Annual Report and
Financial Statements
Baillie Gifford
Shin Nippon PLC
31 January 2024
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
Financial Conduct Authority (‘FCA’). They are not
authorised or regulated by the FCA.
Baillie Gifford Shin Nippon 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 (IFAs) 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 making
an investment in the Company. The Company’s
Investor Disclosure Document is available for
viewing at shinnippon.co.uk.
If you reside in the United Kingdom and you are
in any doubt as to the action you should take, you
should consult your stockbroker, bank manager,
solicitor, accountant or other independent financial
adviser authorised under the Financial Services and
Markets Act 2000 immediately. If you are outside the
United Kingdom you should consult an appropriately
authorised financial adviser.
If you have sold or otherwise transferred all of your
ordinary shares in Baillie Gifford Shin Nippon PLC,
please forward this document, together with
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.
01
Baillie Gifford Shin Nippon PLC
Contents
Introduction
Financial highlights 02
An introduction to Baillie Gifford Shin Nippon PLC 04
Strategic report
Chair’s statement 07
Managers’ report 12
Baillie Gifford’s stewardship principles 18
Proxy voting 20
Environmental, social and governance engagement 22
One year summary 26
Five year summary 28
Ten year record 30
Review of investments 32
Portfolio executive summary 38
Baillie Gifford – valuing private companies 42
Portfolio by investment theme 44
List of investments 45
Business review 48
Governance report
Directors and management 61
Directors’ report 66
Corporate governance report 71
Audit Committee report 78
Directors’ remuneration report 81
Statement of Directors’ responsibilities 85
Financial report
Independent Auditor’s report 88
Income statement 96
Balance sheet 97
Statement of changes in equity 98
Cash flow statement 99
Notes to the Financial Statements 100
Shareholder information
Notice of Annual General Meeting 117
Further shareholder information 122
Communicating with shareholders 125
Third party data provider disclaimer 127
Sustainable Finance Disclosure Regulation 128
Glossary of terms and Alternative Performance Measures 129
Company information 133
Introduction
Annual Report and Financial Statements 2024
02
Financial highlights
Year to 31 January 2024
* Alternative Performance Measure – see Glossary of terms on pages 129 to 132.
#
The comparative index is the MSCI Japan Small Cap Index (total return and in sterling terms).
Source: LSEG/Baillie Gifford and relevant underlying index providers. See disclaimer on page 127.
Past performance is not a guide to future performance.
Total returns
*
J
2023
F MAMJ JASONDJ
2024
●
Share price
●
NAV (after deducting
borrowings at fair value)
*
●
Comparative
index
#
70
110
90
80
100
NAV, share price and comparative index
(figures rebased to 100 at 31 January 2023)
Discount
*
(plotted as at month end dates)
J
2023
F MAMJ JASONDJ
2024
●
Discount (after deducting borrowings at fair value)
(16%)
(8%)
(14%)
(10%)
(12%)
Share price
(20.5%)
NAV (borrowings
at book value)
(14.9%)
NAV (borrowings
at fair value
*
)
(14.9%)
Comparative
index
#
6.3%
Baillie Gifford Shin Nippon PLC
03
Introduction
Annual Report and Financial Statements 2024
04
Investing in new
opportunities in Japan.
Shin Nippon’s objective
is to pursue long term
capital growth through
investment principally in
small Japanese companies
which are believed to have
above average prospects
for growth.
An introduction to
Baillie Gifford
Shin Nippon PLC
Japan is the world’s third largest economy, home
to unique technologies and an emerging class of
digital disruptors. Our patient long-term approach
allows us to benefit from those at the vanguard of
innovation and entrepreneurialism. There are plenty
of examples to be found in areas such as robotics
and automation, or in the manufacturing of complex
electronic components, where Japan retains its
technical edge. Less obvious, are the emerging class
of entrepreneurs that are helping the country tackle
its digital transition. Japan is also home to some of
the world’s best-known brands, many of which are
primed to benefit from the premiumisation trend
within Asia, from rising wealth across the region.
These are just some of the opportunities emerging
for selective bottom-up stock pickers within Japan.
Time is our greatest asset
Adopting a long-term approach allows us to frame
investment opportunities differently to the rest of
the market. We consider the unique attractions of
individual companies, and we do so over five-year
time periods and beyond. This long-term focus
enables us to forgo the short-term fluctuations
of markets, cycles and share prices – to unearth
exploitable and under appreciated opportunities
that will ultimately deliver long-term outperformance.
Baillie Gifford Shin Nippon PLC
05
Flexible approach to growth investing
Growth can come in various guises, from companies
of all shapes and sizes. As such our portfolio is
built, from the bottom-up, with a diversified mix of
companies from across all sectors and industries.
The commonality is that each investment must
present a plausible pathway to doubling in value over
a five-year period. Of course, there are various ways
to climb a mountain – be that through a gradual
(compounding) approach, or via a more vertical
(exponential) axis.
By focusing on businesses with attractive structural
growth opportunities, with strong and sustainable
competitive positions, high-quality earnings and
aligned management we will optimise our exposure
to Japan’s best of breed growth opportunities.
Our
structure
Public company
• Just like other public
companies, Shin Nippon
can borrow money to make
additional investments.
This financial gearing can
amplify investment returns.
• Our shareholders have rights,
and we seek their approval,
via votes, if we want to make
significant changes.
• A board of directors looks
after the interests of our
shareholders. They meet
several times a year and
are responsible for various
things, such as overseeing
performance.
Accessibility
• Listed on the London Stock
Exchange, Shin Nippon
provides intra-day liquid
access, and our shares are
openly tradeable for investors
from around the world.
• There are no performance
fees or minimum investment
restrictions.
• Shareholders could benefit
from simplified tax reporting
when compared with other
structures that hold private
companies.
Permanent capital
• The closed-ended structure
provides a pool of permanent
capital. Unlike open-ended
funds, the portfolio remains
intact and is not impacted
by shareholder demand.
• We have the freedom to invest
for the long term and hold
assets that can be harder
to buy and sell – such as
private companies.
• Our extended time horizons
are matched by our
companies. This alignment
underpins the prospect of
enduring relationships.
This strategic report, which
includes pages 7 to 59 and
incorporates the Chair’s statement
has been prepared in accordance
with the Companies Act 2006.
Strategic
report
07
Baillie Gifford Shin Nippon PLC
Chair’s
statement
Performance
In this, my first year as Chair of the Company, I had
hoped to report an improvement in performance
by the end of it. However, this has not materialised.
Over the year to 31 January 2024, the Company’s
net asset value (‘NAV’) per share
*
declined by 14.9%
and its share price by 20.5%. The comparative
index (MSCI Japan Small Cap Index, total return
in sterling terms) appreciated by 6.3%.
As highlighted in last year’s report, your Board has
determined that performance should be measured
principally over rolling five-year periods to reflect
the Managers’ time horizon for investment. Over
the five years to 31 January 2024, the Company’s
NAV per share declined by 6.8% and its share price
declined by 26.3%. The Company’s comparative
index return appreciated by 24.1%. Much of the
underperformance has occurred over the past
three years when the Company’s NAV per share fell
36.2% against a 7.6% rise in the comparative index.
We remain resolute in our belief that the companies
we hold are very well-placed to generate extremely
attractive returns to investors over the long term.
Although the Company has faced the challenges of
growth investing being out of favour, we support the
Managers in their core ethos of investing in dynamic
entrepreneurial small cap businesses in Japan.
Despite the recent underperformance, over the
ten years to 31 January 2024 the NAV compound
annual return was 9.1% compared to 8.5% for
the comparative index. More detail on ten year
performance can be viewed on page 31.
* After deducting borrowings at fair value. For a definition of terms see Glossary of terms and Alternative Performance Measures on pages 129 to 132.
Source: LSEG/Baillie Gifford and relevant underlying index providers. See disclaimer on page 127.
Past performance is not a guide to future performance.
Jamie Skinner
Chair
Appointed 2018
Chair in 2023
Strategic report
08
Annual Report and Financial Statements 2024
The Board has of course rigorously challenged
the portfolio manager at each Board meeting on
the reasons for the portfolio’s underperformance.
These can be summarised as:
• growth stocks being out of favour, with high
growth Japanese small cap stocks indiscriminately
sold, particularly by domestic Japanese investors,
in favour of value stocks;
• the portfolio has had historically longstanding
structural underweights in the energy, industrials,
financials and materials sectors, all of which have
done exceptionally well over the past couple of
years. In aggregate, these sectors account for just
over 40% of the comparative index and being
underweight has impacted relative performance;
and finally
• rising interest rates and geopolitical risks
have tilted investors towards stocks perceived
to be ‘safe’. These tend to be highly cyclical
(global industrials, shippers), interest rate
sensitive (financials), invested in real assets
(trading companies, miners) and extremely low
valuation (often less than 0.5 times price-to-book).
