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1、Engage.Improve.Transform.Annual Report 2024AN ACTIVE APPROACH TO INVESTING RESPONSIBLYAs an active investor,AVI considers all drivers relevant to each companys success,offering suggestions to enhance sustainable corporate value in consideration of all stakeholders and in the best long-term interest
2、of our clients.We aim to build strong relationships with the boards and management of our portfolio companies.Through constructive engagement,we encourage and expect them to take meaningful action in the context of long-term value creation.AVI Japan Opportunity Trust plc(“AJOT”or“the Company”)invest
3、s 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.Net assets:212 million*Launch date:23 October 2018 Annualised return:8.9%*Ongoing Charges Ratio:1.5%*For all Alternative Performance M
4、easures,please refer to the definitions in the Glossary on pages 74 and 75.*Annualised return net of fees(in GBP)as at 31 December 2024.Annual Report/WelcomeAnnual Report 2024Portfolio construction Screening of the universe Approach Principles Def ning E,S&G Stewardship Purpose PhilosophyResearch Fi
5、ltering Read more about our ESG Perspective on pages 34 and 35 of the Annual ReportAVI Japan Opportunity Trust plc/Annual Report 2024212080100120140160180Oct 18Apr 19Oct 19Apr 20Oct 20Apr 21Oct 21Apr 23Oct 24Apr 24+70%+63%+23%Oct 23Apr 22Oct 225010015020006SStrategic ReportOverview of the YearSStrat
6、egic Report08A New Wave in Japan03SStrategic ReportOur PerformanceCONTENTS Strategic Report:Company Performance 02Company Overview 04Chairmans Statement 06Case Study 08Our Top 10 Holdings 10Investment Managers Report 12Portfolio Construction 22AVI Japan Investment Team 23Investment Portfolio 24Busin
7、ess Model 25Stakeholders 27Key Performance Indicators 32ESG Policy 34Principal Risks and Uncertainties 36Governance:Directors 38Directors Report 39Corporate Governance Statement 41Directors Remuneration Report 46Statement of Directors Responsibilities 49 in Relation to the Annual Report and Financia
8、l StatementsReport from the Audit Committee 50Independent Auditors Report 52Financial Statements:Statement of Comprehensive Income 56Statement of Changes in Equity 57Balance Sheet 58Statement of Cash Flows 59Notes to the Financial Statements 60Shareholder Information:AIFMD Disclosures 73Glossary 74I
9、nvesting in the Company 76Company Information 77The Companys website,which can be found at www.ajot.co.uk,includes useful information on the Company,such as price performance,news,monthly and quarterly reports,as well as previous Annual and Half-Year reports.avi-japan-opportunity-trustu/avi-ajotAVIJ
10、apanAVI takes a unique approach to engagement by focusing on driving operational improvements in addition to the typical engagement areas of capital efficiency,corporate governance and investor relations.Norman Crighton,ChairmanAVI Japan Opportunity Trust NAV TRAVI Japan Opportunity Trust Share Pric
11、e TRMSCI Japan Small Cap Index(adjusted total return)Net Asset Value,Share Price and Benchmark AVI Japan Opportunity Trust plc/Annual Report 202401GFSSISR*For all Alternative Performance Measures,please refer to the definitions in the Glossary on pages 74 and 75.Strategic Report/Company Performance3
12、1 December 202431 December 2023Net Asset Value 211,981,000182,943,000Net Asset Value per Share(total return)for the year*20.9%15.8%Share price total return for the year*19.9%14.8%Comparator BenchmarkMSCI Japan Small-Cap Index(adjusted total return)6.2%6.9%Portfolio Valuation*Net Cash as%of Market Ca
13、p Net Financial Value as%of Market Cap EV/EBIT FCF Yield21.2%48.4%8.7x6.7%35.8%49.6%8.7x 4.4%Year to 31 December 2024Year to 31 December 2023Earnings and DividendsProfit/(loss)before tax Investment income Revenue earnings per share Capital earnings per share Total earnings per share Ordinary dividen
14、ds per share38.6m4.8m2.21p25.00p27.21p2.20p25.2m4.0m1.76p15.89p17.65p1.70pOngoing Charge*Management,marketing and other expenses (as a percentage of average Shareholders funds)1.5%1.5%31 December 202431 December 2023Net asset value per shareShare priceDiscount(difference between share price and net
15、asset value)*155.4p 152.3p 2.1%130.3p127.0p2.5%2024 Years Highs/LowsHighLowNet asset value per share158.6p122.3pPerformance SummaryNAV TR(GBP)Sinceinception20242023202220212020201920181AJOT69.9%20.9%15.8%-4.3%12.3%-1.4%19.0%-4.0%MSCI Japan Small Cap 23.5%6.2%6.9%-1.0%-1.4%3.2%14.7%-6.0%Relative47.9%
16、14.7%8.8%-3.4%13.7%-4.6%4.3%2.0%1 Since inception on 23 October 2018.AVI Japan Opportunity Trust plc/Annual Report 202402*For all Alternative Performance Measures,please refer to the definitions in the Glossary on pages 74 and 75.18016014080100120Oct 18Oct 19Oct 20Oct 21Oct 24+70%+63%+23%Oct 23Oct 2
17、250100150200Net Asset Value,Share Price*and Benchmark Oct 18Apr 19Oct 19Apr 20Oct 20Apr 21Oct 21Apr 23Apr 24Oct 24 Oct 23Apr 22Oct 221086420-4-2-6-8Premium or Discount to Net Asset Value(%)AVI Japan Opportunity Trust plcAverage Premium:0.1%AVI Japan Opportunity Trust NAV TRAVI Japan Opportunity Trus
18、t Share Price TRMSCI Japan Small Cap Index(adjusted total return)AVI Japan Opportunity Trust plc/Annual Report 202403GFSSISRAVI seeks to unlock this value through proactive engagement with management and capitalising on the increased focus on corporate governance,balance sheet efficiency and returns
19、 to Shareholders in Japan.The companies in the portfolio are selected for their high quality,whether having strong prospects for profit growth or economically resilient earnings.By investing in companies whose corporate value should grow over time,AVI can be patient in its engagement to unlock value
20、.BenchmarkThe MSCI Japan Small Cap Index.The Association of Investment Companies(“The AIC”)The Company is a member of The AIC.Finding Compelling Opportunities in JapanStrategic Report/Company OverviewOUR PURPOSEDiscovering overlooked and under-researched investment opportunities,utilising shareholde
21、r engagement to unlock long-term value.ABOUT ASSET VALUE INVESTORSThe Company has appointed Asset Value Investors Limited(“AVI”or the“Investment Manager”)as its Alternative Investment Fund Manager.Asset Value Investors(“AVI”)has been investing in Japan for three decades.AVI focuses on undervalued co
22、mpanies with resilient and growing earnings,that are overlooked by investors due to non-fundamental factors.By utilising 40 years of capital markets experience,having analysed and met with hundreds of Japanese companies across a wide variety of industries,AVI works with management teams,making sugge
23、stions on how to grow long-term corporate value and address share price undervaluation.AVIs engagement focuses on four main areas of improvement:capital efficiency,ESG,shareholder communication and operational strategy.While AVI seeks to work privately and collaboratively with management teams,if pr
24、ogress is not made,AVI will consider sharing its ideas with other Shareholders in a public forum.Capital StructureAs at 31 December 2024,the Companys issued share capital comprised 137,198,943 Ordinary Shares of 1p each,of which 825,716 were held in treasury and therefore total voting rights attache
25、d to Ordinary Shares in issue were 136,373,227.As at 1 April 2025 it comprised 137,198,943 Ordinary Shares,1,075,716 of which were held in treasury,and therefore total voting rights attached to Ordinary Shares in issue were 136,123,227.COMPANY OBJECTIVES AND STRATEGYAJOT aims to provide Shareholders
26、 with total returns in excess of the MSCI Japan Small Cap Index in GBP(“MSCI Japan Small Cap”),through the active management of a focused portfolio of equity investments listed or quoted in Japan,which have been identified by Asset Value Investors Limited as undervalued and typically have a signific
27、ant proportion of their market capitalisation held in cash,listed securities and/or other realisable assets.From left to right:Shuntaro Shimizu,Luke Hutcherson,Nicola Takada Wood,Kaz SakaiJapan Economic Snapshot:JapanRelative to GlobalGDP1$4.1tn4th largestPopulation2 125m1.5%Fortune Global 500 Compa
28、nies418.2%KEY PERFORMANCE INDICATORS(“KPIs”)NAV Performance*(2024),1 Year:20.9%(2023:15.8%)Since Inception(SI)69.9%8.9%Ongoing Charges*(2024),31 December 24:1.5%(2023:1.5%)Discount/Premium*(2024):(2.1)%Range during the period:(6.7)%1.2%Peer Group NAV Performance(2024):(9.6)%Baillie Gifford Shin Nipp
29、on Nippon Active Value AVI Japan Opportunity 20.9%15.2%1 World Bank Data(2023).2 Source:International Monetary Fund(2024).*For definitions,see Glossary on pages 74 to 75SI AnnualisedAVI Japan Opportunity Trust plc/Annual Report 202404OUR CORE VALUESEngagedBuilding relationships with companies,active
30、ly working together to improve shareholder value.ConcentratedOur portfolio of 15-25 holdings means we devote ample resources to research and engagement for every investment.Long-termA three to five-year horizon aligns our interests with those of management.UniqueDiscovering overlooked and under-rese
31、arched investment opportunities to unlock long-term value.ExperiencedInvesting in the Japanese market for over two decades,with a dedicated team in London and Tokyo.Annual General MeetingThe Companys Annual General Meeting(“AGM”)will be held at 11.30 a.m.on Tuesday,20 May 2025 at the offices of the
32、Association of Investment Companies,9th Floor,24 Chiswell Street,London,EC1Y 4YY.Shareholders will be able to submit questions to the Board and AVI ahead of the AGM and answers to these,as well as AVIs presentation,will be made available on the Companys website.Please refer to the Notice of AGM for
33、further information and the resolutions which will be proposed at this meeting.Managed at AVI.Visit the website at:What do we invest in?We believe that the integration of ESG and sustainability considerations into our investment strategy is not only integral to comprehensively understanding each inv
34、estments ability to create long-term value,but is also aligned with our values as responsible investors.WHAT DO WE INVEST IN?AJOT aims to achieve long-term capital growth by engaging with its concentrated portfolio of Japanese equities to unlock value.Sector Breakdown(%of Portfolio):Consumer Durable
35、s and Apparel22%Capital Goods15%Materials15%Consumer Discretionary,Distribution and Retail12%Health Care Equipment and Services11%Software and Services7%Real Estate Management and Development6%Media and Entertainment4%Technology Hardware and Equipment3%Telecommunication Services3%Household and Perso
36、nal Products2%Approach Principles Defi ning E,S&G Stewardship Purpose PhilosophyRESPONSIBLE INVESTORSAVI Japan Opportunity Trust plc/Annual Report 202405GFSSISRAVI takes a unique approach to engagement by focusing on driving operational improvements in addition to the typical engagement areas of cap
37、ital efficiency,corporate governance and investor relations.Your Manager,AVI,has continued its constructive approach to active engagement with portfolio companies to unlock value.AVI takes a unique approach to engagement by focusing on driving operational improvements in addition to the typical enga
38、gement areas of capital efficiency,corporate governance and investor relations.AVIs investment team builds constructive relationships with the management of every portfolio company,holding numerous meetings with senior executives and board directors every year.Private engagement remains AVIs preferr
39、ed approach to driving reform;however,public engagement is also an important element of the strategy,with two portfolio companies,Aichi Corporation and SK Kaken,the subject of public engagement in 2024.The preferred approach of private engagement has led to notable successes,with detailed letters or
40、 presentations sent to 17 portfolio companies over the year.DividendAs provided for in the Prospectus at the IPO,the Company intends to distribute substantially all the net revenue arising from the portfolio.The Company paid an interim dividend of 1.00p per share in November 2024,and the Board has e
41、lected to propose a final dividend of 1.20p per share,bringing total dividends for the year ended 31 December 2024 to 2.20p per share(2023:1.70p per share).Investment StrategyAJOT listed in October 2018 to take advantage of the highly attractive opportunity to invest in under-valued,over-capitalised
42、 Japanese small-cap equities with strong underlying business fundamentals.Active engagement and corporate action are the keys to unlocking valuation anomalies,and AJOTs track record has demonstrated the potential absolute and relative returns this approach can deliver.Over six years since launch,you
