Investment letters

• As Japan lifts Covid restrictions later than in the West, we believe investors can look forward to a strong recovery in 2022.
• We consider the Comgest Growth Japan Fund (the “Fund”) is well-positioned to benefit from the reopening of Japan’s economy.
• As the economy normalises, several holdings should see their profitability boosted in the near-term and beyond, in our view.
• We consider the Fund to be attractively valued at a multi-year P/E low relative to the TOPIX Net Return Index.

As Covid-19 restrictions lift, people are flocking back to the real economy to savour their favourite activities: shopping, eating out and travelling. International tourists are banned for now and some Covid-19 measures remain, but the direction of travel is towards economic normalisation.¹ Our quality retail growth companies are increasing offline sales (year-on-year, 4Q21), eating out is resuming and domestic flight traffic has recovered to 82% of pre-Covid-19 levels.² Although restrictions are being lifted later than in the West, they are likely to be completely removed in the near-term.³

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¹ Sources: Reuters, ‘Japan's economy likely rebounded in Q4 on solid consumption’, as of 4 February 2022. Trading Economics, Japan GDP Growth Annualised – 2021, February 2022.
² A ‘quality-growth’ company is one that delivers superior, long-term earnings growth with below-average risk. Sources: offline sales - Pan Pacific International Holdings, Company website, February 2022; Eating out - Food & Life Companies, Press Release, ‘Consolidated Financial Results for the 1st Quarter Ended December 31, 2021’; and Domestic flight traffic - Japan Airport Terminal, as of October 2021.
³ Source: Inside Japan, ‘Latest Coronavirus News from Japan’, as of 22 February 2022.