These characteristics are not favoured by the
portfolio manager.
The Managers’ report on pages 12 to 16 goes into
significantly more detail on the main drivers of
portfolio performance during the period.
As at 31 January 2024, the Company’s shares
stood at a 14.6% discount
†
, having averaged
11.4% over the year, widening from 8.6% as at
31 January 2023. As part of the process of
becoming the Company’s Chair, I and my fellow
Director Abigail Rotheroe undertook some
shareholder meetings to canvass views on a number
of matters. The Company’s use of share buybacks
featured strongly in the feedback we received. Over
the year, the Company has bought back 4,395,000
shares to be held in treasury, equivalent to 1.4%
of the Company’s issued share capital at the start
of the period, split over 62 separate buyback
transactions. Since then, the buybacks have
accelerated, and a further 3,375,000 shares have
been purchased. The Board remains committed
to utilising the buyback authority appropriately.
The poor investment performance has, not
surprisingly, led to selling by the same investors
that the Board wishes to attract and retain on the
share register. The ‘retail’ weighting on the register
(holding shares on investment platforms) has
declined from 78.9% to 68.7% over the year.
It is the Board’s hope that this trend reverses
once performance improves. To this end, the
Board has agreed to an increased annual marketing
budget of £100,000. The Company is part of a
Baillie Gifford marketing programme which includes
all the investment trusts managed by them. The
cost is borne in partnership by the Company and the
Manager, with the Manager matching the Company’s
marketing contribution and providing the resource
to manage and run the programme. This marketing
programme is a key method of shareholder
communication and, in our opinion, represents
good value for money for our shareholders.
Tender offer
As I have said, the Board maintains a keen interest
in the performance of the portfolio and the resultant
impact this has on the level of the Company’s share
price discount or premium to the underlying NAV per
share. Whilst cognisant of the drivers of performance
and remaining supportive of the portfolio manager,
the Board has concluded that, given the period
of poor performance, it would be in the best
interests of the Company to commit to a one-off
performance-triggered tender offer for up to 15%
of the Company’s issued share capital (excluding
any shares held in treasury). This tender offer would
be triggered if the Company’s NAV total return per
share, measuring debt at fair value, underperformed
the total return of the MSCI Japan Small Cap Index
(in sterling terms) over the three years to 31 January
2027. The tender would be at a price equal to a
2% discount to the cum income NAV per share
(calculating debt at fair value) less costs.
If the tender offer is triggered, it is expected to be
implemented around the time of the Company’s
2027 Annual General Meeting (‘AGM’) and subject
to shareholder approval at that time.
Borrowings
The Company’s gearing
†
increased over the course
of the year from 15.0% to 18.1% whilst gross
gearing increased from 16.1% to 18.9% following
the drawing of a new secured ¥2,000 million
three-year revolving credit facility from ING Bank N.V.
The ¥7,000 million fixed rate facility matured on
27 November 2023 and was refinanced with a
three-year ¥7,000 million revolving credit facility
from ING Bank N.V. As at 31 January 2024, the
Company had total borrowings of ¥16.1 billion
(£86.5 million) at an average blended interest rate
of 1.7%. The Board agreed to increase the level
of borrowing during the year and is committed to
†
Alternative Performance Measure – see Glossary of terms and Alternative Performance Measures on pages 129 to 132.
09
Baillie Gifford Shin Nippon PLC
the strategic use of borrowing at attractive rates
to invest in exciting opportunities, enhancing
shareholder returns over the long term.
During the year the yen weakened against sterling
by 14.0%. The Company undertook no currency
hedging during the year and has no plans to do so.
Revenue return and ongoing charges
Revenue return per share was 0.94p compared
to 1.11p the prior year. Having been in deficit for a
number of years, the Company’s revenue reserve
has moved to a surplus, principally due to increased
dividend payments from the portfolio’s underlying
holdings and a drop in the NAV of the Company
resulting in reduced investment management fees.
The Board is recommending a final dividend of 0.80p
per share, being broadly the minimum required to
maintain investment trust status. The proposed final
dividend will be put before shareholders as part of
the Company’s AGM business in May. I should add
that, as the Company’s focus is on capital growth,
shareholders should not rely on their investment in
the Company to provide a regular and stable source
of income.
The Company’s ongoing charges
†
were 0.72%
compared to 0.74% last year, due largely to the
decline in the Company’s expenses from £3.8 million
to £3.5 million. A reconciliation of this can be found
on page 130.
Share issuance, buybacks and treasury
As part of this year’s AGM business, approval
is again being sought to renew the Company’s
share issuance, buyback and treasury share
authorities. Share issuance, either of new shares
or from treasury, on a non pre-emptive basis,
would only be undertaken at a premium to the
Company’s NAV per share and therefore be NAV
accretive for existing shareholders. The Board is
of the view that being able to increase the size of
the Company, when conditions permit, helps to
improve liquidity, reduces costs per share and
potentially increases the appeal of the Company
to a wider range of shareholders. The buyback
facility is being sought to enable the Company
to keep buying back shares if the discount to
NAV is substantial in absolute terms or in relation
to its peers, should that continue to be deemed
desirable. Any such activity would enhance the
NAV attributable to existing shareholders.
TCFD and Consumer Duty
As Manager to the Company, Baillie Gifford is now
required to produce a product-level TCFD (Task
Force on Climate-Related Financial Disclosures)
report outlining the portfolio’s climate-related risks
and opportunities. The report, which is based on
backward looking historic data, is to be produced
annually. The report on our Company can be found
at shinnippon.co.uk.
A further new regulatory requirement introduced
by the FCA is that of ‘Consumer Duty’. The Duty
raises the standard of care that FCA regulated
firms, such as Baillie Gifford, are expected 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 their products, including investment trusts. This
assessment is similar, though not identical, to the
annual evaluation of the Managers conducted by the
Board of performance and quality of service, costs
and shareholder interest. This year’s assessment has
concluded that the Company is expected to provide
value for a reasonably foreseeable period, meaning
that distributors, such as trading platforms, will be
able to undertake their assessments and continue
to make the Company’s shares available to current
and potential shareholders.
Annual General Meeting
This year’s AGM will take place in London rather
than in Edinburgh. The Company is trialling this
approach following a decline in the number of
shareholders attending the Company’s AGM in
Edinburgh. The AGM is an important opportunity for
engagement and enables shareholders to meet and
question in-person those managing their assets as
well as us the Directors, charged with acting in your
best interests. The AGM will take place on Thursday
23 May 2024 at The Cavendish London, 81 Jermyn
Street, St James’s, London SW1Y 6JF, commencing
at 11.00 and I look forward to seeing as many of you
there as possible.
In recent years, a UK governance service provider
has decided to recommend to the Company’s
shareholders that they oppose AGM resolutions
relating to receiving the Company’s Annual Report.
The reason given is that, because Baillie Gifford
& Co Ltd undertakes the Company’s administration
and company secretarial duties whilst also being
the Manager, the interests of shareholders are
considered to be in conflict with Baillie Gifford as
Manager due to the impact of management fees.
†
Alternative Performance Measure – see Glossary of terms and Alternative Performance Measures on pages 129 to 132.
Strategic report
10
Annual Report and Financial Statements 2024
My fellow Directors and I strongly refute this
claim. There is no evidence of this compromising
the standards of governance or reporting the
Company receives, nor of it creating conflicts which
compromise the efficacy or independence of your
Board. What is more, the Company Secretary has
a fiduciary duty to the Company to act in good
faith in the interests of the Company and to avoid
conflicts of interest. Each year the Board reviews
and evaluates the administration and company
secretarial services provided by Baillie Gifford
& Co Ltd to the Company. This year, as in previous
years, the Board has been pleased with the service
provided and sees no benefit in engaging another
party to undertake these services.
In addition, the same provider recommends
voting against the resolution to authorise share
repurchases, because the Company has not made
a separate public statement addressing a number
of points (which are largely already disclosed in the
Company’s Annual Report) or has not quantified
or attributed their impact on the discount of the
Company’s shares versus the NAV per share.
The suggestion is that the supply and demand
for investment trust shares is materially impacted
by these points and that they can somehow be
quantified and failing to do so means the buyback
authority should be opposed.
Both these recommendations are an outlier
among such service providers and are not unique
to this Company. They appear to be that particular
provider’s view on best practice, despite being out
of line with Financial Reporting Council guidelines
as well as with the AIC Code of Corporate
Governance.
