AVI JAPAN OPPORTUNITY TRUST PLC

INTERIM REPORT 2025

LEI: 894500IJ5QQD7FPT3J73

Interim Report for the six months ended 30 June 2025

The Directors present the unaudited Interim Report for the six months ended 30 June 2025.

Copies of the Interim Report can be obtained from AVI Japan Opportunity Trust plc's website www.ajot.co.uk or by contacting the Company Secretary by telephone on +44 (0) 333 300 1932.

AVI Japan Opportunity Trust plc ("AJOT" or "the Company") invests in a focused portfolio of quality small and mid-cap listed companies in Japan that have a large portion of their market capitalisation in cash or realisable assets.

Dividend

An interim ordinary dividend of 1.60p and a special dividend of 0.60p per Ordinary Share have been declared for the Period ended 30 June 2025 and will be paid on 7 November 2025 to Ordinary Shareholders on the register at the close of business on 10 October 2025 (ex-dividend date is 9 October 2025).

PERFORMANCE SUMMARY

[1] Since inception on 23 October 2018.

*For all Alternative Performance Measures, please refer to the definitions in the Glossary in the full Half Year Report.

CHAIRMAN'S STATEMENT

"AVI continues to identify compelling opportunities in Japan's under-researched small to mid-cap space, employing its constructive engagement strategy to unlock substantial corporate value."

Norman Crighton, Chairman

Performance and Introduction

Welcome to the sixth interim report for AVI Japan Opportunity Trust plc ("the Company" or "AJOT"), covering the period from 1 January 2025 to 30 June 2025 ("the Period"). The year to date has seen a continuation of corporate reform in Japan, as regulators have stepped up the pressure on companies to enhance corporate value. The Tokyo Stock Exchange ("TSE") has introduced several mechanisms for improvement, including mandating timely English disclosures of both quantitative and, perhaps more importantly, qualitative information. In line with this, it was also announced that the TSE plans to make dedicated investor relations systems mandatory to enhance companies' relationships with investors.

To date this year, the MSCI Japan Small Cap Index has returned +6.5% (in GBP) and +7.1% (in JPY), compared to the TOPIX's total return of +3.8% (in JPY) and +3.4% (in GBP). AJOT returned +11.7% (in GBP) and +12.3% (in JPY), delivering outperformance of +5.1% (in GBP) and +5.2% (in JPY) relative to the Benchmark Index. AJOT also outperformed its peer group of UK-listed Japan smaller companies investment trusts over the same period.

The Board maintains high conviction in the AJOT strategy, which it believes is set to benefit from the ever-improving corporate outlook in Japan. Your manager, AVI, continues to identify compelling opportunities in Japan's under-researched small- to mid-cap space, employing its constructive engagement strategy to unlock substantial corporate value across a high-conviction, concentrated portfolio of overcapitalised and high-quality businesses.

In H1 2025, AVI launched public campaigns for two portfolio companies: Rohto Pharmaceutical and Wacom. AVI's comprehensive presentation, "Awakening Rohto", highlights the team's focus on strategy enablement and operational improvement backed by years of collective experience at top consulting firms in Japan, in addition to the traditional engagement areas targeted by "activist" investors, such as capital efficiency and corporate governance. The Board views this expertise as a key differentiator from other Japan engagement strategies. This was further demonstrated during the Period as AVI released "Draw Wacom's Future", which details over a dozen constructive suggestions to management.

The investment team travelled to Japan during the Period to continue their engagement efforts with portfolio companies and to strengthen relationships with management, as well as hold meetings with several other investors.

Since AJOT's launch in October 2018, the portfolio has subtly shifted focus towards more operationally resilient companies that hold strong market positions and exhibit high-quality, growing earnings. Portfolio companies remain significantly overcapitalised, with net cash and securities covering 51% of the market cap on average, and undervalued, with an average EV/EBIT of 7.2x. However, this greater focus on high-quality companies has enabled AJOT to perform resiliently despite the volatility seen in the global market in recent times. Additionally, the small- to mid-cap focus has seemingly shielded the portfolio from tariff uncertainty, as around 80% of portfolio companies' revenues are derived from the domestic market.

