42
	705	724

¹ Details of all amounts payable to Directors are given in the Remuneration Report on page 48.

6. Finance costs

	2026			2025
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Interest on bank loans	3	7	10	11	27	38
Interest paid on long CFDs	183	427	610	105	245	350
	186	434	620	116	272	388

7. Taxation

(a) Analysis of tax charge for the year

	2026			2025
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Irrecoverable overseas tax	883	-	883	901	-	901
Taxation for the year	883	-	883	901	-	901

(b) Factors affecting tax charge for the year

The tax assessed for the year is lower (2025: lower) than the Company's applicable rate of corporation tax for the year of 25% (2025: 25%).

The factors affecting the tax charge for the year are as follows:

	2026			2025
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Net return before taxation	8,658	129,557	138,215	8,921	12,948	21,869
Net return before taxation multiplied by the Company's applicable rate of corporation tax for the year of 25% (2025: 25%)	2,165	32,389	34,554	2,230	3,237	5,467
Effects of:
Capital gains on investments	-	(33,009)	(33,009)	-	(3,706)	(3,706)
Income not chargeable to corporation tax	(2,593)	-	(2,593)	(2,596)	-	(2,596)
Irrecoverable overseas tax	883	-	883	901	-	901
Unrelieved expenses	428	620	1,048	366	469	835
Taxation for the year	883	-	883	901	-	901

(c) Deferred taxation

The Company has an unrecognised deferred tax asset of £13,388,000 (2025: £12,348,000) based on a prospective corporation tax rate of 25% (2025: 25%).

This deferred tax asset has arisen due to the cumulative excess of deductible expenses over taxable income. Given the composition of the Company's portfolio, it is not likely that this asset will be utilised in the foreseeable future and therefore no asset has been recognised in the accounts.

Given the Company's intention to meet the conditions required to retain its status as an investment trust company, no provision has been made for UK capital gains tax on any capital gains or losses arising on the revaluation or disposal of investments.

8. Return per share

	2026	2025
Revenue return (£'000)	7,775	8,020
Capital return (£'000)	129,557	12,948
Total return (£'000)	137,332	20,968
Weighted average number of ordinary shares in issue during the year	114,425,545	116,025,982
Revenue return per share (pence)	6.79	6.91
Capital return per share (pence)	113.22	11.16
Total return per share (pence)	120.01	18.07

9. Dividends

(a) Dividends paid and proposed

	2026	2025
	£'000	£'000
2025 final dividend of 2.85p (2024: 10.81p)	3,275	12,561
First interim dividend of 2.93p (2025: 2.82p)	3,355	3,267
Second interim dividend of 3.05p (2025: 2.89p)	3,489	3,345
Third interim dividend of 3.29p (2025: 2.87p)	3,744	3,317
Total dividends paid in the year	13,863	22,490

	2026	2025
	£'000	£'000
2026 Fourth interim dividend proposed of 4.07p (2025: 2.85p)	4,627	3,292

Dividends are initially paid from the revenue reserve; any amounts exceeding this reserve are funded from the capital reserve. The final dividend of £2,160,000, paid on 31 October 2025, the first interim dividend of £38,000, paid on 30 January 2026, and the second interim dividend of £3,335,000, paid on 28 April 2026, were all paid from the capital reserve.

(b) Dividends for the purposes of Section 1158 of the Corporation Tax Act 2010 ("Section 1158")

The requirements of Section 1158 are considered on the basis of dividends declared in respect of the financial year as shown below. The revenue available for distribution by way of dividend for the year is £7,775,000 (2025: £8,020,000).

	2026
	£'000
First interim dividend of 2.93p	3,355
Second interim dividend of 3.05p	3,489
Third interim dividend of 3.29p	3,744
Fourth interim dividend of 4.07p	4,627
Total dividends of 13.34p (2025: 11.43p)	15,215

10. Investments held at fair value through profit or loss

(a) Movement in investments

	2026	2025
	£'000	£'000
Opening book cost	267,142	287,279
Opening investment holding gains	60,067	66,619
Opening fair value	327,209	353,898
Analysis of transactions made during the year
Purchases at cost	87,755	87,291
Sales proceeds	(89,016)	(126,814)
Gains on investments held at fair value	112,746	12,834
Closing fair value	438,694	327,209
Closing book cost	304,551	267,142
Closing investment holding gains	134,143	60,067
Closing fair value	438,694	327,209

All investments are listed on a recognised stock exchange.

