Annual Report and
Financial Statements
The Baillie Gifford
Japan Trust PLC
31 August 2023
Notes
None of the views expressed in this document
should be construed as advice to buy or sell a
particular investment.
Investment trusts are UK public listed companies
and as such comply with the requirements of the
UK Listing Authority. They are not authorised or
regulated by the Financial Conduct Authority (FCA).
The Baillie Gifford Japan Trust PLC currently
conducts its affairs, and intends to continue to
conduct its affairs, so that the Company’s ordinary
shares can qualify to be considered as a mainstream
investment product and can be recommended by
Independent Financial Advisers to ordinary retail
investors in accordance with the rules of the FCA
in relation to non-mainstream investment products.
This document is important and requires your
immediate attention.
Investor Disclosure Document
The UK Alternative Investment Fund Managers
Regulations require certain information to be
made available to investors prior to their investment
in the Company. The Company’s Investor
Disclosure Document is available for viewing
at japantrustplc.co.uk.
If you reside in the UK and you are in any doubt as to
the action you should take, you should consult your
stockbroker, bank manager, solicitor, accountant
under the Financial Services and Markets Act 2000
immediately. If you are outside the UK, you should
If you have sold or otherwise transferred all of your
ordinary shares in The Baillie Gifford Japan Trust
PLC, please forward this document, together with
any accompanying documents, but not your
personalised Form of Proxy, as soon as possible to
the purchaser or transferee, or to the stockbroker,
bank or other agent through whom the sale or
transfer was or is being effected for delivery to
the purchaser or transferee.
The Baillie Gifford Japan Trust PLC
01
Introduction
Financial Highlights 01
Strategic Report
Chairman’s Statement 05
Managers’ Review 08
Relative Contribution 11
Review of Investments 12
Distribution of Total Assets and Main Portfolio Themes 16
Investment Portfolio by Growth Category 18
List of Investments 20
One Year Summary 24
Five Year Summary 26
Ten Year Record 28
Environmental, Social and Governance Engagement 30
Proxy Voting 32
Climate Change 33
Business Review 34
Governance Report
Directors and Management 47
Directors’ Report 50
Corporate Governance Report 55
Directors’ Remuneration Report 62
Audit Committee Report 66
Statement of Directors’ Responsibilities 69
Financial Report
Independent Auditor’s Report 72
Income Statement 79
Balance Sheet 80
Statement of Changes in Equity 81
Cash Flow Statement 82
Notes to the Financial Statements 83
Shareholder Information
Notice of Annual General Meeting 96
Further Shareholder Information 101
Third Party Data Provider Disclaimer 103
Communicating with Shareholders 104
Sustainable Finance Disclosure Regulation 106
Glossary of Terms and Alternative Performance Measures 107
Contents
Introduction
Annual Report and Financial Statements 2023
02
Financial Highlights
Year to 31 August 2023
Share Price
Total Return
*
(4.0%)
Net Asset Value
Total Return
*
(5.4%)
Benchmark
†
Total Return
*
6.7%
* Alternative Performance Measure – see Glossary of Terms and Alternative Performance Measures on pages 107 and 108.
Comparatives for 2022 can be found on page 24.
†
The benchmark is the TOPIX total return (in sterling terms).
Past performance is not a guide to future performance.
NAV, Share Price and Benchmark Total Return
*
Premium/(Discount)
*
to Net Asset Value
A
2023
A
2022
SONDJFMAMJ
J
● Share price*
●
NAV*
●
Benchmark
†
90%
110%
105%
95%
100%
A
2023
A
2022
SONDJFMAM JJ
● Premium/(discount)*
●
Average discount*
(12%)
2%
0%
(4%)
(2%)
(10%)
(8%)
(6%)
The Baillie Gifford Japan Trust PLC aims to
achieve long term capital growth principally
through investment in medium to smaller sized
Japanese companies which are believed to
have above average prospects for growth.
The Baillie Gifford Japan Trust PLC
03
The Strategic Report, which
comprises pages 5 to 44 and
incorporates the Chairman’s
statement, has been prepared
in accordance with the
Companies Act 2006.
Strategic
Report
The Baillie Gifford Japan Trust PLC
05
Chairman’s
Statement
* Alternative Performance Measure – see Glossary of Terms and Alternative Performance Measures
on pages 107 and 108.
†
The benchmark is the TOPIX total return (in sterling terms).
Past performance is not a guide to future performance.
Introduction
Last year, I reported that there was a great deal
of uncertainty facing investors including the global
yields but also the impact of other factors such
as Covid-19 restrictions. These restrictions were
lifted in Japan in the Autumn of 2022 and the
Board visited Japan with the Managers in
pleased to report a most insightful trip where the
Board had the opportunity to observe the Managers
and their process in action and to meet with some of
the most exciting companies held within the portfolio
as well as several potential future investments.
Performance
In the year to 31 August 2023, the net asset value
(‘NAV’) total return was (5.4%). As market sentiment
remained poor, the Company’s shares continued to
trade at a discount to NAV, leading to a share price
total return of (4.0%). The benchmark total return
was 6.7% over the same period.
The Company’s objective is to achieve long-term
capital growth, and the NAV returns remain ahead
of the benchmark on a 10 year time horizon.
Compound annual returns to end August
5 years
(%)
10 years
(%)
Net asset value total return* (1.2) 9.3
Share price total return* (3.0) 8.7
Benchmark total return*
†
3.5 8.1
David Kidd
Chairman
Appointed to the
Board in 2015,
and as Chairman
in 2022
Strategic Report
Annual Report and Financial Statements 2023
06
Share Capital and Discount Management
Over the course of the year, the share price moved
from a 8.1% discount to NAV to a 6.7% discount
to NAV. During this period, the Company bought
back 851,845 shares at a cost of approximately
£6.4 million. These shares are held in Treasury
and are available to be reissued, at a premium,
when market conditions allow.
Your Board believes it is important that the Company
retains the power to buy back equity during the year
and so, at the Annual General Meeting, is seeking
to renew this facility. Further details of the buy-back
facility can be found on page 53.
The Company also has authority to issue new
shares and to reissue any shares held in Treasury
for cash on a non pre-emptive basis. Shares are
value, thereby enhancing net asset value per share
for existing shareholders. The Directors are, once
again, seeking 10% share issuance authority at
the Annual General Meeting. This authority would
expire at the conclusion of the Annual General
Meeting in 2024.
Regulatory Update
The FCA also introduced a new set of rules labelled
as ‘Consumer Duty’. Investment Trusts, like the
Company, are not directly impacted by this but
Baillie Gifford, as the Company’s Manager is.
The Duty raises the standard of care that FCA
to provide to retail consumers and includes a
number of obligations that need to be met.
One of these obligations is to undertake an
Assessment of Value on the ‘products’ managed.
The relevant report on the Company has concluded
that it does provide value, meaning that distributors
will be able to undertake their assessments and
continue to make shares in the Company available
to current and potential shareholders.
In June 2023, the Board conducted a thorough
analysis with the Managers of the Company’s
both process and outcomes. The Company has an
explicit growth-focused investment strategy. The vast
majority of the Company’s assets are invested in
companies with higher than average growth prospects.
The Board is strongly supportive of this investment
strategy; the Japanese equity market is large and
rich in opportunity but the Japanese economy itself
grows slowly due to structural factors. As such,
the Board believes companies able to demonstrate
idiosyncratic growth should command a premium
valuation and outperform over time. The Manager
invests on a bottom-up basis, focusing on identifying
the most attractive growth companies and largely
ignoring macro factors. However, investors should
note that there are certain market environments
which do not favour growth investing and in which
the Company may be more likely to underperform
both its benchmark and more value-focused peers.
While it is not possible to be prescriptive on this
rates, such as we have seen over the past two years,
tends to be unfavourable for growth stocks’ relative
performance.
Gearing and Borrowing
The Board believes that borrowing will enhance
returns to investors over the long-term. Net gearing
fell very slightly from 17.5% to 17.0% over the
year to 31 August 2023. The Board is pleased to
announce that in August 2023 the Company entered
The Bank of New York Mellon for ¥15 billion, being
an increase of ¥2.8 billion on the SMBC loan that
was repaid in August 2023. The new facility was
used to repay the SMBC facility and Mizuho Bank
revolving credit facility with the balance being
available to the Managers to deploy.
Dividend
The Board is recommending a dividend of 10p per
share, an increase of 11.1% on last year’s 9p. This
will be put to shareholders for approval at the Annual
General Meeting to be held on 12 December 2023
and, if approved, will be paid on 20 December to
shareholders on the register at close of business
on 17 November 2023. A dividend reinvestment
plan (‘DRIP’) is available to shareholders who would
prefer to invest their dividends in the shares of the
Company. For those shareholders electing to receive
the DRIP, the last date for receipt of election is
29 November 2023.
The Baillie Gifford Japan Trust PLC
07
Annual General Meeting
The Company’s Annual General Meeting has been
scheduled to take place on 12 December 2023
encourages all shareholders to attend in person
but also to exercise their votes by completing
and submitting a form of proxy. We encourage
shareholders to monitor the Company’s website
at japantrustplc.co.uk where any updates will be
posted and market announcements will be made,
as appropriate. Should shareholders have questions
for the Board or the Managers or any queries as to
how to vote, they are welcome to submit these
by email to trustenquiries@bailliegifford.com
or call 0800 917 2112.
Information on the resolutions can be found
on pages 97 and 98 of the Annual Report and
Financial Statements. The Directors consider that
all resolutions to be put to shareholders are in their
and the Company’s best interests as a whole and
recommend that shareholders vote in their favour.
In particular, shareholders have the right to vote
annually on whether the Company should continue
in business and will have the opportunity to do
so again this year. Last year, the Company again
received support for its continuation with 99.99%
of votes cast in favour. Your Directors believe there
are attractive opportunities in selected, well-run
favourable outlook for the Japan Trust. To that end,
my fellow Directors and I intend, where possible,
to vote our own shareholdings in favour of the
resolution and hope that all shareholders will feel
disposed to do likewise.
Board
During the year the Board undertook a recruitment
process seeking to appoint an additional independent
non-executive director. The Board was pleased to
announce the appointment of Patricia Lewis with
effect from 1 August 2023. Patricia will stand for
election at the upcoming Annual General Meeting.
The Board is cognisant of good corporate
governance practice and as such I should also like
to mention my intention to step down from the
Board at the Annual General Meeting to be held in
2025. This would mean that I serve 10 years in total
on the Board with just over three of those years as
Chairman, a role to which I was appointed following
the untimely death of Keith Falconer.
Outlook
The portfolio contains many attractive growth
long-term, and hopeful in the shorter-term,
regarding the prospects for the Company.
David Kidd
Chairman
1 November 2023
Strategic Report
Annual Report and Financial Statements 2023
08
Managers’ Review
on pages 107 and 108.
Past performance is not a guide to future performance.
Whilst there remain various global challenges,
including war and other geopolitical tensions,
an investment perspective has been the leap forward
remains complex and at times contradictory
but technological progress and the investment
The last 12 months have certainly not been a vintage
year for the Company with a NAV total return of
(5.4%) compared with 6.7% for the TOPIX index,
in sterling terms. Over 5 years the cumulative NAV
total return was (5.8%) and over 10 years 143.5%.
This compares to increases in the TOPIX index of
18.5% over 5 years and 116.9% over 10 years.
To be behind the index to a material extent
over a 5 year horizon is disappointing to us,
and doubtless to shareholders.
As was the case last year, our biases towards higher
growth and smaller companies have both been
unhelpful to us. While not our natural hunting ground
as growth investors the place to be has been in more
cyclical areas. Since there was a positive return in
Yen, being geared made a small positive contribution
to performance (+0.9ppt). Despite the unsatisfactory
overall result there is little to say at the stock level.
Two companies subtracted more than 1.0ppt from
performance, CyberAgent and Misumi, but the issue
was more that we missed out on many of the
successful names.
The low returns over the past 5 years merit
discussion. Has something gone wrong with
our process? Where do we get conviction
on a forward-looking basis? When will these
businesses become better appreciated?
Matthew Brett
Manager
Praveen Kumar
Deputy Manager
The Baillie Gifford Japan Trust PLC
09
can be split into two halves. In the period from
August 2018 to August 2021 the performance
was positive in both absolute and relative terms.
However, this good 3 year period has been
followed by 2 challenging years. As a reminder,
your Company’s portfolio is very different to the
underlying market. The Trust holds no investments
in around half of the 33 industries included in the
Company’s benchmark index, TOPIX. Some of
the top performing sectors over the past twelve
months include iron and steel, banks, marine
transportation and construction – areas where
we have little exposure. If these stocks go up
we will underperform. But our view remains that
these areas offer little fundamental opportunity
for growth investors. Another measure of how
different your Company’s portfolio is to the TOPIX
is the percentage of the portfolio with founder
shareholders. For The Baillie Gifford Japan Trust,
29% of the portfolio has a founder-owner in
charge compared with 8% for the TOPIX as a
whole (source: MSCI). In the long run we believe
that having a founder at the helm better aligns the
interests of management and shareholders.
Tentatively, it may be that the investment
environment created by the pandemic suited
the types of businesses that we favour while the
investment environment created by the exit from
that environment suited more cyclical businesses.
The net result of this is that performance over
the 5 years is behind. However, inevitably, we are
trying to analyse a story containing large swings
in opposing directions that has not yet completed.
The conclusions that we can draw from this period
will only be secure when more time has passed,
and we know what the ultimate results are.
The fundamentals of our process remain the
same. Our team remains intact with no changes
to the senior investors over the past 5 years and
our approach to selecting stocks is substantially
unchanged. We continue our steady fundamental
research-based approach of trying to identify
companies with good growth prospects at a similar
tempo to the past.
We can look at the stocks in the portfolio with the
worst contributions to performance over the past
5 years. These are CyberAgent, Rakuten,
Outsourcing, Sato Holdings, and GA Technologies.
They had a negative attribution ranging from (2.1%)
has something gone wrong with these businesses?
For the most recent 5 full years available these
companies grew their sales by 14% p.a., 15% p.a.,
25% p.a., 5% p.a., and 64% p.a. respectively.
If we didn’t know the share price return, I would
certainly be more than happy with the average
underlying growth. And as a reminder, these are
the worst contributors to performance. A lot of the
up with sales. For example, CyberAgent had a very
successful hit in its gaming business that it has
yet to be able to better. Meanwhile, Rakuten has
been rolling out a new mobile network in Japan
that has proven more costly than we expected and
expect CyberAgent to be able to achieve new peak
its investment phase and that ultimately its mobile
business will be successful.
Strategic Report
Annual Report and Financial Statements 2023
10
Looking forward we expect continuing developments
in AI to provide opportunities for many of the
companies in the portfolio. AI can be thought of
as comprising multiple layers – chips, datacentres,
models, and applications for example. Currently
much excitement has been about the opportunity
expect a broader view to be taken about where the
opportunities are.
Starting with the major portfolio holdings, SoftBank
owns nearly 90% of recently re-listed ARM, which
has a near-monopoly in mobile phone chip design,
as well as many early-stage AI companies listed in
the Vision Fund. Mr Son is looking towards a future
roughly operates at a human level across a wide
super-intelligence (where AI is multiples more
capable than humans). GMO Internet has a large
exposure to internet infrastructure and datacentres
in Japan. Rakuten has proprietary data across
its ecosystem which provides the foundation for
creating successful applications for AI. CyberAgent
model built with the Japanese language as the base.
Each of these are top 10 holdings in the Company.
Additionally, we expect opportunities in many of the
smaller holdings. For example, Z Holdings expect to
be able to achieve huge improvements in software
engineer productivity as humans work alongside AI
as well as to be able to achieve big cost reductions
in dealing with customer queries. Bengo4.com has
already developed a prototype ‘AI lawyer’.
will become better appreciated which is why we try
to focus more on the underlying progress of sales
share price results over the past couple of years
but, in general, we see solid ongoing progress at
from that.
Meanwhile, we have continued to try to improve the
portfolio. During the period we bought 9 new holdings
and sold 7 holdings. Recently we have been taking
advantage of the high level of pain being felt in
smaller growth companies share prices to initiate
new holdings in Vector (public relations agency),
SWCC Showa (high voltage cables), Nihon M&A
(mergers and acquisitions in Japan) and Lifenet
Insurance (online life insurance). We also took a new
holding in M3 (medical website) after the shares fell
by more than 60% from the price that we previously
sold the shares at in late 2020 due to valuation
concerns. Similar to the case of Pigeon last year,
the very large share price moves have exceeded
the changes in the fundamentals, which we believe
has created opportunity for long-term investors.
The sales spanned a variety of reasons, from
considering the shares to be fully valued due to
cyclical increase in resource prices (Inpex, Toyota
Tsusho), or becoming doubtful on the long-term
prospects being realised (Shimano, Makita, Tsubaki
Nakashima, Lifull). As is typical, turnover remained
low at 8.8% meaning that 91.2% of the portfolio
was unchanged year-on-year. Net gearing ended the
opportunities available.
As Sir John Templeton put it many years ago
“outperforming the majority of investors requires
doing what they are not doing”. We are sticking to an
approach that has been effective over the decades
of trying to buy businesses with attractive long-term
letting those businesses generate the returns over
time. This process has never worked every year and
the past 2 years have been a particularly challenging
time. However, we believe that the opportunities for
growth investing in Japan are the greatest since
the Global Financial Crisis and ask for shareholders
continued support.
Baillie Gifford
1 November 2023
The Baillie Gifford Japan Trust PLC
11
Relative Contribution
Top Ten Relative Stock Contributors
Year to 31 August 2023
Name
Portfolio
(average
weight)
%
Index
(average
weight)
%
Relative
contribution
%
DMG Mori 1.8 0.0 0.4
Itochu 2.8 1.0 0.4
Olympus 0.0 0.5 0.3
Chugoku Marine Paints 0.8 0.0 0.2
Mercari 1.1 0.0 0.2
Sumitomo Mitsui Trust Bank 3.4 0.3 0.2
MS&AD Insurance 2.8 0.3 0.2
Nifco 1.4 0.0 0.2
M3 0.1 0.2 0.1
DENSO 2.1 0.6 0.1
Top Ten Relative Stock Contributors
5 years to 31 August 2023
Name
Portfolio
(average
weight)
%
Index
(average
weight)
%
Relative
contribution
%
M3 0.8 0.3 1.4
Itochu 2.4 0.8 1.3
SoftBank Group 5.7 1.7 1.2
0.6 0.2 1.0
DENSO 1.8 0.5 0.7
MS&AD Insurance 1.4 0.3 0.7
SMC 1.3 0.7 0.7
Inpex 1.7 0.2 0.6
Advantest 0.2 0.2 0.6
JAFCO 0.5 0.0 0.5
Source: Revolution and relevant underlying index providers. Baillie Gifford Japan Trust relative to TOPIX total return, in sterling terms.
See disclaimer on page 103.
Bottom Ten Relative Stock Contributors
Year to 31 August 2023
Name
Portfolio
(average
weight)
%
Index
(average
weight)
%
Relative
contribution
%
CyberAgent 2.4 0.1 (1.3)
Misumi 2.5 0.2 (1.1)
GMO Internet 3.1 0.0 (0.9)
Rakuten 2.4 0.1 (0.8)
MonotaRO 1.4 0.1 (0.7)
FANUC 3.3 0.7 (0.7)
Oisix 1.4 0.0 (0.5)
Sysmex 2.1 0.3 (0.5)
GA Technologies 1.2 0.0 (0.5)
mixi 2.7 0.0 (0.4)
Bottom Ten Relative Stock Contributors
5 years to 31 August 2023
Name
Portfolio
(average
weight)
%
Index
(average
weight)
%
Relative
contribution
%
CyberAgent 2.5 0.1 (2.1)
Rakuten 3.3 0.2 (1.8)
Outsourcing 1.6 0.0 (1.4)
Sato Holdings 1.7 0.0 (1.3)
GA Technologies 0.6 0.0 (1.1)
Toyota Motor 0.0 3.6 (1.1)
Sysmex 2.5 0.3 (1.0)
Misumi 2.5 0.2 (1.0)
Calbee 1.6 0.1 (0.9)
Healios K.K. 0.2 0.0 (0.8)
Strategic Report
Annual Report and Financial Statements 2023
12
Review of
Investments
A review of the Company’s
ten largest investments as
at 31 August 2023.
SoftBank Group
run by dynamic entrepreneur
Masayoshi Son, who holds
over 25% of the shares. It
encompasses large investments
in ARM (global semiconductor
designer), mobile telecoms,
and through its Vision Funds,
many early-stage technology
investments. The underlying
businesses continue to grow,
some very rapidly; we believe
Mr Son to be an excellent
allocator of capital and the
discount that the shares trade
at to the value of the underlying
Sumitomo Mitsui Trust Bank
Sole remaining independent
trust bank in Japan following
consolidation of the sector.
management business and fees
form a major part of the business,
which differentiates them from
the megabanks. It could be a
as domestic investors shift from
vast cash savings into risk assets.
We believe that management
shows a healthy balance between
ambition and conservatism,
which is especially important
in managing a bank.
Valuation £45,420,000
% of total investments 5.3%
Valuation at
31 August 2022
£46,440,000
% of total investments
at 31 August 2022
5.0%
year to 31 August 2023
(£1,954,000)
Valuation £31,818,000
% of total investments 3.7%
Valuation at
31 August 2022
£28,945,000
% of total investments
at 31 August 2022
3.1%
year to 31 August 2023
Nil
The Baillie Gifford Japan Trust PLC
13
SBI Holdings
services company in Japan
offering online brokerage, internet
banking, online life insurance and
venture capital. As the company
once put it: “utilising opportunities
provided by the powerful price-
destruction forces of the Internet
to customers”. The founder,
Yoshitaka Kitao, has succeeded
in building a company with a
very good reputation among
its customers and has been alert
to the opportunities presented
by new technologies.
Rakuten
Internet conglomerate with
strength in e-commerce and
innovative points system that links
them together. Successes include
building Japan’s largest credit
card business and large online
banking and brokerage operations.
The company has recently built
a new mobile phone network in
Japan and is now attempting to
base. The dynamic founder,
Hiroshi Mikitani, owns around
a third of the shares, providing
close alignment of interests.
FANUC
FANUC manufactures factory
automation systems and
robots, with strength in CNCs
(computerised numerical controls)
which are specialist computers
attached to machine tools to
synchronise the actions. We
expect the global automation
market to continue to grow as
and productivity to improve their
competitiveness. We believe that
FANUC’s high market share and
reputation in automation and
robotics will allow it to continue
generating attractive returns on
Valuation £27,787,000
% of total investments 3.2%
Valuation at
31 August 2022
£20,924,000
% of total investments
at 31 August 2022
2.2%
year to 31 August 2023
£13,125,000
Valuation £29,900,000
% of total investments 3.5%
Valuation at
31 August 2022
£31,558,000
% of total investments
at 31 August 2022
3.4%
year to 31 August 2023
Nil
Valuation £25,540,000
% of total investments 3.0%
Valuation at
31 August 2022
£31,699,000
% of total investments
at 31 August 2022
3.4%
year to 31 August 2023
Nil
Strategic Report
Annual Report and Financial Statements 2023
14
Calbee
Leading snack foods company
with very high market shares in
Japan and several opportunities.
First, we think it has scope to
improve margins in the domestic
business over time. Second, it
has a small overseas business
mostly in the US and Asia that
has potential to generate sales
growth for many years. Finally,
Pepsi, which has a strategic
shareholding in the business,
could see it as an attractive
bolt-on acquisition.
Sony
Major owner of game, music and
businesses. The PlayStation is
the leading console platform
for networked games and a
front-runner in virtual reality
(VR). Sony is the world’s largest
music publisher and a major
growing content demand. It is
investing in its areas of strength,
notably content and its dominant
position in image sensors. We
believe CEO Kenichiro Yoshida
continues to provide effective
leadership.
GMO Internet
Domestic internet conglomerate
and leading provider of internet
infrastructure. It is the number
one provider of domain name
registrations and hosting services
and has a strong position in
hosting e-commerce websites
and processing transactions as
well as providing a variety of
internet-related services. Founder
Masatoshi Kumagai owns over
40% of the shares, providing
alignment between management
and shareholders. Finally,
the company trades at a
value of its holdings.
Valuation £24,747,000
% of total investments 2.9%
Valuation at
31 August 2022
£25,431,000
% of total investments
at 31 August 2022
2.7%
year to 31 August 2023
(£62,000)
Valuation £25,206,000
% of total investments 2.9%
Valuation at
31 August 2022
£27,394,000
% of total investments
at 31 August 2022
2.9%
year to 31 August 2023
Nil
Valuation £23,367,000
% of total investments 2.7%
Valuation at
31 August 2022
£29,197,000
% of total investments
at 31 August 2022
3.1%
year to 31 August 2023
£166,000
The Baillie Gifford Japan Trust PLC
15
Kubota
Kubota is a producer of
agricultural equipment and
mini excavators. We believe
agricultural mechanisation is
a very well established and long
duration growth opportunity.
Due to its Japanese heritage,
Kubota is especially well placed
in demand for agricultural
equipment in Asian markets
such as rice planters, combine
harvesters and small tractors.
increased levels of infrastructure
spending in North America giving
a further opportunity.
mixi
mixi is mainly a mobile gaming
company with a founder
shareholder, Kenji Kasahara,
who holds over 40% of the
shares. Currently most of
game Monster Strike, which
is the largest grossing mobile
game in Japan. We believe that
entrepreneurial energy and
the ability to generate future
success, either in the gaming
business or elsewhere.