Outlook
The past couple of years have been very challenging
for high growth investing and some of the headwinds
(heightened macroeconomic and geopolitical
concerns) over this period persist. However, there
are some encouraging signs. Inflation in the US is
showing signs of cooling which has led to expectations
of an end to the current cycle of interest rate
increases. Japanese corporate earnings and profits
remain resilient, with several companies guiding
higher. Contrary to popular belief, the weak yen has
accounted for surprisingly little of this profit growth;
rather it has been due to a combination of price hikes,
stringent cost control and aggressive marketing.
Your portfolio manager is seeing strong results being
reported by holdings across sectors and valuations
are attractive. Nearly 60% of the portfolio now
trades on a price-to-sales ratio of 2x or less, which
is generally considered as a no or low growth
multiple. The Managers’ report on pages 12 to 16
goes into further detail on the portfolio and the
outlook for Japanese smaller companies.
The Board and Managers are confident that the
current portfolio can generate superior growth
relative to the comparative index. Considering the
current low valuation and a mid teens discount,
we think the Company should be top of mind for
investors looking for Japanese equity exposure.
Jamie Skinner
22 March 2024
11
Baillie Gifford Shin Nippon PLC
Strategic report
12
Annual Report and Financial Statements 2024
Managers’ report
It is extremely disappointing to report another year
of weak portfolio performance. For shareholders,
of which I am one, this will undoubtedly be
disappointing, frustrating and possibly puzzling,
especially when the Japanese large cap-oriented
indices, TOPIX and Nikkei 225, are near their
all-time highs recorded at the peak of Japan’s asset
bubble of the late 1980s. There are specific factors,
which we discuss below, for this performance gap
between large and small caps.
The strong performance of the Japanese market
over the past year has been driven largely by
so-called value stocks. These are mostly large
cap stocks from traditional resource intensive
sectors with cash rich balance sheets and large
cross-shareholdings. The Tokyo Stock Exchange
has issued directives, including the threat of
delisting, aimed at forcing such companies to
improve their financial performance. This has
led many companies, especially those trading
below book value, to increase their dividend
significantly, conduct large buybacks and sell
down their cross-shareholdings. Such companies
have attracted considerable investor interest and
feature prominently among the best performing
stocks. This has hurt our relative performance as
we do not invest in such companies given our
philosophy of investing in high growth small caps.
Despite moderation in inflation, especially in the US,
the major central banks across the developed world
are yet to cut interest rates. There is a possibility
that interest rates may remain higher for longer and
some market participants seem to have taken this
view. The inevitable consequence of this has been
Praveen Kumar
Investment Manager
Appointed 2015
13
Baillie Gifford Shin Nippon PLC
continued selling of high growth stocks, including
those in Japan. This is due to the perception that
they all require access to third-party funding at
increased rates of interest, slowing their progress
to profitability. In Japan, the Central Bank’s favoured
measure of inflation (which excludes fresh food
and fuel) remains above its target level. This has
stoked speculation of a potential rate rise in Japan
after years of negative interest rates and has led to
considerable buying of banks and other interest rate
sensitive stocks.
For the first time in decades, we are witnessing
significant levels of corporate action in Japan.
Activist investors and private equity groups, both
domestic and from overseas, are taking large stakes
in underperforming Japanese companies and
agitating for change. This, along with the pressure
being applied on such companies by the Tokyo
Stock Exchange, is resulting in a major change in
corporate behaviour. This includes, but is not limited
to, changes in dividend policy, share buybacks and
the sale of unproductive or loss-making assets.
While this is very positive for the overall health of
corporate Japan, this unfortunately has also resulted
in a significant flight of shareholder capital from
young, disruptive and fast-growing companies into
traditional, old economy businesses. Data from the
Tokyo Stock Exchange shows that Japan’s domestic
individual cash investors, traditionally among the
largest buyers of small caps, have been net sellers
over the past year.
Given these developments, it is unsurprising that
Japanese small caps as an asset class remain
completely out of favour, in particular the pool
of growth names in which we invest. However,
it is precisely for these reasons that we remain
cautiously optimistic about the future. At a
fundamental level, the majority of the Company’s
holdings are continuing to deliver strong sales and
profit growth. Some of our portfolio companies like
business-to-business online food ordering system
provider Infomart, housing renovation specialist
Katitas, and semiconductor valves manufacturer
Kitz have also been raising prices which should
support structurally higher margins in the long run.
The persistent share price weakness of most
holdings across the portfolio, together with their
strong operational performance, has meant that the
portfolio as a whole has been de-rated significantly.
What we look for How we invest How we engage
Disruptive business models and
dynamic entrepreneurs
Domestic champions and global
leaders
Secular growth and innovation:
‘New Japan’
Genuinely long-term: five years
and beyond
Fundamental, bottom-up research
Growth
Serious about engagement
and alignment
Dedicated Environmental,
Social and Governance team
Pragmatic approach
Strategic report
14
Annual Report and Financial Statements 2024
On an EV (enterprise value)/EBIT (earnings before
interest and taxes) basis, the portfolio currently
trades at 13.3 times versus 12.5 times for our
comparative index. However, for the portfolio as
a whole, the one year forward sales growth rate
is estimated to be 9.3% compared to 2.3%.
This means we have a portfolio that, relative to
the comparative index, is valued at a small premium
but should deliver much faster sales growth.
We believe this to be a very encouraging starting
point for future portfolio outperformance.
Performance
For the year ending 31 January 2024, the Company’s
net asset value (‘NAV’) decreased by 14.9% compared
to an increase of 6.3% in the MSCI Japan Small Cap
Index (all figures total return and in sterling terms,
NAV with borrowings at fair value). Performance
has remained weak since the decline in impact of
Covid-19 as large cap value stocks have been very
much in favour compared to high growth small cap
stocks. Consequently, the Company’s NAV now lags
the comparative index over three and five years,
falling 36.2% and 6.8% versus gains of 7.6% and
24.1% respectively for the comparative index over
these periods.
Over the past year, there was wide sectoral
dispersion among the portfolio’s top performing
stocks. The top contributor to relative performance
was Megachips, the largest supplier of custom-made
chips for Nintendo’s gaming consoles. The company
has benefited from the success of Nintendo’s Switch
console and is using the profits generated from this
business to expand into new areas where
it is already making strong progress. Recent holding
SWCC, was another strong performer. It makes
electrical wires and cables for power companies and
was first purchased for the portfolio in May 2023.
Since then, the share price has risen by nearly 80%.
It is run by its first ever female president in its nearly
90-year history. Under her leadership, it is transforming
itself from a manufacturer of commodity products
to a high value-added component supplier. It has
expanded its opportunity set by capturing demand in
renewables and electric vehicles. Margins have been
on an improving trend, and it appears that there is
considerable upside remaining in the shares.
Online shoe retailer Jade Group (previously named
Locondo) was another strong performer. It is forecast
to grow profits at nearly 80% in the current fiscal
year and yet trades at very low multiple of profits.
It has secured a leading market share in Japan and is
continuing to expand rapidly. Management has also
been buying back shares regularly which is quite
unusual for what is an immature small cap company.
Longstanding holding Bengo4.com also performed
well. Growth of its online legal business has
accelerated following the introduction of a range
of artificial intelligence enabled services which
have been well received by the legal community.
Its digital contracts business, CloudSign, is also
making rapid progress and has already achieved
a dominant share of the public sector market.
Elsewhere, enterprise software provider oRo
generated stronger than expected sales and profit
growth. Its cloud-based project management and
cost accounting software attracted increased
interest among small and medium enterprises. Its
good operational performance was rewarded by the
market, resulting in a strong share price. Japan’s
largest drugstore chain, MatsukiyoCocokara, was
also among the portfolio’s top performers. It is
benefiting from a revival in inbound tourism and
the integration with Cocokara Fine, a smaller peer
acquired three years ago, continues to progress
well, resulting in significant synergies.
Most of the portfolio’s poor performers over the past
year were companies with meaningful exposure to
China. They suffered from a sharp fall in demand
as a weak Chinese economy forced corporate and
individual consumers to rein in spending. Premium
motorcycle helmet manufacturer Shoei was among
the largest negative contributors to performance.
Along with weak consumer demand, it is also facing
regulatory change in China which has forced it to
modify the specification of its helmets to comply
with the new rules. This has resulted in additional
costs which have squeezed its profit margins in
the short term. Sensor manufacturer Optex is also
suffering from weak demand in China. Factory
automation is its key end market, and the Chinese
factory automation sector continues to remain
sluggish following a period of inventory correction.
It was a similar story for automatic lathe manufacturer
Tsugami which experienced a sharp fall in orders
from its Chinese customers who are taking a cautious
stance towards forward-looking investments.
