Half-year Report

25 November 2021

Aberdeen Japan Investment Trust PLC (the "Company")

Legal Entity Identifier (LEI): 5493007LN4380BLNLM64

HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2021

INVESTMENT OBJECTIVE

The Company's objective is to achieve long-term capital growth principally through investment in listed Japanese companies which are believed by the Investment Manager to have above average prospects for growth.

CHAIRMAN'S STATEMENT

Performance

The six month period was overshadowed initially by concern in Japan over rising COVID 19 infection rates combined with a slow roll out of the vaccination programme. Prime Minister Suga's announcement that he would not run in the autumn election was welcomed by the market.

Against this extraordinary backdrop your Company's net asset value total return for the six month period to 30 September 2021 was 10.1%, outperforming the Topix benchmark's 6.4%total return.

Your Company's strategy of selecting well-run businesses with management that can adapt to the challenges of changing market conditions once again stood us in good stead. Portfolio companies with good pricing power and operational flexibility have seen improved corporate results. The approach to long-term, active investment and engagement continues to bear fruit. Further details can be found in the Investment Manager's Review.

The Company's longer-term relative performance remains strong, with NAV returns of 32.8% and 63.5% over 3 and 5 years, respectively, compared with benchmark returns of 18.0%and 50.2%.

The Company's Ordinary share price ended the period at 805.0p, up 77.5p on 31 March 2021. The total return for the period was 12.1% with dividends reinvested and the discount to NAV per Ordinary share narrowed from 9.9% to 8.4% as at 30 September 2021.

Dividend

Good performance combined with a regular, sustainable semi-annual dividend should allow the Company to broaden its shareholder base and help to maintain the share price discount to NAV at reasonable levels. The Board continues to make use of the benefits of the investment trust structure to allow the Company to support the enhanced dividend policy.

A final dividend of 9.0p per Ordinary share in respect of the year ended 31 March 2021 was paid to shareholders on 23 July 2021, making a total dividend for the year of 15.0p (2020 - 15.0p). Revenue return per Ordinary share over the six month period to 30 September 2021 rose to 3.42p (2020 - 2.65p). The Board has declared an interim dividend of 6.0p for the year ending 31 March 2022 (2021 - 6.0p) which will be paid to shareholders on 30 December 2021. The record date is 3 December 2021.

Gearing

The Company has a Yen 1.3 billion fixed term facility and a Yen 1.0 billion floating rate facility with ING Bank. The Board considers a gearing level of around 10% to be appropriate, although, with stock market fluctuations, this may range between 5-15%. Net gearing as at 30 September 2021 was 9.5% (31 March 2021 - 10.0%).

The Board believes that the potential to gear the portfolio at the right time is one of the great advantages of the closed ended company structure, with the sensible use of modest financial gearing seeking to enhance returns to shareholders. The Company's gearing options will be considered by the Board prior to the maturity of the current loan facility on 21 January 2022.

Environmental, Social & Corporate Governance ('ESG') 

Corporate Japan is changing its approach, embracing the principles of ESG. This development, particularly on the corporate governance front, has accelerated throughout the review period. Your Investment Manager has played an active role in effecting some of these changes.

Over the period, the portfolio's holdings have continued to register improvements, including greater transparency in terms of disclosure. Encouragingly, companies are more willing to engage with investors, and the composition of boards is growing more inclusive and diverse. Overall, these developments foster a change in attitude, with management more mindful of helping to not only preserve, but also enhance, shareholder value, both in their day-to-day decisions and at more strategic policymaking levels. Your Investment Manager has been working with several companies to encourage them to track their key indicators, such as carbon emissions, supply chain management, carbon intensity and health and safety, and to disclose these regularly. Meticulously tracking and then publishing these numbers will not only help companies provide an objective track record that will result in improved ESG standards, but also keep them accountable in sticking to the targets that they have set for themselves. Japanese companies have an added advantage, in that they possess the technology and leading-edge materials that will help them attain these ESG-related goals.

I have drawn on two examples of engagement with companies in our portfolio to illustrate just how important this has become. First, machinery components supplier Misumi revealed that it has an internal environmental sustainability goal which is not publicly disclosed. Misumi management admitted that there was a need to review and update the goal-setting process to be more in line with current social trends, as well as to revise its disclosure policy under Japan's new Corporate Governance Code, which takes the Task Force on Climate-Related Financial Disclosures' guidelines into consideration. Misumi has clear frameworks and guidelines for managing environmental risk. The chairman oversees climate risk issues and is considering the future incorporation of carbon neutrality targets into key performance metrics, while the use of renewable energy and plans for carbon dioxide emissions will be included as business management indicators at production sites. The company expects the introduction of solar power generation at three factories in Japan to help lower carbon dioxide emissions meaningfully.