The Company received £89,016,000 (2025: £126,814,000) from disposal of investments in the year. The book cost of these investments when they were purchased was £50,346,000 (2025: £107,428,000). These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of the investments.

(b) Transaction costs

The following transaction costs, mainly comprising brokerage commissions, were incurred during the year:

	2026	2025
	£'000	£'000
On acquisitions	21	19
On disposals	19	28
	40	47

(c) Derivative financial instruments

	2026	2025
Contracts for Differences (CFDs)	£'000	£'000
Movement in investment holding (losses)/gains on CFDs	(2,419)	2,803
Realised gains/(losses) on CFDs	22,995	(723)
	20,576	2,080

	2026		2025
	Asset	Fair	Asset	Fair
	exposure	value	exposure	value
Derivative financial instruments held at fair value through profit or loss	£'000	£'000	£'000	£'000
CFD assets	44,985	2,026	59,736	3,855
CFD liabilities	34,196	(713)	3,672	(123)
	79,181	1,313	63,408	3,732

The CFDs are held in order to increase exposure to stock movements without the financial commitment of purchasing the stock. The total market exposure on the CFDs held at the year end is £79,181,000 (2025: £63,408,000) and the liability attached to the contract for differences is £77,868,000 (2025: £59,676,000). This resulted in an unrealised gain of £1,313,000 (2025: £3,732,000).

11. Current assets

	2026	2025
Debtors	£'000	£'000
Securities sold awaiting settlement	1,479	1,851
Dividends and interest receivable	450	339
Other debtors	65	23
	1,994	2,213

The Directors consider that the carrying amount of debtors approximates to their fair value.

	2026	2025
Cash and cash equivalents	£'000	£'000
Cash at bank	26,288	17,028
	26,288	17,028

The carrying amount of cash represents its fair value. No cash equivalents were held at the year end (2025: same).

12. Current liabilities

	2026	2025
Creditors: amounts falling due within one year	£'000	£'000
Amounts held at derivative clearing houses and brokers	2,556	3,145
Securities purchased awaiting settlement	976	1,546
Repurchase of ordinary shares into treasury awaiting settlement	219	114
Other creditors and accruals	1,871	800
	5,622	5,605

The Directors consider that the carrying amount of creditors approximates to their fair value.

The Company had a 1 billion yen, 364 day credit facility arrangement with SMBC, to 10 November 2025. The credit facility was not renewed after the 10 November 2025, and there was no credit facility in place at the year-end date.

Further details of the facility are given in note 19 on page 69.

13. Called-up share capital

	2026	2025
	£'000	£'000
Ordinary shares allotted, called up and fully paid:
Opening balance of 115,495,504 (2025: 117,400,528) ordinary shares of 10p each	11,549	11,740
Repurchase of 1,750,001 (2025: 1,905,024) shares held in treasury	(175)	(191)
Subtotal of 113,745,503 (2025: 115,495,504) shares	11,374	11,549
4,707,783 (2025: 2,957,782) shares held in treasury	471	296
Closing balance of 118,453,286 (2025: 118,453,286) shares	11,845	11,845

During the year, the Company purchased 1,750,001 of its own shares, nominal value £175,000 to hold in treasury, for a total consideration of £5,379,000 representing 1.52% of the shares outstanding at the beginning of the year. The reason for these share repurchases was to seek to manage the volatility of the share price discount to net asset value per share.

