Softbank helps Baillie Gifford Japan beat benchmark

Baillie Gifford's current Edinburgh HQ

The £1 billion Baillie Gifford Japan Trust plc said on Wednesday its net asset value total return rose 6.8% compared to the 0.1% fall in the benchmark TOPIX index total return over the year to August 31, 2020.

The investment trust’s share price total return rose what it called a “more modest” 3.7%.

A final dividend of 4.50p (2019: 3.50p) per ordinary share will be put to shareholders for approval at the closed-end fund’s AGM.

The fund is managed by Baillie Gifford, the Edinburgh-based fund management group with around £285 billion under management and advice.

The largest contributor to the performance of the Baillie Gifford Japan Trust this year was Softbank Group.

There were also good contributions to performance from a variety of internet companies including GMO Internet, M3, and Demae-Can.

About 33% of the fund’s portfolio is in internet related businesses and a further 14% in automation related businesses.

The Baillie Gifford Japan Trust aims to achieve long term capital growth principally through investment in medium to smaller sized Japanese companies “which are believed to have above average prospects for growth.”

Baillie Gifford Japan Trust chairman Keith Falconer said in his report: “In the year to 31 August, after deducting borrowings at fair value, the net asset value total return was 6.8%. 

“However, with the premium of 0.2% enjoyed last year falling to a discount of 2.7%, the rise in share price total return was a more modest 3.7%. 

“The benchmark index fell by 0.1 % over the same period. 

“You do not need to be reminded that equity markets have been extremely volatile, reflecting the uncertainty of the pandemic that has swept the world …

“The share price started the year at 791.0p, fell to a low of 514.0p in the middle of March, before retracing its steps to roughly where it started. 

“Given the extraordinary uncertainties, the performance was better than we might have expected, and it beat inflation albeit by a small margin …

“Revenues in 2020 were £15,337,000, a rise of 13.6% from 2019. 

“It is very encouraging that Japanese companies are able to offer rising dividends as well as capital returns and, by selecting suitable companies, we hope this trend will continue …

“Baillie Gifford are stock pickers and have proved to be rather good at it. 

“We should have faith that this success will continue and your Trust’s shares will offer, over the long term at least, inflation beating returns that amply reward the shareholders.”