(Alliance News) - Baillie Gifford Japan Trust PLC on Wednesday hiked its dividend but said it underperformed against its benchmark in its most recent financial year, with Outsourcing Inc and ZOZO Inc the two weakest performers.
FTSE 250 constituent Baillie Gifford Japan intends to pay a final 3.50 pence per share dividend - hiked sharply from a 0.60p final dividend the year before
The small-to-medium sized Japanese companies investor said its net asset value total return for its year ended August 31 fell 5.3% after deducting borrowings at fair value. Its benchmark, the TOPIX index total return in sterling terms, fell only 0.5% in the same period.
NAV per share fell to 792.1p on August 31 from 835.8p the year before.
Manager Baillie Gifford said: "As we noted last year, following a year when performance was significantly ahead of the benchmark, Baillie Gifford believes that performance should be measured over longer periods. Over five years the NAV has outpaced the benchmark by 7.8% [per annum] and over ten years by 9.4% pa, demonstrating the benefit to shareholders of an active, long-term, growth-orientated approach to investing. Volatility and short-term setbacks are inevitable when pursuing this approach but this, in our view, should not distract from the significant value that can be created over the long-term."
In terms of investments, staffing business Outsourcing was a weak performer in the year, which the manager put down to "the perception that tougher macro conditions might impact the business". Baillie Gifford said it was still "happy" backing the firm and has further increased its holding.
Online fashion retailer ZOZO was also a weak point for the trust, and Baillie Gifford was concerned when ZOZO's board opted to approve an options package to its boss "that seemed excessive relative to the performance hurdles needed to achieve it". As such, Baillie Gifford Japan has shrunk its holding. However, Softbank-controlled Yahoo Japan has made a bid to take majority control of ZOZO so the trust "may end up continuing to own the business indirectly".
Baillie Gifford Japan Chair Nick Bannerman said: "As was the case in my last report, there remain some political tensions in the region. The deterioration in US-China trade relations has increased US pressure on its trade relations with Japan, and a downturn in Japan-South Korea relations is straining US-Japan-South Korea cooperation over East Asian security issues. Ongoing missile testing by North Korea is adding to tensions. Despite these macro issues, we remain positive on the outlook for investments in the Baillie Gifford Japan Trust portfolio over the medium to longer term."
By Anna Farley; annafarley@alliancenews.com
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Baillie Gifford Japan Trust PLC (BGFD)