43、r Company has performed well in the face of multiple headwinds:lacklustre performance of small-cap stocks(MSCI Small Cap Japan has underperformed its larger MSCI Japan brethren by over 30%in JPY);a marked depreciation of the Japanese Yen which has detracted-60%from GBP returns;and a turbulent global
44、 environment encompassing a pandemic,rapidly rising interest rates and multiple geopolitical events.The Board remains confident that AVI is well placed to continue executing the strategy and that there are still plenty of mispriced investment opportunities to discover.Overview of the YearOn behalf o
45、f the Board of Directors(“the Board”),I am pleased to present the Annual Report for 2024 for AVI Japan Opportunity Trust Plc(“AJOT”or“Company”).Since AJOT was launched in October 2018,market-wide reform in Japan has continued to advance,which is supportive of your Managers constructive engagement st
46、rategy.In 2024,regulators stepped up the pressure on companies to improve key issues that are depressing valuations in Japan,such as poor corporate governance,capital efficiency and shareholder communication.Faced with evidence of undeniable change afoot,foreign investors views are shifting from Jap
47、an being a perennially cheap market to one with not only room for rapid growth but with the means to catalyse it.2024 was an eventful year in Japan,during which the Liberal Democratic Party relinquished its majority in the House of Representatives,the Bank of Japan(“BoJ”)ended its ultra-loose moneta
48、ry policy by symbolically increasing its benchmark rate to 0.25%(increased to 0.50%post-period end),and the Tokyo Stock Exchange(“TSE”)piled pressure on underperforming companies by publishing its monthly“name and shame”list.It was another buoyant year for Japanese equity markets,with the MSCI Japan
49、 returning+20.7%over 2024 in Japanese Yen(“JPY”).Large names again outperformed their smaller counterparts,with the MSCI Japan Small Cap index rising a still respectable+16.4%in JPY.AJOTs performance in 2024 continued the impressive outperformance seen in 2023.AJOT returned+20.9%in GBP and+32.4%in J
50、PY.It outperformed its benchmark over the calendar year by 14.7%in GBP and+16.2%in JPY.The weak Yen,which fell by-8.8%relative to the Pound over 2024,continued to be a headwind to sterling-based returns.Since its inception,AJOT has delivered returns of+69.9%in GBP versus+23.5%in GBP for the benchmar
51、k.In JPY terms,the since inception returns are significantly higher,at+130.0%vs+67.1%for the benchmark.It is particularly encouraging in terms of returns and the investment managers strategy that four portfolio companies received tender offer bids during the year,as well as one receiving advance not
52、ice of a tender offer bid.Strategic Report/Chairmans StatementNORMAN CRIGHTON Chairman,Non-Executive DirectorJoined the Board in 2018AVI Japan Opportunity Trust plc/Annual Report 202406In June,Yoshi Nishio and I attended the AGM of SK Kaken,becoming the first foreign investors to do so.We were likel
53、y the first shareholders to ask questions at the AGM.It is hoped that this increased level of direct interaction with a company that had previously been reluctant to meet with AVI will bear fruit in the future.The Directors also took the opportunity to meet with several other portfolio companies as
54、well as our PR agents in Japan.Share Premium and IssuancesAs at 31 December 2024,your Companys shares were trading at a discount of-2.1%to Net Asset Value(“NAV”)per share.The Board monitors the premium/discount and carefully manages it by periodically issuing or buying back shares.During 2024,no new
55、 shares were issued,while 4,063,475 shares were bought back during the year.As of 31 December 2024,137,198,943 shares were in issue,a pleasing increase from the 80,000,000 shares at AJOTs launch.The Directors believe that the performance of the Company since IPO should be attractive to a larger pool
56、 of investors and are exploring avenues to grow AJOT.Realisation OpportunitiesAt the launch of the Company in October 2018,the Prospectus published at that time stated that the Directors may,at their discretion,offer a full or a partial Exit Opportunity to Shareholders in October 2022 and every two
57、years thereafter.The rationale behind including the Exit Opportunity in the Prospectus was to ensure that if the original investment thesis did not generate the expected returns,or if circumstances had changed to make Japan unattractive,then Shareholders would be offered the opportunity to exit at c
58、lose to NAV if they wished.In light of its keen focus on corporate governance,the Board announced its intention to offer the Exit Opportunity on an annual basis(rather than biennially),on that same discretionary basis,from October 2024.The Board therefore expects to offer another Exit Opportunity to
59、 Shareholders in October 2025 and every twelve months thereafter.The Exit Opportunity was structured as a full Tender Offer in 2024,allowing eligible Shareholders to sell 100%of their share capital at a two per cent.discount to NAV.This resulted in 2.58%of the issued share capital being tendered by
60、Shareholders choosing to exercise the opportunity to exit.Debt Structure and GearingAs described in the Prospectus,the Board supports the use of gearing to enhance portfolio performance.The Company has in place a 2.93 billion debt facility,which was renewed on 2 April 2024.As at 31 December 2024,2.9
61、3 billion of the facility had been drawn and net gearing stood at+4.5%.On 28 March 2025,the facility size was increased to 6.6 billion.OutlookThe TSE has continued to disclose a list of companies on a monthly basis that have provided information regarding actions to implement policies conscious of t
62、he cost of capital and share price.In 2024,the TSE increase the level of accountability for companies by critiquing the quality of disclosures and highlighting key points for foreign investors,such as the availability of English disclosures.There are several other tailwinds for the strategy,includin
63、g the unwinding of cross-shareholdings,increasing shareholder activism,private equity firms targeting the Japanese market,and the Japanese government encouraging unsolicited acquisition offers.The mounting pressure for corporate reform will not subside in 2025.AJOTs focus on finding attractively val
64、ued,durable companies and using active engagement to unlock value holds it in good stead to benefit from the changing tide.The portfolio is well-positioned with a concentrated yet diverse collection of high-quality,lowly valued companies,with multiple levers for re-ratings.As a Board,we are confiden
65、t that AJOT can build on its successful track record of engagement and will continue to deliver attractive returns for investors.AJOTs portfolio companies currently have 48%of their market cap covered by net cash and investment securities and trade at a weighted average 8.7x EV/EBIT multiple.During
66、the year,Yoshi Nishio and Katya Thomson resigned from the Board to be replaced by Andrew Rose and Tom Yoritaka.I would like to take this opportunity to welcome both Andrew and Tom to the Board,as well as thank Yoshi and Katya for their contribution to the success of the Company since the IPO.In the
67、coming weeks,I will be meeting any institutional investors who would like to sit down with me,and I hope to see as many Shareholders as possible at our AGM in May.The Board and I remain available to all our Shareholders institutional and retail who may wish to discuss an issue or ask a question.As a
68、lways,please feel free to reach out to me directly at norman.crightonajot.co.uk or contact our broker,Singer Capital Markets,to arrange a meeting.Norman CrightonChairman4 April 2025 Source/Araya Industrial Co LtdAVI Japan Opportunity Trust plc/Annual Report 202407GFSSISRStrategic Report/Case StudyA
69、NEW WAVE Evidence of corporate reforms impact is mounting,and we would argue that Japan is not only already irrevocably transformed,but that we are also at the beginning of a sea change in corporate culture which will have a long-term and far-reaching impact on the Japanese market.Tailwinds for Shar
70、eholder Constructive EngagementThe market environment in Japan is more attractive and supportive of a constructive engagement strategy than previously,with several key tailwinds,including the following:01.Further pressure from the TSE requesting improved disclosure around capital efficiency.02.Unwin
71、ding of cross-shareholdings.03.Increasing shareholder activism impact.04.Private equity firms targeting the Japanese market with dry powder.05.The Japanese government encouraging unsolicited acquisition offers.2012Abenomics Introduced2014Stewardship Code2018Revised Corporate Governance Code2021TSE M
72、arket Structure Reform2023METI revises guidelines for Corporate Takeovers2024TSE published a list of companies disclosing plans 2015Introduced Corporate Governance Code2020METI M&A Guidelines2022Transition from First Section to Prime2023TSE enhanced disclosure for companies in parent-subsidiary rela
73、tionshipsRecent Governance Reform:Read more at: New Wave in JapanAVI Japan Opportunity Trust plc/Annual Report 202408Can you share with us AVIs outlook towards the Japanese market?Historically,small-caps in Japan have consistently outperformed their larger counterparts,but that pattern was disrupted
74、 two years ago when the Yen dramatically weakened by over 30%.The Bank of Japan is under increasing pressure from domestic consumers and companies to ease imported inflation resulting from the weak Yen and has committed to a slow and steady normalisation of monetary policy.The question is how long a
75、 weak Yen will weigh on small-caps,and what will happen when we see that pressure start to be released.How does AVIs approach create value amid this wave of change?We believe that our engagement and constructive activist approach is particularly suited to Japanese companies.The idea of self-help has
76、 percolated slowly through the market over the past ten years,and there is a growing subset of companies who want to improve their valuations,but are not sure how.This is again especially pertinent in the small to mid-cap space.Thoroughly assessing management prior to investment is a key part of our
77、 process.Our team meets with directors,non-executive directors,employees,and industry experts to garner as comprehensive a picture as possible of a companys“engageability”.Building strong relationships with the company and maintaining an intense pace of engagement are key pillars of our approach.The
78、 team meets each company on average 2-3 times a quarter and conducting approximately 200 meetings in total per year.The Japan strategys idiosyncratic returns and outperformance over both the small-cap index and the net cash universe are testament to the thoroughness of our process and our efforts to
79、 avoid low-quality companies that,even with a push,will likely continue to stagnate.What are the main driving forces for the corporate governance reform in Japan?Abes lasting legacy has been supported and cemented by a truly extraordinary coordinated and orchestrated effort from the Tokyo Stock Exch
80、ange(“TSE”),the Government,the Bank of Japan,and large domestic asset owners to drive change.The TSEs“name and shame”1 list of companies who are and,more importantly,who are not taking measures to improve their valuations,is all the more astonishing because it was implemented by a Japanese regulator
81、.This measure alone brought 50%of Japans c.4,000 listed companies who are trading below 1x PBR2 firmly into the TSEs crosshairs.In another power move,the Ministry of Economy,Trade and Industry(“METI”)released guidelines in 2023 to promote corporate takeovers.These guidelines emphasise that credible
82、takeover offers must be considered and cannot simply be dismissed.Since then,a number of high-profile unsolicited takeover bids have been launched(e.g.Nidec and Makino Milling,Bain and KKR for Fuji Soft).QAAre there any particular structures the reforms address?Parent-subsidiaries are an area of foc
83、us for the TSE where they are making solid progress.Listed subsidiaries often exist purely for the convenience of the parent company,and will have limited,if any,pricing power or real agency over business strategy.The number of parent-child subsidiaries peaked at 407 in 2006 and has since steadily d
