The Baillie Gifford Japan Trust PLC (LON:BGFD) has announced its results for the six months to 28 February 2026

The following is the unaudited Interim Financial Report for the six months to 28 February 2026 which was approved by the Board on 1 April 2026.

In the six months to 28 February 2026, The Baillie Gifford Japan Trust’s net asset value total return per share was 4.4% and the share price total return was 6.1%. The TOPIX total return (in sterling terms) was 22.4%.

– Performance lagged the benchmark, with several of the portfolio’s largest growth holdings detracting despite continued positive operational progress. The largest detractors from relative performance were CyberAgent, GMO Internet Group, Rakuten, SBI Holdings and GA Technologies. The Manager remains positive on their long-term prospects, noting improving profitability, restructuring initiatives and the opportunity presented by AI adoption.

– Sumitomo Metal Mining was the largest contributor to performance over the period.

– The Manager made new additions to high-growth opportunities, including Yaskawa Electric and Harmonic Drive, increasing exposure to the theme of “physical AI”.

– During the period, the Company bought back 2,925,000 shares (3.8% of issued share capital), which was NAV accretive for shareholders (0.4%).

– The share price outperformed the NAV, reflecting a narrowing of the discount over the period.

– Given that the forecast sales and earnings growth are ahead of the market, yet the portfolio trades at a meaningful discount to the market on a price to earnings and EV to EBIT basis, the Manager believes that this represents significant opportunity. 

Chair’s Statement

Having taken over as Chair of Baillie Gifford Japan Trust at the AGM in December 2025, this is my first report to you as shareholders.

First, I would like to thank David Kidd for his dedicated service over many years as, variously, Non-Executive Director, Senior Independent Director and ultimately Chairman of the Company. We will greatly miss David’s wisdom, insightful questioning and humour and wish him well for the future.

Second, I am pleased to welcome Robert Talbut, who joined the Board as a Non-Executive Director on 2 March 2026. Robert was appointed following a rigorous market search carried out by an independent professional search firm, with interviews conducted by the Board. He brings to the Board substantial investment management experience from an executive career in the industry encompassing hands-on investing through to team and investment process management as well as significant experience of the investment trust industry from the multiple boards on which he has served.

Performance

The net asset value (NAV) total return over the first half of the Company’s financial year was 4.4%, compared with 22.4% for the TOPIX total return (in sterling terms), the Company’s benchmark. The share price total return over the period was 6.1% and so the discount to NAV of the Company’s shares narrowed from 11.4% to 10.1%.

Analysis of performance over the five years to the last financial year end shows a period of relative under-performance against the benchmark following the end of COVID when rising inflation and interest rates created a more challenging environment for the Manager’s growth investment style. The extent of under-performance during that period impacted the Company’s longer-term record and led the Board to intensify its engagement with the Manager to understand better the factors driving performance and to challenge various aspects of the investment process.

However, shareholders will recall that in the year to 31 August 2025, the last financial year of the Company, NAV increased by 20.5%, outperforming the benchmark by 8.4% and suggesting a return to favour of growth investing in Japan and the performance potential at such inflection points. It is therefore disappointing to report that the Company has reverted to significant under-performance in the first half of the current year, offsetting the benefit of last year’s relative returns. Needless to say, performance remains the Board’s foremost priority and we will continue to challenge the Manager on the strategy and its implementation.

Further details on performance are provided in the Manager’s Report below.

Share Buybacks

As noted, over the six-month period to 28 February 2026, the share price discount to NAV narrowed from 11.4% to 10.1%. The Board continues to believe that, if the Company’s shares trade at anything beyond a high single-digit discount, this presents an attractive opportunity to add value for shareholders through buybacks. During the reporting period, 2,925,000 shares were repurchased for a total consideration of £26.9 million, representing 3.8% of the Company’s issued share capital. This increased the Company’s net asset value by 0.4%. The repurchased shares are held in Treasury and are available to be reissued, at a premium, when market conditions allow.

Outlook

I would like to take this opportunity to remind readers of the attractions of Japan as an investment market, which include:

•         It is a wealthy, educated and democratic country with a high degree of political and social stability, underpinned by strong institutions, and which boasts the fourth-largest economy in the world;

•         a deep and liquid equity market which, unusually among developed markets, continues to see growth in new listings, thereby expanding the opportunity set and offering diversification for investors concerned about over-concentration elsewhere;

•         global leadership across a range of advanced technologies, alongside a range of internationally recognised branded goods companies and content owners/creators;

•         a market that remains relatively under-researched compared to a number of its developed market peers, offering potential excess return opportunities for active investors;

•         ongoing improvements in corporate governance and increased focus on capital efficiency, contributing to more shareholder-oriented policies; and

•         a currency which, on a number of measures, is presently materially under-valued relative to economic fundamentals.

Japan also faces well-known demographic challenges which weigh on overall economic growth, a situation which supports the thesis that the growth companies in which your Company invests should command a premium valuation over time. Your Manager remains confident that the growth the portfolio holdings offer is highly attractive relative to their valuations. That said, arguably this thesis has not been borne out by the Company’s performance and is potentially further challenged, at least in the near term, by the policy direction of Japan’s new Prime Minister. The Board is giving close consideration to this central issue, alongside continued scrutiny of the investment process and remains focused on building value for shareholders over the long term.

Sam Davis

Chair, Baillie Gifford Japan Trust PLC

1 April 2026