14. Reserves

	Capital reserves
		Capital	Warrant	Share
	Share	redemption	exercise	purchase	Capital	Revenue
	premium1	reserve1	reserve1	reserve2	reserve3	reserve4
Year ended 31 July 2026	£'000	£'000	£'000	£'000	£'000	£'000
Opening balance	7	656	3	75,929	255,022	1,115
Gains on sales of investments	-	-	-	-	38,670	-
Change in unrealised gains on Investments at fair value through profit or loss	-	-	-	-	74,076	-
Gains on contracts for difference	-	-	-	-	20,576	-
Exchange losses on cash and short-term deposits	-	-	-	-	(1,288)	-
Repurchase of shares into treasury	-	-	-	(5,379)	-	-
Management fee and finance costs allocated to capital	-	-	-	-	(2,477)	-
Dividend paid	-	-	-	-	(5,533)	(8,330)
Retained revenue for the year	-	-	-	-	-	7,775
Closing balance	7	656	3	70,550	379,046	560

¹ These reserves are not distributable.

² These are realised (distributable) capital reserves which may be used to repurchase the Company's own shares or distributed as dividends.

³ This reserve may include some holding gains/(losses) on liquid investments (which may be deemed to be realised) and other amounts which are unrealised. An analysis has not been made between those amounts that are realised (and may be distributed as dividends or used to repurchase the Company's own shares) and those that are unrealised.

⁴ A credit balance on the revenue reserve may be distributed as dividends or used to repurchase the Company's own shares.

	Capital reserves
		Capital	Warrant	Share
	Share	redemption	exercise	purchase	Capital	Revenue
	premium1	reserve1	reserve1	reserve2	reserve3	reserve4
Year ended 31 July 2025	£'000	£'000	£'000	£'000	£'000	£'000
Opening balance	7	656	3	80,718	249,597	8,062
Gains on sales of investments	-	-	-	-	19,386	-
Change in unrealised gains on Investments at fair value through profit or loss	-	-	-	-	(6,552)	-
Gains on contracts for difference	-	-	-	-	2,080	-
Exchange losses on cash and short-term deposits	-	-	-	-	(304)	-
Exchange gains on foreign currency loans	-	-	-	-	215	-
Repurchase of shares into treasury	-	-	-	(4,789)	-	-
Management fee and finance costs allocated to capital	-	-	-	-	(1,877)	-
Dividend paid	-	-	-	-	(7,523)	(14,967)
Retained revenue for the year	-	-	-	-	-	8,020
Closing balance	7	656	3	75,929	255,022	1,115

¹ These reserves are not distributable.

² These are realised (distributable) capital reserves which may be used to repurchase the Company's own shares or distributed as dividends.

³ This reserve may include some holding gains/(losses) on liquid investments (which may be deemed to be realised) and other amounts which are unrealised. An analysis has not been made between those amounts that are realised (and may be distributed as dividends or used to repurchase the Company's own shares) and those that are unrealised.

⁴ A credit balance on the revenue reserve may be distributed as dividends or used to repurchase the Company's own shares.

15. Net asset value per share

	2026	2025
Total equity shareholders' funds (£'000)	462,667	344,577
Shares in issue at the year end	113,745,503	115,495,504
Net asset value per share (pence)	406.76	298.35

16. Transactions with the Manager

Under the terms of the AlFM Agreement, the Manager is entitled to receive a management fee, a marketing support fee and a company secretarial fee. Details of the AIFM agreement are given in the Report of the Directors on page 39. Any investments in funds managed or advised by the Manager or any of its associated companies are excluded from the assets used for the purpose of the management fee calculation and therefore incur no fee.

The management fee payable in respect of the year ended 31 July 2026 amounted to £2,919,000 (2025: £2,293,000), of which £1,474,000 (2025: £614,000) was outstanding at the year end. The marketing support fee payable to the Manager amounted to £91,000 (2025: £50,000) of which £51,000 (2025: £13,000) was outstanding at the year end. The company secretarial fee payable to the Manager amounted to £90,000 (2025: £90,000) of which £45,000 (2025: £23,000) was outstanding at the year end.