Insurance company Tokio Marine Holdings announced a second share buyback this year in September. While the company is no stranger to buybacks, it had upset the market earlier in the year with the announcement of a new and unclear capital policy for excess capital, despite Tokio Marine's share price trading at attractive levels. The company's management were persuadedto change course after conversations with investors, including abrdn.

Discounts and Share Buybacks

The Board regularly monitors the discount level of the Company's shares in relation to the NAV. There is a mechanism in place to buy back shares at appropriate levels when to do so will add value for shareholders. During the six-month period, 247,156 shares (2020 - 241,746) were bought back into treasury at a cost of £1.77 million (representing 1.9% of the issued ordinary shares at 30 September 2021). Since the period end, a further 94,864 shares have been repurchased.

Outlook

The Board remains optimistic about the future for Japanese equities. We expect political continuity under the new Prime Minister Fumio Kishida. Covid-19 continues to loom over Japan and the rest of the world, vaccination rates are increasing, and infection and death rates are falling.

Global risks such as rising inflation rates, slowing Chinese growth and a US withdrawal of support for bond markets may impact Japanese companies. While these factors could yet pose problems for corporate Japan and beyond, the higher-quality businesses run by tried-and-tested management teams, such as those held by the Company, are well positioned to navigate these times of uncertainty.

The Company's portfolio of investments, with healthy balance sheets and ample free cash flow, puts it in a strong position. A solid fundamental base, coupled with management teams' experience in navigating Covid-19 and previous crises, should allow these companies to continue their strong recovery and progress. Many of our holdings have built dominant positions in their own fields and will continue to thrive regardless of external pressures faced.

The Board has every confidence in your Tokyo-based Manager's consistent approach. The process of seeking out the best companies - whether small, mid or large capitalisation stocks - through stringent screening and regular meetings with senior management will ensure the long-term growth prospects of the underlying investments in your Company's portfolio. The Investment Manager's ESG focus, which is core to the investment process, should also help to ensure effective engagement at all levels as better and more sustainable practices are encouraged and thus hopefully better share price ratings in recognition of their efforts.

Karen Brade,

Chairman24 November 2021

INTERIM BOARD REPORT - OTHER MATTERS

Principal Risks and Uncertainties

The Board has in place a robust process to identify, assess and monitor the principal risks and uncertainties facing the Company and to identify and evaluate newly emerging risks. The Company's risks are regularly assessed by the Audit Committee and managed by the Board through the adoption of a risk matrix which identifies the key risks for the Company, including emerging risks, and covers strategy, investment management, operations, shareholders, regulatory and financial obligations and third party service providers. The Company's risks are regularly monitored at Board meetings and the Board believes that the Company is well prepared to mitigate short term operational risks through the internal controls of the Manager and Depositary. Analysis and mitigation of other longer term and more strategic risks are managed by the Board.

The principal risks and uncertainties facing the Company have been identified as follows:

· Market, economic and political risk

· Investment strategy risk

· Investment management risk

· Operational risk

· Regulatory risk

· Share price and discount risk

· Leverage risk

· Pandemic risk

Further details of these risks are provided on pages 14 to 16 of the 2021 Annual Report and Accounts which is available on the Company's website: aberdeenjapan.co.uk.

In addition to these risks, there are also a large number of international political and economic uncertainties which could have an impact on the performance of global markets. The outbreak of the COVID-19 virus resulted in business disruption and stockmarket volatility across the world. The impact of the virus, including its longer term combined consequences, remains uncertain for both the underlying operating and economic environment. The Investment Manager undertook a detailed review of the investee companies in the Company's portfolio to assess the impact of COVID-19 on their operations, such as employee absence, reduced demand, reduced turnover and supply chain breakdowns; and it continued to review the composition of the Company's portfolio. The business continuity procedures and contingency arrangements implemented by the Manager (and its third party service providers) to ensure that it is able to service their clients, including investment trusts, have proven effective.

The Board will continue to monitor developments as they occur.

In all other respects, the Company's principal risks and uncertainties have not changed materially since the publication of the 2021 Annual Report and Accounts.

Related Party Transactions

Any related party transactions during the period are disclosed in the Notes to the Financial Statements. There have been no related party transactions that have had a material effect on the financial position of the Company during the period.

Going Concern

In accordance with the Financial Reporting Council's Guidance on Risk Management, Internal Control and Related Financial and Business Reporting, the Directors have undertaken a rigorous review and consider that there are no material uncertainties and that the adoption of the going concern basis of accounting is appropriate.

The Company's assets consist of equity shares in companies listed on the Tokyo Stock Exchange and in most circumstances are realisable within a short timescale.

