Nippon Active Value Fund plc

June marked the third month in a row that the fund's NAV per share moved in a narrow band between 228p and 230p, while there was evidence the tech/AI rally was beginning to run out of steam, with the Nikkei 225 and Topix indices only moving 5.3% and 1% higher, respectively. On 5th June, the Nikkei reported that FMH had received 15 offers for Sankei Building, several above Y1 trillion. This calculation exceeded our expectations and having re-entered the stock, we await the eventual sale with interest.

As is normal course for Japanese companies, June saw the majority of the fund's portfolio companies holding their AGMs. Predictably, none of our proposals passed the voting threshold – which is not unusual! Disappointingly, however, both Bunka Shutter and Aska Pharma were successful in having their so-called 'Poison Pills' adopted, with even proxy advisory firms, such as ISS, recommending external shareholders vote in favour – in our view, an extraordinary dereliction of their duty to uphold shareholder democracy. More generally, there are clear signs of a potential pushback against activism detectable in some of the recent reports emanating from the METI, FSA and other Japanese regulators. This should come as no surprise; the wind at our backs produced by Shinzo Abe's Corporate Governance Reform Programme has continued unabated for over a decade. Though the opportunity set in the Japanese markets is as attractive as ever, with much shareholder value remaining subject to inefficient balance sheets and capital allocation practices, the means of unlocking will require ever more nuanced dialogue to constructively work with our portfolio companies. This is all in the nature of the healthy operation of markets. Fundamentally, nothing has changed.