**Summary of Fidelity Japan Trust PLC Half-Year Report (September 2025)**
**Financial Performance (Six Months Ended June 30, 2025):**
**Net Asset Value (NAV) Total Return** +3.3%, outperforming the TOPIX Total Return Index (+3.2%).
**Ordinary Share Price Total Return** +10.6%, driven by a narrowing discount from 13.1% to 6.9%.
**Key Drivers** Successful stock selection in retail and transportation equipment sectors.
**Strategic Developments**
**Voluntary Liquidation** Subject to shareholder approval, the company will be placed into voluntary liquidation due to prolonged underperformance and the retirement of Portfolio Manager Nicholas Price.
**Shareholder Choice** Shareholders will choose between receiving shares in AVI Japan Opportunities Trust (AJOT) or cash for their holdings.
**AGM Outcome** Only 18.17% of voting shareholders supported the companys continuation at the May 2025 AGM, leading to a strategic review.
**Proposed Combination with AJOT**
**Institutional Shareholder Preference** Over 50% of institutional shareholders favored combining with AJOT, a small-cap focused trust.
**AJOT Performance** Strong historical returns (e.g., +89.7% NAV since inception in 2018) and a focus on undervalued Japanese small-cap companies.
**Discount Management** AJOT offers a 5% discount control mechanism and annual tender offers.
**Portfolio and Operations**
**Gearing Reduction** Gearing decreased from 24.0% to 9.5% by August 2025, reflecting reduced risk and liquidation preparations.
**Unlisted Holdings** 7.1% of assets in unlisted companies as of June 2025, with plans to transfer six holdings to AJOT.
**Moneytree Sale** Sold unlisted holding in Moneytree for £2.96 million, a 47% uplift on June 2025 valuation.
**Market Outlook**
**Positive Sentiment** Increasing foreign and domestic investor participation in Japanese equities, supported by corporate governance reforms and reflationary policies.
**Mid/Small-Cap Opportunity** Undervalued mid and small-cap stocks offer attractive returns, driven by domestic demand and governance improvements.
**Engagement and ESG**
**Active Engagement** Conducted 64 engagement meetings in H1 2025, focusing on long-term strategy, climate change, and diversity.
**ESG Integration** Manager has integrated ESG considerations into investment processes.
**Costs and Post-Balance Sheet Events**
**Transaction Costs** Estimated advisory costs for the liquidation and AJOT combination are £800,000.
**NAV Impact** Moneytree sale would have increased NAV by 0.4% if applied at June 2025.
**Conclusion**
Fidelity Japan Trust PLC is transitioning to liquidation, offering shareholders a choice between AJOT shares or cash. The company’s performance improved in H1 2025, but strategic changes reflect long-term underperformance. AJOT’s strong track record and focus on Japanese small-caps present a compelling alternative for shareholders. The Japanese market’s positive outlook, driven by reflation and governance reforms, supports the investment case for AJOT.