AVI Japan Opportunity Trust : A

Five years of change in Japan

Welcome to our 2023 Annual Report

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

AVI Japan Opportunity Trust plc / Annual Report 2023

NET ASSETS†

£183 million*

LAUNCH DATE

23 October 2018

ANNUALISED RETURN

6.8%*

ONGOING CHARGES RATIO

1.5%*

• For all Alternative Performance Measures, please refer to the definitions in the Glossary on pages 73 and 74.

* As at 31 December 2023.

AN ACTIVE APPROACH TO INVESTING RESPONSIBLY

As an active investor, AVI considers all drivers relevant to each company's success, offering suggestions to enhance sustainable corporate value in consideration of all stakeholders and in the best long-term interest 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.

Read more about our ESG Perspective on pages 32 and 33 of the

Annual Report

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AVI Japan Opportunity Trust plc / Annual Report 2023	SR		01
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KEY STORIES

Five years of change in Japan

Read more on pages 08 and 09 of the Annual Report

Incorporating ESG in our strategy

Read more on pages 32 to 35 of the Annual Report

Focus on small and mid-capbusiness

Portfolio Breakdown by Market Capitalisation

		2023	2022
<£250m	17%	26%
£250m	- £500m	21%	15%
£500m	- £750m	21%	19%
£750m	- £1bn	29%	17%
£1bn - £2.5bn	11%	23%
>£2.5bn	1%	0%

Read more on pages 10 and 11 of the Annual Report

CONTENTS

Strategic Report

1. Company Performance

1. Company Overview

1. Chairman's Statement

1. Our Top 10 Holdings

1. Investment Manager's Report

1. Portfolio Construction
2. Japan Investment Team
3. Investment Portfolio
4. Business Model

1. Stakeholders

1. Key Performance Indicators

1. ESG Policy

1. Our Approach to ESG

1. Principal Risks and Uncertainties

Governance

1. Directors
2. Directors' Report

1. Corporate Governance Statement

1. Directors' Remuneration Report

1. Statement of Directors' Responsibilities in Relation to the Annual Report and Financial Statements
2. Report from the Audit Committee

1. Independent Auditor's Report

Financial Statements

1. Statement of Comprehensive Income
2. Statement of Changes in Equity
3. Balance Sheet
4. Statement of Cash Flows
5. Notes to the Financial Statements

Shareholder Information

1. AIFMD Disclosures
2. Glossary

1. Investing in the Company
2. Company Information

The Company's website 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.

@AVIJapanu/avi-ajot

avi-japan-opportunity-trust

02	AVI Japan Opportunity Trust plc / Annual Report 2023

Strategic Report / Company Performance

Performance Summary

		31 December 2023	31 December 2022
	Net Asset Value*	£182,943,000	£156,395,000
	Net Asset Value per Share (total return) for the year	15.8%	-4.3%
	Share price total return for the year*	14.8%	-4.5%
	Comparator Benchmark
	MSCI Japan Small-Cap Index (£ adjusted total return)	6.9%	-1.0%
	Portfolio Valuation*
	Net Cash as % of Market Cap	35.8%	41.9%
	Net Financial Value as % of Market Cap	49.6%	63.0%
	EV/EBIT	8.7x	6.0x
	FCF Yield	4.4%	6.0%
		Year to 31 December 2023	Year to 31 December 2022
	Earnings and Dividends
	Profit/(loss) before tax	£25.2m	-£6.6m
	Investment income	£4.0m	£3.7m
	Revenue earnings per share	1.76p	1.69p
	Capital earnings per share	15.89p	-6.79p
	Total earnings per share	17.65p	-5.10p
	Ordinary dividends per share	1.70p	1.55p
	Ongoing Charge
	Management, marketing and other expenses
	(as a percentage of average Shareholders' funds)	1.5%	1.5%
	2023 Year's Highs/Lows	High	Low
	Net asset value per share	130.3p	110.1p
		31 December 2023	31 December 2022
	Net asset value per share	130.3p	114.1p
	Share price	127.0p	112.3p
	Discount (difference between share price and net asset value)	2.5%	1.6%

* For all Alternative Performance Measures, please refer to the definitions in the Glossary on pages 73 and 74.