Second-hand home renovation specialist Katitas
was another holding that performed poorly. It was
embroiled in a tax dispute with a regional tax agency
that resulted in the company taking a one-off hit to
Source: LSEG/Baillie Gifford and relevant underlying index providers. See disclaimer on page 127.
For a definition of terms see Glossary of terms and Alternative Performance Measures on pages 129 to 132.
Past performance is not a guide to future performance.
15
Baillie Gifford Shin Nippon PLC
profits as it was forced to pay a fine. This incident
was taken negatively by the market. We believe this
was an isolated incident. Fundamentally, Katitas
remains a strong business, with a solid competitive
edge and very attractive growth prospects. Litalico,
which provides education and welfare for disabled
adults and children, also performed poorly. Its shares
have halved over the past two years despite sales
growing at over 20% per annum and profits at over
30% per annum over this period. Management is
investing aggressively in rolling out learning centres
nationwide and this has held back further margin
expansion in the short term, and which was taken by
the market as a disappointment. In contrast, we see
this as positioning the company for future growth.
As alluded to earlier, there has been a significant
uptick in corporate activity in Japan, driven by activist
investors and private equity groups. Although this
is centred mostly around old economy large cap
companies, we are seeing some of this activity
spill over to small caps. Within the Company’s
portfolio we have had two stocks, outdoor camping
equipment manufacturer Snow Peak and staffing
company Outsourcing, that have both announced
a management buy-out supported by Bain, one of
the largest private equity groups globally. This has
been done at an average premium of around 50%.
Another portfolio holding, Wealthnavi, announced
a capital and business alliance with MUFG Bank,
part of the MUFG Group which is one of the
world’s largest financial conglomerates by assets.
Wealthnavi is Japan’s largest robo-advisory firm for
wealth management and as part of this deal, MUFG
is taking a 16% stake in Wealthnavi. By leveraging
MUFG’s considerable resources and vast customer
base, we believe Wealthnavi can potentially
transform its growth opportunity.
Portfolio
The Company’s active share remains high at
95.4%, implying only a 4.6% overlap with the
comparative index. This is consistent with our
investment approach of seeking out and investing
in under researched, dynamic and high growth
smaller businesses in Japan, and being agnostic of
the index constituents and their weights. Portfolio
turnover for the year was 12.1% which is in line with
our investment horizon of five to ten years. Gearing
is 18.1% which is consistent with our philosophy of
maintaining structural gearing which is based on not
taking a view on the market but focusing solely on
the attractions of individual companies to enhance
long-term capital growth.
Over the course of the year, we purchased five new
holdings. As noted earlier, the market dynamics
around high growth small cap stocks in Japan have
changed. Our approach towards idea generation has
therefore adapted too, but without compromising
on our high growth investment philosophy and
style. As avowed growth investors, we do not chase
value stocks or stocks with poor long-term growth
prospects just because they are currently in vogue.
Instead, we try hard to identify stocks with different
drivers of growth, including in sectors to which we
have traditionally not had much exposure.
SWCC is a classic example of this. This is a company
that operates in a terribly unattractive sector but one
where management has successfully reoriented the
business to growth areas. Even within its core
market of supplying cables and wires to electric
utilities, SWCC has developed new high value added
and high margin products that make its clients’
operations more efficient. This has resulted in steady
margin improvement. Management has also managed
to pivot the business to newer growth areas like
renewables and electric vehicles. Another new
purchase was Vector, Japan’s largest public relations
agency. Vector is using its dominant position in public
relations to disrupt the online and offline advertising
market in Japan. This is another example of a growth
stock from a sector not normally associated with
producing high growth businesses.
We also took holdings in Oisix and Appier Group,
more typical high growth companies that we have
a bias towards. Oisix is Japan’s leading online meal
kit provider that is continuing to grow its sales and
profits despite the overall market being sluggish
following a Covid-19 induced boom. It is achieving
this by expanding its product range, building a
sophisticated storage and delivery system and
offering compelling pricing for its customers. Appier
is an artificial intelligence software company founded
by a Taiwanese couple but headquartered in Tokyo.
It has developed a suite of software tools that allow
its clients to track and analyse consumer behaviour
and improve consumer acquisition and retention.
Its software is proving to be extremely popular, and
it already has a growing business outside of Japan,
resulting in ongoing rapid growth in sales and profits.
For a definition of terms see Glossary of terms and Alternative Performance Measures on pages 129 to 132.
Strategic report
16
Annual Report and Financial Statements 2024
As part of our process, we closely monitor the
investment case and performance for every
single stock held in the portfolio. Where there is a
divergence, we have taken decisive action in either
reducing our position or selling the stock outright.
The latter has usually been the case where we lose
conviction in the investment thesis. Overall, we sold
seven stocks over the Company’s fiscal year.
Baby bottle manufacturer Pigeon, a long-term
portfolio holding, was one such stock. It had a large
and highly profitable business in China but has been
struggling of late in this market due to intensifying
competition. Having given management time to
respond to this challenge, we were disappointed
by its apparent lack of ambition and therefore lost
conviction in its ability to respond to competition.
Tsubaki Nakashima was another stock that was sold.
It makes steel and ceramic balls that are used in ball
bearings. It is one of only three companies globally
that make this product. It has struggled to recover
post Covid-19 and demand has stayed muted for
longer than we had anticipated. It also had a weak
balance sheet with a lot of debt. Cognisant of the
current macro environment, we took the view that
the financial burden would prove too much for the
company and there was a material risk of a large
equity issuance to shore up the balance sheet
and massively dilute shareholders in the process.
We also sold artificial intelligence consultant
Brainpad where we were left disappointed with the
inability of management to scale the business and
grow more aggressively, despite a very favourable
operating environment.
Outlook
We acknowledge the frustration that shareholders
have had to endure as a result of the Company’s
underperformance for the third year running. While
it may seem like an uphill task to turn performance
around given the headwinds discussed earlier in
this report, it might be worth remembering that
we have been here before. Small caps can be
extremely volatile at the best of times and in the
current environment they remain very much out
of favour. However, we believe that the stocks that
are driving the current market rally in Japan have
a time-bound investment appeal. As their attraction
in terms of improving shareholder returns plays out,
there is little else to get excited about in terms of
their fundamentals. It is at this point, we think, that
investor interest will refocus on the prospects for
dynamic small cap growth companies in Japan.
Already, based on recent quarterly results, we
have observed tentative signs of such a move.
Portfolio holdings that have reported strong results
have seen a sharp and sustained upward move in
their share price. As the focus on fundamentals
takes a firm hold, we should start seeing a strong
recovery in the performance of the portfolio. In
the meantime, we intend to remain focused on
factors that are within our control. This means
staying patient, disciplined and staying true to the
Company’s core ethos of focusing on, identifying
and investing in dynamic, entrepreneurial high
growth smaller businesses in Japan.
17
Baillie Gifford Shin Nippon PLC
Strategic report
18
Annual Report and Financial Statements 2024
Baillie Gifford’s
stewardship principles
Baillie Gifford’s overarching ethos is that we are
‘Actual’ investors. That means we seek to invest
for the long term. Our role as an engaged owner
is core to our mission to be effective stewards
for our clients. As an active manager, we invest in
companies at different stages of their evolution
across many industries and geographies, and focus
on their unique circumstances and opportunities.
Our approach favours a small number of simple
principles rather than overly prescriptive policies.
This helps shape our interactions with holdings
and ensures our investment teams have the
freedom and retain the responsibility to act in
clients’ best interests.
Long-term value creation
We believe that companies that are run for the
long term are more likely to be better investments
over our clients’ time horizons. We encourage our
holdings to be ambitious, focusing on long-term
value creation and capital deployment for growth.
We know events will not always run according to
plan. In these instances we expect management
to act deliberately and to provide appropriate
transparency. We think helping management to
resist short-term demands from shareholders often
protects returns. We regard it as our responsibility to
encourage holdings away from destructive financial
engineering towards activities that create genuine
value over the long run. Our value will often be in
supporting management when others don’t.
Alignment in vision and practice
Alignment is at the heart of our stewardship
approach. We seek the fair and equitable treatment
of all shareholders alongside the interests of
management. While assessing alignment with
management often comes down to intangible factors
and an understanding built over time, we look for
clear evidence of alignment in everything from
capital allocation decisions in moments of stress
to the details of executive remuneration plans and
committed share ownership. We expect companies
to deepen alignment with us, rather than weaken it,
where the opportunity presents itself.
19
Baillie Gifford Shin Nippon PLC
Governance fit for purpose
Corporate governance is a combination of structures
and behaviours; a careful balance between systems,
processes and people. Good governance is the
essential foundation for long-term company
success. We firmly believe that there is no single
governance model that delivers the best long-term
outcomes. We therefore strive to push back against
one-dimensional global governance principles in
favour of a deep understanding of each company
we invest in. We look, very simply, for structures,
people and processes which we think can maximise
the likelihood of long-term success. We expect to
trust the boards and management teams of the
companies we select, but demand accountability
if that trust is broken.