17. Related party transactions

Details of the remuneration payable to Directors are given in the Remuneration Report on page 48 and details of Directors' shareholdings are given in the Report of the Directors on page 50. Details of transactions with the Manager are given in note 16 above. There have been no other transactions with related parties during the year (2025: nil).

18. Disclosures regarding financial instruments measured at fair value

The Company's financial instruments within the scope of FRS 102 that are held at fair value comprise its investment portfolio and any derivative financial instruments.

FRS 102 requires that financial instruments held at fair value are categorised into a hierarchy consisting of the three levels below. A fair value measurement is categorised in its entirety on the basis of the lowest level input that is significant to the fair value measurement.

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

Level 2 - valued using observable inputs other than quoted prices included within Level 1.

Level 3 - valued using inputs that are unobservable.

Details of the valuation techniques used by the Company are given in note 1(b) on page 61.

The following table sets out the fair value measurements using the FRS 102 hierarchy at 31 July:

	2026
	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Financial instruments held at fair value through profit or loss
Equity investments	438,694	-	-	438,694
Derivative financial instruments - contracts for difference - CFD assets	-	2,026	-	2,026
Derivative financial instruments - contracts for difference - CFD liabilities	-	(713)	-	(713)
Total	438,694	1,313	-	440,007

	2025
	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Financial instruments held at fair value through profit or loss
Equity investments	327,209	-	-	327,209
Derivative financial instruments - contracts for difference - CFD assets	-	3,855	-	3,855
Derivative financial instruments - contracts for difference - CFD liabilities	-	(123)	-	(123)
Total	327,209	3,732	-	330,941

19. Financial instruments' exposure to risk and risk management policies

The investment objective is set out on the inside front cover of this report. In pursuing this objective, the Company is exposed to a variety of risks that could result in a reduction in the Company's net assets or a reduction in profits available for dividends.

These risks include market risk (comprising currency risk, interest rate risk and market price risk), liquidity risk and credit risk. The Directors' policy for managing these risks is set out in the accompanying text. The Board coordinates the Company's risk management policy.

The objectives, policies and processes for managing the risks and the methods used to measure the risks that are set out below, have not changed from those applying in the comparative year.

The Company's classes of financial instruments are as follows:

•   investments in shares of Japanese companies which are held in accordance with the Company's investment objective;

•   a credit facility, the purpose of which are to manage working capital requirements and to gear the Company as appropriate;

•   short-term debtors, creditors and cash arising directly from its operations; and

•   Contract for differences, which are used for the purpose to gain exposure to the Japanese market.

(a) Market risk

The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements: currency risk, interest rate risk and market price risk. Information to enable an evaluation of the nature and extent of these three elements of market risk is given in parts (i) to (iii) of this note, together with sensitivity analysis where appropriate. The Board reviews and agrees policies for managing these risks and these policies have remained unchanged from those applying in the comparative year. The Manager assesses the exposure to market risk when making each investment decision and monitors the overall level of market risk on the whole of the investment portfolio on an ongoing basis.

(i) Currency risk

The Company's functional currency and the currency in which it reports, is sterling. However the Company's assets, liabilities and income are almost entirely denominated in yen. As a result movements in the exchange rate will affect the sterling value of those items.

Management of currency risk

The Manager monitors the Company's exposure to foreign currencies on a daily basis and reports to the Board, which meets on at least four occasions each year. The Manager measures the risk to the Company of the foreign currency exposure by considering the effect on the Company's net asset value and income of a movement in the yen/sterling exchange rate. It is currently not the Company's policy to actively hedge against currency risk. However any yen denominated borrowing acts to reduce the exposure of the Company's portfolio to the yen/sterling exchange rate. Income is converted to sterling on receipt. The Company may use short-term forward currency contracts to manage working capital requirements.

Foreign currency exposure

The fair value of the Company's monetary items that have exposure to the yen at 31 July are shown below. The Company's investments and derivative financial instruments have been included separately in the analysis so as to show the overall level of exposure.