The macroeconomic environment in Japan has entered a period of relative stability, with modest inflation, record nominal wage growth (while real wage growth remains flat), and a stable Yen. The benchmark interest rate is not expected to be raised as quickly as previously thought, with the Bank of Japan hoping to see sustained economic strength before increasing the current 0.5% rate.

The Board is pleased to report the continued outperformance by AJOT over what has been a volatile year for global markets thus far, and we remain confident in AVI's differentiated engagement strategy.

Dividend

The Board has elected to propose an interim ordinary dividend of 1.6 pence per share, as well as a special dividend of 0.6 pence per share, reflecting the receipt of non-recurring income from investments during the period. As stated in the Prospectus at the Initial Public Offering ("IPO"), the Company intends to distribute substantially all net revenue arising from the portfolio and is expected to pay an annual dividend. However, this may vary substantially from year to year.

Investment Strategy

AJOT was listed in October 2018 to take advantage of the highly attractive opportunity to invest in undervalued, overlooked Japanese small-cap equities with strong underlying business fundamentals. We believed then, as much as we still do, that AVI's unique brand of constructive engagement and high-quality research would enable the unlocking of valuation anomalies rarely found in other global developed markets, offering the potential for attractive absolute and relative returns.

Discount and Buybacks

As of 30 June 2025, your Company's shares traded at a premium of +1.3% to net asset value per share. Over the Period, this ranged from a -9.5% discount to a +1.5% premium. The Board monitors the discount/premium situation closely, ensuring investors are protected on the downside from a widening discount while also taking advantage of the premium to grow the Company.

During the Period, the Company bought back 535,000 shares. No further shares have been bought back since the Period end on 30 June 2025. All repurchased shares are held in treasury rather than cancelled, so they may be reissued if sufficient demand arises.

At the end of the Period, the total number of shares in issue was 137,198,943. Of these, 1,360,716 shares were held in treasury. As a result, the total voting rights attached to the shares in issue stood at 135,838,227.

During the Period, AVI purchased 170,000 shares as part of its ongoing commitment to invest one quarter of its management fee in AJOT shares, at an average discount of -3.9%.

Debt Structure and Gearing

At the end of the Period, AJOT held £33.3 million worth of Yen debt, with net gearing equal to 8.2% of NAV.

Annual General Meeting

The Company's Annual General Meeting was held on 20 May 2025. All resolutions were passed with at least a 97% approval. The Board thanks Shareholders for their continuing support.

Proposed combination with Fidelity Japan Value ("FJV")

A significant development since the period end is the proposed combination of the Company with Fidelity Japan Trust Plc ("FJV").

Background

After a comprehensive review process, the FJV Board of Directors concluded that a combination with the Company, pursuant to a scheme of reconstruction, together with an alternative shareholder election for cash, should be put forward to FJV shareholders. On 12 August 2025, the Boards of FJV and the Company announced that they had entered into a set of non-binding Heads of Terms for the proposed combination of the Company with FJV, pursuant to a scheme of reconstruction of FJV under section 110 of the Insolvency Act 1986.

Expected Benefits

• Lower ongoing charges: The new management fee structure and economies of scale will reduce ongoing charges of the Company.

• Lower management fees: Subject to completion of the combination, AVI has agreed to reduce its management fee to a competitive tiered fee rate and will continue to reinvest 25% of the fee into shares of the Company.

• Greater Scale: Shareholders will benefit from a more liquid, larger fund. The enlarged Company is also expected to have increased capability to take influential positions in companies where AVI has identified a significant opportunity to unlock value through AVI's active engagement process.

Expected Timing

General meetings of FJV and the Company are expected to be convened later in 2025 with the transaction becoming effective by no later than the end of November 2025.

Completion will be conditional upon, inter alia, approval from the shareholders of both FJV and the Company, tax clearance and Financial Conduct Authority approval.

Closing Remarks

Your Board continues to have full confidence in the investment thesis and in the ability of the Investment Manager to execute it. However, wanting to lead by example, your Company stands by its commitment, outlined in the original Prospectus, to offer Shareholders the opportunity to exit at close to NAV regularly. The rationale behind including this clause was to ensure that, if the original investment thesis did not generate the expected returns, or if circumstances had changed to make Japan unattractive, Shareholders would not be penalised for wishing to exit.