84、ropped to 219 in 2024.The Alps Logistics buyout in 20243 at a 194%TOB premium is an example of the opportunities presented by the existence of parent-subsidiaries.Is private equity playing a part in Japan?Over the last few years,large global private equity players have opened offices in Tokyo,active
85、ly researching and assessing the market.They have been waiting for the corporate governance seeds sown over a decade ago to bear fruit.Meanwhile,smaller domestic firms have emerged,contributing to an increasingly healthy and sophisticated private equity industry.In 2024,takeover bids in Japan hit an
86、 18-year high,reflecting a significant uptick in activity at a strategy level.Four of our portfolio companies were acquired out over the year.This acceleration in private equity is a direct result of engagement and activism,which has driven change at corporate management level across the market.What
87、 is your view towards small-cap companies in this wave of change?Small-cap companies in Japan are often known for their weak or utterly lacking shareholder communication in Japanese,let alone English.Alongside their infamously overcapitalised balance sheets,this lack of coverage,knowledge,and access
88、 to the small-cap universe is part of the reason why these companies trade at a significant discount to their Japanese and global peers.This makes them an attractive hunting ground for market inefficiencies for those that do the work.QQQQQAAAAANICOLA TAKADA WOODManaging Director JapanAlthough corpor
89、ate governance reform famously formed late Prime Minister Abes third arrow,the initial rumblings of change have taken over a decade to not only gain momentum,but to begin to be recognised by foreign investors.1 On March 2023,Tokyo Stock Exchange,Inc.(“TSE”)requested that all listed companies on the
90、Prime and Standard Markets take“action to implement management that is conscious of cost of capital and stock price”.2 Tokyo Stock Exchange website,as of 19 February 2025.3 Toyo Keizai newspaper,April 2024.AVI Japan Opportunity Trust plc/Annual Report 202409GFSSISR12345667.8%The top ten equity inves
91、tments make up 67.8%of the net assets*,with operating businesses spread across a range of sectors.*For definitions,see Glossary on pages 74 and 75.01.TSI Holdings is an apparel holding company with a diversified collection of brands including Pearly Gates,HUF and Margaret Howell.Its unique focus on
92、athleisure and outdoor wear sets it apart from competitors,but it trades at a steep discount due to a bloated balance sheet.Substantial asset backing of net cash,investment securities and real estate obscure the quality of the underlying business.02.Takuma builds and operates waste treatment plants
93、for local municipalities in Japan,and with a tight labour market,there is a trend of outsourcing the operation of these plants to the constructor on decade-long contracts.Our strong conviction lies in Takumas shifting business model,towards recurring revenue streams from maintenance and operation co
94、ntracts.Almost half of Takumas balance sheet assets are held in cash and listed securities,accounting for just over 60%of the market cap.06.Araya Industrial is engaged in the manufacturing and selling of high-quality,high-performance iron,stainless steel pipes,and other products using metal processi
95、ng technology Roll Forming.Araya Industrials customer base is diversified,with significant exposure to stable growth sectors such as semiconductors and public sector construction,particularly for stainless products,which are major contributors to the companys profits.Net cash,investment securities,a
96、nd real estate cover over 85%of the market cap.07.BeenosTakumaAraya IndustrialTSI Holdings%of net assets10.6%EV/EBIT12.5x%of net assets5.4%EV/EBIT5.1x%of net assets5.3%EV/EBIT2.5x%of net assets10.3%EV/EBIT9.4x Source/BEENOS Inc.Source/Takuma Co LtdSource/Araya Industrial Co LtdSource/TSI Holdings Co
97、 LtdStrategic Report/Our Top 10 HoldingsFocus on Small and Mid-cap BusinessesTop 10 Share of Net Assets%of AJOT net assetsTop 1067.8%Other holdings36.4%104.2%104.2%Incl.gearingBeenos operates e-commerce platforms allowing overseas consumers to purchase Japanese products.A significant portion of Been
98、os profits is derived from its global e-commerce platform,primarily centred around a service called“Buyee”,which enables overseas customers to purchase from popular e-commerce sites in Japan,such as Yahoo!Japan and Rakuten.In December 2024,Beenos received advance notice of a tender offer bid at a+19
99、%premium.Visit our investment platforms: Japan Opportunity Trust plc/Annual Report 20241067891036.4%Kurabo Industries is a diversified conglomerate with significant real estate and investment securities,which accounted for 106%of its market cap at the time of investment in early 2024,which has subse
100、quently fallen to 86%following+47%share price growth.Engaged in the textile,chemical,advanced technology,food&service,and real estate businesses,Kurabo has achieved stable revenues,while its operating margin has doubled in recent years.03.04.AZN is a wealth management consultancy with a specialist f
101、ocus on 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.AZN has successfully maintained an operating marg
102、in of over 30%and a double-digit annual profit growth rate.05.Konishi specialises in the manufacture and sale of synthetic adhesives and sealants,primarily serving the civil engineering construction sector.Konishi manufactures the No.1 household adhesive brand in Japan,“Bond”.The company also produc
103、es adhesives and repair materials for civil engineering infrastructure projects,as well as industrial chemicals and synthetic resins.The company has substantial asset backing,with net cash,investment securities,and real estate covering more than 30%of the market cap.08.Aichi Corporation is a manufac
104、turer of construction machinery such as aerial work platforms,digger derricks,and other special-purpose vehicles.In addition to the sale of specialised machinery,Aichi Corporation also provides maintenance services,which account for nearly a quarter of total sales and offer higher profit margins.The
105、 company is a listed subsidiary of Toyota Industries,which owns over 50%of the shares.09.Sharingtechnology operates one of the largest life service matching platforms in Japan,connecting a variety of user needs with high-quality services.With nearly 200 specialised websites and over 6,000 external s
106、ervice providers,the most frequent services catered for include lost keys,lawn mowing,and termite control.There are several tailwinds to support continued growth,including the declining Japanese population and the projected increase in the number of single-person households.10.KonishiAichi Corporati
107、onSharing-technologyKurabo IndustriesEiken ChemicalAoyama Zaisan Networks%of net assets4.9%EV/EBIT5.8x%of net assets4.6%EV/EBIT8.7x%of net assets4.4%EV/EBIT9.6x%of net assets8.5%EV/EBIT1.2x%of net assets7.6%EV/EBIT21.0 x%of net assets6.2%EV/EBIT8.7x Source/Konishi Co LtdSource/gilaxia via Getty Imag
108、esSource/SHARING-TECHNOLOGY INCSource/Kurabo Industries LtdSource/Eiken Chemical Co LtdSource/Aoyama Zaisan Networks Company LtdEiken Chemical is a manufacturer of medical diagnostics equipment,operating a high-quality business with a proven track record of growing sales.Eiken Chemical holds a domin
109、ant market position in colon cancer screening,with an overwhelming global market share in excess of 70%.Eiken Chemical is set to experience structural growth from the ageing population,and with an open shareholder register,the company is a potential takeover target.AVI Japan Opportunity Trust plc/An
110、nual Report 202411GFSSISR1 10 trillion in 1H2024,Morningstar Research,July 2024.2 Bank of Japan quarterly survey,18 December 2024.Last years Managers Commentary concluded with the assertion that“the potential for alpha generation has never been higher,and we are excited by the abundant opportunities
111、 in the year ahead”.Given your Companys strong performance in 2023,this statement required a certain level of confidence in our ability to capitalise on the opportunities of 2024.We are pleased to report that this optimism proved to be warranted.In 2024,AJOTs NAV rose by an impressive+20.9%(in GBP),
112、significantly outpacing the benchmark,which returned+6.2%.It was a year full of activity,both within the portfolio and in the broader Japanese market.Following their impressive returns in 2023,Japanese indices booked another buoyant year,with the MSCI Japan Small Cap Index and MSCI Japan Index up+16
113、.4%and+20.7%respectively(in JPY).As with last year,headline performance favoured large-cap value stocks,mainly attributable to the continued depreciation of the Japanese Yen.Over the last two years,the persistent devaluation of the Yen has driven earnings at large multinational exporters,with Topix
114、Core 30 companies outperforming the Topix Small Cap section by+27%during that period.Despite this formidable headwind for our predominantly domestically oriented companies,the portfolio managed to deliver an impressive+32.4%return(in JPY).The volatility seen across the equity,bond and foreign exchan
115、ge markets in late July and early August reinforced our conviction in the resilience of the strategy,and 2024 proved to be a year in which keeping your head was paramount.In the market turmoil that followed the Bank of Japans(“BoJ”)benchmark rate hike(by 15bps),the managers increased some positions
116、into the weakness and were reassured when the portfolio recovered to pre-hike levels within a month.Given the corresponding currency volatility that ensued,it is important to remind shareholders that around 80%of AJOT portfolio company revenues derive from the domestic market and are therefore posit
117、ioned to benefit from a stronger Yen.Given the changing macroeconomic environment in Japan and the BoJs slowly-but-surely approach to policy tightening,we believe there is potential for foreign investors to shift their focus toward smaller companies that are shielded from the possibility of further
118、Yen strength.An additional tailwind for small-cap names could be reforms brought into the NISA(Japanese ISA)programme in January.The original NISA programme was introduced in 2014 to encourage a shift from Japanese households cash assets into securities.The Government has proposed plans to double NI
119、SA purchases over five years,by more than doubling the amount of tax-free investment that can be made by individuals and extending their period of use.NISA purchases enjoyed a strong start in 20241,but with Japanese households still holding cash assets of over a quadrillion2 Yen (5 trillion),this tr
120、end is likely to unfold over years rather than months.In late September,the revolving door of Japanese leadership swung once again,with Shigeru Ishiba being appointed as the new Prime Minister and leader of the Liberal Democratic Party(“LDP”).Since the election,Ishiba has demonstrated a clear commit
121、ment to fiscal stimulus,emphasising the need for greater investment over to savings.We anticipate that the Ishiba administration will follow a path similar to that of former Prime Minister Kishida.Consequently,we do not foresee this leadership transition disrupting Japans ongoing corporate governanc
122、e reforms or our engagement strategies with portfolio companies.Down the road at the Tokyo Stock Exchange(“TSE”),CEO Yamaji-san seems to have the proverbial bit between his teeth,as he continues to implement truly ground-breaking reforms for listed companies.In January,the TSE began publishing on it
123、s website the now infamous“name and shame”list of corporates who are taking measures to improve their share prices,and crucially,those who are not.Later in the year,that list was refined to scrutinise the quality of disclosures and improve accountability of companies who say they will implement meas
124、ures,even listing examples of company“bad practices”.The TSE has also focused its attention on the characteristically Japanese structures of parent-child listed subsidiaries and cross-shareholdings.We are witnessing subsidiaries being acquired or subsumed,with the opportunities for such moves amplif
125、ied by the unwinding of cross-shareholdings.The Tokyo bourse is keen to untangle the web of cross-shareholdings that have developed over decades among parent-child subsidiaries,suppliers,clients,business affiliates and in some cases,even personal relationships.These cross-shareholdings can lock a me
126、aningful percentage of voting stock into shareholders allied with company management,effectively creating a de facto poison pill and disadvantaging minority shareholders.Looking ahead,we remain confident in the potential for further outperformance,as we continue to focus on high-conviction investmen