	2026	2025
	£'000	£'000
Debtors (securities sold awaiting settlement, dividends and interest receivable)	1,929	2,190
Cash at bank	24,442	13,650
Amounts owing to derivative clearing houses and brokers	(2,556)	(3,145)
Creditors (securities purchased awaiting settlement)	(976)	(1,546)
Interest payable on long CFDs	(29)	(11)
Foreign currency exposure on net monetary items	22,810	11,138
Investments held at fair value through profit or loss that are equities	438,694	327,209
Derivative financial instruments held at fair value through profit or loss	1,313	3,732
Total net foreign currency exposure	462,817	342,079

The above year end amounts are broadly representative of the exposure to foreign currency risk during the current and comparative year.

Foreign currency sensitivity

The following tables illustrate the sensitivity of return after taxation for the year and net assets with regard to the Company's monetary financial assets, financial liabilities and exchange rates. The sensitivity analysis is based on the Company's monetary currency financial instruments held at each balance sheet date and assumes a 10% (2025: 10%) appreciation or depreciation in sterling against the yen, which is considered to be a reasonable illustration based on the volatility of exchange rates during the year.

If sterling had weakened by 10% this would have had the following effect:

	2026	2025
Income Statement - return after taxation	£'000	£'000
Statement of comprehensive income - return after taxation
Revenue return	936	943
Capital return	2,238	1,087
Total return after taxation for the year	3,174	2,030
Net assets	3,174	2,030

Conversely if sterling had strengthened by 10% this would have had the following effect:

	2026	2025
Income Statement - return after taxation	£'000	£'000
Statement of comprehensive income - return after taxation
Revenue return	(936)	(943)
Capital return	(2,238)	(1,087)
Total return after taxation for the year	(3,174)	(2,030)
Net assets	(3,174)	(2,030)

In the opinion of the Directors, the above sensitivity analysis with respect to monetary financial assets and liabilities is broadly representative of the whole of the current and comparative year. The sensitivity with regard to the Company's investments, and any derivative instruments held, to changes in foreign currency exchange rates is subsumed into market price risk sensitivity below.

(ii) Interest rate risk

Interest rate movements may affect the level of income receivable on cash deposits and the interest payable on variable rate borrowings when interest rates are re-set.

Management of interest rate risk

Liquidity and borrowings are managed with the aim of increasing returns to shareholders. The Company may use gearing to enhance performance (including the use of CFDs) but investment exposure will not exceed 125% of net asset value.

The possible effects on cash flows that could arise as a result of changes in interest rates are taken into account when the Company borrows on the credit facility. However, amounts drawn down on this facility are for short-term periods and therefore exposure to interest rate risk is not significant. The Company has a revolving credit facility agreement which carries a floating rate of interest and which is therefore exposed to interest rate changes.

Interest rate exposure

The exposure of financial assets and financial liabilities to floating interest rates, giving cash flow interest rate risk when rates are re-set, is shown below:

	2026	2025
	£'000	£'000
Exposure to floating interest rates:
Cash at bank	26,288	17,028
Total exposure	26,288	17,028

The floating rate assets consist of cash deposits on call. Sterling cash deposits at call earn interest at floating rates based on Sterling Overnight Index Average ("SONIA") rates, (2025: same).

The Company had a yen 1 billion, 364 day credit facility arrangement with SMBC, to 10 November 2025. Under the terms of the agreement, interest was payable at the "Compounded Reference Rate", being the aggregate of the Daily Non-Cumulative Compounded Risk Free Reference Rate plus the applicable Credit Adjustment Spread. At the year end there was no credit facility in place.

The above year-end amounts are not representative of the exposure to interest rates during the year as the level of cash balances has fluctuated. The maximum and minimum exposure during the year was as follows:

	2026	2025
	£'000	£'000
Maximum debit interest rate exposure during the year - net cash/(debt)	14,370	(939)
Maximum credit interest rate exposure during the year - net cash	26,888	20,596

Interest rate sensitivity

The following table illustrates the sensitivity of the return after taxation for the year and net assets to a 1.0% (2025: 1.0%) increase or decrease in interest rates. This level of change is considered to be a reasonable illustration based on observation of current market conditions. The sensitivity analysis is based on the Company's monetary financial instruments held at the accounting date and which are exposed to interest rate movements, with all other variables held constant.

