REG - Baillie Gifford Shin - Annual Financial Report
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RNS Number : 7107Y Baillie Gifford Shin Nippon PLC 30 March 2026
RNS Announcement
Baillie Gifford Shin Nippon PLC (BGS)
Legal Entity Identifier: X5XCIPCJQCSUF8H1FU83
Results for the year to 31 January 2026
The following is the results announcement for the year to 31 January 2026
which was approved by the Board on 30 March 2026.
Over the year to 31 January 2026, the Company's net asset value per
share† increased by 5.4% and the share price by 14.4%, compared to a 21.5%
increase for the comparative index*.
Over five years, the Company's comparative index* was up 42.4% while the net
asset value per share† was down by 36.1% and the share price was down
43.8%.
¾ Investing for capital growth from Japanese smaller companies has
continued to be challenging. High-growth, domestically oriented small caps,
the focus of the portfolio, continue to be out of favour. Rising interest
rates, a weak yen and significant valuation de-rating across small-cap growth
stocks in Japan have further weighed on performance, despite many holdings
continuing to grow top and bottom-line earnings strongly.
¾ While the recent period has further tested patience, the Board
continues to believe the portfolio is invested in one of the most overlooked
areas of global equity markets, with valuations at near decade lows and
long-term growth opportunities intact; disciplined, long-term investment in
high-quality Japanese smaller companies offers the potential for attractive
capital growth over time.
¾ During the period, Brian Lum was promoted from deputy to being the
Company's lead portfolio manager and Jared Anderson was appointed as deputy
portfolio manager. Portfolio turnover for the financial year was 21.2%, with
fifteen positions exited and eight new positions initiated. There are
currently three private companies in the portfolio accounting for 1.8% of
total assets.
¾ The Company's share price ended the period at a 7.5% discount to the
NAV per share compared to a discount of 14.6% as at 31 January 2025. 34.2
million shares were bought back in the reporting period and are currently held
in treasury.
¾ Revenue return per share was 0.77p (2025: 0.67p). The Board is
recommending a final dividend of 0.69p per share (2025: 0.60p), being broadly
the minimum required to maintain investment trust status.
¾ Since period end, shareholders have approved the replacement of the
15% one-off three-year performance-triggered tender (measured to 31 January
2027) with an immediate 15% tender, along with the introduction of a
continuation vote in 2028 and a 100% performance-triggered tender measured
over the five years to 31 December 2030.
¾ The annual management fee paid, with effect from 1 February 2026,
will be 0.65% on the first £250m of the Company's net assets and 0.55% on the
remainder.
† After deducting borrowings at fair value. For a definition
of terms see Glossary of terms and Alternative Performance Measures at the end
of this announcement.
* The Company's comparative index is the MSCI Japan Small Cap
Index (total return and in sterling terms). See disclaimer at the end of this
announcement.
Source: LSEG/Baillie Gifford and relevant underlying index providers. See
disclaimer at the end of this announcement.
Shin Nippon aims to achieve long term capital growth through investment
principally in small Japanese companies which are believed to have above
average prospects for growth. At 31 January 2026 the Company had total assets
of £428.9 million (before deduction of bank loans of £70.1 million).
The Company is managed by Baillie Gifford, an Edinburgh based fund management
group with approximately £183 billion under management and advice as at 26
March 2026.
Past performance is not a guide to future performance. The value of an
investment and any income from it is not guaranteed and may go down as well as
up and investors may not get back the amount invested. The Company has
borrowed money to make further investments. This is commonly referred to as
gearing. The risk is that, when this money is repaid by the Company, the value
of these investments may not be enough to cover the borrowing and interest
costs, and the Company makes a loss. If the Company's investments fall in
value, gearing will increase the amount of this loss. The more highly geared
the Company, the greater this effect will be.
Investment in investment trusts should be regarded as long term. You can find
up to date performance information about Shin Nippon at shinnippon.co.uk
(http://www.shinnippon.co.uk) .
31 March 2026
For further information please contact:
Anzelm Cydzik, Baillie Gifford & Co
Tel: 0131 275 2000
Jonathan Atkins, Director, Four Communications
Tel: 0203 920 0555 or 07872 495396
Chair's statement
Performance
Despite achieving positive absolute returns, I am sorry to report that over
the twelve months to 31 January 2026, the Company's poor relative performance
has continued. Net asset value total return was 5.4%* and the share price
total return was 14.4%. The MSCI Japan Small Cap Index (total return in
sterling terms) increased by 21.5%.
Investing for capital growth from Japanese smaller companies has continued to
be challenging. The portfolio's focus on high-growth, domestically-oriented
small caps has been out of favour as value stocks, large exporters and
AI-related mega-caps have dominated returns in Japan. Rising interest rates, a
weak yen and significant valuation de-rating across small-cap growth stocks in
Japan have further weighed on performance, despite many holdings continuing to
grow earnings strongly.
Mistakes have certainly been made. Following challenge from the Board, and
open constructive dialogue with the Managers, lessons have been learnt. Past
portfolio construction underestimated correlations between certain growth
holdings, exacerbating the impact of market-wide de-rating and a shrinking
opportunity set at the point of initial investment. As covered in my interim
statement, the investment process has been refined to reflect these insights,
along with accessing a broadened opportunity set at point of initial
investment, improved position sizing and a sharper focus on resilience as well
as growth.
While the recent period has further tested patience, the Board continues to
believe the portfolio is invested in one of the most overlooked areas of
global equity markets, with valuations at near decade lows and long-term
growth opportunities intact.
Portfolio managers
In May 2025, Brian Lum was promoted from deputy portfolio manager to lead
portfolio manager, replacing Praveen Kumar. Jared Anderson was also appointed
deputy portfolio manager. While remaining committed to their long-term
investment approach, Brian and Jared have made a number of changes to the
portfolio since their appointment. These changes reflect their views of the
best Japanese small cap growth companies and take advantage of the changes to
the Company's investment policy announced in 2025, which broadened the
investable universe to reflect the opportunity set. Since then, there have
been five positions initiated in companies with market capitalisation in
excess of ¥150 billion (the upper restriction prior to the changes to the
investment policy) and eleven complete exits, including Moneytree, which was
an unquoted holding. In addition, there have been significant changes to the
size of a number of existing holdings with position sizing forming an
important element of the portfolio review.
Further details on the transactions, current portfolio positioning and
prospects for the portfolio are contained within the portfolio managers'
report.
15% Tender, Continuation Vote in 2028 and 100% Performance Triggered Tender
During the final quarter of 2025, the Board undertook a consultation exercise
with shareholders representing in excess of 43% of the Company's issued share
capital. While those shareholders shared the Board's frustration with the
continued poor performance, many recognised the unique opportunity offered by
the Company, being the only investment trust offering dedicated exposure to
small cap growth companies in Japan, and were supportive of the mandate
continuing to be pursued. They, and the Board, also believed that the
incumbent portfolio managers should be given an appropriate amount of time to
demonstrate the efficacy of the changes made to the portfolio.
Consequently, and looking to balance the views of different shareholders, the
Board sought and, on the 18 February 2026, obtained shareholder approval to:
undertake a tender offer for up to 15% of the Company's issued share capital
in Q1 2026; remove the 2027 performance triggered conditional tender offer for
up to 15% of the Company's issued share capital; introduce a performance
triggered tender offer for up to 100% of the Company's issued share capital,
which will be undertaken if the Company's net asset value total return does
not equal or exceed the total return on the MSCI Japan Small Cap Index (in
sterling terms) over the five year period from 31 December 2025 to 31
December 2030; and put a one-off continuation vote to shareholders in 2028.
The 15% tender offer has taken place and was oversubscribed, with 49.8% of the
Company's issued share capital tendered. On 20 March 2026, payments were made,
in lieu of the tendered shares, through CREST and cheques despatched to
certified shareholders.
Ongoing Charges and Management Fee
The Company's ongoing charges ratio for the year was 0.81% compared to 0.80%
last year.
It has been agreed with the Managers that the annual management fee paid, with
effect from 1 February 2026, will be 0.65% on the first £250m of the
Company's net assets and 0.55% on the remainder. It had previously been 0.75%
on the first £50m of net assets, 0.65% on the next £200m of net assets and
0.55% on the remainder.
Buybacks and Discount
Following shareholder approval at last year's Annual General Meeting ('AGM'),
in August 2025 the Scottish Court of Session approved the Company's
application to cancel its share premium account and the creation of an
equivalent Distributable Capital Reserve of £260.3 million. This provides a
significant pool of reserves which can be used to fund distributions,
including dividends, and returns of capital, such as tender offers and share
buybacks.
As at 31 January 2026, the Company's share price stood at a 7.5% discount to
the NAV per share compared to 14.6% as at 31 January 2025. Over the financial
year, the Company has bought back approximately 34.2 million shares, which are
held in treasury, equivalent to approximately 12.2% of the Company's issued
share capital. Since then and excluding the shares bought back as part of the
recent 15% unconditional tender, a further 2.8 million shares have been
purchased. The Board will continue to authorise the use of buy backs if the
discount to NAV is substantial in absolute terms or in relation to its peers.
Borrowings
The Company has a ¥16.1bn secured revolving credit facility with Bank of
America, which matures in November 2027. At present, ¥14.84bn is drawn,
compared to ¥16.1bn a year ago, with net gearing standing at 14.9% as at 31
January 2026 compared to 16.1% a year earlier.
Dividend
Revenue return per share was 0.77p compared to 0.67p the prior year. The Board
is recommending a final dividend of 0.69p per share (0.60p - 2025), being
broadly the minimum required to maintain investment trust status. The proposed
final dividend will be put before shareholders as part of the Company's AGM
business in May. I should add that, as the Company's focus is on capital
growth, shareholders should not rely on their investment in the Company to
provide any income.
Annual General Meeting
This year's AGM will take place on Thursday 21 May 2026 at the ICAEW,
Chartered Accountants' Hall, 1 Moorgate Place, London EC2R 6EA commencing at
11.30am. The AGM is an important opportunity for engagement, giving
shareholders the chance to meet and ask questions of the Directors and the
portfolio managers, and vice versa. I very much hope to see as many of you
there as possible.
Outlook
During the year, the Board undertook its triennial trip to Japan. The trip
allows the Directors to assess the portfolio managers in action first hand,
along with the quality of current and potential investments. It also provides
an insight to the mood on the ground of management teams, providing a useful
perspective. Utilising a twin-track approach, the Directors met with a total
of 35 companies in aggregate over the course of five days.
Based in part on the learnings from this trip, despite a prolonged period of
weak sentiment and challenging market conditions, it appears that the outlook
for long-term capital growth from investments in Japanese smaller companies
remains attractive. Growth investing and domestically oriented small caps have
been out of favour, particularly amid a weaker yen, rising interest rates and
a strong market preference for value stocks. However, the Board and Managers
believe this backdrop remains a compelling opportunity for patient investors.