127、ts in undervalued companies and drive the catalyst for change.Strategic Report/Investment Managers ReportManagers CommentaryJOE BAUERNFREUND Portfolio ManagerAVI Japan Opportunity Trust plc/Annual Report 202412We are invested in a number of situations where cross-shareholdings make up at least part
128、of the Notional Vendor Finance(“NVF”)on the balance sheet,and selling down those cross shareholdings and using proceeds to buy back shares is often a first port of call when engaging with boards on capital efficiency.The TSE have promised further measures in 2025,and we eagerly anticipate the unveil
129、ing of their plans.Meanwhile,private equity interest in Japan continues to grow,with global funds further expanding their Japanese presence and levels of activity.In October,KKR founder Henry Kravis famously cited his co-founder George Roberts in a Nikkei op-ed,saying“If I were 30 years old today an
130、d I could speak Japanese,Id go to Japan”and we would agree.The overlooked,asset-backed,quality small-cap companies that AJOT typically invests in have proven to be an attractive universe for private equity to deploy their burgeoning keg of“dry powder”.We exited four positions during the year through
131、 tender offer bids at average premiums of+83%to the undisturbed share prices.In parallel with the developing constructive backdrop,your Companys stock selection and active,constructive engagement with portfolio companies continued to bear fruit.Throughout the year,we continued to identify compelling
132、 opportunities in Japans small-cap market,which remains under-researched and underperforming relative to large caps.This presented us with abundant opportunities to selectively add promising companies to the portfolio.Over the course of 2024,AJOT added 13 new positions,which collectively contributed
133、+16.1%to performance.These companies are typically undervalued and offer significant upside potential,with each positioned for improvements in governance,capital allocation and operational efficiency.We also engaged extensively on shareholder communication,board independence,tenure,and diversity,as
134、well as environmental and social issues.Our engagement with portfolio companies remains a core part of our strategy.We filed shareholder proposals with several companies,including SK Kaken,where we have now filed proposals for four consecutive years.Our investment teams focus and commitment to activ
135、e engagement remain resolute,as evidenced by over 150 meetings with corporate management in 2024 on top of extensive presentations and letters.These efforts and improvements have not gone unnoticed by the market,and we have seen share price appreciation in accordance with engagement successes.Moreov
136、er,we are pleased to report that four portfolio companies received tender offer bids in 2024.Conveyor belt and parking system provider NC Holdings,held by AJOT since 2021,was bought out by domestic private equity firm and large shareholder Miri Capital in June.This was followed by food seasonings ma
137、ker Yaizu Suisan Kagaku and a listed subsidiary,Alps Logistics,in May,as well as entertainment company Sun Corporation with a partial tender offer bid.Alps had been in the portfolio since inception in 2018 and was another private equity buyout at a 194%premium to the undisturbed pre-rumour share pri
138、ce.Finally,e-commerce player Beenos received an advanced notice of a tender offer from strategic buyer LY Corporation in December.Corporate action and private equity activity are clearly gaining momentum in Japan,which should continue to be a boon for our strategy next year and beyond.At the end of
139、2024,the portfolios EV/EBIT ratio stood at 8.7x versus 14.7x for the MSCI Small Cap benchmark,with net-financial value(NFV)accounting for 48%of the portfolios weighted market cap.These metrics underscore the significant discounts at which AJOTs portfolio companies trade relative to their peers,large
140、ly due to issues such as over-capitalised balance sheets,poor IR disclosure and poor governance.This dislocation creates a fertile environment for our activist approach,which seeks to unlock value through engagement and operational improvements.Looking ahead,we remain confident in the potential for
141、further outperformance,as we continue to focus on high-conviction investments in undervalued companies and drive the catalyst for change.The lack of research coverage of small-caps and their relative underperformance to large-caps continue to present us with abundant opportunities.We remain committe
142、d to selectively adding the most promising companies to our concentrated portfolio of 15-25 holdings.AVI Japan Opportunity Trust plc/Annual Report 202413GFSSISRStrategic Report/Investment Managers Report continuedBEENOS IncFollowing AVIs initial 5%stake declaration,several other activists followed s
143、uit.With activists owning a combined 40%of the company,LY Corporation placed a tender offer bid for the company at a 19%premium to the share price.Source/BEENOS IncBeenos,an operator of e-commerce platforms allowing overseas consumers to purchase Japanese products,was the largest contributor in 2024
144、,adding+754bps to performance as its share price rose+178%.A significant portion of Beenos profits is derived from its Global E-commerce platform.This is primarily centred around a service called“Buyee”,which enables overseas customers to purchase items from popular e-commerce sites in Japan,such as
145、 Yahoo!Japan,Mercari,and Rakuten.Buyees gross merchandise value has experienced robust growth at an annual rate of+31%.Beenos strong performance over the year was capped off by the announcement on 18 December that it had received advanced notice of a tender offer bid of 4,000 per share at a+19%premi
146、um to the previous days closing price.Beenos performance was supported by the weakening of the Yen,however,a reversal of this trend could harm the companys profits.AJOTs performance will not be impacted,assuming the aforementioned tender offer is successfully completed.We initiated our position in B
147、eenos in January 2024,with several other constructive engagement funds and other investors joining AVI on the shareholder register following AVIs first large ownership declaration in February.As a large shareholder owning about 10%of the voting rights of Beenos,we have engaged extensively with the b
148、oard of Beenos on ways to enhance sustainable long-term corporate value.Beenos serves as another example of how AJOTs concentrated portfolio of asset-backed small to mid-caps can benefit from AVIs active engagement strategy against a backdrop of rapidly increasing corporate activity in Japan.At year
149、 end,Beenos is the largest holding in the portfolio,accounting for 10.6%of AJOTs NAV.The investment has generated an ROI of+125%for an IRR of+188%.Indexed Share PriceJan 24Mar 24May 24Jul 24Sep 24Nov 2450100150200250300Since position in AJOT initiated(Jan 2024)BeenosContribution(GBP)7.5%EV/EBIT12.5x
150、%of net assets10.6%NFV/Market Cap44%01CContributorsAVI Japan Opportunity Trust plc/Annual Report 202414Alps Logistics,a provider of logistics services such as warehousing and distribution,was the second largest contributor,adding+438bps to performance,having received a tender offer bid in February 2
151、024.News first broke in Q1 2024 that parent Alps Alpine was considering selling its 49%stake,due to a deterioration in its business.To address the cash flow gap in their mid-term plan,they announced earlier in the year their intention to explore asset sales.In a takeover bid that reflects the true u
152、nderlying value of the company and showcases the stark valuation differential between listed and private companies in Japan,KKR-controlled Logisteed paid a 194%premium to the undisturbed,pre-rumour price in February to privatise Alps Logistics.We believe this premium was reflective of the true value
153、 of the company,with Alps Logistics being one of eight portfolio companies to be privatised since AJOTs inception.Alps Logistics was held in the portfolio since AJOT inception in 2018,and during this time,AVIs engagement with management focused on ways to enhance corporate value and address the pare
154、nt/child subsidiary relationship with Alps Alpine.Over the more than five-year holding period,the investment in Alps Logistics generated an ROI of+332%for an IRR of+39%.Kurabo Industries,a diversified conglomerate,was another significant contributor to performance,adding+298bps as its share price in
155、creased+105%.Initially founded as a textiles business,the company is now also engaged in chemical,advanced technology,food&service,and real estate businesses.Kurabo Industries has a history of stable revenues,while it has doubled its operating margin in recent years.The company has significant real
156、estate and investment securities backing,which accounted for 106%of its market cap at the time of investment in early 2024,subsequently falling to 89%due to share price growth.During the year,Kurabo made improvements in the chemical and advanced technology segment,leading to improved profit margins
157、especially for its semiconductor business.Much of our engagement to date has focused on encouraging management to address its asset-heavy balance sheet,improve capital efficiency,and focus resources on the successful advanced technology and chemicals segments,rather than laggards such as the textile
158、s business.We have been pleased to see the early results of the companys transformation in November 2024,when Kurabo announced an increase in dividends to a 35%payout ratio and share buybacks amounting to 5.3%of its shares outstanding.Since initiating our position in January 2024,the investment has
159、generated an ROI of+40%for an IRR of+81%.We see substantial upside remaining to the current share price,and accordingly,Kurabo Industries accounted for 8.5%of AJOTs NAV at year end as the third largest position.Indexed Share PriceOct 18Oct 19Oct 20Oct 21Oct 22Oct 230100200300400500600700800Since pos
160、ition in AJOT initiated(Oct 2018 at inception)Indexed Share PriceJan 24Mar 24Jul 24May 24Sep 24Nov 24100150200250Since position in AJOT initiated(Jan 2024)Alps LogisticsKurabo IndustriesContribution(GBP)4.4%EV/EBITN/A%of net assetsN/ANFV/Market CapN/AContribution(GBP)3.0%EV/EBIT1.2x%of net assets8.5
161、%NFV/Market Cap89%0203CCAVI Japan Opportunity Trust plc/Annual Report 202415GFSSISRAoyama Zaisan Networks(“AZN”)was the fifth largest contributor during the year,adding 200bps to performance as its share price rose by 89%.AZN specialises in providing wealth management consulting services across area
162、s 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.In November,AZN disclosed favourable earnings,with EBIT and r
163、evenue increasing year-over-year by 39%and 24%,respectively.Importantly,for the first time,the company also announced a buyback programme,equal to 6%of the market cap,aiming to prevent dilution caused by the most recent share exchange deal with audit firm Chester Group.This aligns with AZNs belief t
164、hat its capital allocation policy should be a core focus of the company.At the time we initiated our investment in March 2024,AZNs stock price had been flat for the past five years,despite operating income continuing to grow steadily and non-operating assets expanding to approximately 47%of market c
165、ap as of the end of December 2023.Since initiating our position in AZN,the investment has generated an ROI of+34%for an IRR of+75%.We anticipate unlocking substantial upside to the current share price through our constructive engagement initiatives with management.At year end,AZN accounted for 6.2%o
166、f AJOTs NAV as the fifth largest holding.TSI Holdings(“TSI”),the apparel holding company and second largest position in AJOT,saw its share price rise by+47%in 2024,contributing 255bps to performance as the fourth largest contributor.As noted in our Q2 newsletter,TSI announced a new mid-term plan in
167、April,which,for the first time,disclosed a quantified shareholder return.The plan aims for a 4%dividend on equity target by FY27/3,coupled with an ambitious business optimisation plan to elevate operating margins to 6%(from the current 1%).As TSIs largest shareholder,holding 10%of the vote across AV
168、I funds,we were pleased to see that the company had actioned many of our suggestions.TSI has received substantial constructive and private engagement from us this year,and we commend management for their proactive approach in listening to shareholders.With net cash and investment securities accounti