Valuation £21,141,000
% of total investments 2.5%
Valuation at
31 August 2022
£23,922,000
% of total investments
at 31 August 2022
2.6%
year to 31 August 2023
(£83,000)
Valuation £22,831,000
% of total investments 2.7%
Valuation at
31 August 2022
£24,429,000
% of total investments
at 31 August 2022
2.6%
year to 31 August 2023
(£72,000)
Strategic Report
Annual Report and Financial Statements 2023
16
Sectoral 2023
Main Portfolio Themes
1
2
3
4
6
5
7
8
9
10
Sectoral 2023
%
2022
%
1 Manufacturing and machinery 18.9 21.5
2 Commerce and services 17.6 18.0
3 Information, communication
and utilities
16.7 16.6
4 Electricals and electronics 14.2 14.3
5 Financials 9.8 9.4
6 Chemicals and other matericals 9.4 8.2
7 Pharmaceuticals and food 4.4 3.6
8 Retail 4.4 4.1
9 Real estate and construction 3.8 4.3
10 Communication services 0.8 –
Distribution of Total Assets
and Main Portfolio Themes
Japan catching up with
other developed nations
SoftBank, Rakuten, SBI, CyberAgent
Global leader in a growing industry
FANUC, SMC, Kubota
Resilient to a changing world
Nintendo, Pigeon, Shiseido, Bridgestone
Internet
Automation
Forever
franchises
The Baillie Gifford Japan Trust PLC
17
Strategic Report
Annual Report and Financial Statements 2023
18
Opportunity to grow rapidly but where there are a
number of potential outcomes.
% of total investments
SBI Holdings 3.5
Rakuten 3.2
FANUC 3.0
GMO Internet 2.7
Kubota 2.7
CyberAgent 2.1
Recruit Holdings 2.0
Misumi 2.0
Sato 1.9
Sysmex 1.8
Oisix 1.6
GA Technologies 1.3
Nidec 1.3
TKP 1.2
Topcon 1.2
MonotaRO 1.1
Mercari 1.1
Keyence 1.1
Raksul 1.1
SMC 0.9
Investment Portfolio
by Growth Category
As at 31 August 2023
Secular Growth Growth Stalwarts
Earnings Earnings
Time Time
Growth is less rapid but more predictable.
% of total investments
Calbee 2.9
Shiseido 2.4
Unicharm 2.2
Nintendo 2.1
Pola Orbis 1.8
Sugi 0.8
Kao 0.8
Park24 0.6
Sawai Pharmaceutical 0.3
Total 13.9
% of total investments
Seria 0.9
Z Holdings 0.8
Broadleaf 0.7
Demae-can 0.7
M3 0.7
Pigeon 0.7
freee K.K. 0.6
Vector 0.6
Infomart 0.6
Digital Garage 0.5
Nihon M&A Center 0.5
Noritsu Koki 0.5
PeptiDream 0.5
Bengo4.com 0.5
Lifenet Insurance 0.4
BASE 0.4
Istyle 0.4
Rizap 0.4
Nippon Ceramic 0.3
Total 47.5
The Baillie Gifford Japan Trust PLC
19
Special Situations Cyclical Growth
Earnings Earnings
Time Time
Performance has not been good but there is a
reason to believe improvements are underway.
% of total investments
SoftBank Group 5.3
Sony 2.9
mixi 2.5
MS&AD Insurance 2.2
Tokyo Tatemono 1.3
Colopl 1.3
Olympus 0.7
Total 16.2
Earnings do not rise every year but are expected
to be higher from one cycle to the next.
% of total investments
Sumitomo Mitsui Trust Bank 3.7
Bridgestone 2.2
DMG Mori 2.2
Itochu 2.2
Sumitomo Metal Mining 2.0
Rohm 1.8
Nifco 1.6
DENSO 1.6
Murata Manufacturing 1.5
Chugoku Marine Paints 1.0
Outsourcing 0.9
Iida Group Holdings 0.7
SWCC Showa 0.5
Shima Seiki 0.5
Total 22.4
Strategic Report
Annual Report and Financial Statements 2023
20
List of
Investments
As at 31 August 2023
Name
Business
2023
Value
£’000
2023
% of total
investments
Absolute *
performance
%
Relative *
performance
%
SoftBank Group Information, communication and utilities 45,420 5.3 3.7 (2.9)
Sumitomo Mitsui Trust Bank Financials 31,818 3.7 14.4 7. 2
SBI Holdings Financials 29,900 3.5 (0.6) (6.9)
Rakuten Commerce and services 27,787 3.2 (24.6) (29.4)
FANUC Electricals and electronics 25,540 3.0 (17.8) (23.0)
Calbee Pharmaceuticals and food 25,206 2.9 (6.6) (12.5)
Sony Electricals and electronics 24,747 2.9 (4.1) (10.1)
GMO Internet Information, communication and utilities 23,367 2.7 (20.1) (25.1)
Kubota Manufacturing and machinery 22,831 2.7 (4.1) (10.2)
mixi Commerce and services 21,141 2.5 (7.9) (13.7)
Shiseido Manufacturing and machinery 20,502 2.4 (1.2) (7.4)
MS&AD Insurance Financials 19,159 2.2 14.9 7.7
Bridgestone Manufacturing and machinery 19,096 2.2 (4.4) (10.4)
DMG Mori Manufacturing and machinery 18,802 2.2 32.0 23.7
Itochu Commerce and services 18,735 2.2 28.3 20.3
Unicharm Chemicals and other materials 18,711 2.2 5.5 (1.2)
Nintendo Manufacturing and machinery 18,216 2.1 (1.1) (7.3)
CyberAgent Commerce and services 17,967 2.1 (40.2) (44.0)
Recruit Holdings Commerce and services 17,467 2.0 2.3 (4.1)
Sumitomo Metal Mining Chemicals and other materials 17,416 2.0 (6.9) (12.8)
Misumi Commerce and services 16,789 2.0 (7.9) (13.7)
Sato Manufacturing and machinery 16,497 1.9 (1.1) (7.3)
Pola Orbis Chemicals and other materials 15,795 1.8 8.8 2.0
Rohm Electricals and electronics 15,575 1.8 2.7 (3.7)
Sysmex Electricals and electronics 15,231 1.8 (20.6) (25.6)
Nifco Chemicals and other materials 13,839 1.6 20.9 13.3
DENSO Manufacturing and machinery 13,631 1.6 16.4 9.1
Oisix Retail 13,497 1.6 (24.0) (28.8)
Murata Manufacturing Electricals and electronics 12,898 1.5 (3.6) (9.7)
Tokyo Tatemono Real estate and construction 11,466 1.3 (17.0) (22.2)
GA Technologies Information, communication and utilities 11,348 1.3 (29.9) (34.3)
The Baillie Gifford Japan Trust PLC
21
Name
Business
2023
Value
£’000
2023
% of total
investments
Absolute *
performance
%
Relative *
performance
%
Nidec Electricals and electronics 11,261 1.3 (27.9) (32.4)
Colopl Information, communication and utilities 10,694 1.3 (18.8) (23.9)
TKP Real estate and construction 10,200 1.2 (3.0) (9.1)
Topcon Manufacturing and machinery 9,878 1.2 (17.4) (22.6)
MonotaRO Retail 9,652 1.1 (39.9) (43.7)
Mercari Information, communication and utilities 9,525 1.1 27.6 19.6
Keyence Electricals and electronics 9,481 1.1 0.6 (5.7)
Raksul Information, communication and utilities 9,150 1.1 14.0 6.9
Chugoku Marine Paints Chemicals and other materials 8,510 1.0 45.3 36.2
SMC Manufacturing and machinery 7,884 0.9 (6.2) (12.1)
Seria Retail 7,726 0.9 (24.6) (29.4)
Outsourcing Commerce and services 7,613 0.9 (16.3) (21.5)
Sugi Retail 7,1 74 0.8 (2.4) (8.5)
Z Holdings
#
Communication services 7,146 0.8 11.1
†
2.4
†
Kao
#
Chemicals and other materials 6,752 0.8 1.1
†
(9.3)
†
Broadleaf Information, communication and utilities 6,278 0.7 (8.8) (14.6)
Demae-can
#
Information, communication and utilities 6,215 0.7 (20.2)
†
(31.1)
†
Olympus
#
Pharmaceuticals and food 6,206 0.7 7.9
†
2.7
†
M3
#
Commerce and services 6,124 0.7 (4.0)
†
(5.7)
†
Iida Group Holdings Real estate and construction 6,123 0.7 2.0 (4.4)
Pigeon Manufacturing and machinery 5,901 0.7 (27.0) (31.6)
Park24 Real estate and construction
5,420 0.6 (9.9) (15.6)
freee K.K. Information, communication and utilities 5,113 0.6 (11.1) (16.6)
Vector
#
Information, communication and utilities 4,787 0.6 (3.2)
†
(4.7)
†
Infomart Commerce and services 4,763 0.6 (3.4) (9.5)
SWCC Showa
#
Electricals and electronics 4,637 0.5 (2.4)
†
(4.0)
†
Digital Garage Information, communication and utilities 4,228 0.5 (15.6) (20.9)
Nihon M&A Center
#
Commerce and services 4,128 0.5 (9.9)
†
(15.6)
†
Noritsu Koki Manufacturing and machinery 4,111 0.5 5.2 (1.4)
PeptiDream Pharmaceuticals and food 4,072 0.5 (2.8) (8.9)
Shima Seiki Manufacturing and machinery 4,017 0.5 (21.4) (26.4)
Strategic Report
Annual Report and Financial Statements 2023
22
Name
Business
2023
Value
£’000
2023
% of total
investments
Absolute *
performance
%
Relative *
performance
%
Bengo4.com Commerce and services 3,884 0.5 14.5 7. 3
Lifenet Insurance
#
Financials 3,728 0.4 (3.2)
†
(1.4)
†
BASE Information, communication and utilities 3,686 0.4 0.7 (5.7)
Istyle Information, communication and utilities 3,359 0.4 (15.1) (20.5)
Rizap Commerce and services 3,124 0.4 10.1 3.1
Nippon Ceramic Electricals and electronics 2,805 0.3 (10.5) (16.1)
Sawai Pharmaceutical Pharmaceuticals and food 2,737 0.3 2.2 (4.2)
Total investments 858,486 100.0
Net liquid assets 6,200
Total assets 864,686
Bank loans (131,723)
Equity shareholders’ funds 732,963
*
Absolute and relative performance have been calculated on a total return basis over the period 1 September 2022 to 31 August 2023. For investments
held for part of the year, the return is for the period they were held. Absolute performance is in sterling terms; relative performance is against TOPIX
total return (in sterling terms).
†
Figures relate to part period returns.
#
New purchase during the year. Complete sales in the year were Inpex, Lifull, Makita, Secom, Shimano, Toyota Tsusho and Tsubaki Nakashima.
Past performance is not a guide to future performance.
The Baillie Gifford Japan Trust PLC
23
Strategic Report
Annual Report and Financial Statements 2023
24
* Alternative Performance Measure – see Glossary of Terms and Alternative Performance Measures on pages 107 and 108.
†
The benchmark is the TOPIX total return (in sterling terms).
Past performance is not a guide to future performance.
31 August
2023
31 August
2022
%
change
Total assets (before deduction
of bank loans)*
£864.7m £940.4m
Bank loans £131.7m £149.4m
Shareholders’ funds £733.0m £791.0m
Net asset value per ordinary share 787.7p 842.4p (6.5)
735.0p 774.0p (5.0)
Discount* (6.7%) (8.1%)
10.52p 11.31p
Dividend per ordinary share payable and
10.00p 9.00p 11.1
Ongoing charges* 0.67% 0.66%
184.5 161.3 14.4
Active share*
83% 82%
Year to 31 August 2023 2022
Total return (%)*
Net asset value per ordinary share (5.4) (16.3)
Share price (4.0) (23.8)
TOPIX (in sterling terms)
†
6.7 (3.9)
One Year
Summary
The following information
illustrates how the Company
has performed over the year
to 31 August 2023. The net
asset value total return was
(5.4%), underperforming the
Company’s benchmark total
return which was 6.7%.
The Baillie Gifford Japan Trust PLC
25
* Alternative Performance Measure – see Glossary of Terms and Alternative Performance Measures on pages 107 and 108.
Past performance is not a guide to future performance.
Year to 31 August 2023 2023 2022 2022
Year’s high and low High Low High Low
Net asset value per
ordinary share
876.0p 749.0p 1,105.7p 707.6p
827.0p 703.0p
* 0.2% (11.9%)
Year to 31 August 2023 2022
Net return per ordinary share
Revenue return 10.52p 11.31p
Capital return (56.79p) (176.19p)
Total return (46.27p) (164.88p)
Strategic Report
Annual Report and Financial Statements 2023
26
* Alternative Performance Measure – see Glossary of Terms and Alternative Performance Measures on pages 107 and 108.
†
The benchmark is the TOPIX total return (in sterling terms).
Past performance is not a guide to future performance.
Five Year Total Return Performance
*
20232018 2019 2020 2021 2022
Cumulative to 31 August
●
NAV total return*
Source: Refinitiv/Baillie Gifford and relevant underlying index providers
#
.
● Share price
total return*
● Benchmark
total return*
†
60
140
120
100
80
Premium/(Discount)
*
to Net Asset Value
20232018 2019 2020 2021 2022
Cumulative to 31 August
●
Baillie Gifford Japan
premium/(discount)*
● Baillie Gifford Japan
average discount*
(12%)
12%
8%
(8%)
(4%)
4%
0%
Five Year
Summary
The following charts indicate
how an investment in
Baillie Gifford Japan has
performed relative to its
benchmark
†
period to 31 August 2023.
The Baillie Gifford Japan Trust PLC
27
20232019 2020 2021 2022
Years to 31 August
●
NAV total return relative
to the benchmark*
†
●
Share price total return
relative
to the benchmark
*
†
(30%)
20%
10%
0%
(20%)
(10%)
2023
2018 2019 2020 2021 2022
Years to 31 August
● Turnover
0%
50%
40%
20%
10%
20%
* Alternative Performance Measure – see Glossary of Terms and Alternative Performance Measures on pages 107 and 108.
†
The benchmark is the TOPIX total return (in sterling terms).
Past performance is not a guide to future performance.
Five Year Active Share
*
Annual Change in Net Asset Value Total Return and
Share Price Total Return
*
Annual Change in Net Asset Value Total Return and
Share Price Total Return
*
Relative to the Benchmark
†
Five Year Turnover
20232019 2020 2021 2022
Years to 31 August
● NAV total return* ●
Share price total return*
(30%)
30%
15%
0%
(15%)
2023
2018 2019 2020 2021 2022
Years to 31 August
● Active share*
0%
100%
80%
60%
20%
40%
Strategic Report
Annual Report and Financial Statements 2023
28
Capital
At
31 August
Total
assets *
£’000
Bank loans
£’000
Shareholders’
funds
£’000
Net asset value
per share
p
Share price
p
Premium/
(discount) *
%
2013 245,954 35,579 210,375 323.5 317.9 (1.7)
2014 290,447 41,733 248,714 358.7 352.3 (1.8)
2015 377,879 54,726 323,153 430.2 444.8 3.4
2016 500,291 75,294 424,997 539.8 517.5 (4.1)
2017 657,721 82,500 575,221 685.8 711.5 3.7
2018 870,590 114,486 756,104 835.8 855.0 2.3
2019 859,746 127,641 732,105 792.1 791.0 (0.1)
2020 923,809 151,420 772,389 840.8 817.0 (2.8)
2021 1,097,602 142,200 955,402 1,012.8 1,022.0 0.9
2022 940,413 149,407 791,006 842.4 774.0 (8.1)
2023 864,686 131,723 732,963 787.7 735.0 (6.7)
Revenue Gearing Ratios
Year to
31 August
Income
£’000
Net return
after tax
£’000
Net return per
ordinary
share
p
Dividend paid
and proposed
per ordinary
share
p
Ongoing
charges *
%
Gearing *
%
Potential
gearing *
%
2013 3,177 141 0.22 – 1.13 16 17
2014 3,746 322 0.47 – 0.89 15 17
2015 4,316 199 0.28 – 0.90 14 17
2016 7,090 1,823 2.35 – 0.87 17 18
2017 8,480 2,235 2.80 – 0.77 13 14
2018 10,874 2,234 2.54 0.60 0.73 11 15
2019 13,498 4,755 5.18 3.50 0.70 12 17
2020 15,337 6,047 6.56 4.50 0.68 4 20
2021 17,224 7,336 7.89 10 15
2022 20,075 10,661 11.31 9.00 0.66 18 19
2023 18,707 9,832 10.52 10.00 0.67 17 18
*
Alternative Performance Measure – see Glossary of Terms and Alternative Performance Measures on pages 107 and 108.
Past performance is not a guide to future performance.
Ten Year
Record
The Baillie Gifford Japan Trust PLC
29
Cumulative Performance (taking 2013 as 100)
At
31 August
Net asset
value per share
total return *
Share price
total return *
Benchmark
total return *
†
Net asset
value per share
total return
% change *
Share price
total return
% change *
Benchmark
total return
% change *
†
2013 100 100 100
2014 111 111 104 10.9 10.8 3.7
2015 133 140 118 19.9 26.3 13.4
2016 167 163 143 25.5 16.4 21.5
2017 212 224 170 27.0 37.5 18.8
2018 258 269 183 21.9 20.2 7.8
2019 245 249 182 (5.2) (7.4) (0.6)
2020 260 257 182 6.6 3.7 (0.1)
2021 313 322 212 21.0 25.7 16.3
2022 260 243 203 (16.3) (23.8) (3.9)
2023 244 231 217 (5.4) (4.0) 6.7
Compound Annual Returns
5 year (1.2%) (3.0%) 3.5%
10 year 9.3% 8.7% 8.1%
*
Alternative Performance Measure – see Glossary of Terms and Alternative Performance Measures on pages 107 and 108.
†
The benchmark is the TOPIX total return (in sterling terms).
Past performance is not a guide to future performance.
Cumulative to 31 August
2023
2013 2015 2018 2020 20222014 20172016 2019 2021
● Share price total return*● NAV total return* ●
Benchmark total return
*
†
0
350
300
150
100
50
250
200
Ten Year Total Return Performance*
Strategic Report
Annual Report and Financial Statements 2023
30
The Company has given discretionary voting
powers to Baillie Gifford. The Managers vote
against resolutions they consider may damage
shareholders’ rights or economic interests and
report their actions to the Board.
The Company believes that it is in the shareholders’
interests to consider environmental, social and
governance (‘ESG’) factors when selecting and
retaining investments and has asked the Managers
to take these issues into account. The Managers
do not exclude companies from their investment
universe purely on the grounds of ESG factors but
adopt a positive engagement approach whereby
matters are discussed with management with
the aim of improving the relevant policies and
management systems and enabling the Managers
to consider how ESG factors could impact long-term
Environmental, Social and
Governance Engagement
investment returns. The Managers’ Statement
of Compliance with the UK Stewardship Code
can be found on the Managers’ website:
bailliegifford.com. The Managers’ policy has been
reviewed and endorsed by the Board. The Managers,
Baillie Gifford & Co, are signatories to the United
Nations Principles for Responsible Investment.
By engaging with companies, the Managers seek
to build constructive relationships with them, to
better inform our investment activities and, where
necessary, effect change within our holdings,
ultimately with the goal of achieving better returns
for our shareholders. The table below shows the
companies the Managers engaged with during the
12 months to 31 August 2023. The two examples
on page 31 demonstrate our stewardship approach
through constructive, ongoing engagement.
Engagements during the 12 months to 31 August 2023 Environmental Social Governance
Demae-can
DENSO
FANUC
GA Technologies
GMO Internet
Kao
Lifenet Insurance Company
M3
mixi
MS&AD Insurance
Nintendo
Outsourcing
Pola Orbis
Raksul
Recruit Holdings
SBI Holdings
SoftBank Group
Sumitomo Metal Mining
Sumitomo Mitsui Trust Bank
Tokyo Tatemono
The Baillie Gifford Japan Trust PLC
31
DENSO
Following previous engagement with DENSO where
we encouraged more ambition on their climate
targets, this year, we decided to abstain on the
chair re-appointment (Koji Arima) as a sign of the
importance we place on ambitious climate targets
at DENSO.
We have decided on this action for the following
reasons:
we would have to wait 2 more years for action.
to the investment case, as we want DENSO to be
more ambitious than the Toyota group, something
we are currently not seeing. Large (ex-Toyota)
customers, such as Ford and Stellantis, have now
set science-based targets and will be seeking the
same from their suppliers.
tackle climate issues was one reason to sell out of
Toyota Motors. We therefore view engagement to
set ambitious targets as an important element of
stewardship with DENSO.
We met with DENSO in Japan following the vote.
The company thanked us for our contributions
regarding the importance of sustainability issues
and shared how management was interested in
continued efforts to improve. DENSO acknowledged
the importance of aligning its emissions reduction
targets with that of its customers and discussed the
approach being taken by business areas supporting
Internal Combustion Engine demand. This was useful
to understand given the need to maximise value
from these business areas whilst ensuring a shift
to electric vehicles does not leave these segments
stranded. Ultimately, we were pleased to note that
emission reduction targets from the Science Based
Targets initiative.
Sumitomo Metal Mining
We met with the president of Sumitomo Metal Mining
(SMM), Akira Nozaki, to discuss their future growth
prospects, approaches to new projects, and their
views on employment and labour conditions in Japan.
We began by exploring the opportunities for SMM’s
mobility, and the development of electricity grid
networks as key drivers for copper demand. Gaining
insight into the company’s ambition in this area was
valuable, as it showcases the opportunities they are
exploring within the energy transition.
One area we felt it would be important to explore
was labour management. This considers the health
and safety impact the company has as well as SMM’s
social licence to operate. We were interested to hear
its use of automation to improve safety and reduce
workplace injury incidents. It was encouraging to hear
that they were addressing health and safety as a long-
term challenge, building solutions into new projects
that sought to improve health and safety performance.
Mr Nozaki also shared that the company was building
goodwill with local governments and communities
in Japan by ensuring continued employment
opportunities after closing mining sites by building
manufacturing sites nearby.
Mining is an industry often associated with
environmental damage. We wanted to explore the
ways in which SMM considered this risk. Mr Nozaki
shared that they are seeking extraction projects
with higher purity ore, and lower waste-to-ore ratios.
These projects can result in cost advantages but also
have the potential to produce more value with lower
environmental costs. Mr Nozaki also acknowledged
the importance of recycling materials (such as nickel
resources. This is a new area for SMM, so it will be
useful to monitor how it scales.
We shared our perspective that operating in a way
that considers value and the environment is a key
component of reducing reputational risk. Mr Nozaki
Strategic Report
Annual Report and Financial Statements 2023
32
Proxy Voting
The Company has given discretionary voting powers
to Baillie Gifford. Baillie Gifford believes that ‘active
ownership’ of its clients’ holdings is as important as
These guidelines are aligned with its stewardship
principles and describe Baillie Gifford’s approach
to proxy voting and company engagement, the key
levers of active ownership, often described as
‘stewardship’.
While these guidelines are intended to provide an
insight into how Baillie Gifford approaches voting
on its clients’ behalf, it is important to note that
every company is individually assessed. In voting,
proposals will always be evaluated on a case-by-case
basis, based on what Baillie Gifford believes to be in
the best long-term interests of its clients, rather than
rigidly applying a policy.
A broad cross section of Baillie Gifford’s investment
staff are involved in its ongoing work on stewardship.
In the same way that the investment approach is
based around empowered and independent teams,
voting and engagement is led by the individual
investment teams. In keeping with a decentralised
and autonomous culture, investment teams will,
on occasion, elect to vote differently on the same
general meeting resolutions. Where this happens, it
is reported accordingly in the proxy voting disclosure
on the website. Baillie Gifford also has clear
processes in place to identify, prevent and manage
interest disclosure is available on its website.
concerns are usually addressed by engaging directly
with the company, using voting as an escalation
An example of Baillie Gifford’s approach to proxy
voting can be found on page 31.
Company Meeting Record
Voting Distribution
Number of meetings voted
with management
59
Number of meetings with at least
one against, withhold or abstain
7
Number of votes for 98.5%
Number of votes against 0.9%
Number of votes abstain 0.6%
The Baillie Gifford Japan Trust PLC
33
Climate Change
The Board recognises that climate change poses
a serious threat to our environment, our society
and to economies and companies around the globe.
Addressing the underlying causes is likely to result
in companies that are high emitters of carbon
facing greater societal and regulatory scrutiny and
higher costs to account for the true environmental
impact of their activities. The Managers published
2022 which is available on the Company’s website
at japantrustplc.co.uk. This report is a means by
which the portfolio’s carbon footprint and
exposure to climate risk are measured and
reported. Companies disclosing their emissions
and communicating emissions plans will be a
helpful place from which to begin more useful
discussions with management teams, industry
experts and regulators. Although this can direct our
efforts, the Managers believe that carbon footprint
pollute more than others is a mostly meaningless
pursuit of long-term growth opportunities which
typically involves investment in entrepreneurial,
disruptive and technology-driven businesses.