I am very pleased to note that, since the IPO, neither of the scenarios has materialised. Both the Board and the Investment Manager firmly believe that the opportunities are now more attractive than they were when the Company was launched in 2018. Nevertheless, we intend to offer shareholders a redemption opportunity in the fourth quarter of this year.

The Board would like to thank Shareholders for their continued trust and support. As always, if you have any queries, please do not hesitate to contact me personally ([email protected]) or speak to our broker, Singer Capital Markets, to arrange a meeting.

Norman Crighton

Chairman

16 September 2025

INVESTMENT MANAGER'S REPORT

"We look forward to continuing to uncover opportunities in the under-researched small to mid-cap market, with a focus on overcapitalised high-quality companies with scope for improvement through our constructive engagement."

Joe Bauernfreund, Portfolio Manager

Over the six-month period to 30 June 2025 ("the Period") and despite turbulent global markets, AVI Japan Opportunity Trust has delivered +5.2% outperformance vs the benchmark, and +11.7% in absolute returns (in GBP).

Encouragingly, performance was driven by meaningful engagement successes, such as Kurabo Industries' disclosure of plans to close down its largest and least profitable textiles factory and TSI Holdings' sale of real estate equal to 30% of its market cap in January 2025. In addition, we continue to see evidence of Japan's burgeoning market for corporate control, with Tecnos Japan receiving a tender offer at a 39% premium to the undisturbed share price.

The Annual General Meeting (AGM) season in June 2025 has proved particularly fruitful. Leveraging our strong relationships with investee companies and our proven expertise in exercising voting rights and shareholder proposals effectively, the team submitted shareholder resolutions to three companies this season. Notably, one of two AVI shareholder proposals at Eiken Chemical successfully passed, which was a partial amendment to the articles of incorporation to allow the dividend to be determined by resolution of a general meeting of shareholders, in addition to a resolution of the Board of Directors. This shareholder proposal was passed with 73% approval, exceeding the 66% super majority required. The other proposal requesting share buybacks did not pass, with 38% approval. The 2025 AGM season saw a record high 52 companies receive proposals from "activist" investors, up from 46 in 2024.

As corporate reform in Japan continues unabated, it was announced that the Tokyo Stock Exchange ("TSE") is set to make investor relations systems mandatory for listed companies to facilitate relationship building with shareholders and prospective investors. The TSE had recently mandated timely English disclosure for both qualitative and quantitative information. In late June 2025, it was also reported that the TSE is planning to introduce new rules to enhance the protection of minority shareholders amid a surge in management buyouts.

During the Period, the team launched public campaigns for both Rohto Pharmaceuticals and Wacom. AVI's recommended framework for lifting Rohto's valuations are encompassed in a 100-page report, "Awakening Rohto", available for viewing on our website. Each of AVI's 17 key suggestions are detailed, ranging from business segment restructuring to improved dialogue with shareholders. Similarly, AVI's "Draw Wacom's Future" report highlights 13 recommendations for the company, focusing on operational issues as well as capital consciousness.

Outside of the headline engagement successes which drove the portfolio's main contributors (further details below), the portfolio benefited from numerous but no less important positive outcomes from the team's engagement efforts. Across the portfolio we saw galvanising of corporate governance structures and procedures, unwinding of cross-shareholdings, more clarity around financial targets, new Mid-Term Plans announced (some for the first time), and an increased focus on capital policy and shareholder return. A clear illustration of this was Wacom, Maruzen Showa, Takuma, Raito Kogyo, Araya, Mitsubishi Logistics, Kurabo and Kokuyo all announcing new share buyback programs.

Across the AJOT portfolio, AVI made several large ownership declarations. At the time of writing, AJOT holds more than 5% of the voting rights in seven names, which account for 45% of NAV. When combined with AVI's holdings across other funds, some of which are invested in the same names as AJOT, AVI holds more than 5% of the voting rights in 11 AJOT portfolio names, which account for 76% of NAV.

