Baillie Gifford Japan Trust declares dividend, soundly beats Topix

The Baillie Gifford Japan Trust's stock picking paid dividends over its latest financial year as it soundly beat its benchmark.

For the year ending on 31 August, the trust posted a 22.1% jump in its net asset value, soundly outperforming the Japanese TOPIX index's 7.8% total return in Sterling terms over the same time horizon.

To take note of, the day before, Japan's Nikkei-225 had run-up to its best level in nearly 27 years and the Topix, which includes all companies on the Tokyo Stock Exchange's first section, was also trading at its best levels since late 1991 after a near three decade long sojourn.

However, trading on an average forward price-to-earnings multiple of 14, according to Bloomberg data, versus the Nikkei on 17, the Topix was cheaper.

Such returns were chiefly due to successful stock selection (10.5%) according to management, with an additional benefit from gearing (1.7%) which at period-end stood at 11% of shareholders' funds.

It also benefitted from a drop in the value of Sterling against the Japanese currency over the same period.

By period-end, the company had £870.6m under management before deducting £114.5m of bank loans.

Chairman Nick Bannerman stressed that the trust's strategy remained focused on the long-term, pointing to its "impressive" five and 10-year record, highlighting that it had a bumber of successes in the Internet area during the year, including with online broker SBI, internet advertiser CyberAgent and internet investor Digital Garage.

The trust said it had sold eight holdings and bought eight new ones over the course of the year, including Katitas and Mercari, both of which were purchased when they listed.

During the period, it had also managed the departure of Sarah Whitley, on 30 April, who left after having managed the company's portfolio since 1991, who was succeeded by Mathew Brett and Praveen Kumar.

It also moved out of a revenue reserve deficit and into a revenue reserve surplus of £475,000, which the company said it would distribute in full in order to maintain investment trust status, supplemented by a "small" distribution from its realised capital reserves.

"In future, the intention is not to make distributions from capital as the Board is firmly of the view that capital growth remains the focus of the Company," the trust said in a statement.

A final dividend of 0.60p per share was declared, versus zero in 2017.

As of 1044 BST, shares of the Baillie Gifford Japan Trust, which had joined the FTSE 250 in march, were off by 0.23% to 864.0p.