SCHRODER JAPAN TRUST PLC
(the "Company")

Half Year Report

Schroder Japan Trust plc hereby submits its Half Year Report for the six months ended 31 January 2026 as required by the Financial Conduct Authority's Disclosure Guidance and Transparency Rule 4.2.

Key highlights

·      The Company achieved a net asset value (''NAV'') increase of 18.9%, surpassing the Benchmark return of 15.3%. On a NAV basis, the Company has outperformed the Benchmark by 4.0% and 4.1% per annum over five and ten years, respectively.

·      The portfolio remains biased towards value opportunities and benefited from exposure to generative AI stocks and improving domestic inflation dynamics, with positions such as Infroneer and Sanki Engineering delivering strong performance.

·      Strong performance has been reflected in the Company being awarded an AAA rating by Citywire, and the AIC including the Company on its 2026 ISA Millionaire list.

·      From 1 August 2026, the Company's investment management fee will reduce from 0.75% to 0.70% on the first £200 million and 0.65% thereafter, and will be charged on the lower of market capitalisation or NAV. The Board expects the more competitive fee structure and total expense ratio to enhance returns per share.

Philip Kay, Chairman of Schroder Japan Trust plc, commented:

"Masaki Taketsume's disciplined approach to stock selection proved effective once again, with strong contributions from holdings exposed to the generative artificial intelligence ("AI") value chain and continuing corporate governance reforms."

The Company's Half Year Report and Financial Statements for the six months ended 31 January 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/japantrust  

The Company has submitted a copy of its Half Year Report to the National Storage Mechanism and it will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

Enquiries:

Schroder Investment Management Limited

Half Year Report for the six months ended 31 January 2026

Chairman's Statement

"Masaki Taketsume's disciplined approach to stock selection proved effective once again, with strong contributions from holdings exposed to the generative artificial intelligence ("AI") value chain and continuing corporate governance reforms"

Performance

I am pleased to report that our Investment Manager's strategy has continued to deliver a solid performance over the six-month period ended 31 January 2026. The Company achieved a net asset value ("NAV") increase of 18.9%, surpassing the Benchmark return of 15.3%. The share price delivered a total return of 27.4%. The Investment Manager continues to demonstrate a consistent and methodical approach, reflected in the Company's long-term performance. On a NAV basis, the Company has outperformed the benchmark by 4.0% and 4.1% per annum over five and ten years, respectively. From a share price perspective, the Company outperformed the benchmark by 5.4% and 1.7% per annum over five and ten years, respectively.

During the period under review, the Japanese stock market experienced a strong rally, with headline indices repeatedly reaching record highs. The policy environment remained supportive, with the Bank of Japan's accommodative monetary stance and modest policy rate increases helping to underpin investor confidence. Masaki Taketsume's disciplined approach to stock selection proved effective once again, with strong contributions from holdings exposed to the generative artificial intelligence ("AI") value chain and continuing corporate governance reforms. More details on the Company's investment strategy and recent portfolio activity can be found in the Investment Manager's Review starting on page 6.

Investment management fee

The Board is pleased to announce that, with effect from 1^st August 2026, the basis on which the Company's investment management fees are charged will be adjusted from a charge on NAV to the lower of market capitalisation or NAV. Therefore, if the shares trade at a discount to NAV, this is a benefit to shareholders. As a result, the Company's investment management fee will be reduced from 0.75% on the first £200 million of NAV to 0.70% on the first £200 million of the lesser of market capitalisation and NAV. A fee of 0.65% will be charged on the lesser of market capitalisation and NAV above £200 million. These changes introduce a fee structure and a total expense ratio that are highly competitive within the industry. These adjustments are expected to enhance returns per share. To support enhanced marketing activity aimed at increasing the Company's profile and investor engagement, it has been agreed that the marketing fee will increase by £50,000.

Awards

I am pleased to confirm that the strong performance over the period has been reflected in the Company being awarded an AAA rating by Citywire, as well as the AIC (Association of Investment Companies) including the Company on its 2026 ISA Millionaire List. The list comprises those trusts that would have generated over £1 million had an investor contributed their full annual ISA allowance since the inception of ISAs in 1999.

Discount management

During the period, the Company's shares continued to trade at a discount to NAV. The Board exercised its buy-back authority to acquire 991,813 shares to be held in treasury, at an average discount of 9.7%. The discount started at 12.9% and narrowed to 6.7% by period-end. We remain committed to monitoring the discount and addressing it through share repurchases as appropriate.