Sustainable business practices
A company’s ability to grow and generate value for
our clients relies on a network of interdependencies
between the company and the economy, society and
environment in which it operates. We expect holdings
to consider how their actions impact and rely on these
relationships. We believe long-term success depends
on maintaining a social licence to operate and look
for holdings to work within the spirit and not just the
letter of the laws and regulations that govern them.
Material factors should be addressed at the board
level as appropriate.
Strategic report
20
Annual Report and Financial Statements 2024
Proxy voting
We believe that ‘active ownership’ of our clients’
holdings is as important as selecting the right
investments in the first instance. These guidelines
are aligned with our stewardship principles and
describe our 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 we approach voting on our clients’
behalf, it is important to note that we assess every
company individually. In voting, we will always
evaluate proposals on a case-by-case basis, based
on what we believe to be in the best long-term
interests of our clients, rather than rigidly applying
a policy.
A broad cross section of our investment staff are
involved in our ongoing work on stewardship. In the
same way that our investment approach is based
around empowered and independent teams, our
voting and engagement is led by the individual
investment teams. In keeping with our decentralised
and autonomous culture, our investment teams will,
on occasion, elect to vote differently on the same
general meeting resolutions. Where this happens,
we report accordingly in the proxy voting disclosure
on our website. We also have clear processes in
place to identify, prevent and manage potential
proxy voting related conflicts of interest to ensure
that in all cases the firm acts in the clients’ best
interest. Baillie Gifford’s firm-wide conflict of interest
disclosure is available on our website.
Prior to taking any voting action, we usually address
specific ESG concerns by engaging directly with the
company, using voting as an escalation mechanism
if we have not seen sufficient progress. Voting
activity and the reasons for any resolutions voted
against in the period is disclosed on the Company
website and can be viewed at shinnippon.co.uk.
Company meeting record
Voting distribution
Number of meetings voted
with management
77
Number of meetings with at least
one against, withhold or abstain
11
Meetings not voted 1
Votes for 97.5%
Votes against 1.9%
Votes abstained 0.3%
No vote 0.3%
21
Baillie Gifford Shin Nippon PLC
Strategic report
22
Annual Report and Financial Statements 2024
By engaging with companies, we 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 issues we consider in our assessment of ESG factors
are varied but may include governance arrangements, human rights, labour rights, diversity and inclusion,
climate change, nature and biodiversity, respect for legal and regulatory guidelines and consideration
of stakeholder perspectives.
Environmental, social and
governance engagement
Engagements in the year to 31 January 2024 Environmental Social Governance
Anest Iwata
Asahi Intecc
AvexGroup
Bengo4.com
Cellsource
Cosmos Pharmaceuticals
Crowdworks
Cybozu
DaikyoNishikawa
Demae-Can
Descente
eGuarantee
Freakout Holdings
GA Technologies
Harmonic Drive Systems
Horiba
Inter Action
Istyle
Jade Group
Kamakura Shinsho
Katitas
Kitanotatsujin
23
Baillie Gifford Shin Nippon PLC
The examples on the following pages demonstrate our approach to proxy voting and stewardship through
constructive, ongoing engagement.
Engagements in the year to 31 January 2024 Environmental Social Governance
Kohoku Kogyo
Kumiai Chemical
M3
MatsukiyoCocokara
Nihon M&A Center
Nikkiso
Oisix
Optex
OSG
Poletowin Pitcrew
Raksul
Seria
Sho-Bond
Shoei
Snow Peak
SpiderPlus
TechnoPro
Torex Semiconductor
Toyo Tanso
Tsugami
WDB Holdings
Weathernews
Strategic report
24
Annual Report and Financial Statements 2024
M3 – navigating trade-offs in digitalising
healthcare
% of total assets* 0.3%
M3 is a Japanese company involved in multiple
areas of digitalising healthcare. The company’s
core business is a medical platform for physicians,
providing them with all the information they need
to make the best decisions for their patients.
Objective: During a meeting with the CEO, Itaru
Tanimura, we discussed how M3 manages the
trade-offs between the needs of pharmaceutical
companies, physicians, and patients.
Discussion: During the meeting, Tanimura san was
forthright about the need for patients to come first
in order for M3’s business model to be sustainable.
He emphasised that the company must navigate
the practicalities of working with pharmaceutical
companies and only pursue business activities
where the balance of return to risk is attractive.
Tanimura san provided examples of where M3
facilitated the success of superior treatments.
However, he emphasised that the company’s core
business, a medical platform for physicians, must
be a neutral marketplace. He acknowledged that
successfully managing these evolving issues will
be critical to M3’s future success.
Outcome: The meeting with Itaru Tanimura
provided valuable insight into the thinking of one
of Japan’s most exciting entrepreneurs. Tanimura
san appreciated the discussion and suggested
establishing some form of internal stakeholder
review board to ensure these ideas are robustly
discussed. This would help M3 navigate the
trade-offs between the needs of pharmaceutical
companies, physicians and patients, and ensure
that the company’s core business remains a neutral
marketplace that provides doctors with all the
information they need to make the best decisions for
their patients. Successfully managing these evolving
issues will be critical to M3’s future success and its
clients’ returns.
Nihon M&A Center – lessons learned and
building culture
% of total assets* 0.4%
Nihon M&A Center is Japan’s leading M&A advisory
firm, with a focus on smaller companies.
Objective: We met with Suguru Miyake, the President
of Nihon M&A, to discuss the company’s response to
the accounting and marketing challenges it faced in
late 2021. The focus was on understanding the steps
taken, in the time that had elapsed since the incident,
to remediation following the premature recording of
deals in order to meet revenue targets.
Discussion: In our discussion Miyake san
emphasised his direct involvement with measures
to improve compliance and transparency, and to
revitalise the company’s culture. This effort led to
changes in the consultant team, with some members
leaving, either by encouragement or voluntarily.
This paved the way for a renewed growth trajectory
in consultant numbers, which saw an over 8%
year-on-year increase.
The company’s morale has seemingly since
improved, as evidenced by a recent staff survey.
Employees now see more opportunities, thanks to
focused talent development initiatives. Miyake san
also discussed maintaining a balance between
entrepreneurship and compliance, stating they can
coexist without conflict, aligning with the employees’
aspirations for growth.
The company had also taken steps to improve ‘group
unity’, an area identified as needing enhancement.
This included dividing all employees into small groups
for teaching sessions and face-to-face meetings
with the President to improve company culture.
These initiatives, coupled with feedback from
50 meetings, have reportedly improved morale.
Despite a second wave of departures mid-year,
following bonus pay-outs, the remaining employees
are described as more cohesive, with an increase
in productivity and a recovery in deal activity.
Outcome: Our meeting with Miyake san provided
valuable insights into Nihon M&A’s response to its
recent challenges and that he had made a concerted
effort to identify and rectify root causes. We learned
more about the company’s focused efforts on
remediation, culture enhancement and employee
engagement, and how they have laid a foundation
for recovery and future growth.
* For a definition of terms see Glossary of terms and Alternative Performance Measures on pages 129 to 132.
25
Baillie Gifford Shin Nippon PLC
Descente – developing a resilient portfolio
of brands
% of total assets* 1.9%
Descente manufactures and sells sportswear. It has
a portfolio of 14 brands across a range of price points,
including the likes of ski apparel brand Descente,
Le Coq Sportif, Umbro, and Srixon.
Objective: During a meeting with corporate planning
officer, Tomoko Kitazawa, we discussed how
Descente is considering the impacts of climate
change on its portfolio of brands.
Discussion: Skiing may become increasingly difficult
in some places like the Alps and there may also
be increasing challenges to growing market share
in a sport that will likely decline should global
temperatures rise. Management is keenly aware that
the long term risk is significant. Reassuringly, this is
a topic of live discussion and management is actively
considering how it can introduce new products to
hedge against possible obsolescence.
Outcome: The meeting provided us comfort in
the short term that the matter is under ongoing
consideration and provided useful context to monitor
how Descente will continue to evolve its portfolio
in response.
Proxy voting – ‘active ownership’ in action
Harmonic Drive
% of total assets* 1.0%
Meeting 2023 Annual General Meeting
Vote Abstain
Reason: We abstained on the election of the chair
of the board in order to escalate our voting approach
due to the ongoing practice of granting bonuses
to non-executive directors. We have been opposing
the resolution to grant bonuses to directors since
2014 and have fed back concerns to the company.