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Net Asset Value, Share Price* and Benchmark

140

120

100

80

60

Oct 18

Apr 19

Oct 19

Apr 20

Oct 20

Apr 21

Oct 21

Apr 22

Oct 22

Apr 23

Oct 23

AVI Japan Opportunity Trust NAV TR

AVI Japan Opportunity Trust Share Price TR

MSCI Japan Small Cap Index (£ adjusted total return)

Premium or Discount to Net Asset Value (%)

15

10

5

0

-5

-10

-15

Oct 18

Apr 19

Oct 19

Apr 20

Oct 20

Apr 21

Oct 21

Apr 22

Oct 22

Apr 23

Oct 23

AVI Japan Opportunity Trust plc

Average Premium: 0.7%

* For all Alternative Performance Measures, please refer to the definitions in the Glossary on pages 73 and 74.

04	AVI Japan Opportunity Trust plc / Annual Report 2023

Strategic Report / Company Overview

Finding compelling opportunities in Japan

OUR PURPOSE

Discovering overlooked and under-researched investment opportunities, utilising shareholder engagement to unlock long-term value.

ABOUT ASSET

VALUE INVESTORS

The 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 companies with resilient and growing earnings, that are overlooked by investors due to non- fundamental factors.

By utilising nearly 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 suggestions on how to grow long-term corporate value and address share price undervaluation.

AVI's 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 progress is not made, AVI will consider sharing its ideas with other shareholders in a public forum.

Capital Structure

As at 31 December 2023, the Company's issued share capital comprised 140,836,702 Ordinary Shares of 1p each, of which 400,000 were held in treasury and therefore the total voting rights attached to Ordinary Shares in issue were 140,436,702. As at 13 March 2024 it comprised 140,836,702 Ordinary Shares, 400,000 of which were held in treasury, and therefore the total voting rights attached to Ordinary Shares in issue were 140,436,702.

COMPANY OBJECTIVES AND STRATEGY

AJOT aims to provide Shareholders 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 significant proportion of their market capitalisation held in cash, listed securities and/or other realisable assets.

AVI seeks to unlock this value through proactive engagement with management and capitalising on the increased focus on corporate governance, balance sheet efficiency, and returns 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 overtime, AVI can be patient in its engagement to unlock value.

Benchmark

The MSCI Japan Small Cap Index.

The Association of Investment Companies ("The AIC")

The Company is a member of The AIC.

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)

Materials	23%
Capital Goods	19%
Health Care Equipment and Services	16%
Software and Services	12%
Consumer Durables and Apparel	10%
Technology Hardware and Equipment	5%
Consumer Discretionary Distribution and Retail	5%
Banks	4%
Transportation	3%
Automobiles and Components	2%
Food, Beverage and Tobacco	1%

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KEY PERFORMANCE INDICATORS ("KPIs")

NAV Performance (2023)		Ongoing Charges (2023)
1 YEAR		31 DECEMBER 2023
15.8%	1.5%
Since Inception ("SI")	40.5%		2022	1.5%
6.8%	SI Annualised

JAPAN ECONOMIC SNAPSHOT

	Japan	Relative to Global
GDP1	$4.2tn	4th largest
Population2	125m	2%
Fortune Global 500 Companies	47	9%

1. Source: International Monetary Fund (2023).
2. World Bank Data (2022, USD).

OUR CORE VALUES

Engaged

Building relationships with companies, actively working together to improve shareholder value.

Concentrated

Our portfolio of 15-25 stocks means we devote ample resources to research and engagement for every investment.

Long-term

A five-year horizon aligns our interests with those of management.

Unique

Discovering overlooked and under researched investment opportunities to unlock long-term value.

Experienced

Investing in the Japanese market for over two decades, with a dedicated team in London and Tokyo.

Managed by AVI. Visit the website at: www.assetvalueinvestors.com

RESPONSIBLE INVESTORS

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 investment's ability to create long-term value, but is also aligned with our values as responsible investors.