Japan is confronting structural pressures that are driving meaningful change.
Labour shortages, demographic challenges and entrenched inefficiencies are
forcing companies to rethink how they operate. Smaller, more entrepreneurial
businesses are often best placed to respond, using digitalisation, automation
and new technologies to improve productivity and scale their businesses.
Artificial intelligence, in particular, is emerging as a powerful enabler
across a wide range of sectors, helping companies remove bottlenecks and
expand growth potential.
The Japanese small-cap universe remains broad and underexplored, offering
access to specialist businesses operating in niche markets, often protected by
local regulation, culture or technical expertise. Many portfolio companies are
delivering growth well ahead of the broader market, yet valuations remain
depressed following an extended period of de-rating.
Despite the troubled times we live in and the current market volatility, the
Board remains confident that disciplined, long-term investment in high-quality
Japanese smaller companies offers the potential for attractive capital growth
over time.
Jamie Skinner
30 March 2026
* After deducting borrowings at fair value. For a definition of terms see
Glossary of terms and Alternative Performance Measures at the end of this
announcement.
Source: LSEG/Baillie Gifford and relevant underlying index providers. See
disclaimer at the end of this announcement.
Past performance is not a guide to future performance.
Managers' report
In May 2025, Jared Anderson and I became the respective new deputy and lead
portfolio managers for Baillie Gifford Shin Nippon. Given the portfolio's poor
performance in recent times, we are under no illusion regarding the challenge
that awaits us, and we acknowledge that shareholders' patience has been
severely tested.
We have subsequently reviewed the portfolio comprehensively, implemented
modifications to the portfolio construction process, and made numerous changes
to the portfolio. What remains unchanged though, is our fundamental commitment
to invest in a portfolio of high growth smaller companies in Japan with a
genuinely long-term mindset, and we are optimistic in our prospects given the
underlying operating performance of the portfolio companies and the attractive
valuations on offer.
Annual review
While it gives us some comfort to see Shin Nippon deliver its first positive
annual NAV (and share price) returns for 5 years, we are nevertheless acutely
aware of the scale of our underperformance relative to the MSCI Japan Small
Cap ('MXJPSC') index in the past 12 months, a period during which the
portfolio continued to face heavy stylistic headwinds.
The increasing interest rate in Japan meant growth stocks' intrinsic
valuations suffered as future profits are discounted more heavily. In
addition, the ongoing push for corporate governance reform, where companies
are heavily encouraged to place more emphasis on shareholder returns, has
given the strongest share price boost to Japan's most poorly run listed
companies. Faced with pressure from the regulators and activist investors,
many such companies have responded by unwinding cross shareholdings and
announcing record buybacks and dividends. A portfolio built around high
growth, typically better-managed businesses did not benefit to the
same degree.
The result is that value stocks overwhelmingly outperformed growth stocks in
the past year - to give an illustration of this dynamic, MSCI Japan Value
outperformed MSCI Japan Growth by 15 percentage points in the calendar year
2025 - and Shin Nippon is positioned much further along the growth spectrum
than Japan's growth indices.
The other headwind is the weak yen, which, despite some strengthening during
the summer of 2025, subsequently returned to near historic lows relative to
the dollar as the market reacted to the election of Sanae Takaichi as Japan's
prime minister in October. Our portfolio is skewed towards domestic growth
companies, which typically suffer as a weak yen stimulates cost inflation and
hurts domestic consumption.
On a more anecdotal note, the level of interest towards individual Japanese
small caps from institutional investors remains low. As someone who has met
Japanese companies regularly at our Edinburgh office for a decade, it is
striking to me that most visiting Japanese small companies have struggled to
secure any other investor meetings in the past year - this was not the case in
the past. Related to this, executives (including those for our holdings) are
often genuinely puzzled (rather than apologetic) by their company's weak share
price. To patient investors like us, these reactions are illuminating. Indeed,
we derive confidence by observing the strong fundamentals of our portfolio
companies. Delivered and expected growth for Shin Nippon's portfolio companies
continue to be far superior to that of the comparative index, both in terms of
revenues and profits. For example, market estimates suggest that the portfolio
will grow sales and earnings by 12.9% and 18.6% respectively on a one-year
forward basis. The equivalent figures for the comparative index are 3.5% and
11.8%. Longer term projections show a similar dynamic. In the meantime, the
portfolio continues to trade at a valuation discount in terms of EV/EBIT
multiple (Enterprise Value/Earnings Before Interest and Tax); 11.1x for the
portfolio vs 12.5x for the comparative index.
Process Improvements
While we remain true to our growth and long-term orientation, we also
recognise that mistakes have been made in recent years. For example, with the
benefit of hindsight, the portfolio was invested in too many stocks that were
driven by a narrow set of growth drivers (such as digitalisation), and the
subsequent correlated derating (deserved or not) hurt. The weighting of a
stock in the portfolio should be commensurate with its potential upside, the
absolute downside risk and its correlation with the rest of the portfolio.
With these in mind, we have implemented a position sizing framework which
divides our portfolio companies into four types of growth profiles (Emerging
Prospects, Rapid Scalers, Cyclical Gainers, and Proven Winners); and three
tiers of conviction levels, as shown by the table below.
The four growth profiles give a sense of a company's level of maturity and
absolute risk profile. Emerging Prospects are companies with unproven business
models, and sometimes in the loss-making or even pre-revenue phase. These are
high risk, high impact investments that should be small positions. The next
category along the maturity spectrum is Rapid Scalers - these typically
founder-led companies are at the most exciting stage of scaling into what are
still immature markets, and this category can be thought of as the engine room
of the portfolio. Then we have Cyclical Gainers, established companies which
enjoy structural growth tailwinds, but nevertheless operate in viciously
cyclical industries (such as semiconductors or capital equipment) where a
degree of caution on position sizing is warranted. Finally, we have Proven
Winners, which are above-average growth companies with proven business models,
strong market positions, and decent or improving financials. These are the
larger positions. Jared and I monitor the portfolio on a regular basis using
this framework as a guideline - corporate developments, further investment
research, or share price movements may prompt us to re‑evaluate a stock's
growth classification, our conviction levels, and therefore the optimal
portfolio weighting.
This process helps us 1) sharpen our research and engagement efforts (each
growth profile demands a different focus), 2) improve buy & sell
discipline, and 3) also enables us to systematically recognise the growth
milestones of our companies (e.g. is this Rapid Scaler now a Proven Winner?).
As growth investors, we will never lose sight of the possibility of unearthing
the next megacaps - having a framework that recognises this is a part of this.
Additionally, we have been working more closely with our internal risk team
and adopted various risk tools to monitor portfolio correlations and risk
factors better. Our primary focus daily remains centred around picking the
best growth stocks. However, we believe these additional considerations will
lead to better aggregate performance outcomes in the long-term.
Portfolio updates
There are several broad directions to highlight. Firstly, we have taken
advantage of our new ability to invest in companies with market capitalisation
of above ¥150b. New buys Seiko Group (the watch company, a 'Proven Winner'),
JMDC (a healthcare big data company, a 'Rapid Scaler'), Kasumigaseki Capital
(a real estate company with an unusual asset light business model, also a
'Rapid Scaler'), DMG Mori (a leading high precision machine tools company, a
'Cyclical Gainer'), and Money Forward (a cloud-based software company that
automates back office workflow such as accounting, another 'Rapid Scaler') are
all such examples. We have long admired some of these names and believe these
are all exciting investment cases individually. At a portfolio level,
historically we have displayed a significant bias towards the small end of the
comparative index. While we expect this stylistic tilt to remain given our
growth style, these latest additions have incrementally narrowed our
difference to the benchmark.
More importantly, they represent a diverse range of growth profiles, driven by
different themes. For example, the investment case for Seiko Group hinges on
structural premiumisation of its product mix, which is shifting gradually from
affordable battery watches to luxury Grand Seiko timepieces which retail for
over £5,000. Kasumigaseki Capital - the real estate development company -
focuses on specific niches such as cold chain storage and group stay hotels in
Japan and beyond, opportunities with esoteric dynamics which the innovative
management team has identified. DMG Mori - a result of a historic merger
between a Japanese company and a German company - is not only a play on
factory automation but also offers a degree of exposure to the growing
aerospace and defence sector in Europe and Japan.
Concurrent with implementing the position sizing framework articulated above,
we have also made the decision to exit several positions that do not make the
cut in terms of conviction levels. Some were successful investments where we
felt significant future upside was unlikely - these include long‑term
holding MonotaRO (the B2B e-commerce company) and MatsukiyoCocokara
(the pharmacy chain). Others were investment cases that have not developed as
we had hoped, such as Kumiai (the agricultural chemicals company), Avex
(the entertainment agency), Cellsource (a regenerative medicine company) and
Demae-Can (the food delivery platform). Another is oRo
(a Software-as-a-Service company) which correlated highly with other similar
holdings in the portfolio, but one we felt may be less resilient to potential
AI disruptions in the long-term. Two holdings, TechnoPro (IT consultancy) and
Moneytree (unlisted fintech), were acquired by third parties during the year,
resulting in the Fund exiting these positions.
The number of stocks in the portfolio has reduced to 63 as at the end of the
Company's financial year, approaching the 50-60 holding range which we see as
the optimal on an ongoing basis in terms of research depth and more meaningful
corporate engagement. There are currently three private companies held,
accounting for 1.8% of the portfolio. Our experience of investing in private
companies has in aggregate been poor and it is likely that the main area of
our focus for the foreseeable future will be on listed companies.
Beyond new buys and complete exits, we have adjusted existing positions to
align with the framework discussed above. Most of the changes are down to
individual bottom-up factors, but one noteworthy theme is of course the rise
of Artificial Intelligence (AI). Japanese Small Caps may not be the first
place to look for AI winners, but this is precisely the opportunity. Over the
past year, we have added to the likes of JEOL and Kohoku Kogyo. These are
just two examples amongst a group of 'Hidden AI Champions' in the portfolio -
low profile companies with strong market positions that either supply into
the AI supply chain or address AI-induced bottlenecks. For example, while JEOL
is better known for selling microscopes to universities, it is also the global
leader in Multi-Beam Mask Writers - an essential piece of equipment used in
the production of the world's most advanced semiconductor chips. Kohoku Kogyo
is the dominant producer of 'optical isolators' - a mission critical component
deployed in subsea communication cables that are also used by datacentres -
which is the company's second most important product in revenue terms but
serves as its key profit driver. These are not well-known companies for global
investors seeking to gain exposure to the AI theme, and we believe they are
underappreciated by the market.
The portfolio segmented by growth profiles can be found on page 42 of the
Annual Report and Financial Statements. The company's net gearing decreased
marginally to 15%.
Performance
For the year ended 31 January 2026, Shin Nippon's NAV total return increased
by 5.4% compared to an increase of 21.5% in the comparative index (all figures
total return and in sterling terms, NAV with borrowings at fair value). Over
three and five years, the Company's NAV (total return) has declined by 14.9%
and 36.1% compared to an increase of 40.7% and 42.4% respectively for the
comparative index.