Enhanced dividend policy

The Board has adopted an enhanced dividend policy under which it intends to pay out 4% of the average NAV in each financial year. Dividends are declared on a quarterly basis and, for the purposes of calculating the NAV in relation to quarterly dividends, the average NAV of the 12 months trailing the relevant quarter is used. The enhanced dividend policy does not result in any change to the Company's investment approach and strategy. As at 31 January 2026, the shares of the Company had a dividend yield of 3.55%, which was significantly higher than any other Japanese investment trust.

Gearing

Throughout the period, the Investment Manager actively geared the portfolio by using contracts for difference ("CFDs"). The gearing level was 13.4% at 31 July 2025 and ended the half year period at 12.4%. The Investment Manager typically targets a gearing range of between 10% and 17.5%. Gearing had a positive effect on performance during the period. The Company's gearing continues to operate within its pre-agreed limit of 25% of net asset value.

Schroders combination with Nuveen

On 12 February 2026 the Board of Schroders plc announced that they had agreed terms of a recommended cash acquisition by Nuveen, to combine the two businesses. The transaction is not expected to complete until Q4 2026. The Board of Schroder Japan Trust have been informed that Nuveen's intention is to maintain continuity across Schroders' existing investment and client-facing functions, and the Board will monitor progress in this regard.

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

Outlook

At the time of writing, escalating geopolitical tensions and ongoing conflict are contributing to an elevated level of uncertainty across global markets. In the near term, investor sentiment is therefore likely to remain sensitive, not only to political and security developments, but also to continued debate around the durability of the AI investment cycle, including whether today's high levels of spending on AI infrastructure can be sustained and how quickly that investment translates into meaningful productivity gains and earnings growth.

Even so, the Board continues to view the outlook for Japanese equities positively. Continued progress of corporate governance reforms, improving capital discipline, and the gradual shift away from deflation should provide supportive conditions for long-term investors.

Philip Kay

Chairman

15 April 2026

Investment Manager's Review

"The Company remains well positioned to capture attractive opportunities across the Japanese equity market"

Our investment approach

We believe the Japanese equity market ultimately acts efficiently in reflecting the intrinsic value of companies. In the short to medium-term, however, considerable inefficiencies are frequently evident in individual stocks. These inefficiencies provide repeatable opportunities to identify and invest in undervalued stocks, with the aim of delivering a better return than the market as a whole on a rolling three-to-five year view.

Our investment resource is entirely devoted to this aim, focusing on individual company fundamentals to understand the true worth of a stock and investing in a portfolio of 60-70 of the highest conviction ideas. These then tend to be held for the long term, with value being realised as the market gradually reflects their true value more efficiently.

Portfolio holdings tend to fall into three categories of inefficiency:

1.   Market misperception - companies with self-improving credentials, with management initiatives to sustainably enhance operational performance being under-appreciated by other investors.

2.   Market oversight - undervalued companies, especially among small and mid-caps where research coverage is less widespread, with strong and defendable business franchises in niche product areas.

3.   Short-term overreaction - ideas arising from abrupt but transitory events which push valuations of quality companies temporarily to unsustainably low levels.

Outside these three categories, the balance of the portfolio represents best in class stocks with reasonable valuations. The weighting given to each of these segments evolves over time, but a reasonable exposure to each category ensures a good level of diversification for the portfolio as a whole. Meanwhile, the approach tends to result in a bias towards value stocks and smaller companies, as well as an overall focus on quality.

The portfolio tends to exhibit a high 'active share', which means that its constituents deviate significantly from the benchmark index. Gearing (financial leverage) typically ranges between 10% and 17.5%, allowing shareholders to potentially benefit even more as the inefficiencies we have identified become more appropriately priced by the market.

Manager's review

Over the first six months of the Company's financial year to 31 January 2026, the Company's net asset value increased by 18.9%, while its Benchmark rose by 15.3%.

The Japanese stock market maintained its recent strength during the period under review, supported by fading concerns over potential changes to US tariff policy and growing optimism about interest rate cuts from the US Federal Reserve (Fed). Following the inauguration of Sanae Takaichi as Prime Minister in early October 2025, the market gained further momentum amid expectations of greater political stability and a more proactive fiscal policy stance.

Recent performance drivers

During the period, Japanese equities advanced but remained sensitive to shifting global rate expectations and artificial intelligence ("AI") related sentiment. Softer US economic data reinforced expectations for Fed cuts, while improving macro data in Japan, including a return to GDP growth and ongoing moderate inflation, supported risk appetite.

