Baillie Gifford Shin Nippon aims to maximise capital returns by investing in the equity of Japanese smaller companies. The management team, led by Praveen Kumar since 2016, are long-term growth investors, and aim to identify disruptive companies which will be long-term winners and to hold them through cyclical changes in sentiment and revenues until their potential is realised. The approach is ultra-long term and ultra-active. The active share of the portfolio was 94% at the end of the last financial year, meaning that there is very little overlap between the trust and the MSCI Japan Small Cap index. The turnover last year was 18.7%, consistent with an average holding period of 5 years, while almost 23% of the portfolio is held in stocks which the trust had owned for over 10 years. The trust has handsomely outperformed the index and peer group over the longer run, leading to its current premium rating. Over five years, the NAV total return is 218% compared to just 135% for the average Japanese smaller company trust and 97% for the Topix. The trust trades on a 2% premium compared to a 3.6% five-year average. The trust has structural gearing worth around 11% of NAV at current levels. While this has been a long-term tailwind, it did hinder returns in 2018 when the Japanese market fell, although this was offset by good stock-picking. Praveen took over management in 2016 and works with 10 other members of the Japanese Equities team with a collaborative approach to a clearly-defined style that is followed across the funds on the desk. The management fee was reduced slightly in December 2018 as the trust has continued to pass benefits of scale on to investors (the premium rating has allowed the trust to grow significantly over the past few years by issuing new stock). It is the cheapest AIC Japanese Smaller Companies trust on an OCF basis.