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<p><strong>As with any investment, your capital is at risk. Past performance is not a guide to future returns.</strong></p>
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<p><strong>Brian Lum:</strong> It has been a year of transition for Baillie Gifford Shin Nippon Investment Trust. When Jared and I took over in May last year, we did so with a real sense of excitement, but also a clear understanding of the challenges. We know that a longer-term performance has been poor, and 2025 proved to be another difficult year. Our net asset value rose by 5.4 percent, while the comparative index was up 21.5 percent. Our style remained badly out of favour. Rising interest rates in Japan hit growth stock valuations hard as future profits count for less.</p>
<p>At the same time, Japan’s corporate governance reforms have lifted Japan’s value-orientated businesses through buybacks, activism or takeover speculations. This is not where we play. And the weak yen, which returned to near historic lows after the October election, added further pressure on our domestically biased portfolio. The good news is that we delivered a positive absolute return in net asset value for the first time in five years, along with a slightly recovering share price. This is encouraging, but only a starting point.</p>
<p>So, what have Jared and I been doing? We have looked through every stock in the portfolio. We have stuck to our growth philosophy, and we have sharpened our processes. For example, we’ve introduced a position sizing framework. It sounds technical, but the idea is straightforward. We categorise every holding into one of four growth profiles: emerging prospects, rapid scalers, cyclical gainers and proven winners.</p>
<p>And we size positions accordingly. A pre-revenue start-up should be a small position, even if conviction is high. A proven winner, on the other hand, should carry more weight. All of this is shared in the annual report. And this framework improves our discipline and also conveys accountability.</p>
<p>Now onto the new buys. We’ve taken advantage of our expanded investment universe. We can now invest in companies above ¥150bn in market cap. And we’ve put that to work. For example, we bought a stake in Seiko Group, which is gradually repositioning its product mix from affordable watches towards luxury Grand Seiko timepieces that often retail for over £5,000. It is a genuine premiumisation story.</p>
<p>We bought JMDC, a healthcare big data company, at an early stage of monetising its proprietary database. Another is Kasumigaseki Capital, a fast-growing real estate company which focuses on niches such as cold chain storage and group stay hotels. We are excited about these, and there is genuine variety here. On the other side, we exited a dozen positions since we took over. It is a mix of taking profits, such as drugstore chain Matsukiyo Cocokara, exiting positions that are not developing as well as we hoped, such as biotech CellSource, and some names were simply acquired.</p>
<p>For example, Moneytree, which is an unlisted company where we doubled our money over our holding period. One theme we are particularly excited about is what we’re calling our hidden AI champions. Japanese smaller companies aren’t where most people look for AI exposure, but that’s exactly the point. We’ve added to JEOL, which makes an essential piece of equipment for producing the world’s most advanced chips, and Kohoku Kogyo, the dominant supplier of a component called optical isolators, used in subsea data cables and data centres. These aren’t the household names, but that’s what makes them interesting.</p>
<p>The portfolio now stands at 63 holdings, and we are working towards a tighter range of 50 to 60. This enables a more focused research agenda and deeper corporate engagements. Nearly one year into my role, I’m genuinely excited by our holdings and the Japanese smaller companies universe. Now, Japan’s structural challenges, ageing demographics, a shrinking workforce and low productivity are all real, but these are precisely the opportunities for our companies in the long run. And AI may well be the productivity catalyst that Japan has been waiting for.</p>
<p>Even higher interest rates and inflation, painful as they are in the short term, can be good news as they ultimately reward companies with pricing power and those that can use capital in the most productive way. Our optimism is also built on valuations. We expect our companies to grow significantly faster than the benchmark, both in terms of sales and profits. And yet, it trades on a discount to the broader market according to some measures. None of these guarantees a quick recovery.</p>
<p>And we can remain out of favour for longer than we would like. But we believe there are exciting, overlooked opportunities for us, and we have an improved investment process to take advantage of those. Thank you, as always, for your continued support. For more details, we invite you to read the Trust’s latest annual report on our website, and we look forward to seeing many of you at the next AGM.</p>
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<h3>Annual past performance to 31 March each year (net%)</h3>
<table border="1" style="border-collapse: collapse; width: 100%; height: 196.055px;">
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<td style="width: 38.6401%; height: 37.1016px;"> </td>
<td style="width: 12.6036%; text-align: right; height: 37.1016px;"><strong>2022</strong></td>
<td style="width: 12.272%; text-align: right; height: 37.1016px;"><strong>2023</strong></td>
<td style="width: 12.272%; text-align: right; height: 37.1016px;"><strong>2024</strong></td>
<td style="width: 12.4378%; text-align: right; height: 37.1016px;"><strong>2025</strong></td>
<td style="width: 11.7745%; text-align: right; height: 37.1016px;"><strong>2026</strong></td>
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<tr style="height: 51.5938px;">
<td width="302" style="width: 38.6401%; height: 51.5938px;">
<p>Baillie Gifford Shin Nippon PLC</p>
</td>
<td width="38" style="width: 12.6036%; text-align: right; height: 51.5938px; vertical-align: bottom;">
<p>-25.2</p>
</td>
<td width="66" style="width: 12.272%; text-align: right; height: 51.5938px; vertical-align: bottom;">
<p>-14.0</p>
</td>
<td width="66" style="width: 12.272%; text-align: right; height: 51.5938px; vertical-align: bottom;">