For the year, Tsugami was our top contributor. Tsugami (a Cyclical Gainer) is
a precision machine-tool maker founded in 1937, best known for products such
as automatic lathes and precision grinding machines. It entered the Chinese
market in the 1990s and today derives most of its sales through its listed
Chinese subsidiary Precision Tsugami. While automotive is the key industry for
Tsugami, it is also exposed to emerging fields such as humanoid robotics and
AI infrastructure, which helped drive strong profit growth in the past year.
In recent years, it has started to invest aggressively in India, which it sees
as the next key growth market for the company, potentially following Precision
Tsugami's trajectory in the long run.
Raksul - the procurement and marketing platform targeting small businesses in
Japan - was also a significant positive contributor to portfolio performance.
We have invested in Raksul since its IPO in 2018, and it has since achieved
sales CAGR of over 27% (and profits ahead of that). Shares jumped in December
following the announcement that the management and Goldman Sachs proposed to
take the company private at ¥1710, a 37% premium relative to the
pre-announcement share price. We believe the tender offer price of ¥1710
severely undervalues the company. We have voiced our opposition both with the
Board of Directors, as well as publicly. The tender offer price has since been
increased to ¥1900 and is set to go through at time of writing in March 2026.
This case highlights 1) the tremendous value that can found in the small cap
growth space, and 2) the premature 'acquisition risk' for some of the best
growth companies in the universe.
Inforich was our biggest detractor to performance. Inforich (an `Emerging
Prospect'), a start-up best known for its network of over 80k mobile battery
rental stations globally, delivered sales growth and operational profit growth
of 35% and 24% respectively in 2025, and is in an early phase of overseas
expansion. These are highly respectable numbers, even if they fall short of
the company's own ambitions a year ago. Unfortunately, the mix of below-plan
growth and its small market capitalisation (which deterred most institutional
investors) has led to a sharp decline in its share price. As of March 2026, a
tender offer is in progress that will see Bain Capital take Inforich private
at ¥4560 per share, more than double the company's share price before the
tender offer announcement.
Given the broader market environment, it is no surprise that the second
biggest performance detractor was another high growth company. Appier, founded
in 2012 by a team of AI scientists, delivers Software-as-a-Service that helps
its business clients find and keep customers - think of Appier's AI tools as
the brains to their clients' marketing department if you will. The
effectiveness of Appier's offering enabled it to consistently deliver strong
growth along with positive and rising profitability. In 2025, it delivered
strong sales growth of 28% (32% on a FX neutral basis) and operating income
growth of 50%. Despite these encouraging results, the shares have declined due
to concerns about its growth investments and general weak sentiment toward
software companies based on AI disruption. While we acknowledge the dynamism
and unpredictability of the AI landscape, we believe Appier's prospects are
still underestimated by the market.
Concluding remarks
As the new lead portfolio manager for Shin Nippon, which has now gone through
a prolonged period of severe underperformance, it is natural to reflect on the
validity of my and Jared's investment approach in this market and why we
remain hugely excited by growth investing in the Japan Small Cap universe,
despite our performance difficulties.
Firstly, Japan is a market that faces huge structural issues: ageing
demographics; a shrinking workforce; and, persistently low labour
productivity. These are well-documented challenges, but for growth investors
and innovative companies (including many portfolio holdings), they represent
enormous opportunities to scale into. For me, this is a far more enticing
long-term investment prospect than aiming for a one-off capital efficiency
uplift that has driven the returns of value stocks in recent times, especially
after a period of dramatic performance differential between growth and value.
Secondly, we acknowledge that growth companies in Japan have not historically
scaled as rapidly as other innovative companies in the US or even Europe.
One typical bottleneck is human resources. It is hard to hire enough top
talent when employment for life is the norm and when the population is
shrinking. This challenge may be falling away, as we are seeing shifts in
attitudes towards employment amongst the younger generation. Then there is AI.
AI may be seen as a job-killer in some markets; in Japan, AI adoption is
necessary and can potentially be a catalyst for the elusive much needed jump
in productivity. Japan may not be an AI superpower like the US or China, but
it could be one of the biggest AI beneficiaries. Encouragingly, the Japanese
government recognises this.
Having stated earlier how higher interest rates are hurting growth companies'
valuations, there is a silver lining here. That capital now carries a cost
should benefit those that can deploy it most effectively - i.e. high-quality
growth companies. At one end of the spectrum, weak companies sustained
historically by zero-cost debt may struggle and eventually exit, freeing up
societal resources. At the other end, those that provide the best products
and services will be able to exercise pricing power more easily in an
environment where inflation has finally taken hold after decades of deflation.
Similarly, ongoing corporate reforms benefit the whole market, as painful as
that has been for us in relative terms. A more competitive and dynamic market
should increase the chances of world class growth companies emerging again
from Japan - this is exciting for growth investors in the long run.
I am hugely energised by the opportunity set as a growth investor, and excited
by what our portfolio can achieve in the coming years. We have companies that
are addressing large growing market opportunities, often with strong
competitive edge (as demonstrated by superior financials), and led by aligned
and ambitious management. Nearly 80% of the companies have founder/founding
family involvement. Many of these are deeply overlooked in an era of factor
investing, and the pipeline of ideas is equally rich and compelling.
In the short term, we are mindful of the crisis in the Middle East. Japan's
economy is particularly vulnerable given its reliance on energy imports, and a
prolonged conflict raises the prospect of stagflation in Japan. Despite the
troubling headlines, we believe that our portfolio is relatively resilient
given our bias towards fast moving domestically orientated companies. We will
monitor the situation closely and adjust the portfolio accordingly.
We would like to thank our shareholders for their continued support and
patience. Jared and I will do our utmost to deliver the returns that Shin
Nippon shareholders deserve in the coming years.
Brian Lum
For a definition of terms see Glossary of terms and Alternative Performance
Measures at the end of this announcement.
Baillie Gifford - valuing private companies
We hold our private company investments at an estimation of 'fair value', i.e.
the price that would be paid in an open-market transaction. Valuations are
adjusted both during regular valuation cycles and on an ad hoc basis in
response to 'trigger events'. Our valuation process ensures that private
companies are valued in both a fair and timely manner.
The valuation process is overseen by a valuations group at Baillie Gifford,
which takes advice from an independent third party (S&P Global). The
valuations group is independent from the investment team, as well as Baillie
Gifford's Private Companies Specialist team, with all voting members being
from different operational areas of the firm, and the investment managers only
receive final valuation notifications once they have been applied.
We revalue the private holdings on a three-month rolling cycle, with one-third
of the holdings reassessed each month. During stable market conditions, and
assuming all else is equal, each investment would be valued four times in a
twelve‑month period. Regarding the Trust's private portfolio, the prices are
also reviewed twice per year by the respective boards and are subject to the
scrutiny of external auditors in the annual audit process.
Beyond the regular cycle, the valuations group also monitors the portfolio for
certain `trigger events'. These may include changes in fundamentals, a
takeover approach, an intention to carry out an Initial Public Offering
(`IPO'), company news which is identified by the valuation team or by the
portfolio managers, or meaningful changes to the valuation of comparable
public companies. Any ad hoc change to the fair valuation of any holding is
implemented swiftly and reflected in the next published net asset value
('NAV'). There is no delay.
The valuations team also monitors relevant market indices on a weekly basis
and updates valuations in a manner consistent with our external valuer's
(S&P Global) most recent valuation report where appropriate.
The valuation movements in the year have been summarised below, pricing in the
continued challenging market backdrop, coupled with some positive performance
within the private portfolio.
Average Average
movement movement
in company in price of
valuation share class
held
Shin Nippon* 47.2% 39.1%
* Data reflecting period 1 February 2025 - 31 January 2026 to align with
the Company's reporting period end.
Review of investments
A review of the Company's ten largest investments together with a list of the
new acquisitions in the year.
Top ten holdings
Tsugami
Founded in 1937, Tsugami is a specialist in high precision machine tools (such
as automatic lathes and grinding machines), which are used to make complex
components with microns-level accuracy. It has a long history, enjoys strong
positions in its niches, and benefits from megatrends such as automation and
miniaturisation of electronic components. Having established itself in China,
where it continues to grow strongly; it has recently established a presence in
India where there are exciting growth prospects. We classify Tsugami to be a
'Cyclical Gainer' in accordance with the growth profiles set out on page 42
of the Annual Report and Financial Statements.
Valuation £17,774,000
% of total assets* 4.1%
Valuation at 31 January 2025 £10,224,000
% of total assets at 31 January 2025 2.2%
Net purchases/(sales) in year to 31 January 2026 £118,000
Held since 2019
Raksul
Raksul is an online platform providing cloud-based printing and advertising
services for SMEs. The printing industry in Japan is very sizeable albeit
mature, and is quite traditional. It is also very inefficient in that a small
number of printing companies get a large chunk of customer orders leaving
smaller and mid-sized players with very low capacity utilisation. Online
penetration also remains very low compared to other developed markets. Through
its online platform, Raksul is attempting to modernise this industry by using
its platform to efficiently allocate orders thereby improving utilisation
rates across the sector. Through its advertising business, Raksul sells SAAS
software that provides low-cost and measurable advertising for SMEs. The
company is growing its sales very rapidly and has built sufficient scale to
improve its profitability as well. Management are young and dynamic, with most
having both an overseas and a consulting background. Raksul is considered to
be a 'Rapid Scaler'.
Valuation £17,333,000
% of total assets* 4.0%
Valuation at 31 January 2025 £11,479,000
% of total assets at 31 January 2025 2.4%
Net purchases/(sales) in year to 31 January 2026 £692,000
Held since 2018
JEOL
JEOL is a specialist manufacturer of high-powered microscopes and other
scientific analysis equipment. In addition, through its partnership with IMS
(an Austrian company), JEOL participates in manufacturing multi-beam mask
writers for the semiconductor industry, which has proved to be a highly
successful business. Over the past few years, JEOL has increased its margins
in both microscope and mask-writing businesses, driven by new product launches
and strong demand. The company should be able to grow revenues strongly, and
defend its margins through the cycle, thanks to its ongoing technological
developments and product innovation. We consider JEOL to be a 'Cyclical
Gainer'.
Valuation £14,042,000
% of total assets* 3.3%
Valuation at 31 January 2025 £12,617,000
% of total assets at 31 January 2025 2.7%
Net purchases/(sales) in year to 31 January 2026 £1,567,000
Held since 2013
GA Technologies
GA Technologies provides online B2B (`business-to-business') services for the
real estate sector. It has developed a suite of artificial intelligence based
software applications that allows clients to manage numerous tasks like remote
viewing, rental property management, end-to-end processing of mortgages and
automated generation of building floor plans, to name a few. It is run by its
ambitious and young founder who owns a large stake, thereby ensuring strong
alignment with minority shareholders. GA Technologies is classified as a
'Rapid Scaler'.