These companies are often capital-light with a
low carbon footprint. More information on climate
change is available on the Company’s website
at japantrustplc.co.uk. An external provider was
engaged to map the carbon intensity of The Baillie
Gifford Japan Trust’s portfolio which is estimated to
be 74.8% lower than the index (TOPIX Index) and
is based on 98.7% of the value of the Company’s
equity portfolio which reports on carbon emissions
and other carbon related characteristics.
The Managers, Baillie Gifford & Co, are signatories
to the Carbon Disclosure Project, the Net Zero Asset
Managers initiative and are also members of the
Asian Corporate Governance Association and the
International Corporate Governance Network.
Strategic Report
Annual Report and Financial Statements 2023
34
Business Model
Business and Status
The Company is an investment company within the
meaning of section 833 of the Companies Act 2006
and carries on business as an investment trust.
Investment trusts are UK public listed companies
and their shares are traded on the London Stock
Exchange. They invest in a portfolio of assets in
capital, although, subject to shareholder approval
sought annually, it may purchase its own shares
or issue shares. The price of the Company’s shares
is determined, like other listed shares, by supply
and demand.
The Company has been approved as an investment
trust by HM Revenue & Customs subject to the
Company continuing to meet the eligibility conditions.
The Directors are of the opinion that the Company
has continued to conduct its affairs so as to enable
it to comply with the ongoing requirements of
section 1158 of the Corporation Tax Act 2010 and
the Investment Trust (Approved Company) (Tax)
Regulations 2011.
The Company is an Alternative Investment Fund
(‘AIF’) for the purposes of the UK Alternative
Investment Fund Managers Regulations.
Objective and Policy
The Baillie Gifford Japan Trust aims to achieve long
term capital growth principally through investment in
medium to smaller sized Japanese companies which
are believed to have above average prospects for
growth, although it invests in larger companies when
considered appropriate.
The Company’s holdings are generally listed in Japan
although the portfolio can also include companies
listed elsewhere whose business is predominantly
in Japan as well as unlisted companies. From
investments, may be held.
of individual companies which offer long term growth
The portfolio is actively managed and does not seek
to track the benchmark; hence a degree of volatility
against the index is inevitable.
In constructing the equity portfolio a spread of risk
is achieved by diversifying the portfolio through
investment in 40 to 70 holdings. Although sector
concentration and the thematic characteristics
of the portfolio are carefully monitored, there are
no maximum limits to deviation from benchmark,
stock or sector weights except as imposed by
banking covenants on borrowings.
On acquisition, no holding shall exceed 5% of the
portfolio at the time of purchase and any holding
that as a result of good performance exceeds 5%
of the portfolio is subject to particular scrutiny.
A holding greater than 5% will be retained only
if the Managers continue to be convinced of the
merits of the investment case.
On acquisition, no more than 15% of the Company’s
total assets will be invested in other UK listed
investment companies.
The Company may use derivatives which will be
principally, but not exclusively, for the purpose of
of reducing, transferring or eliminating investment
risk in its investments, including protection against
currency risks).
The Company recognises the long-term advantages
of gearing and has a maximum equity gearing level
of 30% of shareholders’ funds.
Borrowings are invested in securities when it is
considered that investment grounds merit the
Company taking a geared position. Gearing levels,
and the extent of equity gearing, are discussed by
the Board and Managers at every Board meeting.
A detailed analysis of the Company’s Investment
Portfolio is set out on pages 16 to 22 and in the
Managers’ Review and Review of Investments
on pages 8 to 15.
Business
Review
The Baillie Gifford Japan Trust PLC
35
Culture
As an externally managed investment company
with no employees, Baillie Gifford Japan’s culture
is expressed through its Board and its third party
service providers, in particular its Managers, in
their interactions with shareholders and other
stakeholders. The Board’s assessment of its
own interactions is described in its Section 172
Statement on pages 42 to 44 and the Baillie Gifford
Statement on Stewardship, which describes the
Managers’ culture of constructive engagement,
which can be found on the Managers’ website:
bailliegifford.com.
Borrowings
Facility Lender Maturing 2023 2022
¥9,300
million
ING Bank
N .V.
November
2024
£50,413
million
£57,655
million
¥15,000
million
Bank of
New York
Mellon
August
2025
£81,311
million
–
The main covenants relating to the loans are that
total borrowings shall not exceed 30% of the
Company’s net asset value and the Company’s
minimum net asset value shall be ¥48,545,000,000
(£315,000,000). There were no breaches of loan
covenants during the year. Further details can be
found in note 12 on page 89.
Currency Hedging
movements and currencies can appear cheap
or expensive for long periods of time. The Board
remains of the view that it will not engage in
currency hedging.
Strategic Report
Annual Report and Financial Statements 2023
36
The Board uses key performance
indicators (KPIs) to measure
the progress and performance
of the Company over time when
discharging its duties as set out
on page 55. These KPIs are
established industry measures.
Share price, net asset value
and benchmark total returns
*
The total return is the return to
shareholders after reinvesting the
net dividend on the date that the
share price goes ex-dividend.
-20
0
20
40
60
80
100
120
140
160
●
Net asset
value total
return*
● Share
price total
return*
●
Benchmark
total return*
†
1 year 5 years 10 years
*
As stock markets and share prices
vary, an investment trust’s share price
is rarely the same as its net asset value
(NAV). When the share price is lower
than the NAV per share it is said to be
trading at a discount. If the share price
is higher than the NAV per share, this
situation is called a premium.
● Average (discount)/premium*
of NAV to share price
over stated period to
31 August 2023
1 year 5 years 10 years
%
-8
-6
-4
-2
0
Ongoing charges
*
Ongoing charges are the total
recurring expenses (excluding
the Company’s cost of dealing in
investments and borrowing costs)
incurred by the Company as a
percentage of the daily average
net asset value.
● Ongoing charges*
2013
2023
%
0.0
0.4
0.8
1.2
Key Performance Indicators
The Board also has regard to the total return
of the Company’s principal comparative index
(TOPIX Total Return (in sterling terms)) and
considers the performance of comparable
companies. Across these measures, the Board looks
for relative outperformance over the long term,
while remaining mindful that the nature of the
investment policy and the growth characteristics
of the portfolio investments may entail periods of
underperformance over the short and medium term.
* Alternative Performance Measure – see Glossary of Terms and Alternative Performance Measures on pages 107 and 108.
†
The benchmark is the TOPIX total return (in sterling terms).
Past performance is not a guide to future performance.
The Baillie Gifford Japan Trust PLC
37
Viability Statement
Notwithstanding that the continuation vote of the
Company is subject to the approval of shareholders
annually, the Directors have, in accordance with
provision 31 of the UK Corporate Governance Code,
assessed the prospects of the Company over a
The Directors continue to believe this period to
term investment strategy and to be a period during
which, in the absence of any adverse change to the
regulatory environment and to the tax treatment
afforded to UK investment trusts, they do not expect
principal and emerging risks facing the Company
nor to the effectiveness of the controls employed
to mitigate those risks. Furthermore, the Directors
do not reasonably envisage any change in strategy
or any events, which would prevent the Company
Directors have no reason to believe that the
continuation resolution will not be passed at
the Annual General Meeting.
In considering the viability of the Company, the
Directors have conducted a robust assessment
of each of the principal and emerging risks and
uncertainties detailed on pages 38 to 41, and
in particular the impact of market risk where a
adversely impact the value of the investment
testing was conducted during the year, including
consideration of the risk of further market
deterioration resulting from the war in Ukraine and
increasing geopolitical tensions. The Company’s
investments are listed and readily realisable and can
be sold to meet its liabilities as they fall due with the
main liability currently being the bank borrowings.
The Company’s primary third party suppliers
including its Managers and Secretaries, Depositary
and Custodian, Registrar, Auditor and Broker are
affecting their respective services to the Company.
In addition, all of the key operations required by
the Company are outsourced to third party service
providers and it is reasonably considered that
alternative providers could be engaged at relatively
short notice.
The Board has considered the Company’s leverage
and liquidity in the context of its borrowings. The
leverage in scenarios where gross assets fall by
conditions that may adversely impact the portfolio.
in value of assets that can be liquidated within one
month that would result in the value of those assets
falling below the value of the borrowings. The stress
testing did not indicate any matters of concern.
Based on the Company’s processes for monitoring
the Managers’ compliance with the investment
leverage, counterparty exposure, liquidity risk and
there is a reasonable expectation that the Company
will be able to continue in operation and meet its
Principal and Emerging Risks
As explained on pages 59 and 60 there is an
ongoing process for identifying, evaluating and
managing the risks, including emerging risks, faced
by the Company on a regular basis. The Directors
have carried out a robust assessment of the principal
and emerging risks facing the Company including
those that would threaten its business model, future
performance, solvency or liquidity. There have been
no material changes to the principal risks during
the year. Baillie Gifford’s Business Risk Department
provides regular updates covering the Company’s
principal and emerging risks. A description of these
risks and how they are being managed or mitigated
is set out below.
The Board considers the current global economic
environment to be a factor which exacerbates existing
risks, rather than new emerging risks. Their impact is
considered within the relevant risks.
Strategic Report
Annual Report and Financial Statements 2023
38
Financial
risk
What is the risk?
The Company’s assets
consist of listed securities
risks are therefore market
related and include market
risk (comprising currency risk,
interest rate risk and other
price risk), liquidity risk and
credit risk. An explanation
of those risks and how they
are managed is contained
in note 19 to the Financial
Statements and on pages
91 to 94.
How is it managed?
The Board has, in particular,
considered the impact of
heightened market volatility due
to macroeconomic factors such
geopolitical concerns. To mitigate
this risk the Board considers various
portfolio metrics including individual
stock performance, the composition
by growth category, purchases and
sales of investments, the holding
period of each investment, liquidity
characteristics and the top and
bottom contributors to performance.
The Manager provides rationale for
stock selection decisions. A strategy
meeting is held annually.
The value of the Company’s
investment portfolio would be
affected by any impact, positively or
negatively, on sterling but such
impact would be partially offset by
the effect of exchange movements
on the Company’s yen denominated
borrowings.
Current assessment of risk
This risk is seen as increasing
due to increased volatility as
a result of macroeconomic
factors including increasing
energy prices, interest and
Investment
strategy
risk
What is the risk?
Pursuing an investment
objective which the market
perceives to be unattractive
or inappropriate, or the
ineffective implementation of
an attractive or appropriate
strategy, may lead to reduced
returns for shareholders and,
as a result, a decreased
demand for the Company’s
shares. This may lead to the
Company’s shares trading at
a widening discount to their
net asset value.
How is it managed?
To mitigate this risk, the Board
regularly reviews and monitors: the
Company’s objective and investment
policy and strategy; the investment
portfolio and its performance; the
asset value at which the shares
trade; and movements in the share
register.
Current assessment of risk
This risk is increasing as the
market’s appetite for growth
stocks, typically held by the
Company, has decreased
during the recent period of
heightened macroeconomic
and geopolitical concern.
Discount
risk
What is the risk?
which the Company’s shares
trade relative to its net asset
value can change. The risk of
a widening discount is that
it may undermine investor
How is it managed?
The Board monitors the level of
shares trade and the Company has
authority to issue new shares or
buy back its existing shares when
deemed by the Board to be in the
best interests of the Company
and its shareholders.
Current assessment of risk
The Company’s shares traded
at an average discount of
7.2% throughout the year
and it bought back 851,845
ordinary shares during
the year.
Decreasing RiskIncreasing Risk No Change
Investment and Strategic Risks
The Baillie Gifford Japan Trust PLC
39
Smaller
company
risk
What is the risk?
The Company has
investments in smaller
companies which are
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.
How is it managed?
To mitigate this risk, the Board
reviews the investment portfolio
at each meeting and discusses
the investment case and portfolio
weightings with the Managers.
A spread of risk is achieved by
holding a minimum of 40 stocks.
Current assessment of risk
Due to increased market
volatility resulting from
macroeconomic factors,
share prices may be subject
to greater volatility.
Climate and
governance
risk
What is the risk?
Perceived problems on
environmental, social and
governance (‘ESG’) matters
in an investee company
could lead to that company’s
shares being less attractive to
investors, adversely affecting
its share price, in addition
to potential valuation issues
arising from any direct impact
of the failure to address
the ESG weakness on the
operations or management
of the investee company
(for example in the event
of an industrial accident or
spillage). Repeated failure
by the Managers to identify
ESG weaknesses in investee
companies could lead to the
Company’s own shares being
less attractive to investors,
adversely affecting its own
share price. In addition, the
valuation of investments could
be impacted by climate change.
How is it managed?
This is mitigated by the Investment
Manager’s ESG stewardship and
engagement policies application,
which is integrated into the
investment process, as well as the
extensive upfront and ongoing due
diligence which the Investment
Manager undertakes on each
investee company. This includes
the risk inherent in climate
change (see page 33). The Directors
have considered the impact of
climate change on the Financial
Statements of the Company and this
is included in note 1a to the Financial
Statements on page 84.
Current assessment of risk
The Investment Manager
continues to employ strong
ESG stewardship and
engagement policies.
Leverage
risk
What is the risk?
The Company may borrow
money for investment
purposes (sometimes known
as ‘gearing’ or ‘leverage’).
If the investments fall in
value, any borrowings will
magnify the extent of this
loss. If borrowing facilities are
not renewed, the Company
may have to sell investments
to repay borrowings.
How is it managed?
To mitigate this risk, all borrowings
require the prior approval of
the Board and leverage levels
are discussed by the Board and
Managers at every meeting.
Covenant levels are monitored
regularly. The Company has a
maximum equity gearing level of
30% of shareholders’ funds. The
Company’s investments are in listed
securities that are readily realisable.
Further information on leverage can
be found on page 108 and in the
Glossary of Terms and Alternative
Performance Measures on page 107
and 108.
Current assessment of risk
This risk is seen as increasing
due to global falls in company
valuations.
Decreasing RiskIncreasing Risk No Change
Strategic Report
Annual Report and Financial Statements 2023
40
Regulatory
risk
What is the risk?
Failure to comply with
applicable legal and
regulatory requirements
such as the tax rules for
investment companies, the
FCA Listing Rules and the
Companies Act could lead to
suspension of the Company’s
Stock Exchange listing,
the Company being subject
to tax on capital gains.
Changes to the regulatory
environment could negatively
impact the Company.
How is it managed?
To mitigate this risk, Baillie Gifford’s
Business Risk, Internal Audit and
Compliance Departments provide
regular reports to the Audit
Committee on Baillie Gifford’s
monitoring programmes. Major
regulatory change could impose
disproportionate compliance
burdens on the Company. In such
circumstances representation is
made to ensure that the special
circumstances of investment trusts
are recognised. Shareholder
documents and announcements,
including the Company’s published
Interim and Annual Report and
Financial Statements, are subject
to stringent review processes and
procedures are in place to ensure
adherence to the Transparency
Directive and the Market Abuse
Directive with reference to inside
information.
Current assessment of risk
All control procedures are
working effectively. There
have been no material
regulatory changes that
have impacted the Company
during the year.
Political
and
associated
economic
risk
What is the risk?
Political change in areas in
which the Company invests
or may invest may have
practical consequences
for the Company.
How is it managed?
To mitigate this risk, developments
are closely monitored and
considered by the Board and
are regularly discussed at Board
meetings.
Current assessment of risk
This risk is increasing as
Governments and consumers
around the world continue
to assess the impact
of geopolitical tensions,
interest rates.
Decreasing RiskIncreasing Risk No Change
External Risks
Custody and
depositary
risk
What is the risk?
Safe custody of the
Company’s assets may be
compromised through control
failures by the Depositary,
including cyber security
incidents.
How is it managed?
To mitigate this risk, the Audit
Committee receives six monthly
reports from the Depositary
Company’s assets held by the
Custodian. Cash and portfolio
holdings are independently
reconciled to the Custodian’s
records by the Managers.
The Custodian’s audited internal
controls reports are reviewed by
Baillie Gifford’s Business Risk
Department and a summary of
the key points is reported to the
Audit Committee and any concerns
investigated. In addition, the
existence of assets is subject to
annual external audit.
Current assessment of risk
Control procedures
working effectively with no
interruption to Depositary
or Custodian services during
the year.
Operational Risks
The Baillie Gifford Japan Trust PLC
41
Reliance on
third party
service
provider risk
What is the risk?
Failure of Baillie Gifford’s
systems or those of other
third party service providers
could lead to an inability to
provide accurate reporting
and monitoring or a
misappropriation of assets.
How is it managed?
To mitigate this risk, Baillie Gifford
has a comprehensive business
continuity plan which facilitates
continued operation of the business
in the event of a service disruption or
major disaster. The Audit Committee
reviews Baillie Gifford’s Report on
Internal Controls and the reports by
other key third party service providers
are reviewed by Baillie Gifford on
behalf of the Board. In the year
under review, the other key third
party service providers have not
services to the Company.
Current assessment of risk
Control procedures are
working effectively with no
interruption to Depositary,
Custodian, Broker or
Registrar services during
the year.
Cyber
security
risk
What is the risk?
A cyber attack on Baillie
Gifford’s network or that
of a third party service
provider could impact the
or availability of data and
systems.
How is it managed?
To mitigate this risk, the Audit
Committee reviews reports on
Internal Controls published by
Baillie Gifford and other third party
service providers. Baillie Gifford’s
Business Risk Department reports
to the Audit Committee on the
effectiveness of information security
controls in place at Baillie Gifford
and its business continuity framework.
Cyber security due diligence is
performed by Baillie Gifford on
third party service providers which
includes a review of crisis management
and business continuity frameworks.
Current assessment of risk
This risk is seen as increasing
due to recent indications
that the continuation of
geopolitical tensions could
lead to cyber attacks.
Emerging technologies,
including AI, could potentially
increase information security
risks. In addition, service
providers operate a hybrid
approach of remote and
increasing the potential
of a cyber security threat.
Decreasing RiskIncreasing Risk No Change
Emerging Risks
As explained on pages 59 and 60, the Board has regular discussions on principal and emerging risks, including any risks which are not
an immediate threat but could arise in the longer term. The Board considers emerging risks at each Board meeting and discusses any
mitigations required.
Strategic Report
Annual Report and Financial Statements 2023
42
Promoting the Success of the Company
(Section 172 Statement)
Under section 172 of the Companies Act 2006,
the directors of a company must act in the way
they consider, in good faith, would be most likely
to promote the success of the company for the
so have regard (amongst other matters and to
the extent applicable) to: a) the likely consequences
of any decision in the long term; b) the interests
of the company’s employees; c) the need to
foster the company’s business relationships with
suppliers, customers and others; d) the impact of
the company’s operations on the community and
the environment; e) the desirability of the company
maintaining a reputation for high standards of
business conduct; and f) the need to act fairly as
between members of the company.
In this context, having regard to Baillie Gifford
Japan Trust being an externally managed investment
company with no employees, the Board considers
the Company’s key stakeholders to be: its existing
and potential new shareholders; its externally-
appointed Managers and Secretaries (Baillie Gifford);
its portfolio companies; other professional service
providers (corporate broker, registrar, Auditors
and depositary); lenders; and wider society and
the environment.
The Board considers that the interests of the
Company’s key stakeholders are aligned, in terms
of wishing to see the Company deliver sustainable
long-term capital growth, in line with the Company’s
stated objective and strategy, and meet the highest
standards of legal, regulatory, and commercial
conduct, with the differences between stakeholders
being merely a matter of emphasis on those elements.
Stakeholder Why we engage How we engage and what we do
Shareholders Shareholders are, collectively, the Company’s
owners: providing them with a return for their
investment in accordance with the Company’s
investment policy and objective is the reason
for its existence.
The Board places great importance on communication with
shareholders. The Annual General Meeting provides the key
forum for the Board and Managers to present to shareholders
on the Company’s performance, future plans and prospects.
It also allows shareholders the opportunity to meet with the
Board and Managers and raise questions and concerns.
The Chairman is available to meet with shareholders as
appropriate. The Managers meet regularly with shareholders
and their representatives, reporting their views back to the
Board. Directors also attend certain shareholder presentations,
Shareholders may also communicate with members of the
Board at any time by writing to them at the Company’s
communication opportunities help inform the Board when
considering how best to promote the success of the Company
Baillie Gifford –
Managers and
Secretaries
The Company’s Board has delegated the
management of the Company’s portfolio,
and the administration of the Company’s
and taxation reporting requirements,
to Baillie Gifford.
The Board seeks to engage with its Managers, and other
service providers, in a collaborative and collegiate manner,
encouraging open and constructive discussion and debate,
while also ensuring that appropriate and regular challenge
is brought and evaluation conducted. This approach aims to
enhance service levels and strengthen relationships with the
Company’s providers, with a view to ensuring the interests of
the Company’s shareholders are best served by keeping cost
levels proportionate and competitive, and by maintaining the
highest standards of business conduct.
The Baillie Gifford Japan Trust PLC
43
Stakeholder Why we engage How we engage and what we do
Portfolio companies As all of the Company’s operations are
conducted by third party professional
providers, it is the companies held in its
investment portfolio which have the primary
real-world impact in terms of social and
environmental change, both positively and
negatively, as well as generating, through their
commercial success, the investment growth
sought by the Company’s shareholders.
The Board is cognisant of the need to consider the impact of
the Company’s investment strategy and policy on wider society
and the environment. The Board considers that its oversight
of environmental, social and governance (‘ESG’) matters is
an important part of its responsibility to all stakeholders and
that proper consideration of ESG factors sits naturally with
Baillie Gifford Japan Trust’s aim of providing a sustainable
basis for adding value for shareholders. The Board’s review of
the Managers includes an assessment of their ESG approach
and its application in making investment decisions. Information
on how the Managers engage with investee companies can be
found on pages 30 to 33.
Service providers
The Company’s third party service providers
ensure the Company’s day-to-day operations
run smoothly.
The Board ensures that it promotes the success of the
Company by engaging third party services providers who
have the resources to deliver the service required. The service
providers report regularly to the Board throughout the year
and the Managers also engage regularly with the providers
and inform the Board should any areas of concern arise.
The Management Engagement Committee carries out a review
annually of the level of services delivered by each service
provider and the terms on which they are engaged. The Board
seeks assurance that there has been no disruption to services
provided to the Company during the year.
Auditor The Company’s Auditor has a responsibility to
provide an opinion on whether the Company’s
Financial Statements as a whole are free from
material misstatement, as set out in more
detail in the Auditor’s Report to the Members
on pages 72 to 78.
The Company’s Auditor meets with the Audit Chair and
the Board, in the absence of the Managers where deemed
necessary, and the Managers undertake to provide all
information requested by the Auditor in connection with the
Company’s annual audit promptly and to ensure that it is
complete and accurate in all respects.
Lenders
credit facilities to the Company and have an
health and viability.
The Company’s legal advisers review all legal agreements in
connection with the Company’s loans and advise the Board on
the appropriateness of the terms and covenants. The Managers
and Secretaries ensure compliance with lenders’ covenants
and maintain a good working relationship.
The Association of Investment Companies
(‘AIC’) and the Company’s investment
trust industry peers have an interest in the
Company’s conduct and performance,
as adverse market sentiment towards
one investment trust can affect attitudes
towards the wider industry.
or the Managers and Secretaries (as appropriate) participate
in technical reviews, requests for feedback on proposed
legislation or regulatory developments, corporate governance
Investment platforms Investment platforms provide an interface
with shareholders who invest in the
Company indirectly.
The Managers liaise with the various investment platforms
on strategies for improving communications with the
Company’s shareholders who hold their shares via these
platforms. An annual timetable of key dates is published
on the Company’s website, for the ease of reference of
such shareholders.
Wider society and
the environment
No entity, corporate or otherwise, can exist
in which it operates or utilising the planet’s
resources. Through its third party relationships,
as noted above, the Company seeks to be a
where that is not possible, to mitigate its
negative impacts insofar as is possible.
The Board and Managers’ interactions with the various
stakeholders as noted above comprise the principal forms
of direct engagement with wider society and in respect
of planetary health and resources).
Strategic Report
Annual Report and Financial Statements 2023
44
The Board recognises the importance of keeping
the interests of the Company and its stakeholders,
making. The Company Secretaries are available at
all times to the Board to ensure that suitable
consideration is given to the range of factors to
which the Directors should have regard. In addition
to ensuring that the Company’s stated investment
objective was being pursued, key decisions and
actions during the year which required the Directors
to have regard to applicable section 172 factors
included:
subsequently appointing Ms Patricia Lewis
as a Director with effect from 1 August 2023
(see page 58). This appointment is consistent
with the AIC Corporate Governance Code
principle that ‘a successful company is led by
an effective board, whose role is to promote the
long-term sustainable success of the Company,
generating value for shareholders and
contributing to wider society’;
rate facility with The Bank of New York Mellon
to replace the SMBC Europe Limited facility of
¥12,200 million which matured in August 2023
and repay ¥1,700 million of the revolving credit
facility with Mizuho Bank Ltd. The replacement
loan will maintain the level of gearing of the
Company which the Board believes will enhance
long term returns to shareholders;
shares into treasury at a discount to net asset
value, for subsequent reissue, in order to ensure
the Company’s shareholders found liquidity for
their shares when natural market demand was
value for remaining shareholders;
the purchase of 1,205,000 shares, at a discount,
enhancing net asset value for continuing
shareholders; and,
of 10p per ordinary share.