<p>-20.9</p>
</td>
<td width="66" style="width: 12.4378%; text-align: right; height: 51.5938px; vertical-align: bottom;">
<p>-9.0</p>
</td>
<td width="66" style="width: 11.7745%; text-align: right; height: 51.5938px; vertical-align: bottom;">
<p>22.8</p>
</td>
</tr>
<tr style="height: 53.6719px;">
<td width="302" style="width: 38.6401%; height: 53.6719px;">
<p>NAV</p>
</td>
<td width="38" style="width: 12.6036%; text-align: right; height: 53.6719px; vertical-align: bottom;">
<p>-22.9</p>
</td>
<td width="66" style="width: 12.272%; text-align: right; height: 53.6719px; vertical-align: bottom;">
<p>-4.9</p>
</td>
<td width="66" style="width: 12.272%; text-align: right; height: 53.6719px; vertical-align: bottom;">
<p>-12.3</p>
</td>
<td width="66" style="width: 12.4378%; text-align: right; height: 53.6719px; vertical-align: bottom;">
<p>-13.6</p>
</td>
<td width="66" style="width: 11.7745%; text-align: right; height: 53.6719px; vertical-align: bottom;">
<p>15.7</p>
</td>
</tr>
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<td width="302" style="width: 38.6401%; height: 53.6875px;">
<p>MSCI Japan Small Cap Index</p>
</td>
<td width="38" style="width: 12.6036%; text-align: right; height: 53.6875px; vertical-align: bottom;">
<p>-7.7</p>
</td>
<td width="66" style="width: 12.272%; text-align: right; height: 53.6875px; vertical-align: bottom;">
<p>5.4</p>
</td>
<td width="66" style="width: 12.272%; text-align: right; height: 53.6875px; vertical-align: bottom;">
<p>12.4</p>
</td>
<td width="66" style="width: 12.4378%; text-align: right; height: 53.6875px; vertical-align: bottom;">
<p>1.4</p>
</td>
<td width="66" style="width: 11.7745%; text-align: right; height: 53.6875px; vertical-align: bottom;">
<p>26.2</p>
</td>
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</tbody>
</table>
<p><span class="source-text"><strong>Source:</strong> Morningstar, MSCI. Share price, total return in sterling.</span></p>
<p><strong>Past performance is not a guide to future returns.</strong></p>
<p><span class="source-text" lang="EN-US">Legal Notices Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indexes or any securities or financial products. This report is not approved, endorsed, reviewed or produced by MSCI. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. </span></p>
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<p><strong>Important information</strong></p>
<p><span lang="EN-US">This communication was produced and approved in May 2026 and has not been updated subsequently. It represents views held at the time of recording and may not reflect current thinking.</span></p>
<p><span lang="EN-US">This communication should not be considered as advice or a recommendation to buy, sell or hold a particular investment. This communication contains information on investments which does not constitute independent investment research. Accordingly, it is not subject to the protections afforded to independent research and Baillie Gifford and its staff may have dealt in the investments concerned. </span></p>
<p><span lang="EN-US">The investment trusts managed by Baillie Gifford & Co Limited are listed UK companies and are not authorised or regulated by the FCA. The value of their shares, and any income from them, can fall as well as rise and investors may not get back the amount invested. </span></p>
<p><span lang="EN-US">Baillie Gifford & Co and Baillie Gifford & Co Limited is authorised and regulated by the Financial Conduct Authority (FCA).</span></p>
<p><span lang="EN-US">A Key Information Document is available at bailliegifford.com.</span></p>
<p> </p>
<p><span lang="EN-US">The specific risks associated with the Trust include: </span></p>
<p><span lang="EN-US">– The Trust invests in overseas securities. Changes in the rates of exchange may also cause the value of your investment (and any income it may pay) to go down or up.</span></p>
<p><span lang="EN-US">– Unlisted investments such as private companies can increase risk. These assets may be more difficult to sell, so changes in their prices may be greater. </span></p>
<p><span lang="EN-US">– The Trust can borrow money to make further investments (sometimes known as "gearing" or "leverage"). The risk is that when this money is repaid by the Trust, the value of the investments may not be enough to cover the borrowing and interest costs, and the Trust will make a loss. If the Trust's investments fall in value, any invested borrowings will increase the amount of this loss. </span></p>
<p><span lang="EN-US">– Values for securities which are difficult to trade such as private companies may not be readily available and there can be no assurance that any value assigned to such securities will accurately reflect the price the Trust might receive upon their sale. </span></p>
<p><span lang="EN-US">– The Trust can make use of derivatives which may impact on its performance. </span></p>
<p><span lang="EN-US">– Investment in smaller companies is generally considered higher risk as changes in their share prices may be greater and the shares may be harder to sell. Smaller companies may do less well in periods of unfavourable economic conditions. </span></p>
<p><span lang="EN-US">– The Trust's exposure to a single market and currency may increase risk. </span></p>
<p><span lang="EN-US">– Share prices may either be below (at a discount) or above (at a premium) the net asset value (NAV). The Trust may issue new shares when the price is at a premium which may reduce the share price. Shares bought at a premium may have a greater risk of loss than those bought at a discount. </span></p>
<p><span lang="EN-US">– The Trust can buy back its own shares. The risks from borrowing, referred to above, are increased when a trust buys back its own shares.</span></p>
<p><span lang="EN-US">– The aim of the Trust is to achieve capital growth and it is unlikely that the Trust will provide a steady, or indeed any, income. </span></p>
<p><span lang="EN-US">– The Trust is listed on the London Stock Exchange and is not authorised or regulated by the Financial Conduct Authority. The information and opinions expressed are subject to change without notice. This information does not in any way constitute investment advice or an offer or invitation to deal in securities.</span><span lang="EN-US"></span></p>
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<p><span class="source-text">195708 10062697</span></p>
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