Valuation £12,198,000
% of total assets* 2.8%
Valuation at 31 January 2025 £12,372,000
% of total assets at 31 January 2025 2.6%
Net purchases/(sales) in year to 31 January 2026 £530,000
Held since 2020
Yonex
Yonex is the leading badminton racket brand in the world. Badminton is growing
as a participation sport across Asia and many of the top players use Yonex
equipment. The company is now leveraging its strong brand to expand into the
global tennis market where it has already demonstrated impressive market share
gains, especially in the US which is the world's largest tennis market. In
addition, management have moved to a direct sales model which should support
higher margins in the long run. We see Yonex as a 'Proven Winner'.
Valuation £11,812,000
% of total assets* 2.8%
Valuation at 31 January 2025 £11,906,000
% of total assets at 31 January 2025 2.5%
Net purchases/(sales) in year to 31 January 2026 (£1,946,000)
Held since 2015
Kohoku Kogyo
Kohoku Kogyo manufactures electronic components. Its two main products are
capacitor lead terminals and optical components for subsea data cables.
Both of these product niches are low cost but mission critical, and the
company enjoys powerful leading positions globally with 50%+ market share. The
company's track record, vertical integration, and cumulation of manufacturing
knowhow set it apart from competitors. We believe it has excellent long term
growth prospects as it benefits from structural drivers such as
electrification and AI. Kohoku Kogyo is considered to be a 'Cyclical Gainer'.
Valuation £11,332,000
% of total assets* 2.6%
Valuation at 31 January 2025 £7,917,000
% of total assets at 31 January 2025 1.7%
Net purchases/(sales) in year to 31 January 2026 £2,617,000
Held since 2022
SWCC
SWCC Showa is an electric wire/cable manufacturer. Its traditional business
relates to the manufacture and supply of low and high voltage cables for
private and public electric power utilities. It is in the process of moving
away from its low growth and low margin legacy business, of supplying cables,
to becoming a component supplier. It has developed a set of unique,
lightweight and high margin connector components, branded as SICONEX, that are
driving strong profit growth. The market continues to rate the company as an
undifferentiated supplier of commoditised products, ignoring the radical
changes occurring within the business, and as such the shares remain very
lowly rated. SWCC is classed as a 'Proven Winner'.
Valuation £10,652,000
% of total assets* 2.5%
Valuation at 31 January 2025 £12,625,000
% of total assets at 31 January 2025 2.7%
Net purchases/(sales) in year to 31 January 2026 (£1,450,000)
Held since 2022
Katitas
Katitas is a specialist real-estate developer that buys and renovates old,
abandoned homes before selling them on to mainly first-time buyers. The
problem of empty houses in Japan is reaching acute levels, resulting in a
hollowing out of entire communities. There are an estimated 8 million old or
abandoned houses across Japan, most of them vacant. A lot of these are
ancestral homes which families, despite living elsewhere, are reluctant to
sell. For authorities looking to regenerate local economies, the only option
is to demolish these properties and build new establishments, often for
business purposes. The families are generally reluctant to give up these
properties for sentimental reasons. Katitas offers an alternate and attractive
option for these families by offering to acquire these houses and the
associated land for a reasonable price, renovate these to a high standard
before selling them. In the process, Katitas also ends up playing a part in
rejuvenating local communities. Because these houses are scattered all across
Japan, sourcing potential properties is quite difficult. Over the years,
Katitas has developed a strong network of local contacts across Japan that
ensures a steady supply of properties they could buy. The company generates
very attractive margins despite selling these properties at a meaningful
discount to new builds. Finally, second-hand home ownership in Japan is
exceptionally low compared to other developed markets although this is
changing and should provide a long-term tailwind for Katitas. This is
classified as a 'Proven Winner'.
Valuation £10,521,000
% of total assets* 2.4%
Valuation at 31 January 2025 £14,465,000
% of total assets at 31 January 2025 3.1%
Net purchases/(sales) in year to 31 January 2026 (£6,447,000)
Held since 2017
Gift
Gift holdings is one of Japan's largest ramen restaurants. It has a unique
model whereby it operates its own stores but also supplies raw materials to a
network of franchisees with a very simple charging structure. This
significantly lowers the barrier for franchisees to join Gift Holdings'
ecosystem thereby enabling the company to expand rapidly at very low cost and
high margin. The company is run by its young and dynamic founder who trained
as a ramen chef for several years before starting the company without any
external money. Ramen is a staple food item in Japan and it is one of the few
categories that has grown over the past decade despite demographic headwinds.
We see Gift as a 'Rapid Scaler'.
Valuation £10,434,000
% of total assets* 2.4%
Valuation at 31 January 2025 £10,334,000
% of total assets at 31 January 2025 2.2%
Net purchases/(sales) in year to 31 January 2026 £52,000
Held since 2024
Harmonic Drive Systems
Harmonic Drive is a leading mechatronic company. It is best known for its
precision motion control products such as harmonic reducers, as used in
industrial robots and semiconductor manufacturing. Its long history and
consistent R&D helped cement an excellent position in this exciting
market. Aside from continued developments in established robotics
applications, Harmonic Drive also offers exposure to the 'Physical AI' theme -
for example, we believe Harmonic Drive is well placed to benefit from the
growth of humanoid robots. Harmonic Drive is viewed as a 'Rapid Scaler'.
Valuation £10,177,000
% of total assets* 2.4%
Valuation at 31 January 2025 £11,033,000
% of total assets at 31 January 2025 2.3%
Net purchases/(sales) in year to 31 January 2026 £2,816,000
Held since 2012
New buys
Cover
Cover runs Hololive production, one of the world's leading agencies for
Vtubers (or 'virtual Youtubers') - these are content creators who broadcast
and interact with fans online as animated characters, often using motion
capture technologies. Cover recruits and trains talent, provides content
production and distribution support, and makes money from events,
merchandising and licensing IP. As a pioneer in this emerging field, Cover has
a strong track record in growth and innovation and continues to be led by its
founder Tanigo Motoaki. The opportunity is particularly exciting if Vtubing
becomes mainstream globally. We consider this a 'Rapid Scaler.'
Valuation £2,334,000
% of total assets* 0.5%
DMG Mori
DMG Mori is a leading machine-tool maker formed from the combination of
Japan's DMG Seiki and Germany's Gildemeister, selling high-precision CNC
machines and integrated automated production lines. Factory automation is a
key structural driver. DMG is well positioned through its deep technical
capabilities, a global support network, and an integrated product approach
which leads to long term customer relationships. The company's cost structure
suggests significant scope for profits to grow as utilisation of DMG Mori's
capacity improves; and the growing Aerospace & Defence sector in Europe
and Japan may serve as a powerful catalyst for this to materialise. This is a
'Cyclical Gainer.'
Valuation £5,525,000
% of total assets* 1.3%
JMDC
JMDC is a Japanese healthcare data platform. It aggregates insurance claims
data, personal health records through its Pep Up app, and hospital-derived
datasets, then sells anonymised data packages and analytics to pharma
companies, insurers, and hospitals; it also runs a smaller telemedicine
workflow that lets radiologists read scans remotely. As healthcare becomes
more digital and more AI-enabled, access to high-quality, longitudinal data
becomes scarce and strategically valuable. The company benefits from classic
data-network effects, and the sensitivity of medical data makes it hard for
new entrants to compete. After years of building its datasets, the
management's emphasis is increasingly shifting toward monetisation, and we
believe JMDC has very strong long-term prospects. We categorise JMDC as a
'Rapid Scaler.'
Valuation £3,129,000
% of total assets* 0.7%
Kasumigaseki Capital
Kasumigaseki Capital is a real estate developer that focuses on niches such as
automated refrigerated warehouses, group stay hotels and premium nursing homes
in Japan and beyond. The company has shown a knack for spotting interesting
opportunities and developing properties with innovative features. Furthermore,
Kasumigaseki employs an unusual asset light business model where its own
capital is only deployed for the planning stage of a project, leading to high
asset turnover and impressive returns. As a result, Kasumigaseki Capital has
achieved >100% annual profit growth in recent years, and the ambitious
management continues to aim to recycle capital aggressively to pursue further
expansion in the coming years by targeting ~50% net profit growth in the next
few years. Kasumigaseki Capital is categorised as a 'Rapid Scaler.'
Valuation £5,212,000
% of total assets* 1.2%
Mani
Mani is a niche medical device manufacturer that supplies precision tools to
surgeons and dentists: ophthalmic knives for cataract surgery, specialist
suture needles, and dental restorative materials. While the market may seem
unglamorous, this is an attractive business as quality and reliability really
matters; and Mani enjoys excellent reputation in these niches. The underlying
market is supported by Asia's ageing population, as well as the company's
proactive expansion into the US. We see the company's recent management
changes as an indicator of ambition and expects to see Mani scale profitably
into their chosen segments internationally. We classed Mani as a 'Proven
Winner.'
Valuation £9,001,000
% of total assets* 2.1%
Money Forward
Money Forward is a leading provider of cloud-based software for Japan's small
and mid-sized businesses, covering back-office workflows such as accounting,
expense management, and payroll. Alongside this, Money Forward also runs the
personal finance app Money Forward ME. As Money Forward software forms the
system of record for its business clients, few clients switch away once it is
embedded. This provides a predictable income stream, as well as a platform to
connect clients to other services (such as fintech). Money Forward is led by
its ambitious founder, and we are particularly excited by its long-term
prospects as Japan's smaller businesses digitalise from a low base, and the
company explores the immense potential of AI within its product offering.
Money Forward is a 'Rapid Scaler.'
Valuation £3,638,000
% of total assets* 0.8%
Seiko
Seiko has been making watches for over 100 years. Aside from having a globally
recognised brand backed by heritage and technical innovation, Seiko stands out
in the Swiss dominated industry through its vertical integration and
unrivalled breadth of credible offering across price tiers. While the global
watch market is shrinking in volume terms, it continues to grow in value terms
as watches shift from utility to personal expression and luxury. Seiko, still
led by the founding family, is set to benefit from the premiumisation trend,
and we believe has a long growth runway as it increasingly establishes itself
at the high end of the market through the Grand Seiko and Credor brands. We
see Seiko as a 'Proven Winner.'
Valuation £1,113,000
% of total assets* 0.3%
Shinnihon
Shinnihon Corp is a mid-sized, family-owned construction company and real
estate development company, focusing on projects around the Tokyo metropolitan
area. The company's construction business has achieved decent growth and
profitability in recent years through solid execution, and it has benefited
from the tight labour supply as demand for dependable subcontractors such as
Shinnihon rose. On the real estate side, Shinnihon's long-term orientated
management is ready to deploy its balance sheet to build its land bank should
opportunities emerge and has also signalled for a stronger focus on
shareholder returns. Shinnihon is a 'Cyclical Gainer.'