Employees, Human Rights
and Community Issues
The Board recognises the requirement to provide
information about employees, human rights
and community issues. As the Company has no
employees, all its Directors are non-executive
and all its functions are outsourced, there are no
disclosures to be made in respect of employees,
human rights and community issues. Further
information on the Company’s approach to
environmental, social and governance (‘ESG’)
matters is provided on pages 30 and 31.
Modern Slavery Act
The Company considers that it does not fall within
the scope of the Modern Slavery Act 2015 and it is
not, therefore, obliged to make a slavery and human
considers its supply chains to be of low risk as its
suppliers are typically professional advisers.
A statement by the Managers under the Act has
been published on the Managers’ website at
bailliegifford.com.
Gender Representation
Directors, two male and three female. The Company
has no employees. The Board’s policy on diversity
is set out on page 58.
Future Developments of the Company
The outlook for the Company for the next 12 months
is set out in the Chairman’s Statement on page 7 and
the Managers’ Review on page 10.
The Strategic Report which comprises pages 5 to 44
was approved by the Board of Directors and signed
on its behalf on 1 November 2023.
David Kidd
Chairman
The Baillie Gifford Japan Trust PLC
45
Governance
Report
This Governance Report, which includes
pages 47 to 70 outlines the Board’s
approach to the governance of your
Company. We believe that good governance
builds better outcomes and we are
committed to high standards of corporate
governance and transparency.
The Baillie Gifford Japan Trust PLC
47
Directors and
Management
David Kidd
Chairman
Appointed 2015
David Kidd was appointed a Director in 2015 and
became Chairman in June 2022. He has almost
40 years investment experience in the City, in the
professional trustee. He is also chair of Trustees,
ABRSM Pension Scheme, senior independent
director of Mid Wynd International Investment Trust
PLC and a director of The Golden Charter Trust.
Sharon Brown
Director
Appointed 2019
Sharon Brown was appointed a Director in 2019.
accountant. She is currently a director and audit
committee chair of European Opportunities Trust plc
of Dobbies Garden Centres plc and a director of
McColl’s Retail Group plc, Fidelity Special Values plc
and a number of unlisted companies in the
retail sector.
Joanna Pitman was appointed a Director in 2018
and appointed Senior Independent Director in June
2022. She is Chair of the Remuneration Committee.
She read Japanese Studies at Cambridge University
and speaks Japanese. She was Tokyo Bureau Chief
of The Times from 1989 to 1994 and has since
worked as a corporate research analyst focused
on Japan. She is vice chair of the Great Britain
Sasakawa Foundation and UK chair of SAIDIA.
Joanna Pitman
Director
Appointed 2018
Directors
Governance Report
Annual Report and Financial Statements 2023
48
Sam Davis
Director
Appointed 2021
Sam Davis was appointed a Director in 2021. He is
Chair of the Management Engagement Committee.
Sam studied Japanese at Oxford before joining
Morgan Grenfell & Co. Ltd, working initially in
moved to Morgan Grenfell Asset Management in
1996 to work with a Tokyo-based team. In 2000 he
then in London where, over his 19 year tenure, he
managed Asian, European and broad international
equity portfolios. As Putnam’s co-head of equities
he oversaw a global investment team and was
CEO of Putnam Investments Ltd, the group’s
UK regulated entity.
Patricia Lewis
Director
Appointed
August 2023
Patricia Lewis was appointed a Director on
with 25 years’ experience advising clients globally in
investment and capital management. Most recently,
she held the position of Managing Director and Head
of EMEA Loans and Special Situations Sales at Bank
of America Merrill Lynch. She is also a director of
Snowball Impact Management Ltd.
All Directors are members of the following Committees: Nomination,
Remuneration and Management Engagement. With the exception
of David Kidd, all are members of the Audit Committee. No Director
holds a Directorship in common with another member of the Board.
The Baillie Gifford Japan Trust PLC
49
Matthew is an Investment Manager in the Japanese
Equities Team. He joined Baillie Gifford in 2003
and became a Partner of Baillie Gifford in 2018.
He has managed The Baillie Gifford Japan Trust
since 2018. Matthew has managed the Japanese
All Cap Strategy since 2008 and is Co-Manager
of the Japanese Income Growth Strategy.
Matthew graduated BA (Hons) in Natural Sciences
(Psychology) from the University of Cambridge
in 2000 and holds a PhD in Psychology from the
University of Bristol.
Matthew Brett
Manager
Praveen joined Baillie Gifford in 2008 and is an
Investment Manager in the Japanese Equities Team.
He became Deputy Manager of The Baillie Gifford
Japan Trust in 2018. Praveen is also the Manager
of Baillie Gifford Shin Nippon and the Baillie Gifford
Japanese Smaller Companies Fund, and a founding
member of the Baillie Gifford International Smaller
Companies Strategy. He previously worked for FKI
Logistex as a management consultant. Praveen
graduated BEng in Computer Science from
Bangalore University in 2001 and gained an MBA
from the University of Cambridge in 2008.
Praveen Kumar
Deputy Manager
Portfolio Managers
Governance Report
Annual Report and Financial Statements 2023
50
The Directors present their
Report together with the Financial
Statements of the Company for
the year to 31 August 2023.
Directors’ Report
Corporate Governance
The Corporate Governance Report is set out
on pages 55 to 61 and forms part of this Report.
Managers and Company Secretaries
Baillie Gifford is one of the largest investment trust
managers in the UK and currently manages thirteen
closed-ended investment companies. Baillie Gifford
also manages open-ended investment companies,
together with investment portfolios on behalf of
pension funds, charities and other institutional
clients, both in the UK and overseas. Funds under
the management or advice of Baillie Gifford total
around £202.3 billion at 30 October. Based in
Edinburgh, it is one of the leading privately owned
57 partners and employees of around 1,800.
Baillie Gifford & Co Limited, a wholly owned
subsidiary of Baillie Gifford & Co, has been
appointed as the Company’s Alternative Investment
Fund Manager (‘AIFM’) and Company Secretaries.
Baillie Gifford & Co Limited and Baillie Gifford & Co
are both authorised and regulated by the Financial
Conduct Authority. Baillie Gifford & Co Limited has
delegated portfolio management and services to
Baillie Gifford & Co. Dealing activity and transaction
reporting have been further sub-delegated to Baillie
Gifford Overseas Limited and Baillie Gifford Asia
(Hong Kong) Limited.
Baillie Gifford & Co is an investment management
WS, which had been involved in investment
management since 1908.
The Investment Management Agreement between
the AIFM and the Company sets out the matters over
which the Managers have authority in accordance
with the policies and directions of, and subject to
restrictions imposed by, the Board. The Management
The Baillie Gifford Japan Trust PLC
51
Agreement is terminable on not less than 6 months’
notice or on shorter notice in certain circumstances.
Compensation would only be payable if termination
occurred prior to the expiry of the notice period.
Careful consideration has been given by the Board
as to the basis on which the management fee is
charged. The Board considers that maintaining a
relatively low ongoing charges ratio is in the best
interests of shareholders. The Board is also of
the view that calculating the fee with reference
to performance would be unlikely to exert a
The annual management fee is 0.75% on the
£200 million of net assets and 0.55% on the
remaining net assets, calculated and payable quarterly.
The Board considers the Company’s investment
management and secretarial arrangements on an
ongoing basis and a formal review is conducted by
the Management Engagement Committee annually.
The Committee considers, amongst others, the
following topics in its review: the quality of the
personnel assigned to handle the Company’s affairs;
the investment process and the results achieved to
date; investment performance; the administrative
services provided by the Secretaries and the quality
of information provided; the marketing efforts
undertaken by the Managers; and the relationship
with the Managers.
Following the most recent review it is the opinion
of the Management Engagement Committee that
the continuing appointment of Baillie Gifford on the
terms agreed, is in the best interests of the Company
and shareholders as a whole. This is due to the
strength and quality of the investment management
team, the Managers’ commitment to the investment
secretarial and administrative functions.
Depositary
The Bank of New York Mellon (International) Limited
has been appointed as the Company’s Depositary
in accordance with the requirements of the UK
Alternative Investment Fund Managers (‘AIFM’)
Regulations.
The Company’s Depositary also acts as the Company’s
Custodian. The Depositary’s responsibilities include
cash monitoring, safe keeping of the Company’s
maintaining a record of other assets and monitoring
the Company’s compliance with investment limits
and leverage requirements.
Directors
Information about the Directors, including their
relevant experience, can be found on pages
47 and 48.
Patricia Lewis was appointed to the Board on
1 August 2023 and is required to seek election
by shareholders at the Annual General Meeting.
All other Directors will retire at the Annual General
Meeting and offer themselves for re-election.
Following formal performance evaluation, the
each Director’s performance continues to be
effective and that they remain committed to the
Company. The Board therefore recommends their
re-election to shareholders.
Governance Report
Annual Report and Financial Statements 2023
52
The Company has entered into qualifying third party
deeds of indemnity in favour of each of its Directors.
The deeds which were in force during the year to
31 August 2023 and up to the date of approval of
this report, cover any liabilities that may arise to a
third party, other than the Company, for negligence,
default or breach of trust or duty. The Directors
incurred in connection with criminal proceedings in
which the Director is convicted or civil proceedings
brought by the Company in which judgement is given
apply to any liability to the extent that it is recovered
from another person.
liability insurance.
of interest for consideration prior to each Board
meeting and also annually to the Nomination
Committee. The Board and Nomination Committee
consider these carefully, taking into account the
authorised. Having considered the lists of potential
to a direct or indirect interest of a Director which
Dividends
per ordinary share. If approved, the recommended
shareholders on the register at the close of business
on 17 November 2023. The ex-dividend date is
16 November 2023. A dividend reinvestment plan
(‘DRIP’) is available to shareholders who would
prefer to invest their dividends in the shares of the
Company. For those shareholders electing to receive
the DRIP, the last date for receipt of the election
is 29 November 2023.
The ordinary shares carry a right to receive
dividends. Interim dividends are determined
dividend is subject to shareholder approval.
Share Capital
Capital Structure
The Company’s capital structure consists of
93,047,614 ordinary shares of 5p each at 31 August
2023 (2022 – 93,899,459). At 31 August 2023,
1,280,595 shares were held in treasury (2022 –
428,750). There are no restrictions concerning the
holding or transfer of the Company’s ordinary shares
and there are no special rights attached to any of
the shares.
Capital Entitlement
On a winding up, after meeting the liabilities of the
Company, the surplus assets will be paid to ordinary
shareholders in proportion to their shareholdings.
Voting
Each ordinary shareholder present in person or by
proxy is entitled to one vote on a show of hands and,
on a poll, to one vote for every share held.
Information on the deadlines for proxy appointments
can be found on pages 99 and 100.
Major Interests Disclosed in the Company’s Shares
Name
No. of ordinary
5p shares held
at 31 August
2023 % *
Quilter plc (indirect) 4,873,872 5.2
1607 Capital Partners LLC (indirect) 4,783,535 5.1
Investec Wealth and Investment
Limited (indirect)
4,673,961 5.0
Brewin Dolphin Limited (indirect) 4,635,012 5.0
Rathbones Investment Management
Ltd (indirect)
3,412,614 3.7
In the period from 31 August 2023 to 30 October 2023,
held 8,660,214 shares (9.4% of shares in issue as
at 30 October 2023) and Rathbones Investment
Management Ltd (indirect), which merged
with Investec Wealth and Investment Limited on
21 September 2023, held 9,053,564 shares (9.9%
of shares in issue as at 30 October 2023). There have
been no other changes to the major interests in the
Company’s shares intimated up to 30 October 2023.
* Ordinary shares in issue excluding treasury shares.
2023
Number of
shares held
2023
%
2022
Number of
shares held
2022
% *
Institutions 26,161,102 28.1 19,303,305 20.6
Retail savings
Platforms
66,177,792 71.1 73,660,571 78.4
Individuals 451,669 0.5 564,995 0.6
Marketmakers 257,051 0.3 370,588 0.4
93,047,614 100.0 93,899,459 100.0
* Ordinary shares in issue excluding treasury shares.
The Baillie Gifford Japan Trust PLC
53
Share Issuance Authority
At the last Annual General Meeting, the Directors
were granted authority to issue shares up to an
aggregate nominal amount of £468,288.07 and
to issue shares or sell shares held in treasury on a
non pre-emptive basis for cash up to an aggregate
nominal amount of £468,288.07. These authorities
are due to expire at the Annual General Meeting on
12 December 2023.
Resolution 13 in the Notice of Annual General
Meeting seeks to renew the Directors’ general
authority to issue shares up to an aggregate nominal
amount of £459,213.07. This amount represents
10% of the Company’s total ordinary share capital
in issue at 30 October 2023 and meets institutional
guidelines. No issue of ordinary shares will be made
pursuant to the authorisation in Resolution 13 which
would effectively alter the control of the Company
without the prior approval of shareholders in
general meeting.
Resolution 14, which is proposed as a special
resolution, seeks to provide the Directors with
authority to issue shares or sell shares held in
treasury on a non pre-emptive basis for cash
shareholders pro-rata to their existing holdings) up
to an aggregate nominal amount of £459,213.07
(representing 10% of the issued ordinary share
capital of the Company as at 30 October 2023).
The authorities sought in Resolutions 13 and 14 will
continue until the conclusion of the Annual General
Meeting to be held in 2024 or on the expiry of 15
months from the passing of this Resolution, if earlier.
Such authorities will only be used to issue shares
or re-sell shares from treasury at a premium to net
asset value and only when the Directors believe that
it would be in the best interests of the Company
to do so. The Directors believe that the ability to
buy back shares at a discount and re-sell them or
issue new shares at a premium are useful tools in
smoothing supply and demand.
Market Purchases of Own Shares
At the last Annual General Meeting, the Company
was granted authority to purchase up to 14,039,276
ordinary shares (equivalent to 14.99% of its
issued share capital), such authority to expire at
the 2023 Annual General Meeting. The Directors
are seeking shareholders’ approval at the Annual
General Meeting to renew the authority to make
market purchases up to 13,767,208 ordinary
shares representing approximately 14.99% of
the Company’s ordinary shares in issue, excluding
treasury shares, at the date of passing of the
Resolution, such authority to expire at the Annual
General Meeting of the Company to be held in 2024.
During the year to 31 August 2023, 851,845 shares
were bought back at a cost of £6,372,000 and held
in treasury (2022 – 428,750 shares were bought
back at a cost of £3,262,000 and held in treasury).
Between 1 September and 30 October 2023, the
Company bought back 1,205,000 shares into
treasury at a cost of £8,209,000. 2,485,595 shares
were held in treasury as at 30 October 2023.
The principal reasons for share buy-backs are:
shareholders by purchasing shares at a discount
to the prevailing net asset value; and
and the demand for the Company’s shares that
results in a discount of the quoted market price
to the published net asset value per share.
The Company may hold bought-back shares ‘in
treasury’ and then:
equivalent under the Companies Act 2006); or
All buy-backs will initially be held in treasury.
Shares will only be resold from treasury at a
premium to net asset value per ordinary share.
The Company shall not be entitled to exercise the
voting rights attaching to treasury shares.
In accordance with the Listing Rules of the UK
Listing Authority, the maximum price (excluding
expenses) that may be paid on the exercise of the
authority must not exceed the higher of:
London Stock Exchange of an ordinary share over
date of purchase; and
trade and the highest current independent bid
on the London Stock Exchange as stipulated
by Article 5(1) of Commission Regulation (EC)
22 December 2003 implementing the Market
Abuse Directive as regards exemptions for buy
The minimum price (exclusive of expenses) that may
be paid will be 5p per share. Purchases of shares
will be made within guidelines established, from
time to time, by the Board. Your attention is drawn
to Resolution 15 in the Notice of Annual General
Meeting. This authority, if conferred, will only be
exercised if to do so would result in an increase in
net asset value per ordinary share for the remaining
shareholders and if it is considered in the best
interests of shareholders generally.
Governance Report
Annual Report and Financial Statements 2023
54
Directors’ Fee Limit
The Company’s Articles of Association provide that
Directors’ fees may not exceed £200,000 per annum
in aggregate, or such larger amount as may be
agreed by the Company by ordinary resolution.
Articles of Association
The Company’s Articles of Association may only be
amended by special resolution at a general meeting
of shareholders.
Continuation of the Company
The Company’s Articles of Association give
shareholders the right to vote annually at the Annual
General Meeting of the Company on whether to
continue the Company. The Directors wish to draw
your attention to Resolution 12 in the Notice of
Annual General Meeting, which proposes that the
Company continues in operation until the 2024
Annual General Meeting.
Financial Instruments
its investment portfolio, cash balances, bank
borrowings and debtors and creditors that arise
directly from its operations such as sales and
purchases awaiting settlement and accrued income.
the exposure of the Company to risk are disclosed in
note 19 to the Financial Statements.
Disclosure of Information to Auditor
the Directors is aware, there is no relevant audit
information of which the Company’s Auditor is
unaware and the Directors have taken all the steps
that they might reasonably be expected to have
taken as Directors in order to make themselves
aware of any relevant audit information and to
establish that the Company’s Auditor is aware of
that information.
Independent Auditor
The Auditor, Ernst & Young LLP, is willing to
489(1) of the Companies Act 2006, resolutions
concerning Ernst & Young LLP’s appointment and
remuneration will be submitted to the Annual
General Meeting.
Post Balance Sheet Events
30 October 2023.
Greenhouse Gas Emissions and Streamlined
Energy and Carbon Reporting (‘SECR’)
All of the Company’s activities are outsourced to
third parties. The Company therefore has no
greenhouse gas emissions to report from its
operations, nor does it have responsibility for any
other emissions producing sources under the
Companies Act 2006 (Strategic Report and Directors’
Reports) Regulations 2013. For the same reasons
as set out above, the Company considers itself to
be a low energy user under the SECR regulations
and therefore, is not required to disclose energy
and carbon information.
Bribery Act
The Company has a zero tolerance policy towards
bribery and is committed to carrying out business
fairly, honestly and openly. The Managers also adopt
a zero tolerance approach and have policies and
procedures in place to prevent bribery.
Criminal Finances Act 2017
The Company has a commitment to zero tolerance
towards the criminal facilitation of tax evasion.
Recommendation
The Directors consider each resolution being
proposed at the Annual General Meeting to be in the
best interests of the Company and its shareholders
as a whole and they unanimously recommend that
all shareholders vote in favour of them, as they
intend to do where possible in respect of their own
On behalf of the Board
David Kidd
Chairman
1 November 2023
The Baillie Gifford Japan Trust PLC
55
Compliance
that AIC member companies who report against the
AIC Code will be meeting their obligations in relation to
the UK Code. The Company has complied throughout
the year under review with the relevant provisions of
the Code and the recommendations of the AIC Code
except that the Company does not have a separate
internal audit function, as explained on page 66. Given
that the Company is an externally managed investment
trust, the Board considers the provisions relating to
the role of the chief executive and executive-directors
remuneration are not relevant.
The Board
The Board has overall responsibility for the Company’s
affairs. It has a number of matters formally reserved
for its approval including strategy, investment policy,
currency hedging, gearing, treasury matters, dividend
and corporate governance policy. A separate strategy
session is held annually. The Board also reviews
the Financial Statements, investment transactions,
revenue budgets and performance of the Company.
Full and timely information is provided to the Board to
enable it to function effectively and to allow Directors
to discharge their responsibilities.
all of whom are non-executive. The Chairman, Mr David
Kidd, is responsible for organising the business of the
Board, ensuring its effectiveness and setting its agenda.
The Senior Independent Director (‘SID’) is Ms Joanna
Pitman, and as such, is available to shareholders if
they have concerns not properly addressed by the
Chairman. The SID leads the Chairman’s appraisal and
chairs the Nomination Committee when it considers
the Chairman’s succession.
The executive responsibility for investment management
has been delegated to the Company’s Alternative
Investment Fund Manager (‘AIFM’), Baillie Gifford &
Co Limited, and, in the context of a Board comprising
entirely non-executive Directors, there is no chief
Corporate
Governance Report
The Board is committed to
achieving and demonstrating
high standards of corporate
governance. This statement
outlines how the principles
of the 2018 UK Corporate
Governance Code (the ‘Code’),
which can be found at
frc.org.uk, and the relevant
principles of the Association
of Investment Companies Code
of Corporate Governance (the
‘AIC Code’) issued in 2019 were
year. The AIC Code provides a
framework of best practice for
investment companies and can
be found at theaic.co.uk
Governance Report
Annual Report and Financial Statements 2023
56
Board of Directors
Comprises independent
non-executive Directors
Chairman: David Kidd
Senior Independent Director:
Joanna Pitman
Audit
Committee
Chair: Sharon Brown
Purpose: The primary
purpose of the Company’s
Audit Committee is to
provide oversight of the
the audit process,
the Company’s system
of internal controls
and compliance with
laws and regulations.
Management
Engagement Committee
Chair: Sam Davis
Purpose: The role of the
Management Engagement
Committee is to ensure that the
Managers remain suitable to
manage the portfolio, that the
management contract is competitive
and reasonable for the shareholders,
and that the Company maintains
appropriate administrative and
company secretarial support.
Remuneration
Committee
Chair: Joanna Pitman
Purpose: The role of the
Remuneration Committee
is to review the level of
remuneration paid to
Directors within the limits
approved by shareholders.
Nomination
Committee
Chair: David Kidd
Purpose: The main purpose
of the Nomination
Committee is to oversee
Board recruitment and
succession planning as well
as Board appraisals
including identifying
training needs.
Key Third Party Service Providers
Appointed by the Board
Alternative Investment Fund Manager and Company Secretary:
Baillie Gifford & Co Limited (wholly owned
subsidiary of Baillie Gifford & Co)
Dealing activity and transaction reporting:
Baillie Gifford Overseas Limited and
Baillie Gifford Asia (Hong Kong) Limited
Ernst &
Young LLP
Auditor
The Bank of
New York Mellon
(International) Limited
Depositary
Computershare
Investor
Services PLC
Registrar
Investec Bank plc
Company Broker
The Baillie Gifford Japan Trust PLC
57
The Directors believe that the Board has a balance
of skills and experience that enables it to provide
effective strategic leadership and proper governance
of the Company. Information about the Directors,
including their relevant experience, can be found
on pages 47 and 48.
There is an agreed procedure for Directors to seek
independent professional advice, if necessary, at the
Company’s expense.
Appointments to the Board
The terms and conditions of Directors’ appointments
are set out in formal letters of appointment which are
available for inspection on request.
Under the provisions of the Company’s Articles of
Association, a Director appointed during the year is
required to retire and seek election by shareholders
at the next Annual General Meeting. In accordance
with the Code, all Directors are subject to annual
re-election by shareholders.
Chairman and Directors’ Tenure
It is the Board’s policy that all Directors, including
the Chairman, shall normally have tenure limited
Board. Exceptions may be made in particular
circumstances, for example to facilitate effective
succession planning or if the Company were in the
middle of a corporate action, when an extension
may be appropriate.
Independence of Directors
All the Directors are considered by the Board to
be independent of the Managers and free of any
business or other relationship which could interfere
with the exercise of their independent judgement.
The Directors recognise the importance of
succession planning for company boards and review
the Board composition annually.
The Board is of the view that length of service will
not necessarily compromise the independence or
contribution of Directors of an investment trust
company, where continuity and experience can be
view expressed in the AIC Code that long serving
Directors should not be prevented from being
considered independent.
Meetings
There is an annual cycle of Board meetings which
is designed to address, in a systematic way, overall
strategy, review of investment policy, investment
performance, marketing, revenue budgets, dividend
policy and communication with shareholders. The
to discharge its duties effectively. The table below
shows the attendance record for the Board and
Committee meetings held during the year. The
Annual General Meeting was attended by all
Directors.
Directors’ Attendance at Meetings
Board
Audit
Committee
Nomination
Committee
Remuneration
Committee
Management
Engagement
Committee
Number of meetings 5 2 1 1 1
David Kidd* 5 – 1 1 1
Sharon Brown 5 2 1 1 1
Sam Davis 5 2 1 1 1
Patricia Lewis
†
1 – – – –
Joanna Pitman 5 2 1 1 1
* David Kidd ceased to be a member of the Audit Committee when he was
appointed Chairman of the Board in June 2022 but attends by invitation.
†
Appointed a Director 1 August 2023.
Nomination Committee
The Nomination Committee consists of the whole
Board and the Chairman of the Board is the Chairman
of the Committee. The Committee meets on an
annual basis and at such other times as may be
required. The Committee has written terms of
reference which include reviewing the composition of
the Board, identifying and nominating new candidates
for appointment to the Board, Board appraisal,
succession planning and training. The Committee
also considers whether Directors should be
recommended for re-election by shareholders.
The Committee is responsible for considering
making recommendations to the Board on whether
The Committee’s terms of reference are available on
request from the Company and on the Company’s
website: japantrustplc.co.uk.
Governance Report
Annual Report and Financial Statements 2023
58
Board Diversity
Appointments to the Board are made on merit with
gender, social and ethnic backgrounds, and
cognitive and personal strengths. The priority in
succession planning and appointing new Directors
is to identify the candidate with the best range
of skills and experience to complement existing
Directors, with a view to ensuring that the Board
remains well placed to help the Company achieve its
investment and governance objectives. The following
disclosures are provided in respect of the FCA
Listing Rules targets that i) 40% of a board should
be women, ii) at least one senior role should be held
by a woman; and iii) at least one board member
should be from a non-white ethnic background as
The Board has considered the Company’s year end
date to be the most appropriate date for disclosure
purposes. At 31 August 2023, the Board comprised
women.