Having added 13 new names to the portfolio in 2024, so far this year we have added five additional names to the portfolio. We continued to engage extensively with portfolio companies, attending 80 meetings during the Period with 22 companies, while also sending six letters and seven presentations. Each of these meetings and letters focused on our core engagement areas of capital efficiency, operational improvements, corporate governance and shareholder communication.

At the time of writing, net gearing stood at 8.2%.

Portfolio Trading Activity

With the team identifying plenty of new opportunities, annualised turnover was 67% over the Period, which was elevated by the privatisation of Tecnos Japan, discussed further below. Annualised turnover since inception is 41%. We exited 8 positions entirely and five new companies entered the portfolio during the Period.

The team has several high-conviction ideas in the pipeline, and we look forward to continuing to uncover opportunities in the under-researched small to mid-cap market, with a focus on overcapitalised high-quality companies with scope for improvement through our constructive engagement. Management receptiveness to engagement in dialogue with shareholders remains an important consideration, and we are willing to move onto more promising opportunities if we view further engagement as being unlikely to yield results in a timely manner.

Sales

The largest sale over the Period was Beenos, the former largest position in the portfolio, which we fully exited in May 2025 following the tender offer announced in December 2024, which represented a +19% premium to the undisturbed share price. We initiated our position in Beenos in January 2024, generating an ROI of +127% and IRR of +113% in JPY over the holding period.

Takuma was the second largest sale during the Period, as in June 2025 we exited the position we had held since April 2023. Our investment in Takuma generated an ROI of +33% for an IRR of +19% in JPY.

Other sales included exits in Araya Industrial and Tecnos Japan, which received a tender offer at a +39% premium to the undisturbed share price, as well as Aichi Corp, Nihon Kohden, Jade Group and A-One Seimitsu.

Purchases

The largest purchase during the Period was Rohto Pharmaceutical, as we built the holding to be a top 10 position in the portfolio from initiation in September 2024. As mentioned, during the Period, we published a 100-page report, "Awakening Rohto", available for viewing on our website.

The next largest purchase was in Raito Kogyo, the number one market leader in the specialist construction market, a position we initiated in March 2024 and which has to date achieved an ROI of +24% for an IRR of +44% in JPY.

We also added to our position in Wacom, as we launched a public campaign, "Draw Wacom's Future" in May 2025, a comprehensive multi-year strategy that encompasses 13 key recommendations, focusing on operational issues as well as capital consciousness.

Other notable purchases to the portfolio during the Period were Synchro Food, Mitsubishi Logistics and Kokuyo. We also added to several other established positions such as Atsugi, TSI Holdings and Broadmedia, in which AVI now holds a combined +28% of the voting rights across all AVI funds.

Contributors and Detractors

Kurabo Industries (3106)

Kurabo Industries ("Kurabo"), a conglomerate with a diverse collection of business segments, was the largest contributor, with a +33% share price total return during the Period adding +306bps to performance in GBP.

Kurabo was originally established as a textile manufacturer, however, it has diversified its operations over the years to include chemicals, advanced technology, food and services, and real estate. Kurabo has a history of stable revenues and has doubled its operating margin in recent years.

Much of our engagement with the company has focused on encouraging management to direct resources towards the high-quality chemicals and advanced technology segments, and away from the unprofitable textiles business. Pleasingly, in March 2025, Kurabo announced plans in line with our recommendations, to close down its largest and most unprofitable textile factory, the Anjo Plant, by 30 June 2025.

During May 2025, Kurabo implemented many of AVI's suggestions into its annual results and Mid-Term-Plan. Highlights include introducing a 10% Return on Equity target for 2027, a ¥20 billion buyback, a 4% Dividend on Equity target, committing to reducing cross-shareholdings to 20% of net assets by 2027 and committing to sell underutilised real estate. Operating profit guidance for FY26 is down -22% year-on-year, partly due to the one-off cost associated with shutting down the unprofitable textile factory.

In June 2025, Kurabo announced the introduction of stock-based compensation plans for the company's directors. This positive step will help to ensure alignment of management actions with shareholders' best interests. At the AGM held in June 2025 the CEO saw his approval rating decline by -13% relative to the prior year. Additionally, the company continued its 12-month share buyback plan announced last November to buy back 7.3% of shares, with 48,700 shares repurchased in June 2025 and the plan now 63% complete.