169、ng for more than 70%of the market cap,capital efficiency has been a key focus of our engagement with the company.After period-end,TSI sold its former headquarters building,located in central Tokyo,for a price higher than the companys appraisal value and equivalent to approximately 30%of its market c
170、ap.At year end,TSI Holdings accounted for 10.3%of NAV,reflecting our conviction in the potential upside to be unlocked through AVIs constructive engagement with management.TSI Holdings was added to the portfolio in July 2022,and the investment has so far generated an ROI of+114%for an IRR of+51%.Str
171、ategic Report/Investment Managers Report continuedIndexed Share PriceJul 22Oct 22Jan 23Jul 23Oct 23Jan 24Jul 24Oct 24100150200250300350Since position in AJOT initiated(Jul 2022)Indexed Share PriceMar 24Apr 24Jul 24Aug 24 Sep 24Oct 24Nov 24May 24Jun 24Dec 24100150200Since position in AJOT initiated(M
172、ar 2024)TSI HoldingsAoyama Zaisan NetworksContribution(GBP)2.6%EV/EBIT9.4x%of net assets10.3%NFV/Market Cap70%Contribution(GBP)2.0%EV/EBIT8.7x%of net assets6.2%NFV/Market Cap29%0405CCContributors continuedAVI Japan Opportunity Trust plc/Annual Report 202416TSI HOLDINGSAVIREX is one of TSI Holdings d
173、iverse range of apparel brands.Source/TSI Holdings Co LtdAVI Japan Opportunity Trust plc/Annual Report 202417GFSSISRNihon Kohden,a manufacturer of medical electronics,was the largest detractor over the year,reducing performance by-145bps as its share price fell-2%.Nihon Kohden released its much-anti
174、cipated mid-term plan in May 2024,which we had been engaging on behind the scenes.It was a comprehensive and ambitious plan that caught the market by surprise;a 70-year-old,conservative medical company putting forward a transformation plan was certainly unexpected.While we were pleased,it was less s
175、urprising for us,as we have been in regular dialogue with the founders grandson and President,whom we identified as both motivated and possessing sufficient power to drive corporate reform.Towards the summer of 2024,however,Nihon Kohden saw its operating margin decline due to headwinds to the hospit
176、al sector in Japan.Having previously been a top five holding,by year end,Nihon Kohden accounted for 3.6%of AJOTs NAV.We trimmed the longstanding position,noting the change in the hospital sector environment.AVI has engaged successfully with Nihon Kohden throughout the holding period on matters such
177、as capital efficiency and corporate governance,with the ambitious mid-term plan disclosed in May 2024 as the culmination of our engagement.During Q4 2024,we strategically reallocated capital to more promising opportunities,which have greater scope for improvements through our constructive engagement
178、 with management.We have;held Nihon Kohden in the portfolio since September 2022,generating an ROI of+35%for an IRR of+17%to date.Post-period end,we exited the position fully in February 2025.Strategic Report/Investment Managers Report continuedNIHON KOHDENOver the two-year holding period,AVI engage
179、d extensively with the manufacturer of medical equipment.Source/ozgurdonmaz via Getty ImagesIndexed Share PriceSep 22Dec 22Sep 23Dec 23Mar 24Sep 24Jun 24Mar 23Jun 23Dec 24180160140120100Since position in AJOT initiated(Sep 2022)Nihon KohdenContribution(GBP)-1.4%EV/EBIT17.6x%of net assets3.6%NFV/Mark
180、et Cap15%06DDetractors continuedAVI Japan Opportunity Trust plc/Annual Report 202418Jade Group(“JADE”),an operator of apparel e-commerce sites,was the second largest detractor over the year,detracting-126bps from performance as its share price declined-28%amidst uncertainty surrounding the post-merg
181、er integration(PMI)of Magaseek,which it acquired in early 2024.Investor relations and adequate communication with investors is one of the core agendas of the corporate reform occurring in Japan.The TSE is pushing for companies to improve their disclosure,particularly to foreign investors,with substa
182、ntial discounts applied to the valuations of companies failing to meet the rising expectations.After making an acquisition as pivotal as Magaseek,which JADE initially expected to double gross merchandise value and operating profits within two financial years,JADE left the market disappointed by the
183、lack of consistent disclosure.During Q2 2024,JADEs share price was strong on the back of a press release made in July,which showed signs of successful post-merger integration of Magaseek in a demonstration of improved IR communications,an area in which much of our recent engagement had focused.Unfor
184、tunately,since the announcement in July 2024,JADE has not made adequate disclosures around the significant acquisition,leaving shareholders and prospective investors in the dark on its progress.In its FY25 Q2 presentation material released in October 2024,rather than provide a clear timeline for cos
185、t-cutting measures,management alluded to cross-sales as the likely method to revitalise sales to meet the FY25 forecast.This sent the share price down nearly-15%in the week that followed,and it drifted a further-11%lower to year end.Operating income guidance was revised downward post-period end.Sinc
186、e we initiated our position in November 2021,JADE has made several acquisitions in pursuit of its ambitious growth path to cement itself as the No.2 player in Japans 2.4 trillion fashion e-commerce market.We have supported management in pursuing this growth.However,with the market-wide reform occurr
187、ing in Japan,the importance of investor relations cannot be understated,and we believe JADE needs to make immediate improvements to meet the markets rising expectations.We maintain consistent sell discipline with each of our investments as the situation changes since our initial investment thesis.Ac
188、cordingly,with net cash reduced following several M&A transactions,uncertainty around plans for margin improvement through PMI,and managements apparent lack of urgency to enhance IR disclosure,we have reduced our position in JADE to 1.7%of NAV at year end.We will closely monitor the situation,as JAD
189、E maintains potential for strong earnings growth in the coming years.To date,the investment has been successful,supported by our engagement strategy and timing,and we have generated an ROI of+32%for an IRR of+14%over the more than three-year holding period.Indexed Share PriceDec 21Dec 23Jun 24Jun 22
190、Dec 22Jun 23Dec 2450100150200250Since position in AJOT initiated(Nov 2021)Jade GroupContribution(GBP)-1.3%EV/EBIT10.8x%of net assets1.7%NFV/Market Cap3%07DAVI Japan Opportunity Trust plc/Annual Report 202419GFSSISRTakuma,a waste treatment plant engineering company for local municipalities,reduced pe
191、rformance by-106bps,as the third largest detractor saw its share price decline by-4%over the year.Takuma has built 120 waste treatment facilities in Japan,60%of which already have operating contracts,leaving further room for expansion over the coming years.With a tight labour market,there is a trend
192、 of outsourcing the operation of these plants to the constructor on decade-long contracts.This trend underpins our investment thesis for Takuma,with the business gradually shifting towards recurring maintenance and operation contracts.In May 2024,the market was left disappointed by the announcement
193、of Takumas underwhelming mid-term plan,with the share price declining by-12.0%in the subsequent day of trading.Positively,the mid-term plan demonstrated improved transparency around quantitative targets(such as orders intake and ROE targets),and,for the first time,disclosed a disciplined shareholder
194、 returns policy.This included a 50%payout policy,a 4%dividend on equity target,and the intention to buy back 3.8%of shares outstanding this year,with a similar amount during the following two years.However,the next three years profit guidance left much to be desired,with next years conservative oper
195、ating profit guidance of 11.2 billion falling short of the consensus estimate of 13.4 billion.Having faced much criticism from the stock market and with AVIs patient,constructive engagement,Takuma decided to upgrade its mid-term plan in November 2024,increasing the ROE target and shareholder returns
196、.Having so far achieved an ROI of+18%and an IRR of+13%in our near two-year holding period,we will continue engaging with management on methods to enhance capital policy and improve operating efficiency.We see substantial upside to the current share price,with Takumas 5.4%weight as the sixth largest
197、position in AJOT reflective of our conviction.Strategic Report/Investment Managers Report continuedTAKUMAAVIs strong conviction lies in Takumas business model shift towards recurring maintenance and operation contracts.Source/Takuma Co LtdIndexed Share PriceApr 23Jul 24Oct 23Jul 23Jan 24Apr 24Oct 24
198、80120160Since position in AJOT initiated(Apr 2023)TakumaContribution(GBP)-1.1%EV/EBIT5.1x%of net assets5.4%NFV/Market Cap53%08DDetractors continuedAVI Japan Opportunity Trust plc/Annual Report 202420Shin-Etsu Polymer,a manufacturer of moulded plastics and a listed subsidiary of Shin-Etsu Chemical,re
199、duced performance by-98bps as we reduced our position,although its share price rose modestly by+1%.The companies business operations are intertwined,and the management of both companies have indicated that they are aware of some of the key parent-subsidiary listing issues.Beyond the prospect of a bu
200、yout by Shin-Etsu Chemical,our interest in Shin-Etsu Polymer stems from its discounted valuation and its growing wafer carrier cases business.Much of AVIs engagement with Shin-Etsu Polymer has focused on ways to rectify its poor corporate governance and low valuation.After meeting with the company i
201、n 2024,we lost some conviction in managements ambition to grow corporate value and in the company taking adequate steps to address the conflicts and corporate governance shortcomings of its parent-subsidiary relationship.We continue to believe that the parent-subsidiary relationship is harming Shin-
202、Etsu Polymers corporate value and that,as many listed subsidiaries in Japan have done already,it should be eliminated.With abundant opportunities in our under-research investment universe,we reduced our position in Shin-Etsu Polymer to 2.0%of AJOTs NAV by year end.This is in line with our commitment
203、 to focus our engagement efforts on companies where we see potential for immediate improvements through implementing our suggestions,as we drive catalysts to unlock substantial value.To date,the investment has generated an ROI of+56%for an IRR of+19%.Portfolio Trading ActivityIn a busy year of tradi
204、ng,which saw 13 new names enter the portfolio,turnover was an elevated 68%due to four portfolio companies receiving tender offer bids,as well as one receiving an advance notice of a tender offer bid.On an adjusted basis for these buyouts,as well as trades in three regional banks,turnover was in line
205、 with the historical average(35%)at 38%.The approximate holding period for our strategy is three to five years,however,this may be shortened by catalysts such as tender offers,as a result of our active engagement approach.The largest purchases over the period were in new positions to the portfolio i
206、n 2024,namely Kurabo Industries,Aoyama Zaisan Networks,Beenos,Araya Industrial and Raito Kogyo.Four of these names were top 10 positions by year end.The largest sale during 2024 was Alps Logistics,which,as discussed above,received a tender offer in February at a+194%premium to the undisturbed share
207、price.NC Holdings,which also received a tender offer during the year,was the second largest sale.Outside of these,the largest sales were in longstanding positions such as Nihon Kohden,Digital Garage and Shin-Etsu Polymer.Indexed Share PriceDec 21Jun 22Dec 23Jun 24Dec 22Jun 23Dec 24200180160140120100
208、80Since position in AJOT initiated(Dec 2021)Shin-Etsu PolymerContribution(GBP)-1.0%EV/EBIT7.2x%of net assets2.0%NFV/Market Cap34%09DAVI Japan Opportunity Trust plc/Annual Report 202421GFSSISRStrategic Report/Portfolio ConstructionThe objective of AVIs portfolio construction is to create a concentrat
209、ed position in about 15-25 holdings,facilitating a clear monitoring process of the entire portfolio.PORTFOLIO VALUE BY SECTORAVERAGE VOTING OWNERSHIP OF PORTFOLIO COMPANIES ACROSS ALL AVI FUNDSEQUITY PORTFOLIO VALUE BY MARKET CAPITALISATIONAVI picks stocks that meet our investment criteria and once
