Finding compelling
opportunities in Japan

Overview

Key facts

Total assets:
£200.9m
Launch Date:
23 October 2018

Annualised Return:
6.7%*
Ongoing charges ratio:
1.50%**

* As of 31/05/2024
** Ongoing charges as of 31 December 2022

Key Statistics

Share price:
133.5 p
Premium(+) / discount(-):
-2.1%

NAV:
136.4 p / share
Dividend Yield:
1.3%
As of 24/06/2024, Currency: Pound Sterling

About the Trust

What is AVI Japan Opportunity Trust?

AVI Japan Opportunity Trust (“A JOT” or “the Company”) invests in a focussed portfolio of over-capitalised small-cap Japanese equities. Asset Value Investors will leverage its three decades of experience investing in asset-backed companies to engage with company management and help to unlock value in this under-researched area of the market.

  • AJOT NAV TR
  • AJOT Price TR
  • MSCI Japan Small Cap TR
Rising Star Award 2022
Daniel Lee
AJOT, AVI
Japanese Equities
AJOT
Japan Equity – Active
AJOT

Sector Breakdown (% of Portfolio)

Label 31/05/2024
Consumer Discretionary 23
Industrials 19
Materials 18
Health Care 19
Information Technology 11
Financials 5
Real Estate 3
Communication Services 2
  • 29 February 2024
  • 31 May 2024

Asset Value Investors (“AVI”) investment process for AJOT emphasizes bottom up fundamental research, using both quantitative and qualitative techniques.

Screening of the Universe

AVI’s screening process starts by looking at the c.3,475 non-financial companies in Japan. This is then narrowed down to the c.2,180 companies with an average daily trading volume greater than £300k. We then take a closer look at the c.470 companies that have net cash and securities greater than 30% of their market cap.  We have detailed models on approximately 60 companies out of this universe, which track stock prices and earnings information.

Filtering

Throughout the filtering process AVI asks the following questions:

  • Is it a high quality company with a growing operating business
  • Are we comfortable with the NAV
  • Do we like the valuations
  • Do we want to own the underlying businesses
  • Does the business have a strong balance sheet
  • Is the company highly cash generative

Portfolio Monitoring

Research

AVI’s analysts track stock prices, earnings and balance sheet information with an aim to identify good quality companies trading on a discount to their NAV which exhibit clear trends to create long-term value.

Research includes:

  • In-depth analysis of company annual reports and filings
  • Consulting with industry contacts and brokers
  • Bottom-up analysis of a company’s fundamentals, management and industry trends
  • Specific focus on identifying the catalyst which will reduce the discount and unlock value
  • Regular meetings with top level management

Sizing

We want to have a reasonably concentrated portfolio (typically 15-25 core holdings) of our best ideas.

Portfolio Construction

The objective of AVI’s portfolio construction process is to end up with a concentrated portfolio of about 15-25 core holdings, facilitating a clear monitoring process of the entire portfolio. AVI picks stocks that meet our investment criteria and once we decide to invest we seek a minimum position size of approximately 2% of the portfolio; however, the timing of the catalyst and the liquidity of the stock can result in the holding being greater or lesser than 2%.

The investment philosophy employed by Asset Value Investors (“AVI”), the managers of AVI Japan Opportunity Trust (“AJOT”), strives to identify valuation anomalies and focuses on investing where the market price does not reflect the estimated intrinsic value.

We look for:

  • Discounts To Underlying Value
    We seek to find anomalous valuations and to invest in companies and funds trading on a discount to their net asset value
  • The Purchase Of Assets That Are Of High Intrinsic Quality
    Identifying good quality underlying asset with appreciation potential at compelling values
  • Economic Value
    The underlying assets must be seen to offer appreciation/growth potential which could be based on a number of events or catalysts including potential corporate activity or a turn in market sentiment towards a company etc

Asset Value Investors (“AVI”) deep value investment process strives to identify and mitigate downside risks in all market environments.

We seek to construct a discounted portfolio of stocks consisting of companies which due to the geographic and sector diversification of their underlying assets are less likely to display high correlations to the market.

AVI’s risk management techniques include thorough qualitative fundamental bottom up research to establish a company’s real value. We monitor our holdings on an on-going basis and our in-house OMS system contains an automatic alert system which alerts us of any breaches of built-in risk parameters.

The investment management team holds regular meetings discussing the portfolio with a view to reassess, sell or buy securities and to discuss current cash position as well as sector weighting.

Exclusion list

Exclusionary screening is not our guiding framework, however there are certain exceptions to this. AVI will not invest in a company with direct involvement* in:

  • Tobacco
  • Controversial Weapons
  • Pornography

Or companies that engage in child labour or human exploitation as defined by the relevant ILO conventions.