	2026		2025
	1.0%	1.0%	1.0%	1.0%
	increase	decrease	increase	decrease
	in rate	in rate	in rate	in rate
Income Statement - return after taxation	£'000	£'000	£'000	£'000
Revenue return	263	(263)	170	(170)
Total return after taxation	263	(263)	170	(170)
Net assets	263	(263)	170	(170)

In the opinion of the Directors, this sensitivity analysis may not be representative of the Company's future exposure to interest rate changes due to fluctuations in the level of cash balances and drawings on the credit facility.

(iii) Market price risk

Market price risk includes changes in market prices, other than those arising from interest rate risk, which may affect the value of the Company's investments.

Management of market 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.

Market price risk exposure

The Company's total exposure to changes in market prices at 31 July comprised its portfolio of investments as follows:

	2026	2025
	£'000	£'000
Investments held at fair value through profit or loss	438,694	327,209
Derivative financial instruments - portfolio exposure	79,181	63,408
	517,875	390,617

The above data is broadly representative of the exposure to market price risk during the year.

Concentration of exposure to market price risk

An analysis of the Company's investments is given on pages 16 and 17. The portfolio comprises securities listed on Japanese stock markets and CFDs with exposure to the Japanese stock market. Accordingly there is a concentration of exposure to that country.

However it should be noted that an investment may not be entirely exposed to the economic conditions in its country of listing.

Market price risk sensitivity

The following table illustrates the sensitivity of the return after taxation for the year and net assets to an increase or decrease of 10% (2025: 10%) in the fair values of the Company's investments. This level of change is considered to be a reasonable illustration based on observation of current market conditions. The sensitivity analysis is based on the Company's exposure to market price risk through its portfolio of investments and includes the impact on the management fee but assumes all other variables are held constant.

	2026		2025
	10%	10%	10%	10%
	increase	decrease	increase	decrease
	in fair	in fair	in fair	in fair
	value	value	value	value
Income Statement - return after taxation	£'000	£'000	£'000	£'000
Revenue return	(101)	101	(76)	76
Capital return	51,552	(51,552)	38,884	(38,884)
Total return after taxation and net assets	51,451	(51,451)	38,808	(38,808)
Percentage change in net asset value	11.1%	(11.1%)	11.3%	(11.3%)

(b) Liquidity risk

This is the risk that the Company will encounter difficulty in meeting its obligations associated with financial liabilities that are settled by delivering cash or another financial asset.

Management of the risk

Liquidity risk is not significant as the Company's assets comprise mainly readily realisable securities and derivative instruments, which can be sold to meet funding requirements if necessary. Short-term flexibility is achieved through the use of a credit facility.

Liquidity risk exposure

Contractual maturities of financial liabilities, based on the earliest date on which payment can be required are as follows:

	2026		2025
	Within		Within
	one year	Total	one year	Total
	£'000	£'000	£'000	£'000
Creditors: amounts falling due within one year
Securities purchased awaiting settlement	976	976	1,546	1,546
Repurchase of ordinary shares into treasury awaiting settlement	219	219	114	114
Interest payable on long CFDs	29	29	11	11
Other creditors and accruals	1,842	1,842	789	789
Amounts owing to derivative clearing houses and brokers	2,556	2,556	3,145	3,145
	5,622	5,622	5,605	5,605

(c) Credit risk

Credit risk is the risk that the failure of the counterparty to a transaction to discharge its obligations under that transaction could result in loss to the Company.

Management of credit risk

This risk is not significant and is managed as follows:

Portfolio dealing

The Company invests almost entirely in markets that operate a 'Delivery versus Payment' settlement process, ensuring the security of trades and reducing the risk of losing the principal amount. This approach extends to various investment instruments, while Contracts for Difference (CFDs) are settled through cash payments based on the difference between the opening and closing prices, rather than physical delivery of the underlying assets. The Manager continuously monitors dealing activity to ensure best execution, which involves measuring various indicators including the quality of trade settlement and incidence of failed trades. Counterparties and brokers must be pre-approved by the Manager's credit committee. In relation to CFDs, counterparty risk is limited to the profit on a contract, not the notional value. The value in this regard is shown in the table below under credit risk exposure.