210、we decide to invest,a minimum position size of approximately 2%of the portfolio is initiated.In determining position sizes,AVI is mindful of liquidity and the likely timing of any catalysts to unlock value.A key consideration is the make-up of the shareholder register,a proxy for how receptive manag
211、ement might be to our suggestions.The portfolio is diverse in the industries within it,however,we are sector agnostic and select investments based on quality and value.202420232.5bn2%1%Jun 21Dec 21Jun 22Dec 22 Jun 23Jun 24Dec 24Dec 23 2.0%3.0%4.0%5.0%6.0%7.0%20242023Consumer Durables and Apparel22%2
212、3%Capital Goods15%19%Materials15%16%Consumer Discretionary,Distribution and Retail12%12%Health Care Equipment and Services11%10%Software and Services7%5%Real Estate Management and Development6%5%Media and Entertainment4%4%Technology Hardware and Equipment3%3%Telecommunication Services3%2%Household a
213、nd Personal Products2%1%Dec 18Dec 19Dec 20Dec 21Dec 24Dec 23Dec 2240%50%60%70%80%TOP 10 CONCENTRATION(%OF NET ASSETS)AVI Japan Opportunity Trust plc/Annual Report 202422Strategic Report/AVI Japan Investment TeamOutlookThe combination of rising pressure from regulators and activists in 2024 presents
214、a compelling opportunity to unlock substantial value in small to mid-cap Japanese companies in 2025 and beyond.With several key tailwinds and a deeply under researched market,our conviction in the strategy remains as high as ever.We look forward to continuing our active engagement with companies to
215、drive the catalysts needed to grow long-term corporate value and generate significant alpha.Joe BauernfreundAsset Value Investors Limited4 April 2025AVI JAPAN INVESTMENT TEAMFrom left to right:Kaz Sakai(Head of Japan Research),Joe Bauernfreund(Portfolio Manager),Luke Hutcherson(Investment Analyst),N
216、icola Takada Wood(Managing Director Japan),Shuntaro Shimizu(Senior Investment Analyst)AVI Japan Opportunity Trust plc/Annual Report 202423GFSSISR*Please refer to Glossary on pages 74 and 75.1 Estimates provided by AVI.For all Alternative Performance Measures,please refer to the definitions in the Gl
217、ossary on pages 74 and 75.CompanyStock Exchange Identifer%of investee company Cost000*Market value 000%of AJOT net assets NFV/Marketcapitalisation1EV/EBIT1BeenosTSE:33288.2%10,002 22,445 10.6%44%12.5TSI HoldingsTSE:36085.3%11,866 21,894 10.3%70%9.4Kurabo IndustriesTSE:31063.5%13,265 18,043 8.5%89%1.
218、2Eiken ChemicalTSE:45493.8%13,355 16,100 7.6%20%21.0Aoyama Zaisan NetworksTSE:89295.4%10,016 13,062 6.2%29%8.7TakumaTSE:60131.6%11,378 11,390 5.4%53%5.1Araya IndustrialTSE:73057.1%9,781 11,182 5.3%85%2.5KonishiTSE:49562.2%8,393 10,400 4.9%32%5.8Aichi CorporationTSE:63451.8%7,291 9,789 4.6%47%8.7Shar
219、ingtechnologyTSE:39898.9%8,556 9,451 4.4%18%9.6Top 10 investments 103,903 143,756 67.8%AtsugiTSE:352910.5%7,162 8,913 4.2%123%Raito KogyoTSE:19261.6%8,128 8,635 4.1%49%4.6WacomTSE:67271.5%10,548 7,857 3.7%14%8.6Nihon KohdenTSE:68490.4%6,868 7,533 3.6%15%17.6DTSTSE:96820.8%5,752 7,371 3.5%21%10.7Tecn
220、os JapanTSE:36668.8%6,408 7,322 3.5%29%6.7SK KakenTSE:46280.9%9,445 6,738 3.2%80%2.0BroadmediaTSE:434710.2%6,018 6,547 3.1%40%12.0Rohto PharmaceuticalTSE:45270.1%5,291 4,340 2.0%7%16.6Shin Etsu PolymerTSE:79700.6%3,669 4,340 2.0%34%7.2Top 20 investments 173,192 213,352 100.7%Jade GroupTSE:35584.1%3,
221、822 3,674 1.7%3%10.8Helios Techno HoldingTSE:69273.0%3,093 3,363 1.6%62%3.7A-One SeimitsuTSE:61561.0%517 476 0.2%57%31.6Total investments 180,624 220,865 104.2%Other net assets and liabilities(8,884)(4.2%)Net assets 211,981 100.0%Strategic Report/Investment PortfolioAs at 31 December 2024AVI Japan O
222、pportunity Trust plc/Annual Report 202424Over-capitalised,with signifcant net fnancial value1Suffcient average daily traded valueLow EV/EBIT relative to peers,typically 10 xSector agnostic,typically excl.fnancial sectorHigh Quality BusinessesEngagement ProspectsCompounding EffectSmall to Mid-Cap Foc
223、used with suffcient liquidityDiscount TighteningUndervalued and Surplus CashValue GrowthHOW WE INVESTPortfolio Characteristics1 234Defining our Universec.3,900 Listed Japanese Companies 1234c.800 Companies in the AJOT UniverseHow we Generate Returns1 At the core of all AVIs investments are attractiv
224、e businesses with durable earnings growth.2Occurs when the share price rises more than the NAV.3When these two sources of returns occur simultaneously,an attractive compounding effect enhances investment returns.Company StatusThe Company is registered as a public limited company under the Companies
225、Act 2006 and is an investment company under Section 833 of the Companies Act 2006.It is a member of The AIC.The Company was incorporated on 27 July 2018 and listed on the London Stock Exchange on 23 October 2018.The Company has been approved as an investment trust under Sections 1158/1159 of the Cor
226、poration Tax Act 2010.The Directors are of the opinion,under advice,that the Company continues to conduct its affairs as an Approved Investment Trust under the Investment Trust(Approved Company)(Tax)Regulations 2011.The Company qualifies as an Alternative Investment Fund in accordance with the Alter
227、native Investment Fund Managers Directive(“AIFMD”).Investment Objective The Companys investment objective is to provide Shareholders with a total return in excess of the MSCI Japan Small Cap Index,through the active management of a focused portfolio of equity investments listed or quoted in Japan wh
228、ich have been identified by AVI as undervalued and having a significant proportion of their market capitalisation held in cash,listed securities and/or realisable assets.Investment PolicyThe Company invests in a diversified portfolio of equities listed or quoted in Japan which are considered by the
229、Investment Manager to be undervalued and where cash,listed securities and/or realisable assets make up a significant proportion of the market capitalisation.AVI seeks to unlock this value through proactive engagement with management and taking advantage of the increased focus on corporate governance
230、 and returns to shareholders in Japan.The Board has not set any limits on sector weightings or stock selection within the portfolio.Whereas it is not expected that a single holding(including any derivative instrument)will represent more than 10%of the Companys gross assets at the time of investment,
231、the Company has discretion to invest up to 15%of its gross assets in a single holding,if a suitable opportunity arises.No restrictions are placed on the market capitalisation of investee companies,but the portfolio is weighted towards small and mid-cap companies.The portfolio normally consists of be
232、tween 15 and 25 holdings although it may contain a lesser or greater number of holdings at any time.The Company may invest in exchange traded funds,listed anywhere in the world,in order to gain exposure to equities listed or quoted in Japan.On acquisition,no more than 15%of the Companys gross assets
233、 will be invested in other UK listed investment companies.The Company may also use derivatives for gearing and efficient portfolio management purposes.The Company will not be constrained by any index benchmark in its asset allocation.Strategic Report/Business Model1 Net Financial Value(“NFV”)=cash+i
234、nvestment securities net debt minority interest.Theoretical example of how returns are generated in an AJOT investment.-80%-60%-40%-20%601001400%Discount(%RHS)NAVShare PriceBusiness ModelAVI Japan Opportunity Trust plc/Annual Report 202425GFSSISRStrategic Report/Business Model continuedBorrowing Pol
235、icyThe Company may use borrowings for settlement of transactions,to meet ongoing expenses and may be geared through borrowings and/or by entering into long-only contracts for difference or equity swaps that have the effect of gearing the Companys portfolio to seek to enhance performance.The aggregat
236、e of borrowings and long-only contracts for difference and equity swap exposure will not exceed 25%of NAV at the time of drawdown of the relevant borrowings or entering into the relevant transaction,as appropriate.It is expected that any borrowings entered into will principally be denominated in JPY
237、.Hedging PolicyThe Company does not hedge its currency exposure using financial instruments such as derivatives,forward contracts,or options.Although there are no current plans to hedge investments denominated in JPY,the Investment Manager and the Board will periodically review this policy.Material
238、Changes to the Investment PolicyNo material change will be made to the Companys investment policy without Shareholder approval.In the event of a breach of the Companys investment policy,the Directors will announce through a Regulatory Information Service the actions which have been taken to rectify
239、the breach.Management ArrangementsThe Company has an independent Board of Directors which has appointed AVI,the Companys Investment Manager,as Alternative Investment Fund Manager(“AIFM”)under the terms of an Investment Management Agreement(“IMA”)dated 6 September 2018.The IMA is reviewed annually by
240、 the Board and may be terminated by one years notice from either party subject to the provisions for earlier termination as stipulated therein.The portfolio is managed by Joe Bauernfreund,the Chief Executive Officer and Chief Investment Officer of AVI.He also manages AVI Global Trust PLC,and AVIs op
241、en-ended and segregated portfolios across Family Holding Companies and Japan strategies.He conducts regular visits to Japan,engaging with prospective and current investments,which he has done for over 15 years.Management fees are charged in accordance with the terms of the management agreement,and p
242、rovided for when due.The Investment Manager is entitled to an annual fee of 1%per annum of the lesser of the Companys NAV or the Companys market capitalisation,invoiced monthly in arrears.The IMA requires AVI to invest not less than 25%of the management fee in shares in the Company.Management fees p
243、aid during the year were 1,835,000 and the number of shares held by AVI is set out in note 16.J.P.Morgan Europe Limited was appointed as Depositary under an agreement with the Company and AVI dated 6 September 2018(the“Depositary Agreement”).The Depositary Agreement is terminable on 90 calendar days
244、 notice from either party.JPMorgan Chase Bank,London Branch,has been appointed as the Companys Custodian under an agreement dated 6 September 2018(the“Custodian Agreement”).The Custodian Agreement is terminable on 90 calendar days notice from the Company or 180 calendar days notice from the Custodia
245、n.MUFG Corporate Governance Limited was appointed as corporate Company Secretary on 27 July 2018.The current annual fee is 79,000,which is subject to an annual RPI increase.The agreement may be terminated by either party on six months written notice.Waystone Administration Solutions(UK)Limited has b
246、een appointed to provide general administrative functions to the Company.The Administrator receives an annual fee of 119,000.The agreement can be terminated by either the Administrator or the Company on six months written notice,subject to an initial term of one year.DIRECTORS DUTIESOverviewThe Dire
247、ctors overarching duty is to act in good faith and in a way that is the most likely to promote the success of the Company as set out in Section 172 of the Companies Act 2006(“Section 172”).In doing so,Directors must take into consideration the interests of the various stakeholders of the Company,the
248、 impact the Company has on the community and the environment,take a long-term view on consequences of the decisions they make,as well as aim to maintain a reputation for high standards of business conduct and fair treatment between the members of the Company.Fulfilling this duty naturally supports t
249、he Company in achieving its investment objective and helps to ensure that all decisions are made in a responsible and sustainable way.In accordance with the requirements of the Companies(Miscellaneous Reporting)Regulations 2018,the Company explains how the Directors have discharged their duty under
250、Section 172 below.To ensure that the Directors are aware of,and understand,their duties,they are provided with the pertinent information when they first join the Board,as well as receive regular and ongoing updates and training on the relevant matters.They also have continued access to the advice an
251、d services of the Company Secretary,and,when deemed necessary,the Directors can seek independent professional advice.The schedule of matters reserved for the Board,as well as the terms of reference of its committees,are reviewed on at least an annual basis and further describe Directors responsibili