We believe granting performance-based pay to
non-executives could impact their ability to think
independently and view it as a potential conflict
of interest. The company continues to grant
performance based pay to outsiders and did not
address our concerns and we therefore escalated
our response.
* For a definition of terms see Glossary of terms and Alternative Performance Measures on pages 129 to 132.
DaikyoNishikawa
% of total assets* 0.8%
Meeting 2023 Annual General Meeting
Vote Against
Reason: We opposed the election of one internal
statutory auditor due to ongoing concerns with
the low level of independence on the statutory
auditor board. In 2022 we opposed the election of
an affiliated external statutory auditor as we viewed
the statutory auditor board as being only 33%
independent when we believe it should be at least
50% independent to provide effective objective
oversight of the audit process. We communicated
our concerns to the company however as these
concerns were not addressed, and the statutory
auditor board remains only 33% independent, at
the 2023 Annual General Meeting we continued to
oppose non-independent members of the statutory
auditor board. Again, we communicated our concerns
to the company and encouraged increasing levels
of independence.
Yonex
% of total assets* 1.3%
Meeting 2023 Annual General Meeting
Vote Against
Reason: We opposed a resolution relating to
retirement bonuses due to the lack of disclosure
of the director receiving the bonus and the exact
amounts to be paid. We opposed the same resolution
at the 2019, 2021 and 2022 Annual General
Meetings. While the company is not required to
disclose this information we do not feel we have
sufficient information to make a judgement on
whether the retirement bonus is appropriate or not.
Strategic report
26
Annual Report and Financial Statements 2024
31 January
2024
31 January
2023 % change
Shareholders’ funds £457.8m £545.5m
Gearing
†
18% 15%
Net asset value per ordinary share
(after deducting borrowings at fair value)
†
147.8p 173.7p (14.9)
Net asset value per ordinary share (after
deducting borrowings at book value)*
147.8p 173.6p (14.9)
Share price 126.2p 158.8p (20.5)
Comparative index
#
6.3
Yen/sterling exchange rate 186.15 160.10 (14.0)
Discount (after deducting
borrowings at fair value)
†
14.6% 8.6%
Discount (after deducting
borrowings at book value)
†
14.6% 8.5%
Revenue earnings per ordinary share 0.94p 1.11p
Dividend proposed per ordinary share
in respect of the financial year
0.80p –
Ongoing charges
†
0.72% 0.74%
Active share
†
95% 94%
The following information
illustrates how Shin Nippon
has performed over the year
to 31 January 2024.
* See Glossary of terms and Alternative Performance Measures on pages 129 to 132.
†
Alternative Performance Measure – see Glossary of terms and Alternative Performance Measures on pages 129 to 132.
#
The comparative index is the MSCI Japan Small Cap Index (total return and in sterling terms).
Source: LSEG/Baillie Gifford and relevant underlying index providers. See disclaimer on page 127.
Past performance is not a guide to future performance.
One year
summary
27
Baillie Gifford Shin Nippon PLC
†
Alternative Performance Measure – see Glossary of terms and Alternative Performance Measures on pages 129 to 132.
Source: LSEG/Baillie Gifford and relevant underlying index providers. See disclaimer on page 127.
Past performance is not a guide to future performance.
Year to 31 January 2024 2024 2023 2023
Year’s high and low High Low High Low
Net asset value per
ordinary share
(after deducting
borrowings at fair value)
†
177.7p 133.1p 184.2p 139.2p
Share price 163.8p 116.0p 182.0p 131.8p
Premium/(discount)
(after deducting
borrowings at fair value)
†
(6.4%) (14.6%) 1.5% (11.6%)
Year to 31 January 2024 2023
Net return per ordinary share
Revenue return 0.94p 1.11p
Capital return (27.13p) (3.35p)
Total return (26.19p) (2.24p)
Strategic report
28
Annual Report and Financial Statements 2024
* The comparative index is the MSCI Japan Small Cap Index (total return and in sterling terms).
†
See Glossary of terms and Alternative Performance Measures on pages 129 to 132.
Source: LSEG/Baillie Gifford and relevant underlying index providers. See disclaimer on page 127.
Past performance is not a guide to future performance.
Five year
summary
Annual change in net asset value and share price
2024
2020
2021 2022 2023
Years to 31 January
● NAV return (after deducting
borrowings at fair value)
†
● Share price return
(40%)
50%
40%
30%
20%
(10%)
0%
(20%)
10%
(30%)
The following charts indicate
how an investment in Shin
Nippon has performed relative
to its comparative index, peer
group and its net asset value
over the five year period to
31 January 2024. The Board
reviews performance principally
over rolling five year periods.
Annual change in net asset value and share price
relative to the comparative index
*
2024
2020
2021 2022 2023
Years to 31 January
● Relative NAV return (after deducting
borrowings at fair value)
†
● Relative share price return
(30%)
40%
30%
20%
(10%)
0%
(20%)
10%
29
Baillie Gifford Shin Nippon PLC
20242019 2020 2021 2022 2023
Cumulative to 31 January
NAV total return (after deducting borrowings at fair value) in sterling terms
†
.
●
Shin Nippon
●
AVI Japan
Opportunity Trust
●
JPMorgan Japan Small
Cap Growth & Income
80
150
110
100
140
130
120
90
Five year performance
(figures rebased to 100 at 31 January 2019)
Five year peer group performance
#
(figures rebased to 100 at 31 January 2019)
20242019 2020 2021 2022 2023
Cumulative to 31 January
●
Share price
●
NAV (after deducting
borrowings at fair value)
†
●
Comparative
index
*
60
160
100
140
120
80
* The comparative index is the MSCI Japan Small Cap Index (total return and in sterling terms).
#
AIC peer group comprises: JPMorgan Japan Small Cap Growth & Income, AVI Japan Opportunity Trust and Nippon Active Value Fund.
Nippon Active Value Fund was not part of the peer group for the full period and has therefore been excluded.
†
See Glossary of terms and Alternative Performance Measures on pages 129 to 132.
Source: LSEG/Baillie Gifford and relevant underlying index providers. See disclaimer on page 127.
Past performance is not a guide to future performance.
Premium/(discount) to net asset value
(plotted on a quarterly basis)
Turnover
20242019 2020 2021 2022 2023
Years to 31 January
● Turnover
†
5%
20%
15%
10%
20242019 2020 2021 2022 2023
Years to 31 January
● Shin Nippon premium/(discount)
†
(18%)
12%
6%
0%
(12%)
(6%)
Strategic report
30
Annual Report and Financial Statements 2024
Capital
At
31 January
Total
assets *
£’000
Bank loans
£’000
Shareholders’
funds
£’000
NAV per
share (fair) *
p
Share price
p
Premium/
(discount) *
%
2014 133,828 19,867 113,961 61.6 65.6 6.5
2015 147,529 18,894 128,635 68.7 64.2 (6.6)
2016 182,817 19,427 163,390 86.2 89.6 3.9
2017 257,448 23,576 233,872 115.5 119.6 3.5
2018 449,289 47,877 401,412 168.7 184.4 9.3
2019 486,101 51,946 434,155 158.5 171.2 8.0
2020 535,801 52,085 483,716 172.8 170.4 (1.4)
2021 761,251 63,199 698,052 231.5 244.0 5.3
2022 643,754 91,102 552,652 175.8 174.4 (0.8)
2023 633,466 88,013 545,453 173.7 158.8 (8.6)
2024 544,267 86,475 457,792 147.8 126.2 (14.6)
Revenue Gearing ratios
Year to
31 January
Gross
revenue
£’000
Available
for ordinary
shareholders
£’000
Revenue
(loss)/earnings
per ordinary share
p
Ongoing
charges *
%
Gearing *
%
Gross
gearing *
%
2014 1,259 (239) (0.14) 1.19 11 17
2015 1,554 (374) (0.20) 1.14 9 15
2016 1,798 (290) (0.16) 1.02 9 12
2017 2,912 101 0.05 0.96 8 10
2018 3,496 (227) (0.11) 0.89 11 12
2019 5,092 106 0.04 0.77 11 12
2020 6,006 790 0.28 0.73 10 11
2021 5,587 (141) (0.05) 0.71 8 9
2022 7,436 896 0.29 0.66 11 16
2023 9,617 3,490 1.11 0.74 15 16
2024 8,870 2,944 0.94 0.72 18 19
Ten year
record
* See Glossary of terms and Alternative Performance Measures on pages 129 to 132.
Source: LSEG/Baillie Gifford and relevant underlying index providers. See disclaimer on page 127.
Past performance is not a guide to future performance.
