Atlantis Japan Growth Fund : Feb 2023

28 February 2023

ATLANTIS JAPAN GROWTH FUND

CUMULATIVE PERFORMANCE % (£)	YTD	1M	3M	1Y	3Y	5Y	2022	2021	2020	2019	2018	ITD*
AJG Price (total return)	4.18	1.36	8.09	4.27	16.25	-9.70	-22.90	-10.40	29.58	25.62	-15.52	222.86
AJG NAV (total return)	-1.42	-5.24	-3.70	-5.83	5.21	-10.67	-22.53	-9.58	24.07	33.60	-14.97	253.93
Topix Index (total return)	1.33	-1.90	1.25	1.46	20.11	14.47	-4.45	2.14	8.73	16.05	-8.85	79.31

Sources:	Northern Trust, Bloomberg and Quaero. The Fund's total return performance is calculated with dividends added back on ex-dividend date.
Notes:	* Inception to date NAV return figure was converted to GBP based on the official USD NAV using Bloomberg FX rate.

DIVIDEND POLICY

At the 2019 AGM, shareholders of the Company approved the Board's recommendation to replace the six monthly redemption facility with a regular dividend paid to all shareholders on a quarterly basis set at 1% of the average net asset value per share during the final month of the preceding financial year.

The average daily NAV per share for April 2022 was 215p, thus the four payments in respect of the financial year ended 30 April 2022 will be at 2.15p per share payable at the end of September 2022, December 2022, March 2023 and June 2023. The quarterly interim dividend will be paid out of capital resources.

PERFORMANCE OVER 5 YEARS (£)

40%
	Altantis Japan Growth Fund (total return) - £ NAV
30%	Atlantis Japan Growth Fund (total return) - £ Price
	Topix Index (total return) - £ Price
20%
10%
0%
-10%
-20%

-30%

Feb 18	Feb 19	Feb 20	Feb 21	Feb 22	Feb 23
Sources:	Northern Trust, Bloomberg and Quaero. The Fund's total return performance is calculated with dividends added back on ex-dividend date.
Notes:	The figures in the above table and chart refer to past performance which is not a reliable indicator of future results. An investment in the
	Fund would place an investor's capital at risk. Figures shown are net of all fees.

KEY FACTS

INVESTMENT OBJECTIVE

Aims to achieve long-term capital growth through investment wholly or mainly in listed Japanese equities.

FUND INFORMATION
Lead portfolio adviser	Taeko Setaishi
Lead adviser start date	01 May 2016
Total Net Assets (TNA)	GBP 83m
Shares in issue	40,988,070
Share price	187.0p
NAV per share	202.7p
Discount(-)/Premium	-7.8%
Net gearing	3.8%
Active Share	93.1%
Inception date	10th May 1996
ADMINISTRATIVE & DEALING INFORMATION
Financial Year End	30 April
Company Domicile	Guernsey
Company Legal	UK Investment Trust
Structure
Listing	London Stock Exchange
Valuation	Daily
Company Broker	Singer Capital Markets
Depositary	Northern Trust
Administrator	Northern Trust
Auditor	Grant Thornton
Investment Manager	Quaero Capital LLP
Investment Adviser	Atlantis Investment
	Research Corporation

MANAGER'S COMMENTARY

Performance Review

In February, the Atlantis Japan Growth Fund declined 5.24% MoM versus the benchmark Topix Total Return (TR) Index decline of

1.90% in sterling terms. In Japanese yen, the fund declined 2.48% versus a gain of 0.95% for the benchmark, while the yen lost 2.9% against sterling.