Valuation £5,144,000
% of total assets* 1.2%
* For a definition of terms see Glossary of terms and Alternative
Performance Measures at the end of this announcement.
Baillie Gifford's stewardship principles
Baillie Gifford's overarching ethos is that we are 'Actual' investors. That
means we seek to invest for the long term. Our role as an engaged owner is
core to our mission to be effective stewards for our clients. As an active
manager, we invest in companies at different stages of their evolution across
many industries and geographies, and focus on their unique circumstances and
opportunities. Our approach favours a small number of simple principles
rather than overly prescriptive policies. This helps shape our interactions
with holdings and ensures our investment teams have the freedom and retain
the responsibility to act in clients' best interests.
Long-term value creation
We believe that companies that are run for the long term are more likely to be
better investments over our clients' time horizons. We encourage our holdings
to be ambitious, focusing on long-term value creation and capital deployment
for growth. We know events will not always run according to plan. In these
instances we expect management to act deliberately and to provide appropriate
transparency. We think helping management to resist short-term demands from
shareholders often protects returns. We regard it as our responsibility to
encourage holdings away from destructive financial engineering towards
activities that create genuine value over the long run. Our value will often
be in supporting management when others don't.
Alignment in vision and practice
Alignment is at the heart of our stewardship approach. We seek the fair and
equitable treatment of all shareholders alongside the interests of management.
While assessing alignment with management often comes down to intangible
factors and an understanding built over time, we look for clear evidence of
alignment in everything from capital allocation decisions in moments of stress
to the details of executive remuneration plans and committed share ownership.
We expect companies to deepen alignment with us, rather than weaken it, where
the opportunity presents itself.
Governance fit for purpose
Corporate governance is a combination of structures and behaviours; a careful
balance between systems, processes and people. Good governance is the
essential foundation for long-term company success. We firmly believe that
there is no single governance model that delivers the best long-term outcomes.
We therefore strive to push back against one-dimensional global governance
principles in favour of a deep understanding of each company we invest in. We
look, very simply, for structures, people and processes which we think can
maximise the likelihood of long-term success. We expect to trust the boards
and management teams of the companies we select, but demand accountability
if that trust is broken.
Sustainable business practices
A company's ability to grow and generate value for our clients relies on a
network of interdependencies between the company and the economy, society and
environment in which it operates. We expect holdings to consider how their
actions impact and rely on these relationships. We believe long-term success
depends on maintaining a social licence to operate and look for holdings to
work within the spirit and not just the letter of the laws and regulations
that govern them. Material factors should be addressed at the board level as
appropriate.
Environmental, social and governance engagement
By engaging with companies, we seek to build constructive relationships with
them, to better inform our investment activities and, where necessary, effect
change within our holdings, ultimately with the goal of achieving better
returns for our shareholders. The issues we consider in our assessment of ESG
factors are varied but may include governance arrangements, human rights,
labour rights, diversity and inclusion, climate change, nature and
biodiversity, respect for legal and regulatory guidelines and consideration
of stakeholder perspectives.
GMO Payment Gateway - Engagement case study: encouraging long-term strategic focus and governance clarity.
% of total assets* 0.7%
Objective: To discuss the company's long-term strategic trajectory and 2030
operating profit ambitions with the founder and CEO, Issei Ainoura, explore
the implications of leadership tenure for culture and succession planning, and
encourage a greater emphasis on long-term value creation over annual profit
targets.
Discussions: Ainoura-san described GMOPG as a strongly sales-led organisation.
He noted the monthly meetings, where he reviews progress against target
customers and reiterated GMOPG's highly ambitious financial goals, including a
strong emphasis on achieving 25 per cent annual operating profit growth
alongside a long-term operating profit target for 2030.
We reiterated our preference for directing the market's attention to the
company's long-term direction and progress against its 2030 objectives, rather
than focusing on slight year-on-year variations in operating profit growth. We
highlighted how an excessive focus on short-term performance can distort
internal behaviour, even as we recognise the range of stakeholders he needs to
manage and the impressive ambition that this goal represents.
We asked whether achieving the ¥100 billion operating profit target in 2030
might be a natural point for him to transition to a chair role. He framed the
2030 target as merely a way marker and expressed a desire to continue "like
Buffett," signalling both personal ambition and a clear intention to remain
chief executive officer (CEO). We discussed our view that long tenure is not
inherently problematic, provided there is a precise mechanism for the CEO to
understand when the time is right for change.
Outcome: Following our meeting, management refined its profit-growth messaging
and shared that this was partly informed by our feedback. It shifted from an
annual profit growth-rate objective to a profit point target for the 2031
financial year, intended to more clearly articulate the growth drivers,
visibility, and strategic initiatives underpinning this ambition.
We view this evolution as well aligned with our long‑term investment
horizon. The meeting and follow-up communication reinforced our view that
management is aligned with our investment horizon through its approach,
culture, and governance.
Toyo Tanso: Advancing governance and sustainability through board reform and emissions reduction.
% of total assets* 1.8%
Objective: To assess progress on board reform and governance effectiveness,
encourage greater international expertise at board level given the company's
global revenue exposure, and evaluate the credibility and ambition of its
emissions-reduction and broader sustainability initiatives, alongside capital
allocation discipline.
Discussion: Toyo Tanso is a global leader in the production of speciality
graphite materials, supplying high-performance components used in
semiconductors, electric vehicles, and industrial applications.
We met with Toyo Tanso's Chairman and CEO to discuss the company's
sustainability initiatives, capital allocation strategy, and broader business
developments. The conversation primarily focused on board composition and
progress toward reducing emissions.
The leadership team outlined steps taken to enhance the independence and
expertise of the board, including a reduction in board size from eight members
to four over the past four years. This change aims to foster greater
accountability and more effective governance. Given Toyo Tanso's significant
ex-Japan revenue exposure, we also explored the need for greater international
business expertise within the board. Management was receptive to this idea and
expressed an intention to strengthen global perspectives as the board evolves.
On environmental progress, Toyo Tanso highlighted its efforts to lower
emissions through the adoption of more energy‑efficient technologies and a
shift toward renewable energy sources. The company has set a target to reduce
emissions intensity by 30% by 2030. However, they acknowledged ongoing
challenges in hard-to-abate areas such as carbon baking furnaces.
The discussion also covered human rights initiatives. Toyo Tanso has completed
a due diligence exercise starting with its parent company and plans to extend
this work across its group operations and supply chain. The company's approach
is to build domestic competence first before expanding oversight into
higher-risk international tiers.
Finally, we revisited our voting decision from the previous year regarding
dividend policy. We had abstained on the proposed payout of around 30%, which
fell short of our 40% expectation given the company's strong cash position.
The company acknowledged this feedback and confirmed that it is currently
reviewing its payout framework as part of a broader capital allocation
strategy.
Outcome: The meeting underscored Toyo Tanso's openness to external
perspectives and its willingness to adapt. The company is continuing to refine
its governance structure, strike a balance between reinvestment and
shareholder returns, and make progress on sustainability, although some
operational challenges remain in achieving its environmental targets.
Nakanishi - Addressing governance gaps through stronger tax oversight.
% of total assets* 1.6%
Purpose: To understand the root causes of the overseas tax underpayment,
assess the adequacy of remedial actions taken to strengthen internal controls
and international tax oversight, and ensure governance frameworks are robust
enough to prevent recurrence and maintain shareholder confidence.
Discussion: Nakanishi is a leading manufacturer of high-precision dental and
industrial rotary instruments.
During a meeting with the CFO of Nakanishi, we sought to understand the
circumstances surrounding Nakanishi's recent tax underpayment issue and
evaluate the company's response and corrective measures.
Before our meeting, we became aware that Nakanishi had been required to pay an
additional ¥1.2 billion in taxes and penalties following an underpayment
identified across its overseas entities. During our conversation, Suzuki-san
acknowledged the issue and offered an apology, explaining that the root cause
lay in a lack of specialised international tax expertise within the company.
At the time, Nakanishi relied on a domestic Japanese third-party accounting
firm, which had incorrectly handled certain overseas tax filings. Recognising
this gap, the company has since taken steps to strengthen its internal
financial governance. These include hiring an in-house international tax
advisor and appointing PwC as its new external tax consultant to improve
compliance and oversight going forward.
Outcome: Nakanishi has already settled the ¥1.2 billion payment and appears
to have addressed the shortcomings in its tax management structure. From the
discussion, it was clear that this was a case of administrative oversight
rather than deliberate misconduct. The company's response demonstrates a
commitment to improving governance and restoring confidence in its
financial controls.
Proxy voting - 'active ownership' in action
JEOL
% of total assets* 3.3%
Meeting 2025 Annual General Meeting
Vote Abstain
Reason: We abstained on the dividend because we believe the company could
return more capital to shareholders, given its strong cash position. Ahead of
the AGM, we reached out to the company to understand its stance on shareholder
returns. They informed us that their policy is to maintain a payout ratio of
30 per cent. In previous years, we opposed the company's dividend. However,
this year, we decided to abstain to acknowledge the absolute increase in the
dividend and recognising the cyclical weakness the company has faced in recent
quarters due to challenges in their industry.
Shinnihon
% of total assets* 1.2%
Meeting 2025 Annual General Meeting
Vote Abstain
Reason: We abstained on the resolution to approve the granting of a retirement
bonus to an inside director because details such as the amount and the
recipient were not disclosed. Ahead of the AGM, we contacted the company to
request additional information, however, the company did not respond.
Generally, in Japan, retirement bonuses are calculated based on tenure and not
the recipient's contribution to shareholder value. As we generally think
remuneration should be reflective of an individual and the company's
performance, due to an absence of information we could not make an informed
judgement and decided to abstain.
Kohoku Kogyo
% of total assets* 2.6%
Meeting 2025 Annual General Meeting
Vote Against
Reason: We continued to oppose the low dividend payment because we believe the
company's capital strategy is not in shareholders' interests. Ahead of the
AGM, we reached out to the company to understand its stance on shareholder
returns. They explained that they implemented a share buyback programme, which
we believe will increase the company's total return ratio for the next fiscal
year. While we welcomed this news, we decided to continue to oppose the
dividend due to shareholder returns in the current fiscal year being below our
expectations. This was consistent with our previous voting approach. We hope
to feel able to support the dividend proposal at the 2026 AGM.
Baillie Gifford - proxy voting
We believe that 'active ownership' of our clients' holdings is as important as
selecting the right investments in the first instance. These guidelines are
aligned with our stewardship principles and describe our approach to proxy
voting and company engagement, the key levers of active ownership, often
described as 'stewardship'.
While these guidelines are intended to provide an insight into how we approach
voting on our clients' behalf, it is important to note that we assess every
company individually. In voting, we will always evaluate proposals on a
case-by-case basis, based on what we believe to be in the best long-term
interests of our clients, rather than rigidly applying a policy.