Kurabo Industries was added to the portfolio in January 2024 and is now the largest holding, accounting for 12.5% of AJOT's NAV, with the investment already generating a +70% ROI, for an IRR of +85% to period-end (in JPY).

TSI Holdings (3608)

TSI Holdings, an apparel holding company, achieved a share price total return of +14% over the Period, adding +218bps to performance in GBP as the second largest contributor.

TSI Holdings is an apparel holding company with a diversified collection of brands including Pearly Gates, HUF, and Margaret Howell. Our investment thesis was predicated on valuation of their real estate assets, investment securities and net cash exceeding the market cap at the time of investment, as well as their diversified brand portfolio and diminishing founding family influence. Encouragingly, in line with our suggestions, in April 2024 the company announced a mid-term plan focusing on improving EBIT margin as well as optimising non-operating assets to improve capital efficiency.

In line with that announcement, in mid-January 2025, TSI Holdings announced the sale of its former HQ building for a value equal to 30% of the market cap. The share price responded positively to the disclosure, rising +30% in the subsequent day of trading.

Following this, in April 2025 TSI Holdings released its full-year earnings results. Despite forecasting record EBIT for FY2025, the share price fell -10% in the following trading day, as the market was left disappointed by the lack of a buyback announcement. We note, however, that the company remains committed to continuing to the already announced two-year buyback programme equal to c.13% of current market cap.

Post the Period end, TSI Holdings announced the acquisition of Daytona International, a Japanese online/offline fashion retailer focusing on casual, sports and outdoor styles. Daytona will be made a wholly owned subsidiary at the cost of ¥28.3 billion, significantly reducing the company's pre-deal net cash pile of ¥30.7 billion. At the same time, the company announced a 6.4% buyback programme (shares to be retired) which was positively received by the market.

Added to the portfolio in July 2022, TSI Holdings accounted for 11.5% of the portfolio at period-end as the second-largest holding. To period-end, our investment has generated an ROI of +97% for an IRR of +48% in JPY.

Tecnos Japan (3666)

Tecnos Japan, an IT services company, was the third largest contributor during the Period, adding +142bps to performance in GBP with a share price total return of +33%. The company is engaged in the business of providing information technology services, especially the installation of Enterprise Resource Planning (ERP) systems. Our investment thesis was built on the track-record of high-quality earnings under the digitalisation trends in Japan, with revenue growing steadily and operating margins consistently in the low double digits, in addition to the overcapitalised balance sheet that had net financial value equal to c.35% of the market cap.

During the Period, Tecnos Japan was the recipient of a tender offer bid by Ant Capital Partners at a price of ¥1,155 per share, representing a +39% premium to the undisturbed closing price on 4 February 2025. As per the regulatory news service announcement on 4 February 2025, AVI signed a tender agreement with Ant Capital Partners Co., Ltd. ("the Offeror") for AVI funds' combined 10% stake in Tecnos Japan.

As the largest holder of voting rights in Tecnos Japan, AVI engaged extensively with the company's board on ways to enhance corporate value and returns to shareholders. Tecnos Japan serves as another example of how AJOT's concentrated portfolio of asset-backed Japanese small-caps can benefit from AVI's active engagement strategy against a backdrop of rapidly increasing corporate activity in Japan.

Tecnos Japan held a position in the portfolio from April 2024 to exit in March 2025, with the investment generating a +62% ROI for a +109% IRR (in JPY).

Rohto Pharmaceutical (4527)

Over the Period, Rohto Pharmaceutical ("Rohto"), the largest skincare and eyedrop manufacturing company in Japan, was the largest detractor, reducing performance by -121bps in GBP as its shares returned -23%.

Despite Rohto's top market share in skincare and eye-drop manufacturing in Japan, the company trades at a significant discount to peers. AVI believes that Rohto's undervaluation is explained by management's apparent lack of focus on its core businesses, misleading IR communication, and lower allocation to shareholder returns than its peers. Specifically, management needs to reallocate its R&D spending from low-profit business areas such as the prescription drug business and regenerative medicine business, towards its high-value, high market share product lines, such as skin care products.

