Additional Material from October 2026 Newsletter

We could not squeeze this comment on Baillie Gifford Shin Nippon (BGS) into our busy October newsletter, due out this coming weekend, so we are posting it here for subscribers.

On 30^th September Winterflood issued a note on its client trust Billie Gifford Shin Nippon (BGS, 174.6p), suggesting that its recent recovery may mark the start of a turnaround.  The growth-oriented Japanese smaller companies trust returned 27% in NAV terms over the six months to late September, against 14% from the MSCI Japan Small Cap Index. Over one year it was also ahead, returning 30% versus 24%. Winterflood attributes the improvement partly to renewed demand for growth stocks and AI-related holdings, but also to changes introduced by managers Brian Lum and Jared Anderson since May 2025.  Their revised process puts greater emphasis on valuation, position sizing and unintended correlations. The portfolio has fallen to 62 holdings, with a target of 50–60, while some AI beneficiaries have been trimmed to reduce common risks. Winterflood estimates three-year annualised sales and earnings growth of 12.1% and 17.2%, versus 4.2% and 10.1% for the benchmark. The broker concludes “the shares currently trade at a discount of -9%, in line with the 12-month average rating. We view this as an attractive entry point, with downside discount risk mitigated by the active buyback programme (8% of share capital repurchased over 2026 year to date) and think there is potential for a material re-rating if the turnaround in performance can be sustained, with the fund having traded at a premium to NAV for sustained periods pre-2022.”