Find more about AVI onpage 4 of the

Annual Report

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Annual General Meeting

The Company's Annual General Meeting ("AGM") will be held at 11.30am on Wednesday, 1 May 2024 at the offices of the Association of Investment Companies (the "AIC"), 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 AVI's presentation, will be made available on the Company's website. Please refer to the Notice of AGM for further information and the resolutions which will be proposed at this meeting.

06	AVI Japan Opportunity Trust plc / Annual Report 2023

Strategic Report / Chairman's Statement

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 confident that AJOT can build

on its successful track record of engagement and will continue to deliver attractive returns for investors.

Norman Crighton

Chair

Overview of the Year

On behalf of the Board of Directors ("the Board") I am pleased to present the Annual Report

for 2023 for AVI Japan Opportunity Trust plc. The Company was launched in 2018 to take advantage of the rich opportunity set in Japan, believing that the corporate governance reform agenda first espoused in 2013 had gained critical momentum, and that a sea change was imminent. This was not a consensus view, with Japan considered by most to be a perennially cheap and largely irrelevant market for global investors.

2023 then was a year in which (other) investors' enthusiasm for Japanese equities grew and scepticism waned. The strong economic backdrop, ultra-loose monetary policy, low relative valuations, weak yen, and unabated progress on corporate governance reform drew global attention. Notably, at the start of the year the Tokyo Stock Exchange ("TSE") announced it would require companies to disclose capital efficiency improvement plans, particularly by those trading below 1x book value.

Japanese equity markets were buoyant, with the MSCI Japan returning +28.6% over 2023 (in JPY) and the Nikkei seeing its largest one- year rise since 1989, up +31.0%. This rally, however, was mostly limited to larger cap names, which outperformed their small-cap counterparts by +7.5%.

In this context, it is pleasing to report that your Company ended the year +15.8% in GBP terms, outperforming its official comparator benchmark, the MSCI Japan Small Cap Index, which returned +6.9%. Since its inception, AJOT has delivered returns of +40.5% versus +16.2% for the benchmark. In JPY terms, since inception, returns are significantly higher, at +73.7% vs +43.6% for the benchmark.

Your manager, AVI, has continued constructively engaging with portfolio companies to unlock value. The Board got a first-hand look at their efforts this year, as 2023 marked the first

time that we travelled together to Japan. The enthusiastic response from market participants and investee companies alike to our visit was testament to the high regard in which AVI is held and coupled with the unique benefits of the investment trust structure that your Company enjoys, we are more positive than ever on our future prospects. AVI's investment team builds deep relationships with the management of every portfolio company, holding a great number of meetings with senior executives and board directors. This approach has led to numerous shareholder-friendly measures being introduced across multiple companies without requiring public campaigns which has delivered strong results for our investors.

The preferred approach of private engagement has led to notable successes, with detailed letters or presentations sent to nine portfolio companies over the year. Three portfolio companies were the subject of public engagement, including NC Holdings, where three of our shareholder resolutions were successfully adopted.

Dividend

As 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 0.85p per share in November 2023 and the Board has elected to propose a final dividend of 0.85p per share, bringing total dividends for the year ended 31 December 2023 to 1.70p per share (2022: 1.55p per share).

Investment Strategy

AJOT listed in October 2018 to take advantage of the highly attractive opportunity to invest

in under-valued,over-capitalised Japanese small-cap equities with strong underlying business fundamentals. Active engagement and corporate action are the key to unlocking valuation anomalies and AJOT's track-record has demonstrated the potential absolute and relative returns this approach can deliver.

Over five years since launch, your 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 almost 16%); a marked depreciation of the Japanese Yen which has detracted -33% from GBP returns, and a turbulent global environment encompassing

a pandemic, rapidly rising interest rates and multiple geopolitical events. The Board remains confident that AVI is well placed to continue executing on the strategy and that there are still plenty of mis-priced investment opportunities.