* whereby more than 5% of that company’s NAV is derived from these activities.

ESG risks and opportunities

As part of our in-depth research into companies, we consider and discuss material ESG risks and opportunities, including climate-related risks and opportunities. Supported by ISS Norms-based research, we also assess any involvement in actual or potential violations of international norms and standards.

Bespoke ESG monitoring system

We have developed a bespoke ESG monitoring system built into our proprietary database to ensure ESG factors are considered alongside financial analysis. We conduct ongoing ESG assessments of portfolio companies’ performance against defined ESG metrics. A scoring system is used to assess trends and highlight potential areas for engagement.

Tailored questionnaires

Based on our assessments, we send tailored questionnaires to all portfolio companies to request additional ESG information and promote improved sustainability disclosure. This can provide a useful starting point for deeper engagement on ESG issues.

Ongoing controversy monitoring

Controversies can bring major reputational damage and a loss of consumer trust which can have a significant effect on a company’s value. We promote responsible conduct by actively engaging and encouraging our companies to strengthen their focus on ESG issues.

Constructive engagement

We seek to build constructive relationships with the boards and management of our portfolio companies, offering detailed suggestions to sustainably increase corporate value by building resilience to ESG risks and promoting responsible business practices.

 

Investor Information

Monthly Newsletter

Report Talk

Responsible Investing

We are fundamentally committed to supporting long-term sustainable businesses that will grow and participate in the prosperity of the economy with a responsible approach to the environment, society, and governance.

Engagement is core to our strategy. We aim to be constructive partners and build strong relationships with the boards and management of portfolio companies. Through active engagement, we seek to drive real, meaningful change for the long-term benefit of the company, its stakeholders and our clients.

16 Jan, 2023

E – DTS formally commits to having its environmental targets validated through the Science Based Targets Initiative (SBTi)

31 Oct, 2022

E,S,G – NS Solutions publishes its first Integrated Report

12 Oct, 2022

E – TSI Holdings commits to setting a science-based target through SBT Initiative

AVI has developed a proprietary ESG monitoring system that allows us to track the extent to which our portfolio companies are effectively managing ESG issues and their progress against defined ESG metrics. This process helps to highlight trends and identify weaknesses where we can engage constructively with companies to build resilience to ESG risks and promote responsible business practices.


AVI became a signatory to the UN-supported Principles for Responsible Investment (PRI) on 09 April 2021.

We are aligned with the PRI’s belief that an economically efficient, sustainable global financial system is a necessity for long-term value creation. Such a system will reward long-term, responsible investment and benefit the environment and society as a whole.

View AVI’s Full ESG Policy

View AVI’s Stewardship & Voting Policy

We consider proxy voting to be an important lever in engaging with our portfolio companies and ensuring that our perspectives on environmental, social and governance issues are represented.

As responsible, active stewards of our clients’ capital, we have a duty to vote carefully and thoughtfully on their behalf, and we take this duty seriously. We aim to vote at every general meeting for which we are eligible.

AJOT 2023 Proxy Voting Record

AJOT 2022 Proxy Voting Record

ESG & Sustainability at AVI

As part of our responsible investing initiative, we have compiled a new report detailing our approach to ESG and sustainability at AVI.

To read the full report, please click the button below.

Investing in the Trust

Investment Platforms

Intermediaries participating in the Initial Issue as announced on 3 March 2020 include:

What are investment companies

  • An investment trust is a public listed company. It’s designed to generate profits for its shareholders by investing in the shares of other companies.
  • Shares in investment trusts are traded on the London Stock Exchange.
  • Investment trusts are closed-ended which means they have a fixed number of shares. The investment manager can invest and sell assets when they feel the time is right, not when investors join and leave a fund.
  • Gearing – investment trusts can borrow money to take advantage of investment opportunities. Gearing can increase the returns for shareholders, but if assets fall there is also an increase in potential losses. Not all investment companies use gearing and AVI Japan Opportunity Trust plc (“AJOT”) may utilise gearing at moderate levels.
  • Independent board. Every investment trust has an independent board of directors who are there to provide overall governance and who are responsible to set the dividends paid, ensure the investment manager is adhering to their remit and generally for the safeguarding of shareholders’ interests.
  • Investment management company. The independent board chooses a professional fund manager to run the investment trust’s portfolio. Asset Value Investors (“AVI”) have been the investment manager for AJOT since launch (October 2018), providing their skill and expertise to help maximise the investment trust’s investments and achieve long-term outperformance.
  • When an investor buys shares in an investment trust they become a shareholder. Shareholders have voting rights on issues such as appointment of directors and changes to the investment policy. Annual general meetings are held to which all shareholders are invited and where questions and issues are addressed.