Market leadership was mixed. Generative AI optimism supported sectors such as semiconductor equipment and optical components, but concerns about valuations, the returns on heavy AI infrastructure spending and potential disruption to software businesses - including gaming and companies with 'software as a service' (SaaS) business models - drove sharp rotations and periodic weakness in growth and quality stocks.

Domestic policy developments also influenced sentiment. Following Prime Minister Ishiba's resignation in September, Takaichi's election and the formation of a coalition between the Liberal Democratic Party (LDP) and the Japan Innovation Party (JIP) were generally viewed as positive for political stability, while elevated Japan-China tensions weighed on some sectors that are reliant on inbound tourism. Rising yields, alongside expectations of a strong result for the ruling LDP in the February snap election, supported financials and other domestically focused sectors.

On monetary policy, the Bank of Japan (BoJ) raised interest rates twice in 2025, continued to signal the potential for further increases, and set out an extremely gradual plan to unwind its exchange-traded fund (ETF) holdings. These ETF purchases were originally introduced as part of the BOJ's extraordinary monetary easing measures - intended to support market functioning, encourage risk-taking and help combat persistent deflationary pressures - so the pace of any unwind has been designed to limit the immediate impact on markets.

Whilst the market remains concerned about Japan's dependency on the Middle East for its energy supply. It is worth highlighting that Japan holds some eight months worth of oil reserves in storage, suggesting that short term risk of energy supply shock is limited. The government has also taken a number of other initiatives such as instigating a cap on oil prices at the petrol pump and an increase in alternative energy sources. Japan's energy mix is also very well diversified with oil accounting for 36-37% of the total supply, followed by coal at 26%, natural gas at 21% with nuclear at 6-7% and renewable energy (hydro, solar and wind) at 10-11%.

Within the market, value stocks continued to outperform growth stocks, which assisted the Company's performance given the value bias inherent in our investment approach. Smaller companies generally outperformed their larger counterparts, which also represented a modest tailwind. There was a beneficial impact from gearing and helpful contributions from a range of individual stocks, as explained below.

Two key developments contributed positively to performance during the period.

Firstly, continued investor enthusiasm for generative AI drove outperformance among related stocks, while concerns about its potential disruptive impact led to underperformance in gaming and SaaS stocks. In aggregate, the portfolio's exposure to the AI theme added value during the period. We tend to view these companies as market misperception stocks, as the market has not yet fully reflected either their ability to participate in the AI growth opportunity or the earnings leverage that stems from their dominant positions within their respective markets.

For example, JX Advanced Metals, an advanced non-ferrous materials manufacturer, performed strongly as the market began to recognise its dominant position in high-end materials that are essential for the semiconductors and electronic components used in generative AI. Meanwhile, the portfolio's limited exposure to software-related gaming stocks such as Sony and Nintendo also contributed positively.

Secondly, improving domestic inflation dynamics have enabled companies operating in supply-constrained environments to regain pricing power and improve profitability. The portfolio benefited from this trend, with positions such as Infroneer and Sanki Engineering delivering strong performance in this way.

By contrast, some holdings faced valuation pressure due to rising concerns about potential business model disruption from generative AI. For example, our best in class IT services holding Nomura Research Institute, as well as our market misperception holding LY, both underperformed due to valuation compression despite relatively stable earnings. Asahi, which faced operational disruption caused by cyberattacks, also detracted from performance.

Portfolio strategy

Currently, the largest category within the portfolio is market misperception, which accounts for approximately 40% of assets. This includes companies such as Nippon Steel, Japan Post and Rohm, where management initiatives are paving the way for sustainable improvements in returns that are not yet reflected in valuations.

For example, we expect to see profitability improvements from Japan Post as it implements price increases in its postal services division. A cyclical recovery should also benefit its financial subsidiaries, Yucho Bank and Kampo Life. We also expect management to enhance shareholder returns, although regulatory constraints and complex stakeholder relationships could hinder progress.

Almost 30% of the portfolio is in market oversights, such as Galilei, Hosokawa Micron and Kohoku Kogyo, where we find highly competitive smaller businesses trading at a significant discount to their large cap and global peers. For example, Kohoku Kogyo's two main businesses - lead terminals and optical components - are experiencing rapid growth. Demand for its lead terminals, used in high-end capacitors, is rising as the expansion of electric and electrified vehicles drives the need for more advanced electronic components. Meanwhile, its optical components business is benefiting from surging global data traffic, which is prompting increased investment in subsea optical networks. Despite these strong and sustainable tailwinds, its shares continue to trade at an unwarranted discount to comparable companies worldwide.

