The £880 million Baillie Gifford Japan Trust plc said its net asset value total return per share was 17.7% in the year to August 31, 2026, compared with a 26.7% total return from the TOPIX index (in sterling terms).

Baillie Gifford Japan Trust’s share price total return was 20.9%, with the investment trust’s discount to net asset value narrowing from 11.4% to 9.1%.

“Performance improved significantly in the second half of the financial year, with the company’s net asset value total return of 12.7% outperforming the 3.5% return from TOPIX (in sterling terms),” said Baillie Gifford Japan Trust.

“As a result of the board’s engagement with the managers, we have agreed the introduction of a conditional tender offer for up to 25% of the company’s shares, to be triggered in the event that the company’s NAV total return (cum income, debt at fair value) over the three-year period to 31 August 2029 fails to exceed that of the TOPIX total return (in sterling terms) over the same period.

“If the tender offer were to be triggered, it would be undertaken at a 2.0% discount to the formula asset value (FAV), being the net asset value attributable to the tendered shares less costs and expenses of the tender offer; and would be subject to approval by shareholders at a General Meeting of the company.

“The introduction of this measure reflects the importance that the board attaches to the recent upturn in performance being achieved on a more sustained basis in the future.

‘A final dividend of 10p per ordinary share (2025: 10p per ordinary share) will be put to shareholders for approval at the Annual General Meeting.

“During the year, the company repurchased 12,666,500 shares for a total consideration of £116.9 million, representing 16.3% of the company’s issued share capital as at 31 August 2025. These buybacks increased the company’s net asset value per share for continuing shareholders by 1.7%.

“The most significant positive contributors to relative performance were Murata (+1.6ppt), Sumitomo Metal Mining (+1.1ppt), SoftBank Group (+1.1ppt) and Sumitomo Mitsui Trust Group (+1.0ppt).

“Murata and SoftBank Group benefited from increasing appreciation of their exposure to the opportunities presented by artificia intelligence (AI), while Sumitomo Metal Mining benefited from firm commodity prices and Sumitomo Mitsui Trust Group from rising Japanese interest rates.

“During the year eight new holdings were purchased and ten were sold. New investments included Yaskawa Electric and Harmonic Drive Systems, which the managers believe are well placed to benefit from the development of Physical AI and industrial automation, and Tokyo Electron and Shin-Etsu Chemical, which provide  exposure to continuing investment in semiconductor and computing capacity.

“The Managers continue to see substantial opportunities for long-term growth investing in Japan. In particular, they believe the development and adoption of AI will create significant opportunities for growth companies, while the portfolio’s holdings offer historic and expected sales growth ahead of the wider   market and trade at attractive valuations.

“The managers also believe the materially  undervalued yen provides scope for additional returns for sterling-based investors should it appreciate.”