Discounts and Premiums

There are two ways that the value of a share in an investment trust is often expressed:

  • The share price which is the price at which investors buy and sell shares on the stock exchange.
  • The net asset value per share (NAV). The NAV of a share is the value of all of the investment company’s assets less any liabilities, divided by the number of shares. Shares of an investment trust are traded on the London Stock Exchange and the share price may be higher (at a “premium”) or lower (at a “discount”) than the NAV

It’s the role of the asset management company, AVI ,appointed by AJOT to plan, manage the assets and oversee the investments on behalf of investment trust.

What’s the advantage of investment trusts?

  • It allows you to ‘pool’ your money with others’, giving you access to stock market returns on a much larger scale than you might be able to achieve on your own
  • It spreads your risk; investment trusts own a range of shares, so you’re not tied to the fortunes of just one or two companies
  • You get the benefit of having your investment overseen by professional asset managers with many years’ experience
  • You can enjoy stock market returns from a relatively small investment
  • Compelling opportunity – Japanese Cash-Rich Companies.
    AJOT invests in a wide range of cash-rich and over-capitalised companies in an under-researched and inefficient universe of Japanese companies. For AJOT’s current portfolio breakdown please see our latest newsletter.
  • Active investment management.
    AJOT’s investment managers, Asset Value Investors (“AVI”) promote corporate governance reform and shareholder activism to unlock long trapped value in the portfolio companies.
  • Rigorous discount controls.
    AJOT has authorisation to buy back 15% of shares annually, to be renewed multiple times within each year if necessary.  Buybacks are activated if the discount exceeds 5%.  There is a realisation opportunity to exit all or part of the shareholding at close to NAV four years after launch, and every two years therafter.
  • The closed-ended structure of the investment trust means that whenever you want to buy or sell you can simply do so on the stock market without it having any impact on the underlying portfolio. With an open-ended fund subscriptions and redemptions have an immediate effect on how the manager has to manage the portfolio to meet these requests.
  • Shares are bought and sold on the stock market which can be done directly through a stockbroker or also on a number of platforms.

How Are Investment Trusts Regulated?

They are quoted companies listed on the London Stock Exchange with Boards of Directors; they are subject to the listing rules of the UK Listing Authority established under the Financial Services and Markets Act. ‘Investment Trusts’ are also subject to the Companies Act 1985, as amended. The conduct of investment managers in promoting packaged products (‘ISA’, Share Plans) with underlying investment trust investments are regulated by the FCA.

What Does Gearing Mean?

Investment trusts can borrow money and invest the proceeds. This will magnify returns to investors in a rising market (and vice versa in falling markets). This is known as financial gearing. Typically the ‘gearing’ is described as a ratio (of borrowing to assets) – a gearing factor of 120 means that on a trust with equity of £100 million it has £20 million of debt (bank borrowings).

How Many Investments Are Held Within An Investment Trust Portfolio And How Are They Managed?

Typically anything from 50 to 100 shares. The ‘Fund Manager’ must have regard to the objective of the trust. To that end the underlying stocks are bought or sold to deliver either capital growth or income. Within those portfolios the managers will assess the stocks on a regular basis to ensure that they will deliver the objective, hopefully selling in advance of profit warnings or any other adverse market change that could impact on either the ability to deliver income or capital appreciation. Sometimes that can’t be achieved; that’s why ‘investment trusts’ have a spread of investments.

What Is The Spread For An Investment Trust And Who Actually Sets This, Also What Is The Standard Spread? And Does This Spread Include The Government Stamp Duty Or Not?

The spread is set by the marketmakers. There is no standard spread, it depends on the ‘liquidity’ of a particular stock. It does not include stamp duty which is a tax at 0.5% of the value of all share purchases.

The Yields As Quoted In The Financial Times, Which Are The Standard Quoted On Advertisements, How Do They Actually Calculate Them?

The dividend yield is the last 12 months dividends (historic) divided by the share price.

Is The Discount/ Premium Of A Share Calculated On The Shares, Mid Price/Bid Price/ Or Offer Price?

All are calculated with reference to the previous closing mid price.

What Service Does The Company Secretary Perform For An Investment Trust?

The company secretary has the responsibility for co-ordinating all aspects of the investment trust to ensure that it complies with its legal and financial reporting including any circulars etc., report and accounts, interim reports; convening board meetings, minutes and follow up there from, as well as liaison with the Board and external advisers.

What Service Does The Board Of Directors For A Trust Perform?

The Board is responsible to shareholders; it oversees the external relationships, principally the fund management relationship, to ensure that the trust’s objective is met.

What Role Do The Registrars Perform?

Under the Companies Act all public companies must maintain a register of their shareholders to record title to the security; to determine entitlement to dividends or capital distributions.