Around 10% of the portfolio is invested in short-term overreactions, including out-of-favour technology opportunities such as Recruit and Nichirei. These businesses are beneficiaries of long-term structural tailwinds, but their shares were sold down aggressively - in our view, too aggressively - over the last couple of years. Nichirei, a leading frozen food and cold chain logistics provider in Japan, is well positioned to capture structural demand growth driven by labour shortages in business-to-business (B2B) categories and lifestyle changes in business-to-consumer (B2C) categories. The company's profitability was temporarily pressured by yen depreciation, which led to higher raw material costs. However, these costs have been passed on to customers through price increases, with little impact on underlying volume growth. Despite this, the company's valuation has contracted significantly, leading to what we consider to be an attractive entry point.

The remaining portfolio is invested in what we consider to be best in class operators, such as Sumitomo Mitsui Financial, Asahi and Orix.

From a sector perspective, this results in a bias towards construction, services, chemicals and non-ferrous metal. As is typical, the portfolio remains biased towards value opportunities and overweight to small and mid-cap stocks, where valuations look particularly attractive given the improving domestic economic backdrop.

Top 10 contributors and detractors

Six months to 31 January 2026

Source: FactSet, GBP, TOPIX. Stocks mentioned are shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. Past performance is not a guide to future performance and may not be repeated. The value of investments can go down as well as up and is not guaranteed. Returns may increase or decrease as a result of currency fluctuations.

Portfolio activity

We initiated two new market misperception positions in THK and Yokogawa Electric. For THK, we are constructive on its earnings growth, supported by accelerating sales growth and improving operating leverage as demand recovers in end markets such as semiconductor equipment and machine tools. We also see potential for margin improvement as production normalises following a period of inventory adjustments. Additionally, we believe the company is well positioned to make meaningful progress on corporate governance, as we expect the new president to pursue fundamental reforms to the business portfolio.

For Yokogawa Electric, we expect revenue growth to accelerate, supported in the near term by increased global investment in gas infrastructure, and over the longer term by the expansion of higher-margin services. Improving product mix and near-term investments should enhance overall profitability, and there is considerable scope for revaluation as these benefits come through.

We also initiated a position in Capcom as a new short-term overreaction idea. The company is a well-known Japanese gaming developer with globally recognised franchises such as Monster Hunter and Resident Evil. We believe its business model, which is focused on repeat sales and the expansion of its PC user base in emerging markets, should deliver steady growth. Nevertheless, Capcom's latest Monster Hunter release was poorly received, leading to some share price pressure and a decline in its valuation premium relative to sector peers. We believe this historic premium is still justified and expect the shares to recover as sales rebound following remedial measures to Monster Hunter and the release of a new Resident Evil title next fiscal year.

In terms of exits, we sold out of TPR, as industry-wide uncertainty linked to US tariff policy overshadowed company-specific drivers, such as improving asset efficiency and higher shareholder returns. We also sold the position in Tazmo, as we saw little evidence of acceleration in activity related to advanced integrated circuit packaging technologies such as chip-on-wafer-on-substrate (CoWoS), which we had viewed as a key growth driver for the company.

Outlook

After a strong 2025, Japanese equity valuations have risen towards the upper end of their historical range, suggesting more limited scope for near-term multiple expansion. At the same time, geopolitical tensions - primarily the recent escalation of conflict in the Middle East - and ongoing concerns around a potential 'AI bubble' could keep volatility elevated, particularly among highly valued AI-linked growth stocks. Markets are also likely to remain sensitive to the path of monetary policy normalisation in Japan and the pace of Fed easing in the US, as these factors influence yields, currencies and sector leadership.

Even so, we believe the investment case for the Schroder Japan Trust remains very attractive.

Japan-specific tailwinds - including ongoing progress on corporate governance and capital discipline, improving political stability and the continued shift from deflation to inflation - should support durable earnings growth and rising shareholder returns.

With headline valuations now fuller, further market progress is likely to depend more on earnings growth than continued multiple expansion. There are still pockets of genuine value, and the earnings backdrop has remained encouragingly firm, supported by better-than-expected results and further upgrades to forecasts.

In this environment, outcomes are likely to be driven increasingly by stock selection, and the Company is well positioned to respond. Our investment decisions are underpinned by a dedicated, on-the-ground research capability in Japan, with nine analysts based in Tokyo providing regular company access, local market insight and detailed fundamental analysis.

We continue to favour businesses with robust balance sheets, resilient cash generation and clear capital allocation discipline - particularly those demonstrating tangible progress on return on equity (ROE), governance standards and shareholder returns through dividends and buybacks. Supported by our local research presence, the Company remains well positioned to identify and capture attractive opportunities across the breadth of the Japanese equity market.