In April 2025, we published a 100-page report, "Awakening Rohto", outlining 17 constructive suggestions to enhance corporate value, ranging from business segment restructuring to improved dialogue with shareholders.

During May 2025, Rohto announced its full-year earnings to 31 March 2025, and despite strong Q4 headline numbers of revenue growing +19% year-on-year and EBIT growing +39% year-on-year, the company failed to meet its original annual guidance. In a positive move and in line with our suggestions, Rohto announced its first mid-term plan, which indicated management now views the core skincare and eye-drops businesses as long-term growth drivers.

Added to the portfolio in September 2024, Rohto Pharmaceutical accounted for 6.2% of AJOT's NAV at period-end as a top 10 holding. We see significant upside to the current share price, and to month-end, our investment has returned an ROI of -12% for an IRR of -43% (in JPY).

Konishi (4956)

Konishi, the manufacturer of the number one adhesive brand in Japan, 'Bond', was the second largest detractor over the Period, reducing performance by -61bps in GBP as its shares returned -13%.

In late April 2025, the company announced its full-year earnings results, with sales growing by +2.2% year-on-year, while EBIT increased modestly by +3.5% in line with previous guidance. In terms of guidance for the next financial year, EBIT is projected to increase by just +0.2% year-on-year as revenue is forecast to rise +4.5%.

Konishi's top market share in construction adhesives has allowed it to steadily grow revenue at +2.5% CAGR over the last 15 years, while nearly doubling its operating margin from 4.3% to 7.8% in FY2025. With more than 4% of the voting rights held across AVI funds, we continue to engage with the company

on suggestions to address the undervaluation.

AJOT has held a position in Konishi since inception, with the company now accounting for 3.3% of AJOT's NAV at period-end. The investment to date has generated an ROI of +65% for an IRR of +12% in JPY.

Aoyama Zaisan Networks (8929)

Aoyama Zaisan Networks ("AZN"), a wealth management consultancy, was the third largest detractor over the Period, with its -4% share price total return reducing performance by -41bps in GBP.

AZN specialises in providing wealth management consulting services across areas such as property, succession planning, corporate finance and strategic management of individual assets. AZN is set to benefit from the ageing Japanese population as the need for inheritance and business succession consulting is on the rise.

At the time we initiated our investment (March 2024), AZN's stock price had been flat for the previous five years, despite operating income that had continued to grow steadily and non-operating assets that had expanded to c.47% of its market cap as of the end of December 2023.

In early February 2025, AZN disclosed its full-year FY2024 earnings, with revenue rising +26% year-on-year as EBIT grew +7% year-on-year. Guidance from the company forecasts +10% year-on-year EBIT growth in FY2025. In May 2025, the company announced its FY2025 Q1 earnings, with EBIT falling -9% year-on-year, although revenue grew +24% year-on-year. Historically, AZN has produced somewhat volatile results on a quarterly basis, and the company has not changed its full-year annual guidance.

Since initiating our position in AZN, the investment has generated an ROI of +34% for an IRR of +75% in JPY. We anticipate unlocking substantial upside to the current share price through our constructive engagement initiatives with management. At period-end, AZN accounted for 6.4% of AJOT's NAV as the eighth largest holding.

Outlook

The portfolio performed positively over the Period, achieving a +11.7% return, compared to the benchmark, the MSCI Japan Small Cap Index, which returned +6.5% (both in GBP). In local currency terms, the portfolio achieved a total return over the Period of +12.3%, with Yen weakness less of a headwind to sterling-based returns than in prior years since AJOT's inception. Overall, the portfolio trades at an attractive average EV/EBIT of 7.2x, with net cash and listed securities covering 51% of the market cap at period-end.

Japan's equity market is undergoing a notable transformation, supported by foreign capital, structural reforms, and a renewed commitment to shareholder value. Early signs of progress are now becoming tangible, opening-up a broad array of attractive investment opportunities. Our strategy remains disciplined: we continue to build a focused portfolio of 15 to 25 high-conviction positions, guided by selectivity and long-term potential.

Joe Bauernfreund

Asset Value Investors

16 September 2025