Share Premium and Issuances

As at 31 December 2023, your Company's shares were trading at a discount of -2.5% to NAV per share. The Board monitors the premium/discount and carefully manages it by periodically issuing or buying back shares. During 2023, we employed the Company's authorised block listing facility to increase our shares in issue by 3,375,000 while 985,000 shares were bought back during the period. As of 31 December 2023, 140,436,702 shares were in circulation, a pleasing increase from the 80,000,000 shares at AJOT's launch.

The Directors believe that the performance of the Company since IPO should be attractive to a larger pool of investors and are constantly exploring avenues to grow AJOT.

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Debt Structure and Gearing

As described in the Prospectus, the Board supports the use of gearing to enhance portfolio performance. The Company has in place a ¥2.9 billion debt facility, which was renewed on

2 February 2022 and subsequently extended to

5 April 2024 on the same terms while renewal terms are being agreed. As at 31 December 2023, ¥2.93 billion (£16.3 million) of the facility had been drawn and net gearing stood at 1.6%.

Board Trip to Japan

In September the Board travelled to Japan for its first visit. Meeting with a variety of advisors, market participants, lawyers and the Tokyo Stock Exchange, it provided Directors with a deeper understanding of the opportunity set and of how the Company can be best positioned to benefit. The Board had the opportunity to meet with six portfolio companies, including a laboratory tour and tasting experience at T Hasegawa's R&D facilities outside Tokyo. In Osaka, it was a great privilege when Konishi, your Company's 4th largest position, invited the Board to their historic headquarters built in 1903. This was the first time a foreign company had been invited to the site and it was pleasing to see the depth of the ties AVI has built with the company.

The Board left encouraged with the changes underway in Japan and the evident success of AVI's engagement efforts. Overall, it was a highly fruitful visit, which confirmed that this time really is different in Japan.

Outlook

At the end of November, news broke that Toyota Motors - one of Japan's last holdouts to reform its balance sheet - will partially unwind its cross shareholding in parts maker Denso. In December, the TSE announced that it will add further pressure by calling on 1,000 plus companies that have parent-subsidiary relationships or that have listed or equity affiliates to increase disclosure around their rationale for having listed subsidiaries and their efforts to ensure their independence. Just after the end of the year in January, the TSE then released the names of 1,115 companies that disclosed information regarding actions to implement policies conscious of cost of capital and share price, shaming the 2,160 that did not.

The mounting pressure for corporate reform will not subside in 2024. AJOT's focus on finding attractively valued, 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 confident that AJOT can build on its successful track record of engagement and will continue to deliver attractive returns for investors. The portfolio as at the year end had 49% of its market cap covered by net cash and investment securities and traded at an 8.7x EV/EBIT multiple.

In the coming weeks I shall 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 always, please feel free to reach out to me directly ([e-mail]) or contact our broker, Singer Capital Markets, to arrange a meeting.

Norman Crighton

Chairman

13 March 2024

08	AVI Japan Opportunity Trust plc / Annual Report 2023

Strategic Report / Case Study

Five years of change in Japan

WHAT HAS HAPPENED

IN FIVE YEARS?

It has been five years since we launched the AVI Japan Opportunity Trust ("AJOT"). In Japan, five years is the blink of an eye, Japanese companies tend to think in decades or generations. However, a lot has happened in five years.

In 2012, Shinzo Abe's economic legacy, known as Abenomics, marked the start of corporate reform in Japan. The first two arrows - monetary policy and increased government spending, were quick to implement while early signs of the third - economic structural reform - were starting to emerge. At AVI, it seemed the right time to seize the opportunity in Japan.

1.

Governmental and regulatory bodies pressed ahead with reform measures, encouraging shareholder engagement.

2.

Increase in the quantum and success of shareholder activism.

3.

Changing corporate governance environment prompted increased interest from private equity investors in Japan.

4.

Severe economic shock following COVID-19 highlighted the advantage of investing in resilient companies.

5.

Improvement in management awareness of shareholders.

Visit the website at: www.assetvalueinvestors.com/insight/ five-years-of-change-in-japan/