A broad cross section of our investment staff are involved in our ongoing work
on stewardship. In the same way that our investment approach is based around
empowered and independent teams, our voting and engagement is led by the
individual investment teams. In keeping with our decentralised and autonomous
culture, our investment teams will, on occasion, elect to vote differently on
the same general meeting resolutions. Where this happens, we report
accordingly in the proxy voting disclosure on our website. We also have clear
processes in place to identify, prevent and manage potential proxy voting
related conflicts of interest to ensure that in all cases the firm acts in the
clients' best interest. Baillie Gifford's firm-wide conflict of interest
disclosure is available on our website.
Prior to taking any voting action, we usually address specific ESG concerns by
engaging directly with the company, using voting as an escalation mechanism
if we have not seen sufficient progress. Voting activity and the reasons for
any resolutions voted against in the period are disclosed on the Company
website and can be viewed at shinnippon.co.uk.
List of investments as at 31 January 2026
2026 % of Absolute (†) 2025
Name Business Value total performance Value
£'000 assets (#) % £'000
Tsugami Manufacturer of automated machine tools 17,774 4.1 80.2 10,224
Raksul Internet based services 17,333 4.0 36.2 11,479
JEOL Manufacturer of scientific equipment 14,042 3.3 (0.5) 12,617
GA Technologies Interactive media and services 12,198 2.8 (7.0) 12,372
Yonex Sporting goods 11,812 2.8 42.3 11,906
Kohoku Kogyo Manufacturer of undersea cable lead terminals 11,332 2.6 8.0 7,917
SWCC Electric wire and cable manufacturer 10,652 2.5 41.2 12,625
Katitas Real estate services 10,521 2.4 30.3 14,465
Gift Food industry operator and distributor 10,434 2.4 1.7 10,334
Harmonic Drive Systems Robotic components 10,177 2.4 (30.8) 11,033
Lifenet Insurance Online life insurance 9,605 2.2 (6.5) 14,347
Nifco Value-added plastic car parts 9,241 2.2 19.3 12,886
Mani* Manufactures medical goods and equipment 9,001 2.1 20.9 -
Vector PR Company 8,851 2.1 30.6 8,367
Horiba Manufacturer of measuring instruments 8,669 2.0 73.6 6,889
KH Neochem Chemical manufacturer 8,639 2.0 14.0 3,011
Megachips Electronic components 8,191 1.9 35.6 13,318
Cosmos Pharmaceuticals Drugstore chain 8,137 1.9 (12.6) 8,755
Seria Discount retailer 8,125 1.9 28.5 6,136
eGuarantee Guarantees trade receivables 7,993 1.9 (7.4) 4,683
Top 20 212,727 49.5
Toyo Tanso Electronics company 7,883 1.8 26.9 6,165
Appier Group Software as a service company providing AI platforms 7,826 1.8 (41.7) 11,679
Optex Infrared detection devices 7,677 1.8 35.2 6,622
Bengo4.com Online legal consultation 7,615 1.8 (5.3) 7,226
Kitz Industrial valve manufacturer 7,230 1.7 60.8 5,044
Anicom Pet insurance provider 6,987 1.6 49.0 7,395
Nakanishi Dental equipment 6,783 1.6 (21.6) 9,947
Sho-Bond Infrastructure reconstruction 6,712 1.6 3.8 7,560
Asahi Intecc Specialist medical equipment 6,548 1.5 (10.1) 4,501
Nikkiso Industrial pumps and medical equipment 6,426 1.5 62.6 4,716
Infomart Internet platform for restaurant supplies 6,352 1.5 27.3 10,886
Global Security Experts Cyber Security Company 5,989 1.4 14.5 5,273
Litalico Provides employment support and learning support services for people with 5,693 1.3 (1.7) 4,211
disabilities
DMG Mori* Machine tool manufacturer 5,525 1.3 (21.9) -
Peptidream Drug discovery and development platform 5,490 1.3 (33.8) 9,907
Kasumigaseki Capital* Real estate developer and management services 5,212 1.2 (24.1) -
Shinnihon* Construction company and real estate developer 5,144 1.2 18.8 -
Soracom Networking software provider 5,128 1.2 (16.8) 2,185
Gojo & Company Inc Ord(U) Diversified financial services 5,112 1.2 (15.5) 6,050
Anest Iwata Manufactures compressors and painting machines 4,650 1.1 15.2 11,060
GMO Financial Gate Face-to-face payment terminals and processing services 4,612 1.1 (28.3) 7,140
OSG Manufactures machine tool equipment 4,504 1.1 43.2 4,148
Cybozu Develops and markets internet and intranet application software for business 4,497 1.0 (20.5) 9,389
I-Ne Hair care range 4,303 1.0 (42.1) 6,991
Noritsu Koki Holding company with interests in biotech and agricultural products 4,158 1.0 25.7 10,360
Istyle Beauty product review website 4,136 1.0 (21.5) 6,598
Kamakura Shinsho Information processing company 4,104 1.0 6.4 4,829
Nittoku Coil winding machine manufacturer 3,871 0.9 3.0 7,119
Shoei Manufactures motor cycle helmets 3,774 0.9 (23.2) 7,463
Money Forward* Accounting and back office software company 3,638 0.8 (17.8) -
Weathernews Weather information services 3,323 0.8 6.6 3,057
Oisix Organic food website 3,313 0.8 (12.4) 5,987
GMO Payment Gateway Online payment processing 3,174 0.7 (0.1) 3,351
INFORICH Software Company 3,167 0.7 (62.2) 9,831
JMDC* Medical statistics data services 3,129 0.7 (21.6) -
SpiderPlus Construction project management platform 2,872 0.7 (31.0) 4,263
Genda Operates as a holding company for entertainment businesses 2,699 0.6 (58.4) 659
Nippon Ceramic Electronic component manufacturer 2,490 0.6 46.0 1,181
JEPLAN(U) Chemical PET recycling 2,459 0.6 194.9 834
COVER* An entertainment agency that manages content creators known as Vtubers 2,334 0.5 (42.3) -
('virtual Youtubers')
Crowdworks Crowd sourcing services 1,225 0.3 (44.6) 3,597
Seiko* Vertically integrated manufacturer of watches, and various electronic devices 1,113 0.3 6.3 -
Spiber(U) Textiles - - (100.0) 1,030
Total investments 411,604 96.0
Net liquid assets(#) 17,324 4.0
Total assets(#) 428,928 100.0
Bank loans (70,105) (16.3)
Shareholders' funds 358,823 83.7
U Private company (unlisted) investment.
* Figures relate to part period returns where the investment has been
purchased in the period.
# See Glossary of terms and Alternative Performance Measures at the end of
this announcement.
† Absolute performance (in sterling terms) has been calculated on a
total return basis over the period 1 February 2025 to 31 January 2026.
Listed equities Private company Net liquid Total
% investments assets † assets †
% % %
31 January 2026 94.2 1.8 4.0 100.0
31 January 2025 93.8 1.9 4.3 100.0
† See Glossary of terms and Alternative Performance Measures at the end
of this announcement.
Income statement
For the year ended 31 January
Notes 2026 2026 2026 2025 2025 2025
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on investments 9 - 5,584 5,584 - (34,865) (34,865)
Currency gains 13 - 5,321 5,321 - 2,415 2,415
Income 2 7,052 - 7,052 7,389 - 7,389
Investment management fee 3 (2,270) - (2,270) (2,482) - (2,482)
Other administrative expenses 4 (889) - (889) (714) - (714)
Net return before finance costs and taxation 3,893 10,905 14,798 4,193 (32,450) (28,257)
Finance costs of borrowings 5 (1,208) - (1,208) (1,465) - (1,465)
Net return before taxation 2,685 10,905 13,590 2,728 (32,450) (29,722)
Tax on ordinary activities 6 (704) - (704) (739) - (739)
Net return after taxation 1,981 10,905 12,886 1,989 (32,450) (30,461)
Net return per ordinary share 7 0.77p 4.22p 4.99p 0.67p (10.97p) (10.30p)
Note: Dividends per share payable and paid in respect of the year 8 0.69p 0.60p
The total column of this statement is the profit and loss account of the
Company. The supplementary revenue and capital return columns are prepared
under guidance published by the Association of Investment Companies.
All revenue and capital items in this statement derive from continuing
operations.
A Statement of Comprehensive Income is not required as all gains and losses of
the Company have been reflected in the above statement.
The accompanying notes below are an integral part of the Financial Statements.
Balance sheet
As at 31 January
Notes 2026 2026 2025 2025
£'000 £'000 £'000 £'000
Fixed assets
Investments held at fair value through profit or loss 9 411,604 453,211
Current assets
Debtors 10 2,427 1,989
Cash at bank 18 16,689 20,797
19,116 22,786
Creditors
Amounts falling due within one year 11 (71,897) (86,307)
Net current liabilities (52,781) (63,521)
Net assets 358,823 389,690
Capital and reserves
Share capital 12 6,285 6,285
Share premium account 13 - 260,270
Distributable capital reserve 13 260,270 -
Capital redemption reserve 13 21,521 21,521
Capital reserve 13 68,213 99,445
Revenue reserve 13 2,534 2,169
Shareholders' funds 358,823 389,690
Net asset value per ordinary share* 14 146.3p 139.4p
The Financial Statements of Baillie Gifford Shin Nippon PLC (Company
Registration Number SC093345) below were approved and authorised for issue by
the Board and were signed on its behalf on 30 March 2026.
Jamie Skinner
Chair
* See Glossary of terms and Alternative Performance Measures at
the end of this announcement.
The accompanying notes below are an integral part of the Financial Statements.
Statement of changes in equity
For the year ended 31 January 2026
Notes Share Share Distributable Capital Capital Revenue Shareholders'
capital premium capital redemption reserve reserve funds
£'000 account reserve reserve £'000 £'000 £'000
£'000 £'000 £'000
Shareholders' funds at 1 February 2025 6,285 260,270 - 21,521 99,445 2,169 389,690
Ordinary shares bought back into treasury 12 - - - - (42,137) - (42,137)
Cancellation of share premium account - (260,270) 260,270 - - - -
Net return on ordinary activities after taxation 7 - - - - 10,905 1,981 12,886
Dividend paid in the year 8 - - - - - (1,616) (1,616)
Shareholders' funds at 31 January 2026 6,285 - 260,270 21,521 68,213 2,534 358,823
For the year ended 31 January 2025
Notes Share Share Capital Capital Revenue Shareholders'
capital premium redemption reserve reserve funds
£'000 account reserve £'000 £'000 £'000
£'000 £'000
Shareholders' funds at 1 February 2024 6,285 260,270 21,521 167,114 2,602 457,792
Ordinary shares bought back into treasury 12 - - - (35,219) - (35,219)
Net return on ordinary activities after taxation 7 - - - (32,450) 1,989 (30,461)
Dividend paid in the period 8 - - - - (2,422) (2,422)
Shareholders' funds at 31 January 2025 6,285 260,270 21,521 99,445 2,169 389,690
The accompanying notes below are an integral part of the Financial Statements.