252、ties and obligations and include any statutory and regulatory duties.The Audit Committee has the responsibility for the ongoing review of the Companys risk management systems and internal controls and,to the extent that they are applicable,risks related to the matters set out in Section 172 are incl
253、uded in the Companys risk register and are subject to periodic and regular reviews and monitoring.Decision makingThe importance of stakeholder considerations,in particular in the context of decision-making,is taken into account at every Board meeting.All discussions involve careful consideration of
254、the longer-term consequences of any decisions and their implications for stakeholders.Examples of decisions made by the Board on this basis include the buyback of 425,716 shares during the year under review in order to control the discount,as the Board believes that this is in the interest of Shareh
255、olders as a whole.Norman Crighton and Yoshi Nishio visited Japan in June 2024,primarily to attend and ask questions at the AGM of SK Kaken,one of the investee companies.They also took the opportunity to meet with several portfolio companies and our Japanese PR firm.These meetings contributed to a de
256、eper understanding between the Company and those visited.Additionally,the decision to offer the realisation opportunity annually was based on the Investment Managers recommendation,and accepted after extensive discussions with the Broker and shareholders.AVI Japan Opportunity Trust plc/Annual Report
257、 202426The Board seeks to understand the needs and priorities of the Companys stakeholders and these are taken into account during all its discussions and as part of its decision-making.The Board has discussed which parties should be considered as stakeholders of the Company.Following thorough revie
258、w,it was concluded that,as the Company is an externally managed investment company and does not have any employees or customers,its key stakeholders comprise its Shareholders and service providers.The section on the pages following discusses why these stakeholders are considered of importance to the
259、 Company and the actions taken to ensure that their interests are taken into account.StakeholderImportanceBoard EngagementShareholdersContinued Shareholder support and engagement are critical to the existence of the Company and the delivery of the long-term strategy of the Company.The Company has ov
260、er 200 Shareholders,including institutional and retail investors.The Board is committed to maintaining open channels of communication and to engaging with Shareholders in a manner which they find most meaningful,in order to gain an understanding of the views of Shareholders.These include:Annual Gene
261、ral Meeting The Company welcomes and encourages attendance and participation from Shareholders at the AGM.Shareholders have the opportunity to meet the Directors and Investment Manager and to address questions to them directly.Shareholders who are unable to attend the AGM in person are offered the o
262、pportunity to submit questions via email.The Investment Manager attends the AGM and provides a presentation on the Companys performance and the future outlook,which is made available on the Companys website following the meeting.The Company values any feedback and questions it may receive from Share
263、holders ahead of and during the AGM and will take action or make changes,when and as appropriate;Publications The Annual Report and Half-Year results are made available on the Companys website and the Annual Report is circulated to Shareholders.These reports provide Shareholders with a clear underst
264、anding of the Companys portfolio and financial position.This information is supplemented by the daily calculation and publication of the NAV per share and a monthly factsheet and quarterly reports which are available on the Companys website and the publication of which is announced via a Regulatory
265、Information Service.Feedback and/or questions the Company receives from the Shareholders help the Company evolve its reporting,aiming to render the reports and updates transparent and understandable;Shareholder Meetings Unlike trading companies,Shareholder meetings often take the form of meeting wit
266、h the Investment Manager rather than members of the Board.Shareholders are able to meet with the Investment Manager throughout the year and the Investment Manager provides information on the Company and videos on the Companys website and via various social medial channels.Feedback from all meetings
267、between the Investment Manager and Shareholders is shared with the Board.The Chairman,the Chairman of the Audit Committee or other members of the Board are available to meet with Shareholders to understand their views on governance and the Companys performance where they wish to do so.With assistanc
268、e from the Investment Manager,the Chairman seeks meetings with Shareholders who might wish to meet with him and Shareholders can contact him through our broker,Singer Capital Markets;StakeholdersStrategic Report/StakeholdersAVI Japan Opportunity Trust plc/Annual Report 202427GFSSISRStrategic Report/
269、Stakeholders continuedStakeholderImportanceBoard EngagementShareholders continued Shareholder Concerns In the event Shareholders wish to raise issues or concerns with the Directors,they are welcome to do so at any time by writing to the Chairman at the registered office.Other members of the Board ar
270、e also available to Shareholders if they have concerns that have not been addressed through the normal channels;Exit Opportunities The Directors may,at their discretion,offer Shareholders the opportunity to exit the Company at close to NAV on a regular basis.In October 2024,the Company offered Share
271、holders the chance to tender some or all of their shares for sale at a two per cent.discount to NAV.At the general meeting held in December 2024,Shareholders approved the Exit Opportunity,with approximately 2.6%of Shareholders electing to tender their shares.Given the Boards strong commitment to cor
272、porate governance,the Directors intend to offer the Exit Opportunity annually,instead of every two years.Consequently,the Board expects to offer another Exit Opportunity to Shareholders in October 2025 and every 12 months thereafter;Investor Relations updates At every Board meeting,the Directors rec
273、eive updates from the Companys broker on the share trading activity,share price performance and any Shareholders feedback,as well as an update from the Investment Manager on any publications or comments by the press.To gain a deeper understanding of the views of its Shareholders and potential invest
274、ors,the Investment Manager also undertakes regular Investor Roadshows.Any pertinent feedback is taken into account when Directors discuss the share capital,any possible fundraisings or the dividend policy and actioned as and when appropriate.The willingness of the Shareholders,including the partners
275、 and staff of the Investment Manager,to maintain their holdings over the long-term period is another way for the Board to gauge how the Company is meeting its objectives and suggests the presence of a healthy corporate culture.AVI Japan Opportunity Trust plc/Annual Report 202428StakeholderImportance
276、Board EngagementService ProvidersThe Investment ManagerHolding the Companys shares offers investors an investment vehicle through which they can obtain exposure to AJOTs diversified portfolio of small to mid-cap Japanese equities.The Investment Managers performance is critical for the Company to suc
277、cessfully deliver its investment strategy and meet its objective to provide Shareholders with a total return in excess of the MSCI Japan Small Cap Index through active management of the portfolio and engagement with portfolio companies.Maintaining a close and constructive working relationship with t
278、he Investment Manager is crucial,as the Board and the Investment Manager both aim to continue to achieve consistent,long-term returns in line with the investment objective.Important components in the collaboration with the Investment Manager,representative of the Companys culture,are:encouraging ope
279、n discussion with the Investment Manager,allowing time and space for original and innovative thinking;the Chairman has frequent conversations with the Investment Manager to talk through any matters discussed by the Board between scheduled meetings,as well as any matters raised by the Investment Mana
280、ger;the IMA requires AVI to invest not less than 25%of the management fee in shares in the Company and to hold these for a minimum of two years which ensures that the interests of Shareholders and the Investment Manager are well aligned;recognising the alignment of interests mentioned above,adopting
281、 a tone of constructive challenge,balanced with robust negotiation of the Investment Managers terms of engagement if those interests should not be fully congruent;drawing on Board members individual experience and knowledge to support the Investment Manager in its monitoring of and engagement with p
282、ortfolio companies;and willingness to make the Board members experience available to support the Investment Manager in the sound long-term development of its business and resources,recognising that the long-term health of the Investment Manager is in the interests of Shareholders in the Company.The
283、Administrator,the Company Secretary,the Registrar,the Depositary,the Custodian and the Corporate BrokerIn order to function as an investment trust with a premium listing on the London Stock Exchange,the Company relies on a diverse range of reputable advisers for support in meeting all relevant oblig
284、ations.The Board maintains regular contact with its key external providers and receives regular reporting from them,both through the Board and committee meetings,as well as outside of the regular meeting cycle.Their advice as well as their needs and views are routinely taken into account.The Board f
285、ormally assesses their performance,fees and continuing appointment at least annually,to ensure that the key service providers continue to function at an acceptable level and are appropriately remunerated to deliver the expected level of service.Each year,all key service providers are asked to comple
286、te a questionnaire regarding the matters discussed above,the results of which are discussed during a formal review of service providers at the March Board meeting.The Audit Committee reviews and evaluates the control environment in place at each service provider and also requests confirmation that k
287、ey service providers have the relevant policies in place,including those on business continuity,cyber security and fraud prevention.AVI Japan Opportunity Trust plc/Annual Report 202429GFSSISRStakeholderImportanceBoard EngagementOther StakeholdersLenderAvailability of funding and liquidity are crucia
288、l to the Companys ability to take advantage of investment opportunities as they arise.Therefore,the Company aims to demonstrate to lenders that it is a well-managed business,capable of consistently delivering long-term returns.Proxy AdvisersWhere relevant,the evolving practice and support(or lack th
289、ereof)of proxy adviser agencies are considered by the Directors,as the Company aims to build a good reputation and maintain high standards of corporate governance,which contribute to the long-term sustainable success of the Company.When deemed relevant,the Company will engage with proxy advisers reg
290、arding resolutions that will be proposed to the Companys Shareholders at AGMs and,based on feedback received,incorporate changes to future Annual Reports to enhance disclosures.RegulatorsThe Company can only operate with the approval of its regulators who have a legitimate interest in how the Compan
291、y operates in the market and treats its Shareholders.The Company follows voluntary and best-practice guidance,and regularly considers how it meets various regulatory and statutory obligations and how any governance decisions it makes can have an impact on its stakeholders,both in the shorter and in
292、the longer term.The above mechanisms for engaging with stakeholders are kept under review by the Directors and are discussed on a regular basis at Board meetings,to ensure that they remain effective.Strategic Report/Stakeholders continuedAVI Japan Opportunity Trust plc/Annual Report 202430CULTUREThe