Please choose:
Disclaimer

IMPORTANT INFORMATION

USE OF THIS WEBSITE:

THIS WEBSITE IS NOT INTENDED TO OFFER OR TO PROMOTE THE OFFER OR SALE OF THE SHARES (THE “SHARES”) OF AVI JAPAN OPPORTUNITY TRUST PLC (THE “COMPANY”) IN THE UNITED STATES OR TO ANY “U.S. PERSONS” AS DEFINED IN REGULATION S (“US PERSONS”) UNDER THE US SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”).

THE MATERIALS CONTAINED HEREIN ARE NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, AND MUST NOT BE MADE AVAILABLE, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, TO US PERSONS OR INTO OR WITHIN THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA OR IN ANY OTHER JURISDICTION WHERE, OR TO ANY OTHER PERSON TO WHOM, TO DO SO WOULD CONSTITUTE A VIOLATION OF APPLICABLE LAW OR REGULATION.

The contents of this website are communicated by Asset Value Investors Limited (“AVI”), which is authorised and regulated by the UK Financial Conduct Authority, with registered number 01881101 and which has its registered office at 2 Cavendish Square, London W1G 0PU, United Kingdom.

The information contained in this website does not constitute or form a part of any offer to sell or issue, or the solicitation of any offer to purchase, subscribe for or otherwise acquire, any securities in the United States or in any jurisdiction in which, or to any person to whom, such an offer or solicitation would be unlawful.

Nothing in this website is to be taken as investment or tax advice.  If you are unclear about any of the information on this website or its suitability for you, you must contact your financial or tax adviser, or an independent financial or tax adviser before making any investment or financial decisions.

The Company has not been and will not be registered under the US Investment Company Act of 1940, as amended (the “Investment Company Act“), and as such holders of the Shares are not and will not be entitled to the benefits of the Investment Company Act. The Shares have not been and will not be registered under the Securities Act, or with any securities regulatory authority of any state or other jurisdiction of the United States, and may not be offered, sold, resold, pledged, delivered, assigned or otherwise transferred, directly or indirectly, into or within the United States or to, or for the account or benefit of, any US Persons. There has been and will be no public offer of the Shares in the United States. The offer and sale of the Shares have not been and will not be registered under the applicable securities laws of Australia, Canada, Japan or South Africa. Potential users of the information contained  in this website are requested to inform themselves about and to observe all applicable restrictions.

General risk warning:  All investment is subject to risk. The value of the Shares may go down as well as go up. Past performance is no guarantee of future returns and there is no guarantee that the market price of the Shares will fully reflect their underlying net asset value. There is also no guarantee that the Company’s investment objective will be achieved.

The information contained in this website may contain forward-looking statements. Any statement other than a statement of historical fact is a forward-looking statement. Actual results may differ materially from those expressed or implied by any forward-looking statement.  You should not place undue reliance on any forward-looking statement.

Neither the Company nor AVI undertakes any obligation to update or revise any information in this website, including without limitation, any forward-looking statements, whether as a result of new information, future events or otherwise, and neither the Company nor AVI will confirm the accuracy or completeness of any information at any given time.

This website may contain links to third party websites. These links are provided for your information and convenience only, and do not amount to a recommendation or endorsement by the Company or AVI of that third party or its website. Neither the Company nor AVI has any control over the content of any third party website and neither the Company nor AVI has verified the accuracy of any content on any third party website. Accordingly, neither the Company nor AVI is liable for the content or availability (or lack of availability) of such third party websites.

This website is provided for your use “as is” without any warranties (whether express or implied) of any kind including, but not limited to, the warranty of non-infringement of third party rights or freedom from computer virus. As a result, neither the Company nor AVI accepts any ongoing obligation or responsibility in respect of any errors, omissions, interruptions or delays in service which may occur. Internet is not a secure medium of communication unless the data being sent is encrypted. Neither the Company nor AVI accepts any responsibility for unauthorised access by a third party or the corruption of data sent to it.

By continuing to use this website, you agree to the exclusion by the Company and AVI, to the extent permitted by applicable law and regulation, of any and all liability for any direct, indirect, punitive, consequential, incidental, special or other damages, or any loss of profits, revenue or data arising out of or relating to your use of and our provision of this website and its content. The Company may change these terms and conditions from time to time and any such changes will be posted on this website. Your access to this website is governed by the version of these terms and conditions then in force.

By clicking “Agree” below, you represent, warrant, undertake and agree that (1) you have read, understood and agree to be bound by the terms and conditions and other information set out herein, (2) you are permitted under applicable laws and regulations to receive the information contained in this website, (3) you are located outside the United States and are not a US Person, and (4) you will not transmit or otherwise send any information contained in this website to any persons in the United States or who are US Persons or to any publications with a general circulation in the United States. If you cannot so represent, warrant, undertake and agree, you must click the button labelled “Decline” or otherwise exit this website.