31
Baillie Gifford Shin Nippon PLC
Cumulative to 31 January
20242014 2016 2019 2021 20232015 20182017 2020 2022
● Share price total return* ● NAV (fair) total return*
● MSCI Japan Small Cap Index (total return and in sterling terms)
*
0
400
300
200
100
Cumulative performance (taking 2014 as 100)
At
31 January
NAV
per share
†
Share
price
Comparative
index
#
2014 100 100 100
2015 112 98 113
2016 140 137 126
2017 188 182 169
2018 274 281 198
2019 257 261 183
2020 281 260 200
2021 376 372 211
2022 286 266 202
2023 282 242 213
2024 240 192 227
Compound annual returns (%)
5 year (1.4) (5.9) 4.4
10 year 9.1 6.8 8.5
†
Net asset value per ordinary share has been calculated after deducting borrowings at fair value. See Glossary of terms and Alternative Performance
Measures on pages 129 to 132.
#
The comparative index is the MSCI Japan Small Cap Index (total return and in sterling terms).
Source: LSEG/Baillie Gifford and relevant underlying index providers. See disclaimer on page 127.
All per share figures have been restated for the five for one share split on 21 May 2018.
Ten year total return performance*
*
For a definition of terms see Glossary of terms and Alternative Performance Measures on pages 129 to 132.
Source: LSEG/Baillie Gifford and relevant underlying index providers. See disclaimer on page 127.
Past performance is not a guide to future performance.
Strategic report
32
Annual Report and Financial Statements 2024
Review of
investments
A review of the Company’s ten
largest investments together
with a list of the new acquisitions
in the year.
*
For a definition of terms see Glossary of terms and Alternative Performance Measures on pages 129 to 132.
GMO Financial Gate
GMO Financial Gate is a leading
offline digital payments provider.
Offline digital payments involve
a credit or debit card and take
place at physical stores or internet
of things enabled terminals
like vending and ticketing
machines. This is a large market
in Japan using mainly outdated
technology. GMO is attempting to
modernise this sector with its new
technology and is growing rapidly
as it gains increasing traction with
merchants.
Megachips
Megachips is a fabless
semiconductor chip design
company. The company is a
significant supplier of chips for
Nintendo’s gaming consoles and
has been enjoying strong growth
thanks to the ongoing success
of Nintendo’s latest console,
Switch. It also has a fast growing
US-listed subsidiary called SiTime
that is emerging as a global leader
in advanced and energy efficient
timing devices for electronic
devices.
Valuation £13,482,000
% of total assets* 2.4%
Valuation at
31 January 2023
£10,181,000
% of total assets
at 31 January 2023
1.6%
Net purchases/(sales)
in year to 31 January 2024
£2,853,000
Top ten holdings
Valuation £13,289,000
% of total assets* 2.4%
Valuation at
31 January 2023
£10,209,000
% of total assets
at 31 January 2023
1.6%
Net purchases/(sales)
in year to 31 January 2024
(£1,556,000)
33
Baillie Gifford Shin Nippon PLC
* For a definition of terms see Glossary of terms and Alternative Performance Measures on pages 129 to 132.
Litalico
Litalico provides training and
employment assistance for
disabled people, and educational
and training services for children
with developmental difficulties.
It targets the roughly five million
adults and children in Japan
who suffer from cognitive and
mental disabilities. The Japanese
government has put in place
policies to improve access and
employment opportunities for
disabled people. This should
benefit Litalico which is the
largest national service provider.
Cosmos Pharmaceuticals
Cosmos is a leading Japanese
discount drugstore with a
compelling everyday-low-price
model that is hard to replicate.
The company is growing rapidly
through aggressive store rollouts
and is gaining market share on
a consistent basis from slow-
moving traditional incumbents.
The founder owns and manages
the company, creating strong
alignment between management
and minority shareholders.
Toyo Tanso
Toyo Tanso makes speciality
carbon products used mainly
in renewable energy related
systems and semiconductor
manufacturing. Both these end
markets are growing strongly.
The company has a leading global
market share in its products and
is in pole position to benefit from
the growth in its end markets.
This is a family run business
where the founding family has a
significant stake, thereby ensuring
strong alignment with minority
shareholders.
Valuation £13,272,000
% of total assets* 2.4%
Valuation at
31 January 2023
£17,296,000
% of total assets
at 31 January 2023
2.7%
Net purchases/(sales)
in year to 31 January 2024
£1,213,000
Valuation £12,231,000
% of total assets* 2.2%
Valuation at
31 January 2023
£9,900,000
% of total assets
at 31 January 2023
1.6%
Net purchases/(sales)
in year to 31 January 2024
£1,522,000
Valuation £12,219,000
% of total assets* 2.2%
Valuation at
31 January 2023
£14,181,000
% of total assets
at 31 January 2023
2.2%
Net purchases/(sales)
in year to 31 January 2024
(£1,871,000)
Strategic report
34
Annual Report and Financial Statements 2024
* For a definition of terms see Glossary of terms and Alternative Performance Measures on pages 129 to 132.
Lifenet Insurance
Lifenet is a fast-growing online life
insurer. It offers a limited range of
easy to understand life insurance
products sold predominantly
through its own website. Its direct-
to-consumer model enables it to
price competitively, resulting in a
potentially enduring competitive
edge. Incumbents are large, slow
moving and traditional insurers
which lack technological prowess
and employ a labour intensive
sales model. This is allowing
Lifenet to gain market share
on a consistent basis.
Sho-Bond
Sho-Bond specialises in
reinforcing concrete structures
like bridges, highways, and
tunnels with its proprietary resin.
The demand background has
been improving due to the need to
repair and replace Japan’s ageing
infrastructure. The competitive
environment has become more
favourable for Sho-Bond as it
operates a fabless model whereas
competitors are more labour
intensive and are suffering from
cost escalations due to labour
shortages in Japan.
Horiba
Horiba makes analysers
and measuring devices for
automobiles, semiconductors
and in healthcare. It has high
global market shares in its
products and a good long-term
financial record. Tightening
emissions standards, the rapid
growth of electric vehicles and
strong demand for semiconductors
across a range of applications are
all resulting in strong and sustained
demand for Horiba’s products.
© Shutterstock/smereka.
Valuation £12,017,000
% of total assets* 2.2%
Valuation at
31 January 2023
£13,364,000
% of total assets
at 31 January 2023
2.2%
Net purchases/(sales)
in year to 31 January 2024
£868,000
Valuation £12,017,000
% of total assets* 2.2%
Valuation at
31 January 2023
£12,445,000
% of total assets
at 31 January 2023
2.0%
Net purchases/(sales)
in year to 31 January 2024
(£517,000)
Valuation £11,742,000
% of total assets* 2.2%
Valuation at
31 January 2023
£7,775,000
% of total assets
at 31 January 2023
1.2%
Net purchases/(sales)
in year to 31 January 2024
(£1,006,000)
35
Baillie Gifford Shin Nippon PLC
* For a definition of terms see Glossary of terms and Alternative Performance Measures on pages 129 to 132.
GA Technologies
GA Technologies provides online
B2B (‘business-to-business’)
services for the real estate sector.
It has developed a suite of artificial
intelligence based software
applications that allows clients
to manage numerous tasks like
remote viewing, rental property
management, end-to-end
processing of mortgages and
automated generation of building
floor plans, to name a few. It is
run by its ambitious and young
founder who owns a large stake,
thereby ensuring strong alignment
with minority shareholders.
Anest Iwata
Anest Iwata makes oil-free air
compressors, vacuum pump
equipment and paint application
systems. Its compressors and
paint application systems are
environmentally friendly, which
is a key feature. Tightening
environmental regulations are
driving demand for its products
and this should result in a steady
expansion of sales and profits
longer term.
Valuation £11,586,000
% of total assets* 2.1%
Valuation at
31 January 2023
£11,594,000
% of total assets
at 31 January 2023
1.8%
Net purchases/(sales)
in year to 31 January 2024
(£678,000)
Valuation £10,924,000
% of total assets* 2.0%
Valuation at
31 January 2023
£7,852,000
% of total assets
at 31 January 2023
1.2%
Net purchases/(sales)
in year to 31 January 2024
£658,000
Strategic report
36
Annual Report and Financial Statements 2024
Appier Group
Founded in 2012, Appier products
use AI to help clients acquire
data on and understand customer
behaviour and automate a range
of related business processes.
There are significant opportunities
for it to add new clients and
cross-sell its products to existing
clients. A major competitive
advantage is that the company’s
clients achieve fantastic returns
from Appier’s products, which
in turn improve over time.
Furthermore, pricing is closely
aligned with clients’ success.
After multiple engagements
with the company, we have been
impressed by the ambition of the
founders and the management
team, the effectiveness of the
products and the company’s
operational performance.