Cash flow statement
For the year ended 31 January
Notes 2026 2026 2025 2025
£'000 £'000 £'000 £'000
Cash flows from operating activities
Net return/(loss) on ordinary activities before taxation 13,590 (29,722)
Net (gains)/losses on investments (5,584) 34,865
Currency gains (5,321) (2,415)
Finance costs of borrowings 1,208 1,465
Overseas withholding tax (709) (805)
Decrease in debtors, accrued income and prepaid expenses 55 638
Increase/(decrease) in creditors 149 (402)
Cash inflow from operations 3,388 3,624
Interest paid (1,384) (1,460)
Net cash inflow from operating activities 2,004 2,164
Cash flows from investing activities
Acquisitions of investments (96,423) (112,102)
Disposals of investments 142,314 165,814
Net cash inflow from investing activities 45,891 53,712
Ordinary shares bought back into treasury and stamp duty thereon 12 (42,137) (35,219)
Bank loans repaid (456,693) (35,907)
Bank loans drawn down 449,990 35,907
Net cash (outflow) from financing activities (48,840) (35,219)
Dividends paid 8 (1,616) (2,422)
(Decrease)/increase in cash and cash equivalents (2,561) 18,235
Exchange movements (1,547) (403)
Cash and cash equivalents at 1 February 18 20,797 2,965
Cash and cash equivalents at 31 January* 18 16,689 20,797
* Cash and cash equivalents represent cash at bank and deposits
repayable on demand.
The accompanying notes below are an integral part of the Financial Statements.
Notes to the Financial Statements
1. Principal accounting policies
The Financial Statements for the year to 31 January 2026
have been prepared in accordance with FRS 102 'The Financial Reporting
Standard applicable in the UK and Republic of Ireland' on the basis of the
accounting policies set out below which are unchanged from the prior year and
have been applied consistently.
2. Income
2026 2025
£'000 £'000
Income from investments
Listed overseas dividends 7,052 7,387
Other income
Deposit interest - 2
Total income 7,052 7,389
Total income comprises
Dividends from financial assets designated at fair value through profit or 7,052 7,387
loss
Interest from financial assets not at fair value through profit or loss - 2
Total income 7,052 7,389
3. Investment management fee - all charged to revenue
2026 2025
£'000 £'000
Investment management fee 2,270 2,482
Baillie Gifford & Co Limited, a wholly owned subsidiary
of Baillie Gifford & Co, has been appointed as the Company's Alternative
Investment Fund Manager ('AIFM') and Company Secretaries. Baillie Gifford
& Co Limited has delegated portfolio management services to Baillie
Gifford & Co. Dealing activity and transaction reporting have been further
sub-delegated to Baillie Gifford Overseas Limited and Baillie Gifford Asia
(Hong Kong) Limited.
The Investment Management Agreement sets out the matters over which the
Managers have authority in accordance with the policies and directions of, and
subject to restrictions imposed by, the Board. The Management Agreement is
terminable on not less than six months' notice. Compensation fees would only
be payable in respect of the notice period if termination were to occur
sooner. The annual management fee is 0.75% on the first £50m of net assets,
0.65% on the next £200m of net assets and 0.55% on the remainder.
With effect from 1 February 2026, the annual management fee
is 0.65% on the first £250m of net assets and 0.55% on the remaining net
assets. The fees are calculated and paid on a quarterly basis.
4. The bank loan interest disclosed includes £0 paid (2025 - £9,000) in respect of yen deposits held at the custodian bank.
5. Ordinary dividends
2026 2025 2026 2025
p p £'000 £'000
Amounts recognised as distributions in the year:
Previous year's final dividend (paid 29 May 2025) 0.60p 0.80p 1,616 2,422
We set out below the total dividends proposed in respect of
the financial year, which is the basis on which the requirements of section
1158 of the Corporation Tax Act 2010 are considered. There is a revenue
surplus for the year to 31 January 2026 of £1,981,000 which is available for
distribution by way of a dividend payment (year to 2025 - a revenue surplus of
£1,989,000).
2026 2025 2026 2025
p p £'000 £'000
Amounts paid and payable in respect of the financial year:
Proposed final dividend per ordinary share (payable 26 May 2026) 0.69p 0.60p 1,693 1,677
If approved, the recommended final dividend will be paid on 26 May 2026 to shareholders on the register at the close of business on 17 April 2026. The ex-dividend date is 16 April 2026.
6. Net return per ordinary share
2026 2026 2026 2025 2025 2025
Revenue Capital Total Revenue Capital Total
Net return on ordinary activities after taxation 0.77p 4.22p 4.99p 0.67p (10.97p) (10.30p)
Revenue return per ordinary share is based on the net
revenue gain on ordinary activities after taxation of £1,981,000 (2025 - gain
of £1,989,000) and on 258,475,084 ordinary shares (2025 - 295,693,208) being
the weighted average number of ordinary shares in issue during the year.
Capital return per ordinary share is based on the net
capital gain for the financial year of £10,905,000 (2025 - net capital loss
of £32,450,000) and on 258,475,084 ordinary shares (2025 - 295,693,208) being
the weighted average number of ordinary shares in issue during the year.
There are no dilutive or potentially dilutive shares in
issue.
7. Fixed assets - investments
As at 31 January 2026 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Quoted equities 404,032 - - 404,032
Unlisted securities - - 7,572 7,572
Total financial asset investments 404,032 - 7,572 411,604
As at 31 January 2025 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Quoted equities 444,025 - - 444,025
Unlisted securities - - 9,186 9,186
Total financial asset investments 444,025 - 9,186 453,211
Investments in securities are financial assets designated
at fair value through profit or loss. In accordance with Financial Reporting
Standard 102, the tables provide an analysis of these investments based on the
fair value hierarchy described below, which reflects the reliability and
significance of the information used to measure their fair value.
Fair value hierarchy
The fair value hierarchy used to analyse the basis on which
the fair values of financial instruments held at fair value through the profit
or loss account are measured is described below. Fair value measurements are
categorised on the basis of the lowest level input that is significant to the
fair value measurement.
Level 1 - using unadjusted quoted prices for identical instruments in an
active market;
Level 2 - using inputs, other than quoted prices included within Level 1, that
are directly or indirectly observable (based on market data); and
Level 3 - using inputs that are unobservable (for which market data is
unavailable).
The valuation techniques used by the Company are explained
in the accounting policies below.
Unlisted securities are categorised as Level 3. None of the
financial liabilities are designated at fair value through profit or loss
in the Financial Statements.
8. Included in creditors is £568,000 (2025 - £611,000) in respect of the investment management fee.
The creditors above are stated at amortised cost which is a
reasonable approximation to fair value.
Amortisation of the loan arrangement fees during the year
was £nil (2025 - £19,000).
Borrowing facilities
At 31 January 2026
Bank of America - 3 year ¥16,100 million revolving credit
facility maturing 7 November 2027. The rollover date is 12 February 2026.
Drawings: ¥14,840 million.
At 31 January 2025
ING Bank N.V. - 3 year ¥2,000 million revolving credit
facility maturing 3 March 2026.
ING Bank N.V. - 3 year ¥7,000 million revolving credit
facility maturing 23 November 2026.
Bank of America - 3 year ¥7,100 million revolving credit
facility maturing 7 November 2027.
Drawings: ¥16,100 million.
The covenants during the year relating to the ING Bank N.V.
and Bank of America loans were as follows:
(i) Total borrowings shall not exceed 35% of the Company's net
asset value; and
(ii) The Company's minimum net asset value shall be £225 million.
During the year, Bank of America removed covenant (ii).
There were no breaches in loan covenants during the year.
Security has been provided to ING Bank N.V. and Bank of
America in respect of the loans by way of floating charges.
The interest rate, maturity profiles and fair value of the
bank loans are shown in note 18.
During the year, the existing ¥2bn and ¥7bn revolving
credit facilities with ING were cancelled and incorporated into the cheaper
secured revolving credit facility with Bank of America (extended to ¥16.1bn).
9. At 31 January 2026 the Company had remaining authority to buy back 17,628,183 shares. 34,171,228 shares were bought back during the year for total consideration of £42,137,000 (2025 - 30,266,184 shares for a total consideration of £35,219,000). Share buy-backs are funded from the capital reserve.
During the year the Company issued no shares on a non
pre-emptive basis (2025 - no shares).
Between 1 February and 26 March 2026, excluding the shares
bought back as part of the recent 15% unconditional tender, the Company did
not issue any shares and bought back 2,821,169 shares.
10. Analysis of change in net debt
31 January Cash flows Exchange Other 31 January
2025 £'000 movement non-cash 2026
£'000 £'000 changes £'000
£'000
Cash and cash equivalents 20,797 (2,561) (1,547) - 16,689
Loans due within one year (83,676) 6,703 6,868 - (70,105)
(62,879) 4,142 5,321 - (53,416)
11. The Annual Report and Financial Statements will be available on
the Company's website shinnippon.co.uk† on or around 13 April 2026.
12. The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 January 2026 or 2025 but
is derived from those accounts. Statutory accounts for 2025 have been
delivered to the Registrar of Companies, and those for 2026 will be delivered
in due course. The auditor has reported on those accounts; their reports were
(i) unqualified, (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006.
† Neither the contents of the Company's website nor the contents of any
website accessible from hyperlinks on the Company's website (or any other
website) is incorporated into, or forms part of, this announcement.
Glossary of terms and Alternative Performance Measures ('APM')
An alternative performance measure is a financial measure of historical or
future financial performance, financial position, or cash flows, other than a
financial measure defined or specified in the applicable financial reporting
framework. The APMs noted below are commonly used measures within the
investment trust industry and serve to improve comparability between
investment trusts.
Total assets
This is the Company's definition of Adjusted Total Assets, being the total
value of all assets held less all liabilities (other than liabilities in the
form of borrowings).
Net Asset Value
Also described as shareholders' funds, Net Asset Value ('NAV') is the value of
total assets less liabilities (including borrowings). The NAV per share is
calculated by dividing this amount by the number of ordinary shares in issue.
Net Asset Value (borrowings at book value)
Borrowings are valued at adjusted net issue proceeds. The Company's yen
denominated loans are valued at their sterling equivalent and adjusted for
their arrangement fees. The value of the borrowings on this basis is set out
in note 11 on page 103 of the Annual Report and Financial Statements.
Net Asset Value (borrowings at fair value) (APM)
This is a widely reported measure across the investment trust industry.
Borrowings are valued at an estimate of their market worth. The Company's yen
denominated fixed rate loans are fair valued using methodologies consistent
with International Private Equity and Venture Capital Valuation ('IPEV')
guidelines. The value of the borrowings on this basis is set out above. A
reconciliation from NAV (with borrowings at book value) to NAV per ordinary
share (with borrowings at fair value) is provided below.