A sense of optimism permeated at the start of the month on expectations of a robust US economy following much better-than- expected employment data for January. This was at the same time as inflation was expected to ease, allowing the Fed to slow the pace of tightening. In Japan, a view was taking hold that the BoJ would start winding down its YCC (yield curve control) policy with the next governor taking office in April, and

that interest spreads between the US and Japan would narrow, thereby stabilising the yen. However, by mid-month, a stronger US CPI print (+6.4% YoY vs +6.2% expected) for January turned sentiment upside down, reigniting concerns on inflation, policy, and a consequent global recession. On the same day, the announcement of a surprise choice for the next BoJ governor - Kazuo Ueda - unsettled the outlook for policy in Japan as well. Over the course of the month this resulted in the yen weakening from ¥128/$ to ¥136/$, and market style veering sharply with the Topix Growth TR Index falling 3.26% MoM vs the Topix Value TR Index declining only 0.59% in sterling terms. This negatively impacted the Fund's relative performance for the month, although this may be temporary given the fluctuating sentiment and the view

DIVIDEND
12 months dividend yield	5.4%
Quarterly interim paid	March, June,
	September and
	December
COMPANY FEES & EXPENSES
Ongoing Charges*	1.65%
Annual Management Fee	1.00% up to £125m

	0.85% between £125m-£175m
	0.70% greater than £175m
FUND CODES
Bloomberg	AJG LN
SEDOL	B61ND55
ISIN	GG00B61ND550

• Based on the Company's Annual Financial Statements to
  30 April 2022.

Quaero Capital LLP | 2-4 King Street, London SW1Y 6QL | [phone] | [e-mail]

www.atlantisjapangrowthfund.com

in Japan is that the economy is not in bad shape.

Sectors which outperformed for the Company included Machinery, Banks, and Precision. Machinery and Precision were helped by the weaker yen and structural earnings growth stories in Disco (6146 JP) and Topcon (7732 JP). Although the timing for normalising interest rate spreads was put in doubt, by the unexpected BoJ governor choice, banks were nevertheless supported by gains in SMFG (8316 JP), one of the more profitable of Japan's mega banks, and Keiyo Bank (8544 JP), a regional bank transforming its business with various tie-ups and operating in a neighbouring prefecture to Tokyo. Sectors that underperformed included Other Products, Services and Electrical Appliances. EDP (7794 JP), in the Other Products sector, was the Fund's worst performing stock for the month, falling 46.9% after a small downward revision to its earnings coincided with the end of the post- IPO lock-up period. Having revised up twice in this period, the company still expects to see revenue growth of 73% and profit growth of 138%. The company's business remains very positive, with a strong order backlog in its most profitable products. Such volatility illustrates the risks and opportunities of investing in the smaller cap market, and we see such a correction as an opportunity to accumulate.

Investment Activity

During a relatively subdued month for investment activity, this month the fund added two positions in Services and Wholesale Trade resulting in the number of holdings increasing to 54, up from 52 the previous month.

Changes in overall sector exposures were minimal and reflected stock price moves - the Other Products sector declined from 3.46% to 1.69% due to the fall in EDP's price.

The Company is fully invested in equities and does not hold bonds or derivatives and the currency is not hedged.

Outlook

As noted above, the outlook for the global economy became more clouded this month. However, we would highlight an interesting anecdote from a meeting we recently had with a leading service provider in Japan. They had noted, in some of their investor and analyst meetings, a contrast between overseas parties who expressed increased concerns of recession, with expectations locally in Japan where the domestic economy is seen to be in relatively good shape. Employment is steady (Dec unemployment was 2.5%), wages are being increased by more than inflation at many leading companies (Dec labour cash earnings +4.8% YoY vs 2.5% expected), and retail spending is rising noticeably with both December (+1.1% YoY) and January (+6.3% YoY) ahead of expectations (+0.7% and +4.0% respectively). They also noted that it was clear, from the first testimony of BoJ Governor-elect Ueda, that he was "not going to sink the economy". They said that their SME customers were likely to spend on replacing various hardware in the near term because of expectations of rising prices, while a possible office PC replacement cycle was set to take hold over the next 3-years ahead of Microsoft ending its support for Windows 10. This behaviour could also partially explain rising retail sales as consumers are developing healthy "rational expectations" of a rising prices mentality, which bodes well for the overall direction of the economy. Inbound tourist travel is also increasing with 1.5mil people visiting Japan in January, up 84 times from the previous year, though still only 55.7% of the January 2019 level. Virus testing and other requirements have been eased and thus the inbound trend is expected to accelerate. Separately, we also heard from meetings with companies, with overseas operations, that the outlook for a global recession may have been over-hyped and that conditions on the ground are better than widely reported in the media.