Gender Number %
Senior
roles
*
Men 2 40
1
Women 3 60
2
Ethnic background Number %
Senior
roles
*
White 4 80
3
Black British
1 20 –
* As an externally managed investment company with no chief executive
FCA guidance are Chairman and Senior Independent Director (‘SID’).
The Chairman is a man and the SID a woman. The Board also considers
the role of Audit Committee Chair to represent a senior role within this
context and this role is performed by a woman.
The Board currently complies in all respects with
the FCA Listing Rules targets.
Board Composition
The Committee reviewed the Board’s composition
and succession planning during the year and
engaged an external search consultancy,
Fletcher Jones, to recruit an additional non-
executive Director to maintain the broad range
of experience that is particularly valuable when
supporting and challenging the Managers.
Fletcher Jones has no other connection with the
Company or any of the Directors. Fletcher Jones
promotion of diversity on the Board as an integral
part of the recruitment process, having regard to
the skills, experience and knowledge of each
of the existing and prospective Directors and
with particular regard to the Parker Review
recommendations. Following the conclusion of the
process, it was announced on 16 June 2023 that
Ms Patricia Lewis would be appointed to the Board
with effect from 1 August 2023. The Board believes
that Ms Lewis’ knowledge and experience will be of
after reviewing her other commitments, she will
The Board recognises the importance of having
Directors with a range of skills and experiences
knowledge of the Company with the desirability
of ensuring refreshment of the Board.
Performance Evaluation
An appraisal of the Chairman, each Director and a
performance evaluation and review of the Board
as a whole and its Committees was carried out
during the year. After inviting each Director and the
Chairman to consider and respond to an evaluation
questionnaire, each Director met with the Chairman
and the Chairman’s appraisal was led by Ms Pitman,
the Senior Independent Director. The appraisals
and evaluations considered, amongst other criteria,
the balance of skills of the Board, training and
development requirements, the contribution of
individual Directors, the overall competency and
effectiveness of the Board and its Committees and
the continuing professional development undertaken
by the Directors during the year.
Following this process, it was concluded that
the performance of each Director, the Chairman,
the Board and its Committees continues to be
effective and that each Director and the Chairman
remain committed to the Company. A review of the
Chairman’s and other Directors’ commitments was
carried out and the Nomination Committee was
time to the Company.
Lintstock, an independent company which assists
companies with the design and execution of board
evaluations, facilitated an external performance
evaluation in 2022. It is intended that the evaluation
will again be externally facilitated in 2025.
The Baillie Gifford Japan Trust PLC
59
Induction and Training
New Directors are provided with an induction
programme which is tailored to the particular
provided during the year on regulatory matters.
Directors receive other relevant training as necessary.
Management Engagement Committee
The Management Engagement Committee consists
of all Directors and Sam Davis is Chair of the
Committee. The Board considers each member of
the Committee to be independent. To discharge its
duties, the Committee met on one occasion during
the year to consider: the performance and suitability
of the Manager; the terms and conditions of the
AIFM Agreement, including fees; the performance
of other third party service providers; and the
Committee’s Terms of Reference.
The Committee’s Terms of Reference are available
on request from the Company and on the Company’s
pages of the Managers’ website: japantrustplc.co.uk.
Remuneration Committee
The Remuneration Committee consists of all
Directors and Joanna Pitman is the Chair of the
Committee. The Remuneration Committee reviews
and makes recommendations to the Board in respect
of the level of remuneration paid to Directors within
the limits approved by shareholders. The Company’s
policy on remuneration is set out in the Directors’
Remuneration Report on pages 62 to 65.
The Committee’s Terms of Reference are available
on request from the Company and on the Company’s
page of the Managers’ website: japantrustplc.co.uk.
Audit Committee
The report of the Audit Committee is set out on
pages 66 to 68.
Internal Controls and Risk Management
The Directors acknowledge their responsibility
for the Company’s risk management and internal
control systems and for reviewing their effectiveness.
The systems are designed to manage rather than
eliminate the risk of failure to achieve business
objectives and can only provide reasonable but not
absolute assurance against material misstatement
or loss.
process for identifying, evaluating and managing
accordance with the FRC guidance ‘Guidance on
Risk Management, Internal Control and Related
Financial and Business Reporting’.
The practical measures in relation to the design,
implementation and maintenance of control policies
and procedures to safeguard the Company’s
assets and to manage its affairs properly, including
the maintenance of effective operational and
compliance controls have been delegated to the
Managers and Secretaries.
The Board oversees the functions delegated to the
Managers and Secretaries and the controls managed
by the AIFM in accordance with the UK Alternative
Investment Fund Managers Regulations (as detailed
below). Baillie Gifford & Co’s Internal Audit and
Compliance Departments and the AIFM’s permanent
risk function provide the Audit Committee with
regular reports on their monitoring programmes.
The reporting procedures for these departments
agreement. Baillie Gifford & Co conducts an annual
review of its system of internal controls which is
documented within an internal controls report which
complies with ISAE 3402 – Assurance Reports on
Controls at a Service Organisation. This report is
independently reviewed by Baillie Gifford & Co’s
Auditor and a copy of the report is submitted to
the Audit Committee.
A report identifying the material risks faced by the
Company and the key controls employed to manage
these risks is reviewed by the Audit Committee.
These procedures ensure that consideration is given
regularly to the nature and extent of risks facing the
Company and that they are being actively monitored.
the year they also provide a mechanism to assess
whether further action is required to manage
these risks.
effectiveness of the Company’s risk management
and internal controls systems, which accord with
the FRC’s ‘Guidance in the Risk Management,
Internal Control and Related Financial and Business
Reporting’ and they have procedures in place
to review their effectiveness on a regular basis.
year under review and up to the date of this Report.
Governance Report
Annual Report and Financial Statements 2023
60
year and continue to be in place up to the date of
approval of this Report.
To comply with the UK Alternative Investment Fund
Managers Regulations, The Bank of New York
Mellon (International) Limited acts as the Company’s
Depositary, and Baillie Gifford & Co Limited as AIFM.
The Depositary’s responsibilities include cash
instruments, verifying ownership and maintaining
a record of other assets and monitoring the
Company’s compliance with investment limits and
leverage requirements. The Depositary is liable for
The Depositary will ensure that any delegate
segregates the assets of the Company. As explained
on page 51, the Company’s Depositary also acts as
the Company’s Custodian. The Custodian prepares
a report on its key controls and safeguards which
is independently reviewed by KPMG LLP, as the
Custodian’s report Auditor. The reports are reviewed
by Baillie Gifford’s Business Risk Department and
a summary of the key points is reported to the Audit
Committee and any concerns are investigated.
The Depositary provides the Audit Committee with
a report on its monitoring activities twice a year.
The AIFM has established a permanent risk
management function to ensure that effective risk
management policies and procedures are in place
and to monitor compliance with risk limits. The AIFM
has a risk management policy which covers the risks
associated with the management of the portfolio,
and the adequacy and effectiveness of this policy is
reviewed and approved at least annually. This review
includes the risk management processes and
systems and limits for each risk area.
The risk limits, which are set by the AIFM and
approved by the Board take into account the
These limits, including leverage (see page 103),
are monitored and the sensitivity of the portfolio to
key risks is undertaken periodically as appropriate
to ascertain the impact of changes in key variables
in the portfolio. Exceptions from limits monitoring
and stress testing are escalated to the AIFM and
reported to the Board along with remedial measures
being taken.
Going Concern
In accordance with FRC’s guidance on going concern
and liquidity risk the Directors have undertaken a
rigorous review of the Company’s ability to continue
as a going concern.
The Company’s principal and emerging risks are
market related and include market risk, liquidity risk
and credit risk. An explanation of these risks and
how they are managed is contained in note 19 to
the Financial Statements.
The Board has considered severe but plausible
downside scenarios, which include the impact of
heightened market volatility over recent months
due to macroeconomic and geopolitical concerns,
the continuation of geopolitical tensions, through
the performance of stress testing using a variety
of parameters which have the potential to impact
the Company’s share price and net asset value.
The Directors do not believe the Company’s going
concern status is affected. In addition, in accordance
with the Company’s Articles of Association, the
Company is subject to an annual continuation
vote which in previous years has been passed
reason to believe that the vote will not continue
to be in favour based on their assessment of the
Company’s performance and the views collated
from shareholders. For these reasons the Directors
have prepared the Financial Statements on a going
concern basis.
The Company’s assets, the majority of which
are investments in quoted securities which are
All borrowings require the prior approval of
the Board. Gearing levels and compliance with
borrowing covenants are reviewed by the Board
on a regular basis.
During the year, the Company entered into a 2 year
rate loan facility with SMBC was repaid upon expiry
on 29 August 2023 and the ¥1,700 million tranche
drawn down under the ¥2,600 million revolver loan
facility with Mizuho was repaid on 30 August 2023.
The Baillie Gifford Japan Trust PLC
61
The Company has continued to comply with the
investment trust status requirements of section 1158
of the Corporation Tax Act 2010 and the Investment
Trust (Approved Company) Regulations 2011.
The Company’s third party suppliers, including
its Managers and Secretaries, Custodian and
Depositary, Registrar, Auditor and Broker are not
affecting their respective services to the Company.
Accordingly, the Financial Statements have been
prepared on the going concern basis as it is the
Directors’ opinion, having assessed the principal
and emerging risks and other matters set out in
the Viability Statement on page 37 which assesses
years, that the Company will meet its liabilities as
they fall due for a period of at least twelve months
from the date of approval of these Financial
Statements. If the continuation resolution is not
passed, the Articles provide that the Directors shall
convene a General Meeting within three months
at which a special resolution will be proposed to
wind up the Company voluntarily. If the Company
is wound up, its investments may not be realised at
their full market value.
Relations with Shareholders
The Board places great importance on communication
with shareholders. The Company’s Managers meet
regularly with shareholders and their representatives,
accompanied by the Chairman when requested
and report shareholders’ views to the Board.
The Chairman is available to meet with shareholders
as appropriate. Shareholders wishing to communicate
with any members of the Board may do so by writing
through the Company’s broker, Investec Bank plc
(see contact details on page 109).
The Company’s Annual General Meeting (‘AGM’)
provides a forum for communication with all
shareholders. The level of proxies lodged for each
resolution is announced at the Meeting and is
published at japantrustplc.co.uk subsequent to
the meeting. The notice period for the AGM
is at least twenty working days. Shareholders
and potential investors may obtain up-to-date
information on the Company from the Managers’
website at japantrustplc.co.uk.
On behalf of the Board
David Kidd
Chairman
1 November 2023
Governance Report
Annual Report and Financial Statements 2023
62
Directors’
Remuneration Report
The Directors’ Remuneration Policy is subject
to shareholder approval every three years or
sooner if an alteration to the policy is proposed.
As the Remuneration Policy was last approved by
shareholders at the Annual General Meeting in
December 2020, shareholders’ approval of the policy
is being sought at the forthcoming Annual General
Meeting. Your attention is drawn to Resolution 2 in
the Notice of Annual General Meeting on page 97.
The policy for which approval is being sought is set
out below and is unchanged from that currently
in force.
The Board reviewed the level of fees during the
year and it was agreed that, with effect from
1 September 2023, the Chairman’s fee would be
increased from £40,000 to £43,000, the other
Directors’ fees would be increased from £29,000
to £31,000 and that the additional fee for the Chair
of the Audit Committee would be increased from
£5,000 to £6,000. The fees were last increased
on 1 September 2022.
Directors’ Remuneration Policy
The determination of the Directors’ fees is a matter
considered by the Remuneration Committee and
recommended to the Board for approval.
The Board and its Committees are composed wholly
of non-executive Directors, none of whom has a
service contract with the Company. Baillie Gifford
& Co Limited, the Company Secretaries, provide
comparative information when the Board considers
the level of Directors’ fees.
The Board’s policy is that the remuneration of
Directors should be set at a reasonable level that is
commensurate with the duties and responsibilities
of the role and consistent with the requirement
to attract and retain Directors of the appropriate
quality and experience. The Board believes that
experience of the Board as a whole, be fair and
should take account of the level of fees paid by
This report has been prepared in
accordance with the requirements
of the Companies Act 2006.
The Baillie Gifford Japan Trust PLC
63
comparable investment trusts. Any views expressed
by shareholders on the fees being paid to Directors
will be taken into consideration by the Board when
reviewing the Board’s policy on remuneration.
Non-executive Directors are not eligible for any
reimbursement of allowable expenses. There are no
performance conditions relating to Directors’ fees
and there are no long term incentive schemes or
pension schemes. No compensation is payable on
Limits on Directors’ Remuneration
The fees for the non-executive Directors are payable
monthly and are determined within the limit set out
in the Company’s Articles of Association which is
currently £200,000 per annum in aggregate.
The fees paid to Directors in respect of the year
ended 31 August 2023 and the expected fees
payable in respect of the year ending 31 August 2024
are set out in the table below. The fees payable to
will be determined following an annual review of
the Directors’ fees.
Expected
fees for the
year ending
31 August
2024
£
Fees as at
31 August
2023
£
Chairman’s fee 43,000 40,000
Non-executive Director fee 31,000 29,000
Additional fee for Audit
Committee Chair
6,000 5,000
Total aggregate annual fees that can
be paid to the Directors in any year
under the Directors’ Remuneration
Policy, as set out in the Company’s
Articles of Association
200,000 200,000
Annual Report on Remuneration
An ordinary resolution for the approval of this report
will be put to the members at the forthcoming Annual
General Meeting.
The law requires the Company’s Auditor to audit
certain of the disclosures provided in this report.
Where disclosures have been audited, they are
indicated as such. The Auditor’s opinion is included
in the Independent Auditor’s Report on pages
72 to 78.
Statement of Voting at Annual General Meeting
At the last Annual General Meeting, of the
proxy votes received in respect of the Directors’
Remuneration Report, 99.85% were in favour,
0.08% were against and votes withheld
were 0.07%. At the last Annual General Meeting
at which the Directors’ Remuneration Policy was
considered (December 2020), 99.8% were in
favour, 0.1% were against and votes withheld
were 0.1%.
Governance Report
Annual Report and Financial Statements 2023
64
Annual Percentage Change in
Directors’ Remuneration
The following table sets out the annual percentage
change in Directors’ fees for the past 3 years from
1 September 2020 to 31 August 2023.
Name
Year ended
31 August
2023
%
Year ended
31 August
2022
%
Year ending
31 August
2021
%
David Kidd* 35.6 13.5 0.0
Sharon Brown
†
9.7 5.1 11.8
Sam Davis
#
17.2 – –
Patricia Lewis
‡
– – –
Joanna Pitman 7. 4 3.8 0.0
* Appointed Chairman 1 June 2022.
†
Appointed Audit Chair 5 December 2019.
#
Appointed a Director 1 October 2021.
‡
Appointed a Director 1 August 2023.
Directors’ Remuneration for the Year (Audited)
The Directors who served during the year received the following remuneration in the form of fees and taxable
Name
2023
Fees
£
2023
Taxable
*
£
2023
Total
£
2022
Fees
£
2022
Taxable
*
£
2022
Total
£
David Kidd
†
40,000 3,384 43,384 29,500 691 30,191
Sharon Brown 34,000 627 34,627 31,000 564 31,564
Sam Davis
#
29,000 3,294 32,294 24,750 792 25,542
Patricia Lewis
‡
2,417 – 2,417 – – –
Joanna Pitman 29,000 2,792 31,792 27,000 815 27,815
Keith Falconer
¶
– – – 27,750 – 27,750
Martin Paling
§
– – – 9,000 166 9,166
134,417 10,097 144,514 149,000
3,028
152,028
* Comprises expenses incurred by Directors in the course of travel to attend Board and Committee meetings.
†
Appointed Chairman 1 June 2022.
#
Appointed a Director 1 October 2021.
‡
Appointed a Director 1 August 2023.
¶
Deceased May 2022.
§
Retired 16 December 2021.
Directors’ Interests (Audited)
The Directors at the end of the year under review,
and their interests in the Company, are shown in
the following table. There have been no further
changes intimated in the Directors’ interests up
to 30 October 2023.
Name
of interest
Ordinary
5p shares
held at
31 August
2023
Ordinary
5p shares
held at
31 August
2022
David Kidd
42,500
42,500
Sharon Brown
3,995
3,995
Sam Davis
5,059
5,002
Patricia Lewis
*
–
–
Joanna Pitman
5,262
5,262
* Patricia Lewis purchased 5,100 ordinary shares on 28 September 2023.
The Baillie Gifford Japan Trust PLC
65
Relative Importance of Spend on Pay
The table below shows the actual expenditure
during the year in relation to Directors’ fees and
distributions to shareholders.
Name
2023
£
2022
£
%
change
Directors’ fees
134
149 (10.1)
Dividends paid to
shareholders
8,426 5,660 48.9
Company Performance
The graph which follows compares the share price
total return (assuming all dividends are reinvested)
to ordinary shareholders compared with the total
shareholder return on a notional investment made up
of shares in the component parts of the TOPIX total
return (in sterling terms). This index was chosen
for comparison purposes as it is the index against
which the Company has measured its performance
over the period covered by the graph.
Performance Graph
Cumulative to 31 August
20232013 2015 2018 2020 20222014 20172016 2019 2021
Source:
Refinitiv/Baillie Gifford and relevant underlying index providers.
See disclaimer on page 103.
●
Share price total return
*
●
TOPIX total return (in sterling terms)
*
50
350
200
150
100
300
250
* Alternative Performance Measure – see Glossary of Terms and
Alternative Performance Measures on pages 107 and 108.
Past performance is not a guide to future performance.
Approval
The Directors’ Remuneration Report on pages 62
to 65 was approved by the Board of Directors
and signed on its behalf on 1 November 2023.
Joanna Pitman
Remuneration Committee Chair
Governance Report
Annual Report and Financial Statements 2023
66
Audit Committee
Report
The Audit Committee consists of all Directors with
the exception of Mr Kidd, who attends by invitation.
Mrs Brown is Chair of the Audit Committee. The
members of the Committee consider that they
within its written terms of reference which are
available on request from the Company Secretaries
and at japantrustplc.co.uk. The terms of reference
are reviewed annually.
The Committee’s effectiveness is reviewed on an
annual basis as part of the Board’s performance
evaluation process.
At least once a year the Committee meets with the
external Auditor without any representative of the
Manager being present.
Main Activities of the Committee
The Committee met two times during the year
and Ernst & Young, the external Auditor, attended
both of these meetings. In addition Ernst & Young
met with the Audit Chair on two occasions during
the year. Baillie Gifford & Co’s Internal Audit and
Compliance Departments and the AIFM’s permanent
risk function provided reports on their monitoring
programmes for each of these meetings.
The matters considered, monitored and reviewed
by the Committee during the course of the year
included the following:
Interim reports;
the Annual Report and Financial Statements and
whether it provided the information necessary
for shareholders to assess the Company’s
performance, business model and strategy;
control environment including the internal audit
work of the Manager;
engagement of the external Auditor;
Auditor to supply non-audit services;
Auditor and the effectiveness of the audit process;
audit function;
Managers and Custodian; and
concerns about possible improprieties in matters
Internal Audit
The Committee continues to believe that the
compliance and internal control systems and the
internal audit function in place within the Investment
sound system of internal control, which safeguards
shareholders’ investment and the Company’s assets,
the Company, is therefore considered unnecessary.
The Baillie Gifford Japan Trust PLC
67
Financial Reporting
areas of risk likely to impact the Financial
Statements are the existence and valuation of
investments, as they represent 99.3% of total
assets. Another area of risk considered by the
Committee is the accuracy and completeness of
income from investments.
All of the investments are quoted securities and
market prices are readily available from independent
external pricing sources. The Committee reviewed
the Managers’ Report on Internal Controls which
details the controls in place regarding recording
and pricing of investments, accurate recording
of investment income and the reconciliation of
investment holdings to third party data.
The value of all the investments at 31 August 2023
were agreed by the Managers to external price
sources and the portfolio holdings agreed to
The Committee reviewed the Managers’ Report on
Internal Controls which details the controls in place
regarding completeness and accurate recording of
investment income. The accounting treatment of
each special dividend received or receivable during
the year was reviewed by the Managers.
The Committee considered the factors, including
increasing geopolitical tensions, that might affect
and its ability to continue as a going concern for
at least twelve months from the date of signing of
the Financial Statements, together with reports
from the Managers on the cash position and cash
its investment portfolio, compliance with debt
covenants, availability of borrowing facilities, and
the Company’s ability to meet its obligations as
they fall due. The Committee also reviewed the
Viability Statement on page 37 and statement on
Going Concern on pages 60 and 61. Following this
assessment, the Committee recommended to the
Board the appropriateness of the Going Concern
basis in preparing the Financial Statements and
and statement on Going Concern.
were not aware of any material misstatements in the
context of the Financial Statements as a whole and
that the Financial Statements are in accordance with
applicable law and accounting standards.
Internal Controls and Risk Management
The Committee reviewed the effectiveness of the
Company’s risk management and internal controls
systems as described on pages 59 and 60. No
year under review.
External Auditor
Following a formal audit tender process in 2022,
Ernst & Young LLP was appointed as the Company’s
Auditor at the Annual General Meeting held on
15 December 2022.
is independent within the meaning of regulatory and
professional requirements and that the objectivity
of the audit partner and staff is not impaired.
and objectivity of the external Auditor, the
Committee reviewed:
arrangements to manage Auditor independence
Governance Report
Annual Report and Financial Statements 2023
68
external Auditor. The Auditor will not provide
any non-audit services unless approved by the
Committee. There were no non-audit fees for the
year to 31 August 2023 or 31 August 2022.
To assess the effectiveness of the external Auditor,
the Committee reviewed and considered:
of the audit team; and
audit process the Committee considered and
reviewed:
of the audit.
The audit partner responsible for the audit will be
professional and regulatory standards in order
to protect independence and objectivity and to
provide fresh challenge to the business. Ms Caroline
Mercer, the current partner, has held this role for
one year and will continue as audit partner until the
conclusion of the 2027 audit.
Having carried out the review described above,
independent and effective for the purposes of this
year’s audit.
There are no contractual obligations restricting the
Committee’s choice of external Auditor.
The audit fee has increased from £42,000 to
in the regulatory environment with additional audit
procedures now being required. The Committee
considered the increase by benchmarking fees for
Regulatory Compliance
compliance with the requirements of the Statutory
Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive Tender
Processes and Audit Committee Responsibilities)
Order 2014, which relates to the frequency and
governance of tenders for the appointment of the
external Auditor and the setting of policy on the
provision of non-audit services.
Accountability and Audit
The respective responsibilities of the Directors
and the Auditor in connection with the Financial
Statements are set out on pages 69 to 78.
On behalf of the Board
Sharon Brown
Audit Committee Chair
1 November 2023
The Baillie Gifford Japan Trust PLC
69
The Directors are responsible for preparing
the Annual Report and Financial Statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare
Under that law they are required to prepare the
Financial Statements in accordance with applicable
law and United Kingdom Accounting Standards,
including FRS 102, the Financial Reporting Standard
Applicable in the UK and Republic of Ireland.
Under company law the Directors must not approve
that they give a true and fair view of the state of
of the Company for that year. In preparing these
Financial Statements, the Directors are required to:
them consistently;
Accounting Standards have been followed, subject
to any material departures disclosed and explained
in the Financial Statements;
are reasonable and prudent;
going concern, disclosing as applicable, matters
related to going concern; and
they either intend to liquidate the Company or to
cease operations, or have no realistic alternative
but to do so.
The Directors are responsible for keeping adequate
explain the Company’s transactions and disclose
position of the Company and enable them to ensure
that the Financial Statements comply with the
Companies Act 2006. They are responsible for such
internal control as they determine is necessary to
enable the preparation of Financial Statements that
are free from material misstatement, whether due
to fraud or error, and have general responsibility for
taking such steps as are reasonably open to them to
safeguard the assets of the Company and to prevent
and detect fraud and other irregularities.
Under applicable laws and regulations, the Directors
are also responsible for preparing a Strategic
Report, Directors’ Report, Directors’ Remuneration
Report and Corporate Governance Statement that
complies with that law and those regulations.
In accordance with Disclosure Guidance and
Transparency Rule 4.1.14R, the Financial Statements
using the single electronic reporting format under
the TD ESEF Regulation. The Auditor’s Report on
these Financial Statements provides no assurance
over the ESEF format.
The Directors are responsible for the maintenance
and integrity of the Company’s page on the
Managers’ website. Legislation in the United
Kingdom governing the preparation and
dissemination of Financial Statements may
differ from legislation in other jurisdictions.
Statement of Directors’
Responsibilities
in respect of the Annual Report and the Financial Statements
Governance Report
Annual Report and Financial Statements 2023
70
Responsibility Statement of the Directors in Respect
of the Annual Financial Report
prepared in accordance with applicable law and
United Kingdom Accounting Standards, give a
includes a fair review of the development and
performance of the business and the position of
the Company, together with a description of the
principal risks and uncertainties that it faces.
We consider the Annual Report and Financial
Statements taken as a whole, is fair, balanced
and understandable and provides the information
necessary for shareholders to assess the Company’s
performance, business model and strategy.