31 January 2026 31 January 2025
NAV per ordinary share (borrowings at book value) 146.3p 139.4p
Shareholders' funds (borrowings at book value) £358,823,000 £389,690,000
Add: book value of borrowings £70,105,000 £83,676,000
Less: fair value of borrowings (£70,105,000) (£83,676,000)
NAV (borrowings at fair value) £358,823,000 £389,690,000
Shares in issue at year end 245,320,073 279,491,301
NAV per ordinary share (borrowings at fair value) 146.3p 139.4p
Premium/discount (APM)
As stockmarkets and share prices vary, an investment trust's share price is
rarely the same as its NAV. When the share price is lower than the NAV per
share it is said to be trading at a discount. The size of the discount is
calculated by subtracting the NAV per share from the share price and is
usually expressed as a percentage of the NAV per share. If the share price is
higher than the NAV per share, this situation is called a premium.
2026 2026 2025 2025
NAV (book) NAV (fair) NAV (book) NAV (fair)
Closing NAV per share 146.3p 146.3p 139.4p 139.4p
Closing share price 135.4p 135.4p 119.0p 119.0p
Discount (7.5%) (7.5%) (14.6%) (14.6%)
The average discount/premium (APM) as disclosed above is calculated by taking
an average of the daily discount/premium percentage using NAV (with borrowings
at fair value) for the relevant periods.
Ongoing charges (APM)
The total expenses (excluding borrowing costs) incurred by the Company as a
percentage of the average NAV (with borrowings at fair value). The ongoing
charges have been calculated on the basis prescribed by the Association of
Investment Companies.
A reconciliation from the expenses detailed in the Income statement above is
provided below:
31 January 2026 31 January 2025
Investment management fee £2,270,000 £2,482,000
Other administrative expenses £889,000 £714,000
Less: Non-recurring expenses* (£240,000) -
Total expenses (a) £2,920,000 £3,196,000
Average daily cum-income NAV (b) £359,484,000 £401,677,000
(with borrowings at fair value)
Ongoing charges (a) as a percentage of (b) 0.81% 0.80%
* Comprises the total costs incurred in connection with the share premium
account cancellation and the 2026 Tender Offer.
Total return (APM)
The total return is the return to shareholders after reinvesting the net
dividend on the date that the share price goes ex-dividend.
2026 2026 2025 2025
NAV (book) Share price NAV (book) Share price
Closing NAV per share/share price (a) 146.3 135.4 139.4 119.0
Dividend adjustment factor* (b) 1.0047 1.0058 1.0059 1.0076
Adjusted closing NAV (c = a x b) 147.0 136.2 140.2 119.9
per share/share price
Opening NAV per share/share price (d) 139.4 119.0 147.8 126.2
Total return (c ÷ d)-1 5.4% 14.4% (5.1%) (5.0%)
* The dividend adjustment factor is calculated on the assumption that the
dividend of 0.60p (2025 - 0.80p) paid by the Company during the year was
reinvested into shares of the Company at the cum income NAV per share/share
price, as appropriate, at the ex-dividend date.
Gearing (APM)
At its simplest, gearing is borrowing. Just like any other public company, an
investment trust can borrow money to invest in additional investments for its
portfolio. The effect of the borrowing on the shareholders' assets is called
'gearing'. If the Company's assets grow, the shareholders' assets grow
proportionately more because the debt remains the same. But if the value of
the Company's assets falls, the situation is reversed. Gearing can therefore
enhance performance in rising markets but can adversely impact performance in
falling markets.
Gearing represents borrowings at book less cash and cash equivalents expressed
as a percentage of shareholders' funds.
Gross gearing is the Company's borrowings expressed as a percentage of
shareholders' funds.
31 January 2026 31 January 2025
Gearing * Gross gearing (†) Gearing * Gross gearing (†)
£'000 £'000 £'000 £'000
Borrowings (a) 70,105 70,105 83,676 83,676
Cash and cash equivalents (b) 16,689 - 20,797 -
Shareholders' funds (c) 358,823 358,823 389,690 389,690
14.9% 19.5% 16.1% 21.5%
* Gearing: ((a) - (b)) ÷ (c), expressed as a percentage.
† Gross gearing: (a) ÷ (c), expressed as a percentage.
Leverage
For the purposes of the Alternative Investment Fund Managers (AIFM)
Regulations, leverage is any method which increases the Company's exposure,
including the borrowing of cash and the use of derivatives. It is expressed as
a ratio between the Company's exposure and its NAV and can be calculated on a
gross and a commitment method. Under the gross method, exposure represents the
sum of the Company's positions after the deduction of sterling cash balances,
without taking into account any hedging and netting arrangements. Under the
commitment method, exposure is calculated without the deduction of sterling
cash balances and after certain hedging and netting positions are offset
against each other.
Active share (APM)
Active share, a measure of how actively a portfolio is managed, is the
percentage of the quoted equity portfolio that differs from its comparative
index. It is calculated by deducting from 100 the percentage of the portfolio
that overlaps with the comparative index. An active share of 100 indicates no
overlap with the index and an active share of zero indicates a portfolio that
tracks the index.
Net liquid assets
Net liquid assets comprise current assets less current liabilities, excluding
borrowings.
Share split
A share split (or stock split) is the process by which a company divides its
existing shares into multiple shares. Although the number of shares
outstanding increases, the total value of the shares remains the same with
respect to the pre-split value.
Treasury shares
The Company has the authority to make market purchases of its ordinary shares
for retention as treasury shares for future reissue, resale, transfer, or for
cancellation. Treasury shares do not receive distributions and the Company is
not entitled to exercise the voting rights attaching to them.
Private (unlisted) company
A private (unlisted) company means a company whose shares are not available to
the general public for trading and not quoted on a stock exchange.
Turnover
Turnover is calculated as the minimum of purchases and sales in a month,
divided by the average market value of the portfolio, summed to get rolling 12
month turnover data.
Third party data provider disclaimer
No third party data provider ('Provider') makes any warranty, express or
implied, as to the accuracy, completeness or timeliness of the data contained
herewith nor as to the results to be obtained by recipients of the data. No
Provider shall in any way be liable to any recipient of the data for any
inaccuracies, errors or omissions in the index data included in this document,
regardless of cause, or for any damages (whether direct or indirect) resulting
therefrom.
No Provider has any obligation to update, modify or amend the data or to
otherwise notify a recipient thereof in the event that any matter stated
herein changes or subsequently becomes inaccurate.
Without limiting the foregoing, no Provider shall have any liability
whatsoever to you, whether in contract (including under an indemnity), in tort
(including negligence), under a warranty, under statute or otherwise, in
respect of any loss or damage suffered by you as a result of or in connection
with any opinions, recommendations, forecasts, judgements, or any other
conclusions, or any course of action determined, by you or any third party,
whether or not based on the content, information or materials contained
herein.
MSCI Index data
Source: MSCI. The MSCI information may only be used for your internal use, may
not be reproduced or redisseminated in any form and may not be used as a basis
for or a component of any financial instruments or products or indices. None
of the MSCI information is intended to constitute investment advice or a
recommendation to make (or refrain from making) any kind of investment
decision and may not be relied on as such. Historical data and analysis should
not be taken as an indication or guarantee of any future performance analysis,
forecast or prediction.
The MSCI information is provided on an 'as is' basis and the user of this
information assumes the entire risk of any use made of this information.
MSCI, each of its affiliates and each other person involved in or related to
compiling, computing or creating any MSCI information collectively, the 'MSCI
Parties' expressly disclaims all warranties (including, without limitation,
any warranties of originality, accuracy, completeness, timeliness,
non-infringement, merchantability and fitness for a particular purpose) with
respect to this information. Without limiting any of the foregoing, in no
event shall any MSCI Party have any liability or any direct, indirect,
special, incidental, punitive, consequential (including, without limitation,
lost profits) or any other damages (msci.com).
Automatic Exchange of Information
In order to fulfil its obligations under UK tax legislation relating to the
automatic exchange of information, Baillie Gifford Shin Nippon PLC is
required to collect and report certain information about certain shareholders.
The legislation requires investment trust companies to provide personal
information to HMRC on certain investors who purchase shares in investment
trusts. Accordingly, Baillie Gifford Shin Nippon PLC must provide information
annually to the local tax authority on the tax residencies of a number of
non‑UK based certificated shareholders and corporate entities.
Shareholders, excluding those whose shares are held in CREST, who come on to
the share register will be sent a certification form for the purposes of
collecting this information.
For further information, please see HMRC's Quick Guide: Automatic Exchange of
Information - information for account holders
gov.uk/government/publications/exchange-of-information-account-holders.
Sustainable Finance Disclosure Regulation ('SFDR')
The EU Sustainable Finance Disclosure Regulation ('SFDR') does not have a
direct impact in the UK due to Brexit, however, it applies to third-country
products marketed in the EU. As Shin Nippon is marketed in the EU by the AIFM,
BG & Co Limited, via the National Private Placement Regime ('NPPR') the
following disclosures have been provided to comply with the high-level
requirements of SFDR.
The AIFM has adopted Baillie Gifford & Co's stewardship principles and
guidelines as its policy on integration of sustainability risks in
investment decisions.
Baillie Gifford & Co believes that a company cannot be financially
sustainable in the long run if its approach to business is fundamentally out
of line with changing societal expectations. It defines 'sustainability' as a
deliberately broad concept which encapsulates a company's purpose, values,
business model, culture, and operating practices.
Baillie Gifford & Co's approach to investment is based on identifying and
holding high quality growth businesses that enjoy sustainable competitive
advantages in their marketplace. To do this it looks beyond current financial
performance, undertaking proprietary research to build up an in-depth
knowledge of an individual company and a view on its long-term prospects.
This includes the consideration of sustainability factors (environmental,
social and/or governance matters) which it believes will positively or
negatively influence the financial returns of an investment. The likely
impact on the return of the portfolio from a potential or actual material
decline in the value of investment due to the occurrence of
an environmental, social or governance event or condition will vary and will
depend on several factors including but not limited to the type, extent,
complexity and duration of an event or condition, prevailing market conditions
and existence of any mitigating factors.
Whilst consideration is given to sustainability matters, there are no
restrictions on the investment universe of the Company, unless otherwise
stated within in its investment objective & policy. Baillie Gifford &
Co can invest in any companies it believes could create beneficial long-term
returns for investors. However, this might result in investments being made in
companies that ultimately cause a negative outcome for the environment or
society.
More detail on the Manager's approach to sustainability can be found in the
stewardship principles and guidelines document, available publicly on the
Baillie Gifford website bailliegifford.com and by scanning the QR code below.
The underlying investments do not take into account the EU criteria for
environmentally sustainable economic activities established under the EU
Taxonomy Regulation.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
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RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
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. END FR FLFSTVVIIVIR
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