The Company has a fixed term loan facility of JPY 1.3 billion and a revolving loan facility of JPY 1.0 billion in place until January 2022. The Board has set limits for borrowing and regularly reviews the Company's gearing levels and its compliance with bank covenants. Initial discussions with banks have commenced with a view to renewing the facility.

The Board has a reasonable expectation that the Company has adequate financial resources to continue its operational existence for the foreseeable future and the ability to meet all its liabilities and ongoing expenses from its assets. Given that the Company's portfolio comprises "Level One" assets (listed on a recognisable exchange and realisable within a short timescale), and the Company's relatively low level of gearing, the Directors believe that adopting a going concern basis of accounting remains appropriate.

Accordingly, the Board continues to adopt the going concern basis in preparing the financial statements.

Directors' Responsibility Statement

The Directors are responsible for preparing the Half Yearly Financial Report in accordance with applicable laws and regulations. The Directors confirm that to the best of their knowledge:

· the condensed set of Financial Statements has been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting);

· the Half Yearly Financial Report includes a fair review of the information required by rule 4.2.7R of the Disclosure and Transparency Rules (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of Financial Statements and a description of the principal risks and uncertainties for the remaining six months of the financial year); and

· the Half Yearly Financial Report includes a fair review of the information required by 4.2.8R (being related party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could do so).

The Half Yearly Financial Report for the six months ended 30 September 2021 comprises the Interim Board Report, which consists of the Chairman's Statement, Investment Manager's Review and Other Matters (including the Directors' Responsibility Statement), and the condensed set of Financial Statements.

Karen Brade,

Chairman24 November 2021

INVESTMENT MANAGER'S REVIEW

Overview

The Japanese equity market rose over the six months to 30 September 2021. The period was characterised by a strengthening economy and, later, a new government. While Covid-19 remained a threat throughout the period, we ended the half year optimistically.

Early in the period, the Japanese government declared an emergency lockdown in Tokyo and other economic hubs. The coronavirus infection rate undulated through the period, peaking in April, then falling back in June before rising again over the summer. Led by the more infectious 'Delta' variant, cases spiked in August, after the end of the 2020 Summer Olympics, peaking at around 26,000 cases per day. However, this declined sharply, to less than 2,000 cases at the end of September. The state of emergency and quasi-state of emergency were finally lifted in all regions at the end of September, for the first time since April. After a slow start, the proportion of the Japanese population having received two doses of a vaccine reached 60% at theend of September.

On the political front, the Liberal Democratic Party's (LDP) popularity suffered over the summer months. Former Prime Minister Yoshihide Suga was criticised for his handling of the Covid-19 pandemic. Fumio Kishida won the leadership race of the LDP to become Japan's new prime minister on 4 October 2021. The former foreign minister ran against the popular vaccinations minister, Taro Kono, in the run-off vote, having beaten the two female candidates in the first round.

On the economic front, Japan avoided a recession in the second quarter. A rebound in consumer spending defied virus restrictions, while renewed investments by businesses and increased government spending also allowed for an annualised GDP growth rate of 1.9%. Japanese firms boosted investments for a second straight quarter, a sign that companies are looking past the Covid-19 crisis. Private consumption rose 0.9% quarter-on-quarter, overshooting economists' expectations of flat numbers. The Bank of Japan ("BoJ") kept interest rates unchanged throughout the period.

In general, corporate results have been positive. Quarterly reporting has reaffirmed our view that fundamentals remain firm at our holdings. While sustained geopolitical tensions and supply shortage issues hampered a number of industries, our holdings fared well, thanks to their pricing power, ability to procure components and flexibility in adjusting production. Several of our holdings have raised forecasts on the back of firm results and rising confidence.

With this backdrop, we have been busy taking stock of the new trends, assessing how they might affect the portfolio's underlying holdings and evaluating what sorts of opportunities lie ahead. We lay this out in greater detail in the section below.

Portfolio review

We are pleased to report that the portfolio returned 9.8% in sterling terms during the six-month period under review, outperforming the benchmark's return of 6.4%. On a sterling total return basis, the Company's NAV rose by 10.1% and the share price rose by 12.1%.

The ongoing pandemic has had far-reaching effects on all businesses. In this environment, the Company's focus on well-run companies, which adapted quickly to changes in the market and which continue to find ways to create value, contributed to outperformance. Importantly, we have observed increasingly positive trends in ESG initiatives across most of our holdings. These are borne out of conversations and ideas seeded over time, and we do not expect this momentum to slow. The discussions we have had with the portfolio companies include proposals to raise disclosure standards on their initiatives, to create frameworks for better assessment of risk, and to improve returns and promote more comprehensive restructuring.