On behalf of the Board
David Kidd
1 November 2023
Financial
Report
The Financial Statements for the
year to 31 August 2023 set out
on pages 79 to 94 have been
prepared in accordance with FRS
102 ‘The Financial Reporting
Standard applicable in the UK
and Republic of Ireland’.
Financial Report
Annual Report and Financial Statements 2023
72
Independent
Auditor’s Report
to the members of The Baillie Gifford Japan Trust PLC
Opinion
We have audited the Financial Statements of
Baillie Gifford Japan Trust plc (“the Company”)
for the year ended 31 August 2023 which comprise
the Income Statement, Balance Sheet, Statement
of Changes in Equity, Cash Flow Statement and
the related notes 1 to 19, including a summary
reporting framework that has been applied in their
preparation is applicable law and United Kingdom
Accounting Standards including FRS 102
“The Financial Reporting Standard applicable in
the UK and Republic of Ireland” (United Kingdom
Generally Accepted Accounting Practice).
In our opinion, the Financial Statements:
as at 31 August 2023 and of its loss for the year
then ended;
United Kingdom Generally Accepted Accounting
Practice; and
requirements of the Companies Act 2006.
Basis for Opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (ISAs (UK))
and applicable law. Our responsibilities under those
standards are further described in the Auditor’s
responsibilities for the audit of the Financial
Statements section of our report. We believe that
and appropriate to provide a basis for our opinion.
Independence
We are independent of the Company in accordance
with the ethical requirements that are relevant to
our audit of the Financial Statements in the UK,
including the FRC’s Ethical Standard as applied to
other ethical responsibilities in accordance with
these requirements.
The non-audit services prohibited by the FRC’s
Ethical Standard were not provided to the Company
and we remain independent of the Company in
conducting the audit.
Conclusions Relating to Going Concern
In auditing the Financial Statements, we have
concluded that the Directors’ use of the going
concern basis of accounting in the preparation of the
Financial Statements is appropriate. Our evaluation
of the Directors’ assessment of the Company’s
ability to continue to adopt the going concern basis
of accounting included:
Company’s going concern assessment process
and engaged with the Directors and the Company
secretary to determine if all key factors that we
have become aware of during our audit were
considered in their assessment.
concern, including the revenue forecast, for
the period to 30 November 2024 which is at
least twelve months from the date the Financial
Statements were authorised for issue. In preparing
the revenue forecast, the Company has concluded
that it is able to continue to meet its ongoing costs
as they fall due.
The Baillie Gifford Japan Trust PLC
73
the impact of the current economic environment,
as applied to the revenue forecast and the liquidity
assessment of the investments. We considered
the appropriateness of the methods used to
calculate the revenue forecast and the liquidity
assessment and determined, through testing
of the methodology and calculations, that the
methods, inputs and assumptions utilised were
appropriate to be able to make an assessment for
the Company.
covenants as a result of a reduction in the value of
the Company’s portfolio. We calculated reviewed
the Company’s compliance with debt covenants,
validated the inputs used to the underlying
information and we performed reviewed reverse
stress testing in order to identify what factors
would lead to the Company breaching the financial
covenants.
in the revenue forecast and covenant calculations
that are within the control of the Company.
We reviewed the Company’s assessment of the
liquidity of investments held and evaluated the
Company’s ability to sell those investments in
order to cover working capital requirements
should revenue decline significantly.
voting results of previous AGMs to establish
voting patterns; and obtained feedback from the
Company’s shareholders and brokers on their
assessment of expected voting intentions for the
continuation vote to be held at the AGM in 2023.
disclosures included in the Annual Report in order
to assess that the disclosures were appropriate
and in conformity with the reporting standards.
Based on the work we have performed, we have
events or conditions that, individually or collectively,
to continue as a going concern for a period to
30 November 2024.
In relation to the Company’s reporting on how they
have applied the UK Corporate Governance Code,
we have nothing material to add or draw attention to
in relation to the Directors’ statement in the Financial
Statements about whether the Directors considered
it appropriate to adopt the going concern basis
of accounting.
Our responsibilities and the responsibilities of
the Directors with respect to going concern are
described in the relevant sections of this Report.
However, because not all future events or conditions
can be predicted, this statement is not a guarantee
as to the Company’s ability to continue as a going
concern.
Overview of our Audit Approach
Key audit
matters
Risk of incomplete or inaccurate revenue
dividends as revenue or capital items in the
Income Statement.
Risk of incorrect valuation or ownership of the
investment portfolio
Materiality Overall materiality of £7.33m which represents
1% of shareholders’ funds.
An Overview of the Scope of our Audit
Tailoring the Scope
Our assessment of audit risk, our evaluation of
materiality and our allocation of performance
materiality determine our audit scope for the
Company. This enables us to form an opinion on
the Financial Statements. We take into account
and effectiveness of controls, the potential impact
of climate change and changes in the business
environment when assessing the level of work to
be performed. All audit work was performed directly
by the audit engagement team.
Climate Change
Stakeholders have been increasingly interested as
to how climate change will impact companies. The
Company has determined that the impact of climate
change could affect the Company’s investments and
the overall investment process. This is explained
on page 39 in the principal and emerging risks
section, which form part of the “Other information,”
rather than the audited Financial Statements. Our
procedures on these disclosures therefore consisted
solely of considering whether they are materially
consistent with the Financial Statements or our
knowledge obtained in the course of the audit or
otherwise appear to be materially misstated.
Our audit effort in considering climate change
was focused on the adequacy of the Company’s
disclosures in the Financial Statements as set out
in Note 1a and concluded that there was no further
impact of climate change to be taken into account as
the investments are valued based on market pricing
as required by FRS 102. We also challenged the
Directors’ considerations of climate change in their
assessment of viability and associated disclosures.
Financial Report
Annual Report and Financial Statements 2023
74
Key Audit Matters
Key audit matters are those matters that, in our
our audit of the Financial Statements of the current
risks of material misstatement (whether or not due
Risk Our response to the risk
Key observations
communicated to the
Audit Committee
Incomplete or inaccurate
revenue recognition, including
dividends as revenue or capital
items in the Income Statement
Refer to the Audit Committee
Report (page 67); Accounting
policies (page 84); and Note 2
of the Consolidated Financial
Statements (page 85)
The total revenue for the year
to 31 August 2023 was £18.7m
(2022: £20.1m), consisting
primarily of dividend income
from listed equity investments.
The investment income
receivable by the Company
during the year directly affects
the Company’s revenue return.
There is a risk of incomplete
or inaccurate recognition of
revenue through the failure
to recognise proper income
entitlements or to apply
an appropriate accounting
treatment.
In addition, the Directors
may be required to exercise
judgment in determining
whether income receivable in
the form of special dividends
‘revenue’ or ‘capital’ in the
Income Statement.
We have performed the following procedures:
We obtained an understanding of Baillie Gifford’s processes
and controls surrounding revenue recognition including the
procedures.
For all dividends received and accrued, we recalculated the
dividend income by multiplying the investment holdings at
the ex-dividend date, traced from the accounting records,
by the dividend per share, which was agreed to an independent
data vendor. For all dividends received and those accrued
within two weeks of year end, we also agreed amounts to
bank statements.
For all dividends accrued, we reviewed the investee Company
announcements to assess whether the dividend obligations
arose prior to 31 August 2023.
dividends had been recorded for each investee Company
held during the year with reference to investee Company
announcements obtained from an independent data vendor.
For all investments held during the year, we reviewed the
type of dividends paid with reference to an external data
source to identify those which were ‘special’ dividends.
We performed a review of the income and acquisition and
disposal reports produced by Baillie Gifford to identify all
special dividends received and accrued during the period.
the year, consistent with the dividends recognised by
Baillie Gifford. For a sample of two special dividends
received, we assessed the appropriateness of Baillie Gifford’s
the underlying rationale for the distribution.
The results of our procedures
misstatement in relation
to the risk of incomplete
or inaccurate revenue
recognition, including
special dividends as revenue
or capital items in the Income
Statement.
those which had the greatest effect on: the overall
audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement
team. These matters were addressed in the context
of our audit of the Financial Statements as a whole,
and in our opinion thereon, and we do not provide a
separate opinion on these matters.
The Baillie Gifford Japan Trust PLC
75
Risk Our response to the risk
Key observations
communicated to the
Audit Committee
Risk of incorrect valuation or
ownership of the investment
portfolio
Refer to the Audit Committee
Report (page 67); Accounting
policies (page 84); and Note 9
of the Consolidated Financial
Statements (page 88)
The valuation of the investment
portfolio at 31 August 2023
was £858.5 million (2022:
£930.4 million) consisting of
listed equities.
The valuation of investments
held in the investment
portfolio is the key driver
of the Company’s net asset
value and total return.
Incorrect investment pricing,
or failure to maintain proper
legal title of the investments
held by the Company, could
on the portfolio valuation
and the return generated for
shareholders.
The fair value of listed
investments is determined
using listed market bid prices
at close of business on the
reporting date.
We have performed the following procedures:
We obtained an understanding of Baillie Gifford’s processes
and controls surrounding investment valuation and legal title
by performing walkthrough procedures.
For all investments in the portfolio, we compared the market
prices and exchange rates applied to an independent pricing
vendor and recalculated the investment valuations as at the
year end.
We reviewed the prices for all investments in the portfolio to
of year end to verify whether the listed price is a valid fair value.
Our testing did not identify any prices which had not changed
by Baillie Gifford.
We compared the Company’s investment holdings at 31 August
Company’s Depositary.
The results of our procedures
misstatements in relation
to the risk of incorrect
valuation or ownership of
the investment portfolio.
In the prior year, our predecessors Audit Report did not include a key audit matter in relation to Incomplete
Our Application of Materiality
We apply the concept of materiality in planning
and performing the audit, in evaluating the effect
forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that,
individually or in the aggregate, could reasonably
of the users of the Financial Statements.
Materiality provides a basis for determining the
nature and extent of our audit procedures.
We determined materiality for the Company
to be £7.33m, which is 1% of shareholders funds.
We believe that shareholders funds’ provides
us with a materiality aligned to the key measure
of the Company’s performance.
In the prior year, the predecessor Auditor determined
materiality for the Company to be £9.3m, which was
1% of gross assets.
Performance Materiality
The application of materiality at the individual
account or balance level. It is set at an amount to
reduce to an appropriately low level the probability
that the aggregate of uncorrected and undetected
misstatements exceeds materiality.
On the basis of our risk assessments, together with
our assessment of the Company’s overall control
environment, our judgement was that performance
materiality was 75% of our planning materiality,
namely £5.50m. We have set performance
materiality at this percentage due to our experience
of working with the manager and administrator
of the Company that indicates a lower risk of
misstatements, both corrected and uncorrected.
Financial Report
Annual Report and Financial Statements 2023
76
Given the importance of the distinction between
revenue and capital for investment trusts, we also
applied a separate testing threshold for the revenue
column of the Income Statement of £0.59m.
Reporting Threshold
are considered as being clearly trivial.
We agreed with the Audit Committee that we would
report to them all uncorrected audit differences in
excess of £0.37m, which is set at 5% of planning
materiality, as well as differences below that
threshold that, in our view, warranted reporting
on qualitative grounds.
We evaluate any uncorrected misstatements against
both the quantitative measures of materiality
discussed above and in light of other relevant
qualitative considerations in forming our opinion.
Other Information
The other information comprises the information
included in the annual report, other than the
Financial Statements and our Auditor’s Report
thereon. The Directors are responsible for the other
information contained within the annual report.
Our opinion on the Financial Statements does not
cover the other information and, except to the extent
otherwise explicitly stated in this report, we do not
express any form of assurance conclusion thereon.
Our responsibility is to read the other information
and, in doing so, consider whether the other
information is materially inconsistent with the
Financial Statements or our knowledge obtained in
the course of the audit or otherwise appears to be
materially misstated. If we identify such material
inconsistencies or apparent material misstatements,
we are required to determine whether this gives
rise to a material misstatement in the Financial
Statements themselves. If, based on the work we
have performed, we conclude that there is a material
misstatement of the other information, we are
required to report that fact.
We have nothing to report in this regard.
Opinions on other Matters Prescribed
by the Companies Act 2006
In our opinion the part of the Directors’ remuneration
report to be audited has been properly prepared in
accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the
course of the audit:
the Directors’ report for the financial year for
which the Financial Statements are prepared is
consistent with the Financial Statements; and
been prepared in accordance with applicable
legal requirements.
Matters on which we are Required
to Report by Exception
In the light of the knowledge and understanding of
the Company and its environment obtained in the
misstatements in the Strategic Report or Directors’
Report.
We have nothing to report in respect of the following
matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
or returns adequate for our audit have not been
received from branches not visited by us; or
Directors’ Remuneration Report to be audited
are not in agreement with the accounting records
and returns; or
specified by law are not made; or
explanations we require for our audit.
Corporate Governance Statement
We have reviewed the Directors’ statement in
relation to going concern, longer-term viability and
that part of the Corporate Governance Statement
relating to the Company’s compliance with the
provisions of the UK Corporate Governance Code
Based on the work undertaken as part of our audit,
we have concluded that each of the following
elements of the Corporate Governance Statement is
materially consistent with the Financial Statements
or our knowledge obtained during the audit:
appropriateness of adopting the going concern
basis of accounting and any material uncertainties
Company’s prospects, the period this assessment
covers and why the period is appropriate set out
on page 37;
The Baillie Gifford Japan Trust PLC
77
reasonable expectation that the company will
be able to continue in operation and meets its
liabilities set out on page 37;
understandable set out on pages 69 and 70;
robust assessment of the emerging and principal
risks set out on page 37;
the review of effectiveness of risk management
and internal control systems set out on page 59
and 60; and;
Committee set out on pages 66 to 68
Responsibilities of Directors
As explained more fully in the Directors’
Responsibilities Statement set out on pages 69
and 70, the Directors are responsible for the
preparation of the Financial Statements and for
and for such internal control as the Directors
determine is necessary to enable the preparation
of Financial Statements that are free from material
misstatement, whether due to fraud or error.
In preparing the Financial Statements, the Directors
are responsible for assessing the Company’s
ability to continue as a going concern, disclosing,
as applicable, matters related to going concern
and using the going concern basis of accounting
unless the Directors either intend to liquidate the
Company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s Responsibilities for the Audit
of the Financial Statements
Our objectives are to obtain reasonable assurance
about whether the Financial Statements as a whole
are free from material misstatement, whether due
to fraud or error, and to issue an Auditor’s Report
that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK)
will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the
aggregate, they could reasonably be expected to
the basis of these Financial Statements.
Explanation as to what Extent the Audit
was Considered Capable of Detecting
Irregularities, Including Fraud
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined
above, to detect irregularities, including fraud.
The risk of not detecting a material misstatement
due to fraud is higher than the risk of not detecting
one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery or
intentional misrepresentations, or through collusion.
The extent to which our procedures are capable
of detecting irregularities, including fraud is
detailed below.
However, the primary responsibility for the
prevention and detection of fraud rests with both
those charged with governance of the Company
and management.
regulatory frameworks that are applicable to the
Company and determined that the most significant
are United Kingdom Generally Accepted
Accounting Practice, the Companies Act 2006,
the Listing Rules, UK Corporate Governance Code,
the Association of Investment Companies’ Code
and Statement of Recommended Practice,
Section 1158 of the Corporation Tax Act 2010
and The Companies (Miscellaneous Reporting)
Regulations 2018.
with those frameworks through discussions with
the Audit Committee and Company Secretary
and review of Board minutes and the Company’s
documented policies and procedures within the
Financial Statements.
Financial Statements to material misstatement,
including how fraud might occur by considering
the key risks impacting the Financial Statements.
We identified a fraud risk with respect to the
incomplete or inaccurate revenue recognition
through incorrect classification of special
dividends as revenue or capital items in the
Income Statement. Further discussion of our
approach is set out in the section on key audit
matters above.
Financial Report
Annual Report and Financial Statements 2023
78
audit procedures to identify non-compliance
with such laws and regulations. Our procedures
involved review of the reporting to the Directors
with respect to the application of the documented
policies and procedures and review of the
Financial Statements to ensure compliance with
the reporting requirements of the Company.
A further description of our responsibilities for the
audit of the Financial Statements is located on the
Financial Reporting Council’s website at
www.frc.org.uk/Auditorsresponsibilities.
This description forms part of our Auditor’s Report.
Other Matters we are Required to Address
Committee, we were appointed by the Company
on 15 December 2022 to audit the Financial
Statements for the year ending 31 August 2023
and subsequent financial periods.
including previous renewals and reappointments
is one year, covering the year ending 31 August
2023.
report to the Audit Committee.
Use of our Report
This Report is made solely to the Company’s
members, as a body, in accordance with Chapter
3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state
to the Company’s members those matters we are
required to state to them in an Auditor’s Report and
for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to
anyone other than the Company and the Company’s
members as a body, for our audit work, for this
Report, or for the opinions we have formed.
Caroline Mercer (Senior statutory Auditor)
for and on behalf of Ernst & Young LLP,
Statutory Auditor
Edinburgh
1 November 2023
The Baillie Gifford Japan Trust PLC
79
For the Year Ended 31 August
Notes
2023
Revenue
£’000
2023
Capital
£’000
2023
Total
£’000
2022
Revenue
£’000
2022
Capital
£’000
2022
Total
£’000
Losses on investments 9 – (70,082) (70,082)
Currency gains 14 – 17,005 17,005
Income 2 18,707 – 18,707
Investment management fee 3 (4,448) – (4,448)
Other administrative expenses 4 (688) – (688)
and taxation
13,571 (53,077) (39,506)
Finance costs of borrowings 5 (1,869) – (1,869)
Net return before taxation 11,702 (53,077) (41,375)
Tax
6
(1,870) – (1,870)
Net return after taxation 9,832 (53,077) (43,245)
Net return per ordinary share 7 10.52p (56.79p) (46.27p)
guidance published by the Association of Investment Companies.
All revenue and capital items in this statement derive from continuing operations.
A Statement of Comprehensive Income is not required as the Company does not have any other comprehensive income and the net return after taxation is
The accompanying notes on pages 83 to 94 are an integral part of the Financial Statements.
Income
Statement
Financial Report
Annual Report and Financial Statements 2023
80
As at 31 August
Notes
2023
£’000
2023
£’000
2022
£’000
2022
£’000
Fixed assets
Investments 9 858,486
Current assets
Debtors 10 1,811
Cash and cash equivalents 19 6,030
7,841 13,202
Creditors
Amounts falling due within one year 11 (1,641)
Net current assets/(liabilities) 6,200
Total assets less current liabilities 864,686
Creditors
Amounts falling due after more than one year 12 (131,723)
Net assets 732,963 791,006
Capital and reserves
Share capital 13, 14 4,717
Share premium account 14 213,902
Capital redemption reserve 14 203
Capital reserve 14 496,965
Revenue reserve 14 17,176
Shareholders’ funds 732,963
Net asset value per ordinary share 15 787.7p
The Financial Statements of The Baillie Gifford Japan Trust PLC (Company registration number SC075954)
on pages 79 to 94 were approved and authorised for issue by the Board and were signed on 1 November
2023.
David Kidd
Chairman
The accompanying notes on pages 83 to 94 are an integral part of the Financial Statements.
Balance
Sheet
The Baillie Gifford Japan Trust PLC
81
For the Year Ended 31 August 2023
Notes
Share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Shareholders’
funds
£’000
Shareholders’ funds at 1 September 2022
Shares bought back 13, 14 – – – (6,372) – (6,372)
Net return on ordinary activities after
taxation
– – – (53,077) 9,832 (43,245)
Dividends paid in the year – – – – (8,426) (8,426)
Shareholders’ funds at 31 August 2023 4,717 213,902 203 496,965 17,176 732,963
For the Year Ended 31 August 2022
Notes
Share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Shareholders’
funds
£’000
Shareholders’ funds at 1 September 2021
Shares bought back 13, 14
Net return on ordinary activities after
taxation
Dividends paid in the year – – – –
Shareholders’ funds at 31 August 2022
The accompanying notes on pages 83 to 94 are an integral part of the Financial Statements.
Statement of
Changes in Equity
Financial Report
Annual Report and Financial Statements 2023
82
The accompanying notes on pages 83 to 94 are an integral part of the Financial Statements.
For the Year Ended 31 August
Notes
2023
£’000
2023
£’000
2022
£’000
2022
£’000
Net return on ordinary activities before taxation (41,375)
Net losses on investments 9 70,082
Currency gains 14 (17,005)
Finance costs of borrowings 5 1,869
Overseas withholding tax (1,912)
Changes in debtors and creditors 373
Cash from operations 12,032
Interest paid (1,961) (1,827)
10,071
Acquisitions of investments (99,512) (197,244)
Disposals of investments
101,483
1,971 (51,755)
Shares bought back (7,926)
Equity dividends paid 8 (8,426)
Bank loans drawn down 107,124
Bank loans repaid (106,131) –
(15,359)
Decrease in cash and cash equivalents (3,317) (32.511)
Exchange movements (1,670) (761)
Cash and cash equivalents at start of period 19 11,017
Cash and cash equivalents at end of period* 6,030
* Cash and cash equivalents represent cash at bank and short term money market deposits repayable on demand.
Cash from operations includes dividends received of £19,122,000 (2022 – £19,993,000) and interest received of £3,000 (2022 – nil).
Cash Flow
Statement
The Baillie Gifford Japan Trust PLC
83
01 Principal Accounting Policies
The Financial Statements for the year to 31 August 2023
have been prepared in accordance with FRS 102 ‘The
Financial Reporting Standard applicable in the UK and
Republic of Ireland’ on the basis of the accounting policies
set out below which are unchanged from the prior year and
have been applied consistently.
The Financial Statements have also been prepared in
accordance with the Companies Act 2006, and with the
AIC’s Statement of Recommended Practice ‘Financial
Statements of Investment Trust Companies and Venture
Capital Trusts’ issued in November 2014 and updated
in July 2022 with consequential amendments.
a. Basis of Accounting
All of the Company’s operations are of a continuing
nature and the Financial Statements are prepared
on a going concern basis under the historical cost
that approval as an investment trust under section 1158
of the Corporation Tax Act 2010 and the Investment
Trust (Approved Company) (Tax) Regulations 2011 will
be retained. The Board has, in particular, considered
the impact of heightened market volatility and
macroeconomic and geopolitical concerns, including
and does not believe the Company’s going concern status
is affected. In addition, the Company is subject to an
annual continuation vote which in previous years has been
no reason to believe that the vote will not continue to be
in favour based on their assessment of the Company’s
performance and the views collated from shareholders.
The Company’s assets, the majority of which are
investments in quoted securities which are readily
require the prior approval of the Board. Gearing levels and
compliance with borrowing covenants are reviewed by the
Board on a regular basis.
Notes to the
Financial Statements
The Baillie Gifford Japan Trust PLC
(the ‘Company’) was incorporated
under the Companies Act 2006
in Scotland as a public limited
company with registered number
SC075954. The Company is an
investment company within the
meaning of section 833 of the
Companies Act 2006 and carries
on business as an investment trust.
Financial Report
Annual Report and Financial Statements 2023
84
The Company has continued to comply with the
investment trust status requirements of section 1158
of the Corporation Tax Act 2010 and the Investment
Trust (Approved Company) (Tax) Regulations 2011.
The Company’s primary third party suppliers, including
its Managers and Secretaries, Depositary and Custodian,
Registrar, Auditor and Broker, are not experiencing
respective services to the Company.
In preparing these Financial Statements, the Directors
have considered the impact of climate change risk as a
principal risk set out on page 39, and have concluded that
it does not have a material impact on the Company’s
investments. The Directors consider the impact of climate
change on the value of the investments included in the
Financial Statements to already include the impact in their
prices as the investments are quoted on a stock exchange.
Accordingly, the Financial Statements have been prepared
on a going concern basis as it is the Directors’ opinion,
having assessed the principal and emerging risks and
other matters set out in the Viability Statement on page
37 which assesses the prospects of the Company over
operational existence until 30 November 2024, which is
for a period of at least twelve months from the date of
approval of these Financial Statements.
and in accordance with guidance issued by the AIC,
supplementary information which analyses the Income
Statement between items of a revenue and capital nature
has been presented.
in the Company’s Balance Sheet when it becomes a
party to the contractual provisions of the instrument.
The Directors consider the Company’s functional and
presentation currency to be sterling, (see consideration
in accounting policy (j)), as the Company’s shareholders
are predominantly based in the UK, the Company pays
its dividends and expenses in sterling and the Company
and its Investment Manager, who are subject to the UK’s
regulatory environment, are also UK based.
b. Financial Instruments
sections 11 and 12 of FRS 102.
Purchases and sales of investments are recognised
on a trade date basis.