Exposure to the Custodian

The Custodian of the Company's assets is J.P. Morgan Europe Limited which has Long-Term Credit Ratings of AA- with Fitch and Aa3 with Moody's.

The Company's investments are held in accounts which are segregated from the Custodian's own trading assets. If the Custodian were to become insolvent, the Company's right of ownership of its investments is clear and they are therefore protected. However the Company's cash balances are all deposited with the Custodian as banker and held on the Custodian's balance sheet. In accordance with usual banking practice, the Company will rank as a general creditor to the Custodian in respect of cash balances.

Credit risk exposure

The following amounts shown in the Statement of Financial Position, represent the maximum exposure to credit risk at the current and comparative year end.

	2026	2025
	£'000	£'000
Current assets
Debtors - securities sold awaiting settlement, dividends and interest receivable and other debtors	1,994	2,213
Cash at bank	26,288	17,028
Derivative financial instruments	2,026	3,855
	30,308	23,096

No debtors are past their due date and no provision has been made for impairment.

The Company had received an amount of cash denominated in Japanese Yen (JPY) from JPMorgan Chase Bank as collateral in relation to derivative financial instruments. The total amount from JPMorgan Chase Bank as at 31 July 2026 was £2,556,000 (2025: £3,145,000).

(d) Fair values of financial assets and financial liabilities

All financial assets and liabilities are either carried at fair value or the amount in the Statement of Financial Position is a reasonable approximation of fair value.

20. Capital management policies and procedures

The Company's objectives, policies and processes for managing capital are unchanged from the preceding year.

The Company's debt and capital structure comprises the following:

	2026	2025
	£'000	£'000
Equity
Called-up share capital	11,845	11,845
Reserves	450,822	332,732
Total equity	462,667	344,577

The Company's capital management objectives are to ensure that it will continue as a going concern and to maximise the capital return to shareholders through an appropriate level of gearing. The Board's policy is that the Company may use gearing to enhance performance (including the use of CFDs) but investment exposure will not exceed 125% of net asset value. Following the change in investment policy gearing is calculated as the amounts by which portfolio exposure exceeds net assets expressed as a percentage of net assets.

	2026		2025
	Portfolio	Portfolio	Portfolio	Portfolio
	exposure	exposure1	exposure	exposure1
	£'000	£'000	£'000	£'000
Investments	438,694	94.8	327,209	95.0
Portfolio exposure on CFDs	79,181	17.1	63,408	18.4
Total portfolio exposure	517,875	111.9	390,617	113.4
Net assets	462,667		344,577
Total portfolio exposure		11.9		13.4

¹ Portfolio exposure to the market expressed as a percentage of net assets.

The Board, with the assistance of the Manager, monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes:

·      the planned level of gearing, which takes into account the Manager's views on the market;

·      the need to buy back shares to be held in treasury, which takes into account the share price discount;

·      the opportunities for issues of new shares; and

·      the level of dividend distribution in excess of that which is required to be distributed.

21. Status of results announcement

2026 Financial Information

The figures and financial information for 2026 are extracted from the Annual Report and Financial Statements for the year ended 31 July 2026 and do not constitute the statutory accounts for that year. The Annual Report and Financial Statements include the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

2025 Financial Information

The figures and financial information for 2025 are extracted from the published Annual Report and Financial Statements for the year ended 31 July 2025 and do not constitute the statutory accounts for the year. The Annual Report and Financial Statements have been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

Schroder Investment Management Limited

E-mail: [e-mail]

Issued by Schroder Investment Management Limited. Registration No 1893220 England.

Authorised and regulated by the Financial Conduct Authority.  For regular updates by e-mail please register online at www.schroders.com for our alerting service.

ENDS

 

END