In terms of individual stock performance, the holding in precision machinery parts distributor Misumi Group benefited us, as the company continued to report better-than-expected results. In addition to a recovery in the demand cycle, company-wide efforts to optimise prices and eliminate unprofitable products are starting to generate returns. Industrial gas company Nippon Sanso rose on the back of a broad-based recovery in demand as industrial activity resumed in the US, Japan and Europe. Investors also welcomed the company's hydrogen-related initiatives to contribute to decarbonisation. The online marketing company ValueCommerce has delivered a series of healthy results, supported by sustained demand for its marketing solutions from vendors on the Yahoo Shopping platform.

The gains from these companies were partially offset by some weaker performers, but we remain confident in the longer-term prospects for these businesses, which are underpinned by resilient balance sheets. Factory automation components provider Nabtesco declined on concerns over a weaker outlook for hydraulic equipment used in construction machinery. However, with the firm's global market share in the oligopolistic market of reduction gears, and with automation needs in factories structurally rising, we remain positive about the company's long-term prospects. Edulab, the computer-based testing provider, delayed releasing June quarter-end results after their auditor raised questions around the reporting of certain transactions. The committee set up to investigate later disclosed further questionable accounting practices around sales recognition, and we opted to sell out of this position due to the perceived governance risk. Finally, automotive headlamp manufacturer Stanley Electric underperformed on weak results due to supply chain issues and expectations that a ramp-up in production will weigh on future profitability.

In portfolio activity we sold several positions in favour of more attractive opportunities elsewhere. Early in the period, we exited material handling systems provider Daifuku, which we had initiated early in 2020. Valuations were no longer attractive, following a welcome re-rating last year. At the same time, management released cautious guidance, anticipating a rise in fixed costs such as research and development. We exited the position to raise cash for more attractive opportunities elsewhere. In September, we exited Edulab in light of the accounting investigation, as outlined above.

Late in the period, we initiated a position in AGC, a leading maker of glass products, chemicals and electronics that trades at an attractive valuation. The company has been using cash generated by more mature businesses, to invest in structural growth opportunities, including pharmaceutical development and manufacturing outsourcing, EUV mask blanks for semiconductor manufacturing, and display products for next-generation vehicles. The company has a number of global leading products, enabling stable cashflow generation to support continued reinvestment in the business, underpinning shareholder returns.

Outlook

Prospects for Japanese equities are looking up amid a global economic recovery. A ramp-up in the vaccination rate in Japan and the reopening of economies in North America and Europe should benefit Japanese corporates with local as well as overseas operations. We believe the portfolio is poised to reap the benefits of these developments and that valuations remain reasonable against the improving outlook of our portfolio as a whole.

On the political front, the new prime minister is widely viewed as a centrist politician. During the presidential campaign, Kishida called for a ¥30 trillion stimulus package to revive the economy and vowed to reduce to zero the number of people without access to Covid-19 medical care. He has flagged income inequality as a problem and hopes raising wages could fuel growth. We do not expect major policy shifts as a result of the change in prime minister. The recent general election won by the LDP with a solid majority should provide a reasonable platform for Kishida.

Economically, we remain cautiously optimistic. Bank of Japan Governor Kuroda has been positive on Japan's economy, forecasting growth returning to pre-coronavirus levels by late 2021 or early 2022. Equally, businesses are upbeat about their prospects. The BoJ's Tankan survey of large manufacturers, published just after the period end, showed sentiment at its highest level since 2018. Meanwhile, sentiment among large non-manufacturers also improved. Businesses that have delayed expansion plans are making up for lost time, resulting in a broad-based pick-up in corporate capital expenditure; there is pent-up demand, not only from last year's business disruption, but also from geopolitical uncertainty the year before. There are, however, risks: global inflation, a slowing Chinese economy and a more hawkish interest rate policy from the US Federal Reserve could all spill over and impact Japanese corporate activity.

From an investment perspective, our continued focus on well-run businesses that are leaders in their segments and that are linked to longer-term structural changes in society, and our diligence in carrying out proprietary research has, to date, yielded success. The results of many of the underlying companies held in the portfolio underpin our investment choices, which should position your Company well for a recovering global economy.

Kwok Chern-Yeh

abrdn Investments (Japan) Limited

Investment Manager

24 November 2021

FINANCIAL HIGHLIGHTS

INVESTMENT PORTFOLIO

As at 30 September 2021

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (unaudited)

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (Cont'd)

CONDENSED STATEMENT OF FINANCIAL POSITION (unaudited)

CONDENSED STATEMENT OF CHANGES IN EQUITY (unaudited)

CONDENSED STATEMENT OF CASH FLOWS (unaudited)

NOTES TO THE ACCOUNTS (unaudited)

ALTERNATIVE PERFORMANCE MEASUREMENTS