Investments in securities are initially recognised at fair
value which is taken to be their cost excluding expenses
incidental to purchases, and are subsequently measured
investments is the last traded price which is equivalent
to the bid price on Japanese markets. Changes in the fair
value of investments and gains and losses on disposal are
recognised as capital items in the Income Statement.
c. Cash and Cash Equivalents
Cash and cash equivalents include cash in hand and
deposits repayable on demand. Deposits are repayable
on demand if they can be withdrawn at any time without
notice and without penalty or if they have a maturity or
period of notice of not more than one working day.
d. Income
i. Income from equity investments is brought into account
on the date on which the investments are quoted ex-
dividend or, where no ex-dividend date is quoted, when
the Company’s right to receive payment is established.
ii. Special dividends are treated as repayments of capital
or income depending on the facts of each particular
case.
iii. If scrip is taken in lieu of dividends in cash, the net
amount of the cash dividend declared is credited to the
revenue account. Any excess in the value of the shares
received over the amount of the cash dividend foregone
is recognised as capital.
an effective yield basis (none were held in the period).
v. Overseas dividends include withholding tax deducted
at source.
vi. Interest receivable on bank deposits is recognised on
an accruals basis.
e. Expenses
All expenses are accounted for on an accruals basis
and are charged to the revenue account except where
they relate directly to the acquisition or disposal of an
investment (transaction costs), in which case they are
Expenses directly relating to the issuance of shares are
deducted from the proceeds of such issuance.
f. Finance Costs
Long term borrowings are carried in the Balance Sheet
at amortised cost, representing the cumulative amount
the revenue account at a constant rate on the carrying
amount.
Gains and losses on the repurchase or early settlement
of debt are wholly charged to capital.
g. Taxation
The taxation charge represents non-recoverable overseas
taxes which is charged to the revenue account as it
relates to income received. Deferred taxation is provided
on all timing differences which have originated but not
reversed by the Balance Sheet date, calculated on a non-
discounted basis at the tax rates expected to apply when
the timing differences reverse, based on what has been
or liability. Deferred tax assets are recognised only to
the extent that it is more likely than not that there will be
can be deducted.
h. Foreign Currencies
Transactions involving foreign currencies are converted
at the rate ruling at the time of the transaction. Monetary
assets, liabilities and equity investments held at fair value
in foreign currencies are translated at the closing rates
of exchange at the Balance Sheet date. Any gain or loss
arising from a change in exchange rate subsequent to the
date of the transaction is included as an exchange gain or
or capital item as appropriate.
The Baillie Gifford Japan Trust PLC
85
i. Capital Reserve
Gains and losses on disposal of investments, changes in
the fair value of investments held, exchange differences of
a capital nature and the amount by which other assets and
liabilities valued at fair value differ from their book cost are
dealt with in this reserve. Purchases of the Company’s own
shares for cancellation are also funded from this reserve.
The Directors do not believe that any accounting
judgements or estimates have been applied to these
causing material adjustment to the carrying amount
The Directors consider that the preparation of the
Financial Statements involves the following key
judgements:
(i) the functional currency of the Company is sterling
(see rationale in 1(a) above); and
(ii) the determination as to whether special dividends
should be treated as a repayment of capital or income
depending on the facts of each particular case.
Although the Company invests in yen denominated
investments, it has been determined that the functional
currency is sterling as the entity is listed on a sterling
stock exchange in the UK, and its share capital is
denominated, and its expenses and dividends are
paid, in sterling.
02 Income
2023
£’000
2022
£’000
Income from investments
Overseas dividends 18,704 20,073
Other income
Deposit interest 3 2
Total income 18,707 20,075
Special dividends received during the year amounted to £471,000 (2022 – £66,000) with £471,000 (2022 – £66,000) classed as
revenue and nil (2022 – nil) classed as capital.
03 Investment Management Fee – All Charged to Revenue
2023
£’000
2022
£’000
Investment management fee 4,448 4,802
Details of the Investment Management Agreement are disclosed on page 50.
04 Other Administrative Expenses – All Charged to Revenue
2023
£’000
2022
£’000
General administrative expenses 238 220
Directors’ fees 134
Depositary fees 96
Marketing* 74
Custody charges 73 84
Auditor’s remuneration for audit services (excluding VAT) 49 42
Registrar fees 24
688
* The Company is part of a marketing programme which includes all the Investment Trusts managed by the Manager. The marketing strategy has an
ongoing objective to stimulate demand for the Company’s shares. The cost of this marketing strategy is borne in partnership by the Company and
the Manager. The Manager matches the Company’s marketing contribution and provides the resource to manage and run the programme.
There were no non-audit fees paid to the Auditor during the year (2022 – nil).
Financial Report
Annual Report and Financial Statements 2023
86
05 Finance Costs of Borrowings
2023
£’000
2022
£’000
Interest on bank loans 1,869 1,866
The bank loan interest disclosed includes £38,000 (2022 – £58,000) paid in respect of yen deposits held at the custodian bank.
06 Tax on Ordinary Activities
2023
£’000
2022
£’000
Analysis of charge in year
Overseas taxation 1,870 2,004
Factors affecting tax charge for year
The tax assessed for the year is lower than the average standard rate of corporation tax in the UK
of 21.515%* (2022 – 19%). The differences are explained below:
Net return on ordinary activities before taxation (41,375) (153,470)
Net return multiplied by the average standard rate of corporation tax in the
UK of 21.515%* (2022 – 19.00%)
(8,900) (29,159)
Effects of:
Capital returns not taxable 11,420
Income not taxable (4,024)
Overseas withholding tax 1,870
Taxable losses in year not utilised 1,504
Tax charge for the year 1,870
* This is a blended rate based on the increased rate of UK corporation tax effective from 1 April 2023.
Factors that may affect Future Tax Charges
At 31 August 2023 the Company had surplus management expenses and losses on non-trading loan relationships of £19,448,000
(2022 – £17,699,000) which have not been recognised as a deferred tax asset. This is because the Company is not expected
to generate taxable income in a future period in excess of the deductible expenses of that future period and, accordingly, it is
unlikely that the Company will be able to reduce future tax liabilities through the use of existing surplus expenses. The potential
deferred tax asset has been calculated using a corporation tax rate of 25% (2022 – 19%). On 3 March 2021, the UK Government
announced its intention to increase the rate of UK corporation tax from 19% to 25% from 1 April 2023 and this was subsequently
substantively enacted on 24 May 2021.
Due to the Company’s status as an investment trust, and the intention to continue meeting the conditions required to maintain
that status in the foreseeable future, the Company has not provided for deferred tax on any capital gains and losses arising on
the revaluation or disposal of investments.
The Baillie Gifford Japan Trust PLC
87
07 Net Return Per Ordinary Share
2023
Revenue
2023
Capital
2023
Total
2022
Revenue
2022
Capital
2022
Total
Net return per ordinary share on
ordinary activities after taxation
10.52p (56.79p) (46.27p)
£10,661,000) and on 93,451,827 (2022 – 94,292,038) ordinary shares, being the weighted average number of ordinary shares in
issue (excluding treasury shares) during the year.
£166,135,000) and on 93,451,827 (2022 – 94,292,038) ordinary shares, being the weighted average number of ordinary shares
in issue (excluding treasury shares) during the year.
and on 93,451,827 (2022 – 94,292,038) ordinary shares, being the weighted average number of ordinary shares in issue
(excluding treasury shares) during the year.
There are no dilutive or potentially dilutive shares in issue.
08 Ordinary Dividends
by way of dividend.
2023 2022 2023
£’000
2022
£’000
Amounts recognised as distributions in the year:
9.00p 6.00p 8,426 5,660
2023 2022 2023
£’000
2022
£’000
Dividends paid and payable in respect of the year:
10.00p 9.00p 9,305 * 8,426
* Based on ordinary shares in issue at 31 August 2023.
Financial Report
Annual Report and Financial Statements 2023
88
09 Investments
2023
£’000
2022
£’000
Financial assets
Listed equity investments 858,486 930,354
858,486 930,354
Listed
equities
£’000
Cost of investments at 1 September 2022 792,685
Investment holding gains at 1 September 2022 137,669
Value of investments at 1 September 2022 930,354
Movements in year:
Purchases at cost 99,694
Sales proceeds received (101,480)
Realised gains on sales 23,549
Losses on investments (93,631)
Value of investments at 31 August 2023 858,486
Cost of investments at 31 August 2023 814,448
Investment holding gains at 31 August 2023 44,038
Value of investments at 31 August 2023 858,486
The transaction costs of purchases and sales were £34,000 (2022 – £70,000) and £29,000 (2022 – £66,000) respectively.
The Company received £101,480,000 (2022 – £145,492,000) from investments sold during the year. The book costs of these
investments when they were purchased was £77,931,000 (2022 – £126,671,000). These investments have been revalued over
2023
£’000
2022
£’000
Net gains/(losses) on investments
Gains on sales 23,549
Changes in investment holding losses (93,631)
(70,082)
The Baillie Gifford Japan Trust PLC
89
10 Debtors
2023
£’000
2022
£’000
Income accrued and prepaid expenses 1,789
Sales for subsequent settlement –
Other debtors 22
1,811
The carrying amount of debtors is a reasonable approximation of fair value.
11 Creditors – Amounts Falling Due Within One Year
2023
£’000
2022
£’000
Purchases for subsequent settlement 182 –
Bank loans (see note 12) –
1,459
1,641
Included in other creditors is £1,083,000, (2022 – £1,163,000) in respect of the investment management fee.
12 Creditors – Amounts Falling Due After More Than One Year
2023
£’000
2022
£’000
Bank loans 131,723 57,655
Borrowing facilities
At 31 August 2023
Drawings
At 31 August 2022
Drawings
Revolving credit facility with Mizuho
Bank, Ltd. for ¥2,600 million, expiring
March 2025
–
–
–
¥900 million (£5,579 million) at 1.196%
¥900 million (£5,579 million) at 1.182%
¥800 million (£4,960 million) at 1.187%
Bank N.V. for ¥9,300 million, expiring
November 2024
¥9,300 million (£57,655 million)
at 1.585%
¥9,300 million (£57,655 million)
at 1.585%
Bank of New York Mellon for
¥
15,000
million, expiring August 2025
¥15,000 million (£81,311 million)
at 1.14909%
–
Europe Limited for ¥12,200 million,
expired August 2023
– ¥12,200 million (£75,634 million)
at 0.925%
The main covenants relating to the above loans are:
i. Total borrowings shall not exceed 30% of the Company’s net asset value; and
ii. The Company’s minimum net asset value shall be ¥48,545,000,000 (£315,000,000).
There were no breaches of loan covenants during the year.
Financial Report
Annual Report and Financial Statements 2023
90
13 Called-up Share Capital
2023
Number
2023
£’000
2022
Number
2022
£’000
Authorised ordinary shares of 5p each 93,047,614 4,653
Treasury shares of 5p each 1,280,595 64
Total 94,328,209 4,717
The Company’s authority permits it to hold shares bought back in ‘treasury’. Such treasury shares may be subsequently either
sold for cash at a premium to net asset value per ordinary share or cancelled. In the year to 31 August 2023, 851,845 shares
with a nominal value of £42,600, representing 0.9% of the issued share capital at 31 August 2022, were bought back at a cost
of £6,372,000 and held in treasury (31 August 2022 – 428,750 shares with a nominal value of £22,000 representing 0.5% of
the issued share capital at 31 August 2021, were bought back at a cost of £3,262,000 and held in treasury). At 31 August 2023
the Company had authority to buy back 13,187,431 ordinary shares. Over the period from 1 September to 30 October a further
1,205,000 shares have been bought back and held in treasury at a cost of £8,209,000.
Under the provisions of the Company’s Articles, the share buy-backs are funded from the capital reserve.
In the year to 31 August 2023, the Company sold no ordinary shares from treasury (2022 – no ordinary shares). The Company
issued no further ordinary shares (2022 – no ordinary shares). As at 31 August 2023 the Company had the authority to issue
9,365,761 ordinary shares. Over the period from 1 September 2023 to 30 October 2023 no further shares were issued by the
Company.
14 Capital and Reserves
Share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Shareholders’
funds
£’000
At 1 September 2022 213,902 203 556,414 15,770 791,006
Shares bought back – – – (6,372) – (6,372)
Gains on investments – – – 23,549 – 23,549
Changes in investment holding gains – – – (93,631) – (93,631)
Exchange differences on bank loans – – – 18,677 – 18,677
Exchange differences on settlement
of investment transactions – – – (82) – (82)
Other exchange differences – – – (1,590) – (1,590)
Revenue return on ordinary activities
after taxation – – – – 9,832 9,832
Dividends paid in the year – – – – (8,426) (8,426)
At 31 August 2023
4,717 213,902 203 496,965 17,176 732,963
The capital reserve includes unrealised investment holding gains of £44,038,000 (2022 – £137,669,000) as disclosed in note 9.
are distributable.
15 Shareholders’ funds per ordinary share
The net asset value per ordinary share and the net assets attributable to the ordinary shareholders at the year end calculated in
accordance with the Articles of Association were as follows:
2023 2022
Shareholders' funds £732,963,000 £791,006,000
Number of ordinary shares in issue at the year end
* 93,047,614 93,899,459
Shareholders' funds per ordinary share
787.7p 842.4p
* Excluding shares held in treasury at 31 August 2023 and 31 August 2022.
The Baillie Gifford Japan Trust PLC
91
16 Analysis of Change in Net Debt
At
1 September
2022
£’000
£’000
Exchange
movement
£’000
At
31 August
2023
£’000
Cash at bank and in hand 11,017
(3,865)
(1,122) 6,030
Loans due in less than one year (91,752) 103,478 (11,726)
–
Loans due in more than one year (57,655)
(81,327)
7,259 (131,723)
18,286 (5,589) (125,693)
17 Contingent Liabilities, Guarantees and Financial Commitments
18 Related Party Transactions and Transactions with Investment Manager
Related Party Transactions
The Directors’ fees for the year and Directors’ shareholdings at 31 August 2023 are detailed in the Directors’ Remuneration Report
on pages 62 and 65 respectively. No Director has a contract of service with the Company.
Transactions with Investment Manager
The management fee due to Baillie Gifford and Co Limited is set out in note 3 on page 85 and the amount accrued at 31 August 2023
is set out in note 11 on page 89. Details of the Investment Management Agreement are set out on pages 50 and 51.
19 Financial Instruments
The Company invests in medium to smaller sized Japanese companies and makes other investments so as to achieve its
conviction that the assets funded by borrowed monies will generate a return in excess of the cost of borrowing. In pursuing its
markets in which it invests and could result in a reduction in the Company’s net assets.
These risks are categorised here as market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and
credit risk. The Board monitors closely the Company’s exposures to these risks but does so in order to reduce the likelihood of a
permanent loss of capital rather than to minimise the short term volatility.
The risk management policies and procedures outlined in this note have not changed substantially from the previous accounting
period.
Market Risk
of changes in market prices. This market risk comprises three elements – currency risk, interest rate risk and other price risk.
The Board of Directors reviews and agrees policies for managing these risks and the Company’s Investment Manager assesses
the exposure to market risk when making individual investment decisions as well as monitoring the overall level of market risk
across the investment portfolio on an ongoing basis. Details of the Company’s investment portfolio are shown on pages 20 to 22.
i. Currency Risk
The Company’s assets, liabilities and income are principally denominated in yen. The Company’s functional currency and that in
those items.
The Investment Manager monitors the Company’s yen exposure (and any other overseas currency exposure) and reports to
the Board on a regular basis. The Investment Manager assesses the risk to the Company of the overseas currency exposure
by considering the effect on the Company’s net asset value and income of a movement in the rates of exchange to which the
Company’s assets, liabilities, income and expenses are exposed. However, the currency in which a company’s share price is
company is quoted.
rate which might otherwise adversely affect the value of the portfolio of investments. The Company has the authority to use
forward currency contracts to limit the Company’s exposure if it so chooses to anticipated future changes in exchange rates so
that the currency risks entailed in holding the assets are mainly eliminated. No forward currency contracts have been used in the
current or prior year.
Financial Report
Annual Report and Financial Statements 2023
92
19 Financial Instruments (continued)
i. Currency Risk (continued)
Exposure to currency risk through asset allocation, which is calculated by reference to the currency in which the asset or liability
is quoted, is shown below.
At 31 August 2023
Investments
£’000
Cash and cash
equivalents
£’000
Bank
loans
£’000
Other debtors
and creditors *
£’000
Net
exposure
£’000
Total exposure to currency risk (yen) 858,486 5,970 (131,723) 1,278 734,011
Sterling – 60 – (1,108) (1,048)
858,486 6,030 (131,723) 170 732,963
* Includes non-monetary assets of £101,000.
At 31 August 2022
Investments
£’000
Cash and cash
equivalents
£’000
Bank
loans
£’000
Other debtors
and creditors *
£’000
Net
exposure
£’000
Total exposure to currency risk (yen)
Sterling
* Includes non-monetary assets of £94,000.
Currency Risk Sensitivity
At 31 August 2023, if sterling had strengthened by 10% against the yen, with all other variables held constant, total net assets
and net return on ordinary activities after taxation would have decreased by £73,401,000 (2022 – £79,365,000). A 10%
weakening of sterling against the yen, with all other variables held constant, total net assets and net return on ordinary activities
after taxation would have had a similar but opposite effect on the Financial Statement amounts.
ii. Interest Rate Risk
Interest rate movements may affect the level of income receivable on cash deposits. They may also impact upon the market value
impact upon the valuation of that company’s equity.
when making investment decisions and when entering borrowing agreements.
The Board reviews on a regular basis the amount of investments in cash and the income receivable on cash deposits.
approved levels are monitored and reviewed regularly by the Board.
Financial Assets
2023
Fair value
£’000
2023
Weighted
average
interest rate
2023
Weighted
average period
until maturity *
2022
Fair value
£’000
2022
Weighted
average
interest rate
2022
Weighted
average period
until maturity *
Cash:
Japanese yen 5,970 (0.1%) 10,957 (<0.1%)
Sterling 60 0.2% 60 <0.1%
6,030 11,017
* Based on expected maturity date.
rates based on prevailing bank base rates.
The Baillie Gifford Japan Trust PLC
93
19 Financial Instruments (continued)
ii. Interest Rate Risk (continued)
Financial Liabilities
2023
Book value
£’000
2023
Weighted
average
interest rate
2023
Weighted
average period
until maturity *
2022
Book value
£’000
2022
Weighted
average
interest rate
2022
Weighted
average period
until maturity *
Bank loans:
Yen denominated 131,723 1.3% 20 months 149,407 1.1% 17 months
Interest Rate Risk Sensitivity
An increase of 100 basis points in interest rates, with all other variables held constant, would have decreased the Company’s
total net assets and total return on ordinary activities for the year ended 31 August 2023 by £134,000 (2022 – decreased by
A decrease of 100 basis points would have had an equal but opposite effect. The Company does not hold bonds.
iii. Other Price Risk
Changes in market prices other than those arising from interest rate risk or currency risk may also affect the value of the
Company’s net assets.
The Board manages the market price risks inherent in the investment portfolio by ensuring full and timely access to relevant
information from the Investment Manager. The Board meets regularly and at each meeting reviews investment performance,
the investment portfolio and the rationale for the current investment positioning to ensure consistency with the Company’s
objectives and investment policies. The portfolio does not seek to reproduce the index, investments are selected based upon
the merit of individual companies and therefore performance is highly likely to diverge from the comparative index.
Other Price Risk Sensitivity
A full list of the Company’s investments is shown on pages 20 to 22. In addition, analyses of the portfolio by growth category,
and sector listing are shown on pages 16 to 19.
117% (2022 – 118%) of the Company’s net assets are invested in Japanese quoted equities. A 20% (2022 – 20%) increase in
quoted equity valuations at 31 August 2023 would have increased total net assets and net return on ordinary activities after taxation
by £171,697,000 (2022 – £186,071,000). A decrease of 20% (2022 – 20%) would have had an equal but opposite effect.
Liquidity Risk
The Board provides guidance to the Investment Manager as to the maximum exposure to any one holding (see Investment Policy
on page 34).
The Company has the power to take out borrowings, which give it access to additional funding when required. The Company’s
borrowing facilities are detailed in note 12.
2023
£’000
2022
£’000
In less than one year – 91,752
131,723 57,655
131,723 149,407
Credit Risk
This is the risk that a failure of a counterparty to a transaction to discharge its obligations under that transaction could result in
the Company suffering a loss. This risk is managed as follows:
then compared to the prospective investment return of the security in question;
segregates the assets of the Company. The Depositary has delegated the custody function to Bank of New York Mellon
(International) Limited. Bankruptcy or insolvency of the custodian may cause the Company’s rights with respect to securities
held by the custodian to be delayed. The Investment Manager monitors the Company’s risk by reviewing the custodian’s internal
Financial Report
Annual Report and Financial Statements 2023
94
19 Financial Instruments (continued)
Credit Risk (continued)
Manager. Transactions are ordinarily undertaken on a delivery versus payment basis whereby the Company’s custodian bank
ensures that the counterparty to any transaction entered into by the Company has delivered on its obligations before any
transfer of cash or securities away from the Company is completed;
wherein the creditworthiness of the entity acting as broker or counterparty to the transaction is likely to be of sustained
interest, are subject to rigorous assessment by the Investment Manager; and
Credit Risk Exposure
The exposure to credit risk at 31 August was:
2023
£’000
2022
£’000
Cash and cash equivalents 6,030 11,017
Debtors 1,811 2,064
7,841
Fair Value of Financial Assets and Financial Liabilities
The Company’s investments are stated at fair value and the Directors are of the opinion that the reported values of the Company’s
amortised cost. The fair value of borrowings is shown below.
2023
Book
value
£’000
2023
Fair *
value
£’000
2022
Book
value
£’000
2022
Fair *
value
£’000
Yen bank loans 131,723 131,584
* The fair value of each bank loan is calculated with reference to a Japanese government bond of comparable yield and maturity.
Capital Management
The Company does not have any externally imposed capital requirements other than the loan covenants detailed in note 12 on
page 89. The capital of the Company is the ordinary share capital as detailed in note 13. It is managed in accordance with its
investment policy in pursuit of its investment objective, both of which are detailed on page 34, and shares may be repurchased
or issued as explained on page 53.
Fair Value of Financial Instruments
Level 1 – using unadjusted quoted prices for identical instruments in an active market;
Level 2 – using inputs, other than quoted prices included within Level 1, that are directly or indirectly observable (based on market
data); and
Level 3 – using inputs that are unobservable (for which market data is unavailable).
Financial Statements.
Shareholder
Information
Shareholder Information
Annual Report and Financial Statements 2023
96
Notice of Annual
General Meeting
John
Lewis
A8 Princes Street
Ge
orge Street
Calton Square
Bus
Station
Omni
Centre
Balmoral
Hotel
L
e
i
t
h
S
t
r
e
e
t
Queen Street
W
a
t
e
r
l
o
o
P
l
a
c
e
C
a
l
t
o
n
H
i
l
l
C
a
l
t
o
n
R
o
a
d
St Andrew Square
Edinburgh
Waverley
Station
Leith
Walk
A7 North Bridge
York Place
G
r
e
e
n
sid
e
R
o
w
Tram
Stop
St Andrew Square
St Andrew Square
Tram
Stop
By Rail:
Edinburgh Waverley – approximately a 5 minute walk away
By Bus:
Lothian Buses local services include:
1, 3, 5, 7, 8, 10, 14, 15, 16, 25, 34
By Tram:
Stops at St Andrew Square and Picardy Place
Access to Waverley Train Station on foot
The Annual General Meeting of The Baillie Gifford
Baillie Gifford & Co, Calton Square,
1 Greenside Row, Edinburgh EH1 3AN,
on Tuesday, 12 December 2023 at 12.30pm.
the QR code above.
If you have any queries as to how to vote or how to
attend the meeting, please call us on 0800 917 2112.
Baillie Gifford may record your call.
The Board encourages all shareholders to submit
proxy voting forms as soon as possible and,
in any event, by no later than 12.30pm on
Friday 8 December 2023. We would encourage
shareholders to monitor the Company’s website
at japantrustplc.co.uk. Should shareholders have
questions for the Board or the Managers or
any queries as to how to vote, they are welcome,
as always, to submit them by email to
trustenquiries@bailliegifford.com or call
0800 917 2112. Baillie Gifford may record your call.
The Baillie Gifford Japan Trust PLC
97
Notice is hereby given that the forty second
Annual General Meeting of The Baillie Gifford Japan
& Co, Calton Square, 1 Greenside Row, Edinburgh
EH1 3AN, on Tuesday, 12 December 2023 at
12.30pm for the following purposes:
Ordinary Business
Resolutions as Ordinary Resolutions.
01. To receive and adopt the Financial Statements
of the Company for the year to 31 August 2023
with the Reports of the Directors and of the
Independent Auditor thereon.
02. To approve the Directors’ Remuneration Policy.
03. To approve the Directors’ Annual Report on
Remuneration for the year to 31 August 2023.
share.
05. To re-elect Mr David Kidd as a Director.
06. To re-elect Mrs Sharon Brown as a Director.
07. To re-elect Ms Joanna Pitman as a Director.
08. To re-elect Mr Sam Davis as a Director.
09. To elect Ms Patricia Lewis as a Director.
10. To re-appoint Ernst & Young LLP as Independent
conclusion of this meeting until the conclusion
of the next Annual General Meeting at which
the Financial Statements are laid before the
Company.
11. To authorise the Directors to determine the
remuneration of the Independent Auditor of
the Company.
12. That, pursuant to article 165 of the Articles
of Association of the Company, this meeting
hereby approves the continuance of the
Company until the Annual General Meeting
of the Company held in respect of the year
to 31 August 2024.