PORTFOLIO STATISTICS

MARKET EXPOSURE	103.8%
TOP 10 HOLDINGS	(% TNA)
Japan Material	3.8
Internet Initiative Japan	3.6
Intloop	3.5
Sumitomo Mitsui Financial	3.3
Creek & River	2.9
Amvis Holdings	2.9
Topcon	2.8
Hikari Tsushin	2.6
Bellsystem24 Holdings	2.6
Shin-Etsu Chemical	2.5
SECTOR BREAKDOWN	(% TNA)
Consumer Discretionary	11.2
Consumer Staples	3.1
Financials	12.1
Health Care	6.0
Industrials	25.2
Information Technology	34.5
Materials	2.5
Real Estate	5.6
Communication Services	3.6
MARKET CAPITALISATION	(% TNA)
> 10bn	17.7
5-10bn	7.3
2-5bn	11.8
0.5-2bn	24.6
< 0.5bn	42.5

CONTACTS

INVESTOR RELATIONS

Contact:	Henry Pollard
Phone:	[phone]
Email:	[e-mail]
FUND BROKER
Contact:	James Waterlow
Phone:	[phone]
Email:	[e-mail]

Quaero Capital LLP | 2-4 King Street, London SW1Y 6QL | [phone] | [e-mail]

www.atlantisjapangrowthfund.com

KEY RISKS

• Past performance is not a reliable indicator of future results. The value of your investment may go down as well as up and you may not get back the amount originally invested.
• The Fund may be invested in securities denominated in currencies other than Sterling. Changes in exchange rates may cause your investment to decrease or increase in value.
• The Fund, as an investment trust, is a public limited company, the shares of which are traded on the London Stock Exchange. Investment trusts are not authorised and regulated by the Financial Conduct Authority.
• Investment trusts may borrow money in order to make further investments. This is known as 'gearing' or 'leverage'. The effect of gearing can enhance returns to shareholders in rising markets but will have the opposite effect on returns in falling markets.
• The Fund may invest in smaller companies which are generally considered to carry a higher degree of risk as the market for their shares is often less liquid than that for larger companies.
• An investment trust's exposure to a single market and currency may increase the level of risk.

IMPORTANT INFORMATION

This newsletter is prepared on behalf of Atlantis Japan Growth Fund Limited (the "Fund") by Quaero Capital LLP ("Quaero"), which is authorised and regulated by the United Kingdom Financial Conduct Authority ("FCA") with registered number 434203. Quaero is registered in England & Wales under number OC314014 and has its registered office at 2-4 King Street, London SW1Y 6QL. This newsletter does not constitute an offer of or solicitation to buy shares in the Fund ("Shares"). The key information document ("KID") contains detailed information on risk factors and fees that may apply and should be read carefully before investing. No investment decisions should be made without first reviewing the KID (available in English) for the Fund which can be obtained from www.atlantisjapangrowthfund.com or requested directly from Quaero via email at [e-mail] or by calling us on [phone].

This newsletter is being communicated by Quaero only to persons who qualify as (a) eligible counterparties, (b) professional customers or (c) exempted recipients under any of the exemptions to section 21 of the United Kingdom Financial Services and Markets Act 2000 (FSMA). Investors in the Fund will be shareholders in the Fund and not customers of Quaero. As such they are advised that in respect of an investment in the Fund they will not generally benefit from the protection of FSMA and provisions made thereunder or the United Kingdom Financial Services Compensation Scheme and will not have access to the United Kingdom Financial Ombudsman Services in the event of a dispute. Past performance is not necessarily a guide to the future performance. The value of Shares in the Fund and the income derived from them may go down as well as up. Changes in rates of exchange may be one of the causes of the value of investment in the Fund to go up and down. This newsletter is written for the benefit of the category of persons described above. It is not addressed to any other person and may not be used by them for any purpose whatsoever. It expresses no views as to the suitability of the investments described herein to the individual circumstances of any recipient.

Copyright Quaero Capital LLP 2023. All rights reserved.

Quaero Capital LLP | 2-4 King Street, London SW1Y 6QL | [phone] | [e-mail]

www.atlantisjapangrowthfund.com