Masaki Taketsume

Portfolio Manager

15 April 2026

Interim Management Statement

Principal risks and uncertainties

The principal risks and uncertainties with the Company's business fall into the following risk categories: strategic; investment management; financial and currency; custody; gearing and leverage; accounting, legal and regulatory; service provider; and cyber. A detailed explanation of the risks and uncertainties in each of these categories can be found on pages 30 to 32 of the Company's published annual report and financial statements for the year ended 31 July 2025.

These risks and uncertainties have not materially changed during the six months ended 31 January 2026. While assessing the financial statements, the Board undertook a review of the principal and emerging risks and noted that geopolitical risks had increased considerably in recent months. Most notably it is due to the global trade wars arising from the evolving US tariff regime as well as escalating geopolitical tensions and ongoing conflict which are contributing to an elevated level of uncertainty across global markets. These matters will be closely monitored and reported on in the next Annual Report, as appropriate.

Going concern

Having assessed the principal risks and uncertainties, and the other matters discussed in connection with the viability statement as set out on page 33 of the published annual report and financial statements for the year ended 31 July 2025, the Directors consider it appropriate to adopt the going concern basis in preparing the financial statements.

Related party transactions

There have been no transactions with related parties that have materially affected the financial position or the performance of the Company during the six months ended 31 January 2026.

Directors' responsibility statement

In respect of the half year report for the six months ended 31 January 2026, we confirm that, to the best of our knowledge:

-    the condensed set of Financial Statements contained within have been prepared in accordance with IAS 34 Interim Financial Reporting and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company as at 31 January 2026, as required by the Disclosure Guidance and Transparency Rule 4.2.4R;

-    the half year report includes a fair review as required by the Disclosure Guidance and Transparency Rule 4.2.7R, of important events that have occurred during the six months to 31 January 2026, and their impact on the condensed set of Financial Statements, and a description of the principal and emerging risks for the remaining six months of the financial year; and

-    the half year report includes a fair review of the information concerning related party transactions as required by the Disclosure Guidance and Transparency Rule 4.2.8R.

The half year report has not been reviewed or audited by the Company's auditors.

The half year report for the six months ended 31 January 2026 was approved by the Board and the above Responsibilities Statement has been signed on its behalf.

Statement of Comprehensive Income

For the six months ended 31 January 2026 (unaudited)

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 Association of Investment Companies. The Company has no other items of other comprehensive income and therefore the net return after taxation is also the total comprehensive income for the period.

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

Statement of Changes in Equity

For the six months ended 31 January 2026 (unaudited)

Statement of Financial Position

as at 31 January 2026 (unaudited)

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

Company registration number: 02930057

Notes to the Financial Statements

for the six months ended 31 January 2026 (unaudited)

1. Accounts

The information contained within the financial statements in this half year report has not been audited or reviewed by the Company's independent auditor.

The figures and financial information for the year ended 31 July 2025 are extracted from the latest published financial statements of the Company and do not constitute statutory financial statements for that year. Those financial statements have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.

2. Accounting policies

Basis of accounting

The financial statements have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice, in particular with Financial Reporting Standard 104 "Interim Financial Reporting" and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" issued by the Association of Investment Companies in July 2022.

All of the Company's operations are of a continuing nature.

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

3. Taxation on ordinary activities

The Company's effective corporation tax rate is nil, as deductible expenses exceed taxable income. The tax charge comprises irrecoverable overseas withholding tax.

4. Return per share

5. Dividends paid

The 2025 final dividend amounted to £3,292,000. However the amount actually paid was £3,275,000 as shares were repurchased and held in treasury, after the accounting date, but prior to the dividend Record Date.

A second interim dividend of 3.05p (2025: 2.89p) per share, amounting to £3,492,000 (2025: £3,345,000) has been declared in respect for the year ending 31 July 2026.

6. Creditors: amounts falling due within one year

The company has a yen 1.0 billion credit facility available from Sumitomo Mitsui Banking Corporation, London Branch, which was undrawn at the period end (2025: yen 1.0 billion).

7. Called-up share capital

Changes in called-up share capital during the period were as follows:

8. Net asset value per share

9. 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 derivative financial instruments.

FRS 102 requires financial instruments to be categorised into a hierarchy consisting of the three levels below.

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.

The following table sets out the fair value measurements using the FRS 102 hierarchy above:

10. Events after the interim period that have not been reflected in the financial statements for the interim period

The Directors have evaluated the period since the interim date and have not noted any significant events which have not been reflected in the financial statements.

ENDS