13. That, in substitution for any existing authority,
but without prejudice to the exercise of any such
authority prior to the date hereof, the Directors
of the Company be and they are hereby
generally and unconditionally authorised in
accordance with section 551 of the Companies
Act 2006 (the ‘Act’) to exercise all the powers of
the Company to allot shares in the Company and
to grant rights to subscribe for or to convert any
security into shares in the Company (‘Securities’)
provided that such authority shall be limited to
the allotment of shares and the grant of rights
in respect of shares with an aggregate nominal
value of up to £459,213.07 such authority to
expire at the conclusion of the next Annual
General Meeting of the Company after the
passing of this resolution or on the expiry of
15 months from the passing of this resolution,
whichever is the earlier, unless previously
revoked, varied or extended by the Company in
a general meeting, save that the Company may
at any time prior to the expiry of this authority
make an offer or enter into an agreement which
would or might require Securities to be allotted
or granted after the expiry of such authority
and the Directors shall be entitled to allot or
grant Securities in pursuance of such an offer or
agreement as if such authority had not expired.
14 and 15 as Special Resolutions.
14. That, subject to the passing of Resolution 13
above, and in substitution for any existing power
but without prejudice to the exercise of any such
power prior to the date hereof, the Directors of
the Company be and they are hereby generally
empowered, pursuant to sections 570 and 573
of the Companies Act 2006 (the ‘Act’), to allot
equity securities (within the meaning of section
560(1) of the Act), for cash pursuant to the
authority given by Resolution 13 above, and to
sell treasury shares for cash, as if section 561(1)
of the Act did not apply to any such allotment or
sale, provided that this power:
a. expires at the conclusion of the next Annual
General Meeting of the Company after the
passing of this Resolution or on the expiry of
15 months from the passing of this Resolution,
whichever is the earlier, save that the Company
may, before such expiry, make an offer or
agreement which would or might require
equity securities to be allotted or treasury
shares to be sold after such expiry and the
Directors may allot equity securities or sell
treasury shares in pursuance of any such offer
or agreement as if the power conferred hereby
had not expired; and
Shareholder Information
Annual Report and Financial Statements 2023
98
b. shall be limited to the allotment of equity
securities or the sale of treasury shares up to
an aggregate nominal value of 459,213.07
being approximately 10% of the nominal value
of the issued share capital of the Company, as
at 30 October 2023.
15. That, in substitution for any existing authority
but without prejudice to the exercise of any such
authority prior to the date hereof, the Company
be and is hereby generally and unconditionally
authorised, pursuant to and in accordance
with section 701 of the Companies Act 2006
(the ‘Act’) to make market purchases (within
the meaning of section 693(4) of the Act) of
fully paid ordinary shares of 5 pence each in
the capital of the Company (‘ordinary shares’)
(either for retention as treasury shares for
future reissue, resale, transfer or cancellation),
provided that:
a. the maximum aggregate number of ordinary
shares hereby authorised to be purchased
is 13,767,208, or, if less, the number
representing approximately 14.99% of
the issued ordinary share capital of the
Company as at the date of the passing of this
Resolution;
b. the minimum price (excluding expenses)
which may be paid for each ordinary share is
5 pence;
c. the maximum price (excluding expenses)
which may be paid for each ordinary share
shall not be more than the higher of:
i. 5 per cent. above the average closing
price on the London Stock Exchange of
days immediately preceding the date of
purchase; and
ii. the higher of the last independent trade
and the highest current independent bid on
the London Stock Exchange as stipulated
by Article 5(1) of Commission Regulation
(EC) 22 December 2003 implementing
the Market Abuse Directive as regards
exemptions for buy back programmes and
d. unless previously varied, revoked or renewed
by the Company in a general meeting, the
authority hereby conferred shall expire at the
conclusion of the Annual General Meeting
of the Company to be held in respect of the
year ending 31 August 2024, save that the
Company may, prior to such expiry, enter
into a contract to purchase ordinary shares
under such authority which will or might be
completed or executed wholly or partly after
the expiration of such authority and may make
a purchase of ordinary shares pursuant to any
such contract.
By Order of the Board
Baillie Gifford & Co Limited
Company Secretaries
1 November 2023
The Baillie Gifford Japan Trust PLC
99
Notes
01. As a member you are entitled to appoint a proxy
or proxies to exercise all or any of your rights
to attend, speak and vote at the AGM. A proxy
need not be a member of the Company but
must attend the AGM to represent you. You may
appoint more than one proxy provided each
proxy is appointed to exercise rights attached to
different shares. You can only appoint a proxy
using the procedure set out in these notes and
the notes to the proxy form. You may not use
any electronic address provided either in this
notice or any related documents (including
the Financial Statements and proxy form) to
communicate with the Company for any purpose
other than those expressly stated.
02. To be valid any proxy form or other instrument
appointing a proxy, together with any power
of attorney or other authority under which it
received by post or (during normal business
hours only) by hand at the Registrars of the
Company at Computershare Investor Services
PLC, The Pavilions, Bridgwater Road, Bristol,
BS99 6ZY or eproxyappointment.com no later
than 2 days (excluding non-working days)
before the time of the meeting or any adjourned
meeting.
03. CREST members who wish to appoint a proxy
or proxies through the CREST electronic proxy
appointment service may do so by using the
procedures described in the CREST Manual
euroclear.com/CREST. CREST personal
members or other CREST sponsored members,
and those CREST members who have appointed
a voting service provider(s), should refer to their
CREST sponsor or voting service provider(s),
who will be able to take the appropriate action
on their behalf.
04. In order for a proxy appointment or instruction
made using the CREST service to be valid, the
appropriate CREST message (a ‘CREST Proxy
Instruction’) must be properly authenticated
in accordance with Euroclear UK & Ireland
information required for such instruction, as
described in the CREST Manual. The message,
regardless of whether it constitutes the
appointment of a proxy or is an amendment to
the instruction given to a previously appointed
proxy must, in order to be valid, be transmitted
so as to be received by the Company’s Registrar
(ID 3RA50) no later than 2 days (excluding
non-working days) before the time of the
meeting or any adjournment. For this purpose,
the time of receipt will be taken to be the time
(as determined by the timestamp applied to
the message by the CREST Application Host)
from which the Company’s registrar is able to
retrieve the message by enquiry to CREST in
the manner prescribed by CREST. After this time
any change of instructions to proxies appointed
through CREST should be communicated to the
appointee through other means.
05. CREST members and, where applicable, their
CREST sponsors, or voting service providers
should note that Euroclear UK & Ireland Limited
does not make available special procedures
in CREST for any particular message. Normal
system timings and limitations will, therefore,
apply in relation to the input of CREST Proxy
Instructions. It is the responsibility of the CREST
member concerned to take (or, if the CREST
member is a CREST personal member, or
sponsored member, or has appointed a voting
CREST sponsor or voting service provider(s)
take(s)) such action as shall be necessary to
ensure that a message is transmitted by means
of the CREST system by any particular time. In
this connection, CREST members and, where
applicable, their CREST sponsors or voting
service providers are referred, in particular,
to those sections of the CREST Manual
concerning practical limitations of the CREST
system and timings.
06. The Company may treat as invalid a CREST
Proxy Instruction in the circumstances set out
Securities Regulations 2001.
07. The return of a completed proxy form or other
instrument of proxy will not prevent you attending
the AGM and voting in person if you wish.
Shareholder Information
Annual Report and Financial Statements 2023
100
Securities Regulations 2001 and section 311 of
that to be entitled to attend and vote at the
Annual General Meeting (and for the purpose of
the determination by the Company of the votes
they may cast), shareholders must be registered
in the Register of Members of the Company no
later than 2 days (excluding non-working days)
prior to the commencement of the AGM or any
adjourned meeting. Changes to the Register
of Members after the relevant deadline shall
be disregarded in determining the rights of any
person to attend and vote at the meeting.
09. Any person to whom this notice is sent who is
a person nominated under section 146 of the
Companies Act 2006 to enjoy information rights
(a ‘Nominated Person’) may, under an agreement
appointed (or to have someone else appointed)
as a proxy for the Annual General Meeting.
If a Nominated Person has no such proxy
appointment right or does not wish to exercise it,
right to give instructions to the shareholder as to
the exercise of voting rights.
10. The statement of the rights of shareholders in
relation to the appointment of proxies in notes
1 and 2 above does not apply to Nominated
Persons. The rights described in those notes
can only be exercised by shareholders of the
Company.
11. The members of the Company may require the
Company to publish, on its website, (without
payment) a statement (which is also passed
to the Auditor) setting out any matter relating
to the audit of the Company’s Financial
Statements, including the Auditor’s Report and
the conduct of the audit. The Company will
be required to do so once it has received such
requests from either members representing
at least 5% of the total voting rights of the
Company or at least 100 members who have
a relevant right to vote and hold shares in the
Company on which there has been paid up an
average sum per member of at least £100. Such
requests must be made in writing and must state
your full name and address and be sent to the
Company at Calton Square, 1 Greenside Row,
Edinburgh, EH1 3AN.
12. Information regarding the Annual General
Meeting, including information required by
section 311A of the Companies Act 2006, is
available from the Company’s page of the
Managers’ website at japantrustplc.co.uk.
13. Members have the right to ask questions at the
meeting in accordance with section 319A of the
Companies Act 2006.
14. Any corporation which is a member can appoint
one or more corporate representatives who
may exercise on its behalf all of its powers as a
member provided that each representative does
so in relation to distinct shares.
15. As at 30 October 2023 (being the last
practicable day prior to the publication of this
notice) the Company’s issued share capital
consisted of 91,842,614 ordinary shares,
carrying one vote each. Therefore, the total
voting rights in the Company as at 30 October
2023 were 91,842,614 votes.
16. Any person holding 3% or more of the total
voting rights of the Company who appoints a
person other than the Chairman of the meeting
respective disclosure obligations under the
UK Disclosure and Transparency Rules.
17. No Director has a contract of service with
the Company.
The Baillie Gifford Japan Trust PLC
101
How to Invest
The Company’s shares are traded on the London
Stock Exchange. They can be bought by placing an
order with a stockbroker or by asking a professional
adviser to do so. If you are interested in investing
directly in Baillie Gifford Japan, you can do so
online. There are a number of companies offering
real time online dealing services. Find out more
by visiting the investment trust pages at
bailliegifford.com.
Sources of Further Information
on the Company
The price of shares is quoted daily in the Financial
Times and can also be found on the Company’s page
of the Managers’ website at japantrustplc.co.uk,
Trustnet at trustnet.co.uk
websites. Monthly factsheets are also available on
the Baillie Gifford website. These are available from
Baillie Gifford on request.
ISIN GB0000485838
Sedol 0048583
Ticker BGFD
The ordinary shares of the Company are listed on
the London Stock Exchange and their price is shown
in the Financial Times and The Scotsman under
‘Investment Companies’.
Key Dates
The Annual Report and Financial Statements are
normally issued in October and the AGM is normally
held in December. Dividends will be paid by way
Company’s AGM.
The cost for capital gains taxation purposes to
shareholders who subscribed for ordinary shares
(with warrants attached) is apportioned between
the ordinary shares and the warrants on the
following basis:
Cost of each ordinary share 96.548p
Cost of fraction for warrant 3.452p
100.000p
The market value of the ordinary shares on 31 March 1982 was
dealing of new warrants) were as follows:
Ordinary shares 120p
Warrants 26p
November 2000.
Further Shareholder
Information
Shareholder Information
Annual Report and Financial Statements 2023
102
Share Register Enquiries
Computershare Investor Services PLC maintains the
share register on behalf of the Company. In the event
of queries regarding shares registered in your own
name, please contact the Registrars on
0370 889 3221.
This helpline also offers an automated self-service
functionality (available 24 hours a day, 7 days a
week) which allows you to:
forms.
You can also check your holding on the Registrars’
website at investorcentre.co.uk. They also offer a
free, secure share management website service
which allows you to:
price of your shares;
shareholding;
To take advantage of this service, please log in at
investorcentre.co.uk and enter your Shareholder
Reference Number and Company Code (this
Dividend Reinvestment Plan
Computershare operates a Dividend Reinvestment
Plan which can be used to buy additional shares
instead of receiving your dividend via cheque or into
your bank account. For further information log into
investorcentre.co.uk and follow the instructions or
telephone 0370 707 1694.
Electronic Proxy Voting
If you hold stock in your own name you can choose
to vote by returning proxies electronically at
eproxyappointment.com.
If you have any questions about this service please
contact Computershare on 0370 889 3221.
CREST Proxy Voting
If you are a user of the CREST system (including
a CREST Personal Member), you may appoint one
or more proxies or give an instruction to a proxy
by having an appropriate CREST message
transmitted. For further information please
refer to the CREST Manual.
Data Protection
The Company is committed to ensuring the
provided to it. Further details on how personal data
is held and processed on behalf of the Company
can be found in the privacy policy available on the
Company’s website japantrustplc.co.uk.
The Baillie Gifford Japan Trust PLC
103
UK Alternative Investment Fund
Managers (AIFM) Regulations
In accordance with the UK AIFM Regulations,
information in relation to the Company’s leverage
and the remuneration of the Company’s AIFM,
Baillie Gifford & Co Limited, is required to be
made available to investors. In accordance with
the Regulations, the AIFM remuneration policy
is available at bailliegifford.com or on request
(see contact details on page 109). The numerical
remuneration disclosures in respect of the AIFM’s
reporting period (year ended 31 March 2023) are
available at bailliegifford.com.
The Company’s maximum and actual leverage
(see Glossary of Terms and Alternative
Performance Measures on pages 107 and 108)
levels at 31 August 2023 are shown below:
Leverage
Gross
method
Commitment
method
Maximum limit
2.50:1
2.00:1
Actual 1.16:1 1.16:1
Benchmark
The benchmark for the Trust where stated within
the Annual Report is the TOPIX total return (in
sterling terms).
Automatic Exchange of Information
Legislation relating to the automatic exchange of
information, the Company is required to collect
and report certain information about certain
shareholders.
The legislation requires investment trust companies
to provide personal information to HMRC on certain
investors who purchase shares in investment trusts.
As an affected company, The Baillie Gifford Japan
Trust PLC must provide information annually to
the local tax authority on the tax residencies of a
and corporate entities.
All new shareholders, excluding those whose shares
are held in CREST, who come on to the share
purposes of collecting this information.
For further information, please see HMRC’s
Quick Guide: Automatic Exchange of Information –
information for account holders
gov.uk/government/publications/exchange-of-
information-account-holders.
Third Party Data Provider Disclaimer
No third party data provider (‘Provider’) makes any
warranty, express or implied, as to the accuracy,
completeness or timeliness of the data contained
herewith nor as to the results to be obtained by
recipients of the data.
No Provider shall in any way be liable to any recipient
of the data for any inaccuracies, errors or omissions
in the index data included in this document,
regardless of cause, or for any damages (whether
direct or indirect) resulting therefrom. No Provider
has any obligation to update, modify or amend the
data or to otherwise notify a recipient thereof in the
event that any matter stated herein changes or
subsequently becomes inaccurate.
Without limiting the foregoing, no Provider shall have
any liability whatsoever to you, whether in contract
(including under an indemnity), in tort (including
negligence), under a warranty, under statute or
otherwise, in respect of any loss or damage suffered
by you as a result of or in connection with any
opinions, recommendations, forecasts, judgements,
or any other conclusions, or any course of action
determined, by you or any third party, whether or
not based on the content, information or materials
contained herein.
Shareholder Information
Annual Report and Financial Statements 2023
104
Communicating
with Shareholders
Trust magazine A Baillie Gifford Japan Trust web page at japantrustplc.co.uk
Trust Magazine
Trust is the Baillie Gifford investment trust magazine
which is published twice a year. It provides an insight
to our investment approach by including interviews
with our fund managers, as well as containing
investment trust news, investment features and
articles about the trusts managed by Baillie Gifford,
including Baillie Gifford Japan. Trust plays an
important role in helping to explain our products
so that readers can really understand them.
You can subscribe to Trust magazine or view
a digital copy at bailliegifford.com/trust
Suggestions and Questions
Any suggestions on how communications with
shareholders can be improved are welcomed,
so please contact the Baillie Gifford Client
Relations Team and give them your suggestions.
They will also be very happy to answer questions
that you may have about Baillie Gifford Japan.
Baillie Gifford Japan on the Web
Up-to-date information about Baillie Gifford Japan,
including a monthly commentary, recent portfolio
on the Company’s page of the Managers’ website at
japantrustplc.co.uk.
Japan, an explanation of the effects of gearing
Client Relations Team Contact Details
You can contact the Baillie Gifford Client
Relations Team by telephone, email or post:
Telephone: 0800 917 2112
Your call may be recorded for training or
monitoring purposes.
Email: trustenquiries@bailliegifford.com
Website: bailliegifford.com
Address:
Baillie Gifford Client Relations Team
Calton Square
1 Greenside Row
Edinburgh EH1 3AN
Please note that Baillie Gifford is not permitted to give
authorised intermediary.
Trust magazine
The Baillie Gifford Japan Trust PLC
105
From Y to Z: Japan’s online
powerhouse
by Thomas Patchett
How Yahoo! Japan and Z Holdings’
conquest of the country’s internet
realm unfolded.
Webinar: Japan Trust
and Citywire
by Matthew Brett
Though 2022 was tough for
investing, hope remains that
Japanese companies can
overcome a challenging backdrop.
Super Mario’s World
by Matthew Brett
Nintendo’s iconic characters
new forms of gameplay.
These articles can be viewed by scanning the QR codes below each.
Shareholder Information
Annual Report and Financial Statements 2023
106
The EU Sustainable Finance Disclosure Regulation
(‘SFDR’) does not have a direct impact in the UK
due to Brexit, however, it applies to third-country
products marketed in the EU. As Baillie Gifford
Japan is marketed in the EU by the AIFM,
Baillie Gifford & Co Limited, via the National Private
Placement Regime (‘NPPR’) the following disclosures
have been provided to comply with the high-level
requirements of SFDR.
The AIFM has adopted Baillie Gifford & Co’s ESG
Principles and Guidelines as its policy on integration
of sustainability risks in investment decisions.
Baillie Gifford & Co believes that a company
its approach to business is fundamentally out of
‘sustainability’ as a deliberately broad concept which
encapsulates a company’s purpose, values, business
model, culture, and operating practices.
Baillie Gifford & Co’s approach to investment is
based on identifying and holding high quality
growth businesses that enjoy sustainable
competitive advantages in their marketplace.
performance, undertaking proprietary research to
build up an in-depth knowledge of an individual
company and a view on its long-term prospects.
This includes the consideration of sustainability
matters) which it believes will positively or negatively
The likely impact on the return of the portfolio
from a potential or actual material decline in the
Sustainable Finance Disclosure
Regulation (‘SFDR’)
value of investment due to the occurrence of an
environmental, social or governance event or
condition will vary and will depend on several
factors including but not limited to the type,
extent, complexity and duration of an event
or condition, prevailing market conditions and
existence of any mitigating factors.
Whilst consideration is given to sustainability
matters, there are no restrictions on the investment
universe of the Company, unless otherwise
stated within in its Investment Objective & Policy.
Baillie Gifford & Co can invest in any companies it
investors. However, this might result in investments
being made in companies that ultimately cause a
negative outcome for the environment or society.
More detail on the Investment Manager’s approach
to sustainability can be found in the ESG Principles
and Guidelines document, available publicly on the
Baillie Gifford website bailliegifford.com and by
scanning the QR code below.
The underlying investments do not take into account
the EU criteria for environmentally sustainable
economic activities established under the EU
Taxonomy Regulation.
The Baillie Gifford Japan Trust PLC
107
Glossary of Terms and Alternative
Performance Measures (‘APM’)
Total Assets
The total value of all assets held less all liabilities (other than liabilities in the form of borrowings).
Net Asset Value
Also described as shareholders’ funds, net asset value (‘NAV’) is the value of total assets less liabilities
(including borrowings). The NAV per share is calculated by dividing this amount by the number of ordinary
shares in issue (excluding treasury shares). Borrowings are valued at their nominal par value. Par value
approximates to amortised cost. The Company’s yen denominated loans are valued at their sterling equivalent.
(Discount)/Premium (APM)
As stockmarkets and share prices vary, an investment trust’s share price is rarely the same as its NAV.
When the share price is lower than the NAV per share it is said to be trading at a discount. The size of the discount
is calculated by subtracting the share price from the NAV per share and is usually expressed as a percentage
of the NAV per share. If the share price is higher than the NAV per share, this situation is called a premium.
31 August
2023
31 August
2022
Net asset value per share (a) 787.7p 842.4p
Share price (b) 735.0p 774.0p
Discount ((b) – (a)) ÷ (a) (6.7%) (8.1%)
Total Return (APM)
The total return is the return to shareholders after reinvesting the net dividend on the date that the share
price goes ex-dividend.
2023
NAV
2023
Share
price
2022
NAV
2022
Share
price
(a) 787.7p 735.0p 842.4p 774.0p
Dividend adjustment factor
* (b) 1.0113 1.0113 1.0058 1.0059
(c) = (a) x (b) 796.6p 743.3p 847.3p 778.6p
(d) 842.4p 774.0p 1,012.8p 1,022.0p
Total return
((c) ÷ (d)) –1 (5.4%) (4.0%) (16.3%) (23.8%)
* The dividend adjustment factor is calculated on the assumption that the dividend of 9.00p (2022 – 6.00p) paid by the Company during the year was
Turnover
Annual turnover is calculated on a rolling 12 month basis. The lower of purchases and sales for the 12 months
is divided by the average assets, with average assets being calculated on assets as at each month’s end.
Shareholder Information
Annual Report and Financial Statements 2023
108
Ongoing Charges (APM)
The total expenses (excluding borrowing costs) incurred by the Company as a percentage of the average
net asset value.
2023
£’000
2022
£’000
Investment management fee 4,448 4,802
Other administrative expenses 688 742
Total expenses (a) 5,136 5,544
Average net asset value
* (b)
£
764,686
£843,789
Ongoing charges (a) ÷ (b) expressed as a percentage 0.67%
0.66%
* Average of daily net asset values calculated during the year.
Gearing (APM)
At its simplest, gearing is borrowing. Just like any other public company, an investment trust can borrow
money to invest in additional investments for its portfolio. The effect of the borrowing on the shareholders’
assets is called ‘gearing’. If the Company’s assets grow, the shareholders’ assets grow proportionately more
because the debt remains the same. But if the value of the Company’s assets falls, the situation is reversed.
Gearing can therefore enhance performance in rising markets but can adversely impact performance
in falling markets. The level of gearing can be adjusted through the use of derivatives which affect the
sensitivity of the value of the portfolio to changes in the level of markets.
Gearing is the Company’s borrowings less cash and cash equivalents expressed as a percentage
of shareholders’ funds.
Potential gearing is the Company’s borrowings expressed as a percentage of shareholders’ funds.
2023 2022
Gearing *
£’000
Potential
gearing
†
£’000
Gearing *
£’000
Potential
gearing
†
£’000
Borrowings (a) 131,723 131,723
Cash and cash equivalents
(b) 6,030 –
Shareholders’ funds
(c) 732,963 732,963 791,006 791,006
Gearing
17.1% 18.0% 17.5% 18.9%
* Gearing: ((a) - (b)) divided by (c), expressed as a percentage.
†
Potential gearing: (a) divided by (c), expressed as a percentage.
Leverage (APM)
For the purposes of the UK Alternative Investment Fund Managers (‘AIFM’) Regulations, leverage is any
method which increases the Company’s exposure, including the borrowing of cash and the use of derivatives.
It is expressed as a ratio between the Company’s exposure and its net asset value and can be calculated on
a gross and a commitment method. Under the gross method, exposure represents the sum of the Company’s
positions after the deduction of sterling cash balances, without taking into account any hedging and netting
arrangements. Under the commitment method, exposure is calculated without the deduction of sterling cash
balances and after certain hedging and netting positions are offset against each other.
Active Share (APM)
Active share, a measure of how actively a portfolio is managed, is the percentage of the portfolio that differs
from its comparative index. It is calculated by deducting from 100 the percentage of the portfolio that
overlaps with the comparative index. An active share of 100 indicates no overlap with the index and an
active share of zero indicates a portfolio that tracks the index.
The Baillie Gifford Japan Trust PLC
109
Company
Information
Directors
Chairman: David Kidd
Sharon Brown
Sam Davis
Patricia Lewis
Joanna Pitman
Registrar
Computershare Investor
Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
T: +44 (0)370 707 1229
Alternative Investment Fund
Managers, Secretaries and
Baillie Gifford & Co Limited
Calton Square
1 Greenside Row
Edinburgh EH1 3AN
T: +44 (0)131 275 2000
bailliegifford.com
Independent Auditor
Ernst & Young LLP Chartered Accountants
and Statutory Auditors
Atria One
144 Morrison Street
Edinburgh
EH3 8EX
Company Details
japantrustplc.co.uk
Company Registration No. SC075954
ISIN: GB0000485838
Sedol: 0048583
Ticker: BGFD
54930037AGTKN765Y741
Further Information
Client Relations Team
Baillie Gifford & Co
Calton Square
1 Greenside Row
Edinburgh EH1 3AN
T: +44 (0)800 917 2112
trustenquiries@bailliegifford.com
Depositary
The Bank of New York Mellon
(International) Limited
1 Canada Square
London
E14 5AL
Company Broker
Investec Bank plc
30 Gresham Street
London
EC2V 7QP
Copyright © Baillie Gifford & Co 2023.
Calton Square, 1 Greenside Row, Edinburgh EH1 3AN
Telephone +44 (0)131 275 2000
japantrustplc.co.uk