293、 Directors agree that establishing and maintaining a healthy corporate culture within the Board and in its interaction with the Investment Manager,Shareholders and other stakeholders,will support the delivery of its purpose,values and strategy.The Board seeks to promote a culture of openness,debate
294、and integrity through ongoing dialogue and engagement with its service providers,principally the Investment Manager.The Board strives to ensure that its culture is in line with the Companys purpose,values and strategy.The Company has a number of policies and procedures in place to assist with mainta
295、ining good corporate governance,including those relating to diversity,Directors conflicts of interest and Directors dealings in the Companys shares.The Board assesses and monitors compliance with these policies,as well as the general culture of the Board,regularly through Board meetings and in parti
296、cular during the annual evaluation process(for more information see the performance evaluation section on page 44).The Board seeks to appoint the best possible service providers and evaluates their service on a regular basis as described on page 29.The Board considers the culture of the Investment M
297、anager and other service providers,including their policies,practices and behaviour,through regular reporting from these stakeholders and in particular during the annual review of the performance and continuing appointment of all service providers.ENVIRONMENTAL,SOCIAL AND GOVERNANCE MATTERSAs an inv
298、estment trust without employees,the Companys own direct environmental impact is minimal and as such,the Company is also not required to report against the TCFD framework.The Company has minimal direct greenhouse gas emissions to report from its operations(2023:minimal),nor does it have responsibilit
299、y for any other emissions producing sources under the Companies Act 2006(Strategic Report and Directors Reports)Regulations 2013 or the Companies(Directors Report)and Limited Liability Partnerships(Energy and Carbon Report)Regulations 2018.Where a large company does not consume more than 40,000 kWh
300、of energy in a reporting period,it qualifies as a low energy user and is exempt from reporting under these regulations.This exemption applies to the Company.As institutional investors,we have a duty to act in the best long-term interests of our beneficiaries.In this fiduciary role,we believe that ES
301、G issues can affect the performance of investment portfolios(to varying degrees across companies,sectors,regions,asset classes and through time).We also recognise that applying these Principles may better align investors with broader objectives of society.Therefore,where consistent with our fiduciar
302、y responsibilities,Asset Value Investors Limited commits to the following:to incorporate ESG issues into investment analysis and decision-making processes;to be an active owner and to incorporate ESG issues into our ownership policies and practices;to seek appropriate disclosure on ESG issues by the
303、 entities in which we invest;to promote acceptance and implementation of the Principles within the investment industry;to work with the PRI Secretariat and other signatories to enhance their effectiveness in implementing the Principles;and to report on our activities and progress towards implementin
304、g the Principles.The Companys operations are delegated to third-party service providers,and the Company has no employees.The Board seeks assurances,at least annually,from its suppliers that they comply with the provisions of the UK Modern Slavery Act 2015 and maintain adequate safeguards in keeping
305、with the provisions of the Bribery Act 2010 and Criminal Finances Act 2017.The Directors do not have service contracts.For the majority of the year,the Board comprised four Directors,two males and two females.However,one Director tendered their resignation at the end of September 2024 and a second D
306、irector tendered their resignation post year end.To facilitate the search for a new Director,the Company engaged the services of an external search consultant,Nurole.At the time of writing this report,the Board had successfully recruited two new Directors.Further information on the Boards policy on
307、diversity and recruitment of new Directors is contained on page 42.Both the Board and AVI recognise that social,human rights,community,governance and environmental issues have an effect on its investee companies.The Board supports AVI in its belief that good corporate governance will help to deliver
308、 sustainable long-term Shareholder value.AVI is an investment management firm that invests on behalf of its clients and its primary duty is to produce returns for its clients.AVI seeks to exercise the rights and responsibilities attached to owning equity securities in line with its investment strate
309、gy.A key component of AVIs investment strategy is to understand and engage with the management of public companies.AVIs Stewardship Policy recognises that Shareholder value can be enhanced and sustained through the good stewardship of executives and boards.It therefore follows that in pursuing Share
310、holder value AVI will implement its investment strategy through proxy voting and active engagement with management and boards.Further details on AVIs environmental,social and governance policy can be found on pages 34 and 35.AVI became a supporter of the Task Force on Climate-related Financial Discl
311、osures(“TCFD”)in May 2021 and a signatory to the UN-supported Principles for Responsible Investment(“PRI”)on 9 April 2021.The PRI is the worlds leading proponent of responsible investment which entails the following commitments,developed by an international group of institutional investors.AVI becam
312、e a signatory to the UN-supported Principles for Responsible Investment(“PRI”)on 9 April 2021.AVI Japan Opportunity Trust plc/Annual Report 202431GFSSISRStrategic Report/Key Performance IndicatorsThe Companys Board meets regularly and at each meeting reviews performance against a number of key measu
313、res.In selecting these measures,the Directors considered the key objectives and expectations of typical investors in an investment trust such as the Company.These indicators are Alternative Performance Measures(“APMs”).NAV Total Return Performance11 Year*:20.9%Since Inception(SI)69.9%8.9%The Directo
314、rs regard the Companys NAV total return as the overall measure of value delivered to Shareholders by the Investment Manager over the long term.Total return reflects both the NAV growth of the Company and also dividends paid to Shareholders.Since the launch on 23 October 2018,the Companys NAV has inc
315、reased by 69.9%,resulting in an annualised return of 8.9%.The Investment Managers investment style is such that performance is likely to deviate materially from that of any broadly based equity index.The Board considers the most useful comparator to be the MSCI Japan Small Cap Index.Since the launch
316、 on 23 October 2018,the benchmark has increased by 23.5%,resulting in an annualised return of 3.5%.For the year ended 31 December 2024,the Companys NAV increased by 20.9%while the MSCI Japan Small Cap Index increased by 6.2%.A full description of performance and the investment portfolio is contained
317、 in the Investment Managers Report,commencing on page 12.Discount/Premium1 Discount,31 December 2024:-2.1%The Board believes that an important driver of an investment trusts discount or premium over the long term is investment performance.However,there can be volatility in the discount or premium.Th
318、erefore,the Board seeks Shareholder approval each year to buy back and issue shares with a view to limiting the volatility of the share price discount or premium.During the period under review,nil new shares were issued under the authorisation granted at the AGM.During the year,425,716 shares were b
319、ought back into treasury under the authorisation granted at the AGM.As at 1 April 2025,the Company had 137,198,943 shares in issue.The Company has a successful discount control policy whereby if,under normal market conditions,the four-month average share price discount to NAV is greater than-5%,the
320、Company will buy back shares with the intention of reducing the discount to a level no greater than-5%.Since IPO,the Company has bought back shares on 12 occasions under this policy.The Board is aware of other investment trusts in The AIC Japanese Smaller Companies Sector.Each investment trust has i
321、ts own focus and strategy,which will differ from the one implemented by AVI.The Companys activist approach aligns with the focus on corporate governance reform taking place in Japan.Ongoing Charges131 December 2024:1.5%The Board continues to be conscious of expenses and aims to maintain a sensible b
322、alance between good service and costs.Each year,the Board reviews in detail the costs incurred and ongoing commercial arrangements with each of the Companys key suppliers.The majority of the ongoing charges ratio is attributed to the fees paid to the Investment Manager.This fee is reviewed annually,
323、and the Board believes that the cost is reasonable,given the Investment Managers activist approach to fund management and the resources required to provide the level of service.The Company adheres to The AIC guidance in calculating its ongoing charges ratio.Going ConcernThe Directors have assessed t
324、he Companys ability to continue as a going concern based on detailed profit and loss and cash flow forecasts,covering the period up to and including 31 December 2025.These forecasts have been“stressed”for inflation,as well as a severe and sudden downturn in market conditions,under which it is assume
325、d that the investment portfolio will lose 45%of its value.Even under this extreme“stress”scenario,the Company has adequate resources to continue in operational existence for the foreseeable future(being a period of at least 12 months from the date these financial statements were approved).The Direct
326、ors also regularly assess the resilience of key third-party service providers,most notably the Investment Manager and Fund Administrator.The Directors do not have any concerns about the financial viability of the Companys third-party service providers.*Returns are for the year to 31 December 2024.1
327、For all Alternative Performance Measures,please refer to the definitions in the Glossary on pages 74 and 75.SI Annualised 1.2%Premium,High for the periodDiscount,Low for the period-6.7%31 December 2023 1.5%Peer Group NAV Performance Total Return AIC Japanese Smaller Companies Sector*(9.6)%Baillie Gi
328、fford Shin Nippon Nippon Active Value 15.2%AVI Japan Opportunity 20.9%Key Performance IndicatorsAVI Japan Opportunity Trust plc/Annual Report 202432Going Concern continuedFurthermore,the Directors are not aware of any material uncertainties that may cast significant doubt upon the Companys ability t
329、o continue as a going concern,having taken into account liquidity of the Companys investment portfolio and the Companys financial position in respect of its cash flows,borrowing facilities and investment commitments(of which there are none of significance)and the Exit Opportunity in October 2025 as
330、discussed in the viability statement below.Therefore,the financial statements have been prepared on a going concern basis.ViabilityThe Directors believe five years to be a reasonable time horizon to consider the continuing viability of the Company,reflecting a balance between a longer-term investmen
331、t horizon and the inherent shorter-term uncertainties within equity.The Company is an investment trust whose portfolio is invested in readily realisable listed securities and with some short-term cash deposits.The five-year time horizon takes into account that the Directors may,at the Boards discret
332、ion,offer Shareholders an opportunity to exit the Company at close to NAV in October 2025 and every year thereafter under a revised policy as announced in October 2024(previously,every two years).In November 2024,the Company announced it would offer Shareholders the opportunity to tender some or all
333、 of their shares for sale.The Company received applications from eligible shareholders to tender an aggregate of 3,637,759 shares,equivalent to 2.58%of the Companys issued share capital at that time.The Board,together with its advisers,intends to canvass opinion from Shareholders in the months leading up to October 2025 when making the decision regarding any potential Exit Opportunity.However,the
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