Cellsource
Cellsource provides contract
processing services to medical
institutions in Japan. It processes
blood samples received from
patients and extracts specific
proteins which it then converts
into powdered form using its
patented technology. This is then
injected back into the patient
to stimulate growth. Currently,
Cellsource is focused on treating
patients with osteoarthritis,
but its products have potential
applications across a range of
other chronic diseases, meaning
that the addressable market
is potentially very large. It is
managed by its two co-founders
who between them have significant
stake in the company thereby
ensuring strong alignment with
minority shareholders.
Oisix
Oisix provides high-quality meal
kits and organic food through
online ordering. Both areas have
been growing from a low base in
Japan and appear to have a long
growth runway ahead. Oisix has
strong relationships with organic
farmers and has been investing
in distribution efficiency, which
will depress short-term profits but
deepen its long-term competitive
edge. The business is run by its
founder who owns a sizeable part
of the business thereby ensuring
strong alignment with minority
shareholders.
New buys
Valuation £4,375,000
% of total assets* 0.9%
Valuation £2,026,000
% of total assets* 0.4%
Valuation £8,128,000
% of total assets* 1.5%
*
For a definition of terms see Glossary of terms and Alternative Performance Measures on pages 129 to 132.
37
Baillie Gifford Shin Nippon PLC
SWCC
SWCC Showa is an electric
wire/cable manufacturer. Its
traditional business relates to
the manufacture and supply
of low and high voltage cables
for private and public electric
power utilities. It is in the process
of moving away from its low
growth and low margin legacy
business, of supplying cables, to
becoming a component supplier.
It has developed a set of unique,
lightweight and high margin
connector components, branded
as SICONEX, that are driving
strong profit growth. The market
continues to rate the company
as an undifferentiated supplier of
commoditised products, ignoring
the radical changes occurring
within the business, and as such
the shares remain very lowly
rated.
Vector
Vector is one of Japan’s largest
PR companies. It is run by a
dynamic and entrepreneurial
founder who retains a large stake
in the company. The PR industry
in Japan is relatively small but
has been growing at a steady
rate over the past decade. Vector
is disrupting Japan’s traditional
advertising market by using its
expertise in PR to offer a bundled
package of services. This will
allow clients to deal with just one
counterparty, instead of many, for
all their PR and advertising needs.
Valuation £6,073,000
% of total assets* 1.1%
Valuation £6,756,000
% of total assets* 1.2%
*
For a definition of terms see Glossary of terms and Alternative Performance Measures on pages 129 to 132.
Strategic report
38
Annual Report and Financial Statements 2024
Performance
1 year
%
3 years
%
5 years
%
10 years
%
Share price (20.5) (48.3) (26.3) 92.4
NAV (14.9) (36.2) (6.8) 140.1
Comparative index* 6.3 7. 6 24.1 126.7
All figures are stated on a total return basis
†
for the period to 31 January 2024.
*
Comparative index: MSCI Japan Small Cap Index (total return and in sterling terms).
†
Alternative Performance Measure – see Glossary of terms and Alternative Performance Measures on pages 129 to 132.
Source: Baillie Gifford/LSEG and relevant underlying index providers. See disclaimer on page 127.
Portfolio executive
summary
Contributors
Absolute
performance
% *
Horiba 78.1
Megachips 57.5
JEOL 57.6
SWCC 53.1
Outsourcing 52.9
Detractors
Absolute
performance
% *
Snow Peak (63.7)
Katitas (48.6)
Torex Semiconductor (42.7)
Shoei (29.7)
Kamakura Shinsho (48.7)
Key contributors and detractors to performance – year to 31 January 2024
* Absolute performance (in sterling terms) has been calculated on a total return basis over the period 1 February 2023 to 31 January 2024.
For the definition of total return see Glossary of terms and Alternative Performance Measures on pages 129 to 132. Table ordered by contribution
to performance.
Source: Revolution.
39
Baillie Gifford Shin Nippon PLC
New buys
Appier Group
Cellsource
Oisix
SWCC
Vector
Anest Iwata
Asahi Intecc
Avex Group
Bengo4.com
Cosmos Pharmaceuticals
Crowdworks
Daikyonishikawa
Demae-Can
Enechange
GMO Financial Gate
I-ne
Infomart
Iriso Electronics
Istyle
Kamakura Shinsho
Katitas
KH Neochem
Kitz
Kohoku Kogyo
Kumiai Chemical
Lifenet Insurance
Litalico
Nikkiso
Nippon Ceramic
Nittoku
oRo
Peptidream
SIIX
SpiderPlus
Wealthnavi
Additions
Akatsuki
Cybozu
Descente
eGuarantee
GA Technologies
GMO Payment Gateway
Harmonic Drive Systems
Horiba
Inter Action
Jade Group
JEOL
Kitanotatsujin
M3
MatsukiyoCocokara
Megachips
MonotaRO
Nabtesco
Nakanishi
Nifco
Nihon M&A Center
Noritsu Koki
Optex
OSG
Outsourcing
Raksul
Seria
Shima Seiki
Sho-Bond
Shoei
Snow Peak
TechnoPro
Torex Semiconductor
Toyo Tanso
Tsugami
WDB Holdings
Weathernews
Yonex
ReductionsComplete sales
Brainpad
Broadleaf
Calbee
Freakout Holdings
Pigeon
Poletowin Pitcrew
Tsubaki Nakashima
Strategic report
40
Annual Report and Financial Statements 2024
>£5bn<£250m £250–500m £2–5bn£1–2bn£500m–1bn
● Shin Nippon ● MSCI Japan Small Cap Index (total return and in sterling terms)
% of portfolio and index stocks
0%
50%
40%
30%
10%
20%
Distribution of total assets
*
and size splits
Industry 2024
Listings 2024
3
4
2
1
Size splits (market capitalisation of investments)
As at 31 January 2024
3
4
5
8
7
2
6
1
Industry 2024
%
2023
%
1 Industrials 28.5 29.3
2 Information technology 19.5 21.8
3 Consumer discretionary 15.1 16.9
4 Financials 10.3 6.2
5 Communication services 7. 7 6.6
6 Healthcare 7.2 6.7
7 Consumer staples 6.9 6.8
8 Materials 2.5 2.5
9 Real estate 1.5 2.0
10 Net liquid assets 0.8 1.2
Listings 2024
%
2023
%
1 Tokyo Prime 71.5 74.8
2 Tokyo Growth 15.8 12.0
3 Tokyo Standard 8.2 9.0
4 Private company 3.7 3.0
5 Net liquid assets 0.8 1.2
Source: Baillie Gifford/LSEG and relevant underlying index providers. See disclaimer on page 127.
* For a definition of terms see Glossary of terms and Alternative Performance Measures on pages 129 to 132.
41
Baillie Gifford Shin Nippon PLC
Portfolio weightings
*
Relative to comparative index
Holding period
* Source: Baillie Gifford/Revolution and relevant underlying index providers. See disclaimer on page 127 and Glossary of terms and Alternative
Performance Measures on pages 129 to 132.
Materials
Consumer
staples
Utilities
Financials
Energy
Consumer
discretionary
Healthcare
Communication
services
Industrials
Information
technology
Real estate
(10) (8) (6) (4) (2) 02468
10
% points underweight/overweight
0102030
40
% of portfolio
<2 years
2–5 years
5–10 years
>10 years
Strategic report
42
Annual Report and Financial Statements 2024
We hold our private company investments at an
estimation of ‘fair value’, i.e. the price that would be
paid in an open-market transaction. Valuations are
adjusted both during regular valuation cycles and on
an ad hoc basis in response to ‘trigger events’. Our
valuation process ensures that private companies
are valued in both a fair and timely manner.
The valuation process is overseen by a valuations
group at Baillie Gifford, which takes advice from an
independent third party (S&P Global). The valuations
group is independent from the investment team, as
well as Baillie Gifford’s Private Companies Specialist
team, with all voting members being from different
operational areas of the firm, and the investment
managers only receive final valuation notifications
once they have been applied.
We revalue the private holdings on a three-month
rolling cycle, with one-third of the holdings
reassessed each month. During stable market
conditions, and assuming all else is equal, each
investment would be valued four times in a twelve
month period. For Shin Nippon, and our other
investment trusts, the prices are also reviewed twice
per year by the respective boards and are subject
to the scrutiny of external auditors in the annual
audit process.
Beyond the regular cycle, the valuations team also
monitors the portfolio for certain ‘trigger events’.
These may include changes in fundamentals, a
takeover approach, an intention to carry out an
Initial Public Offering (‘IPO’), company news which is
identified by the valuation team or by the investment
team, or meaningful changes to the valuation of
comparable public companies. Any ad hoc change
to the fair valuation of any holding is implemented
swiftly and reflected in the next published net asset
value. There is no delay.
The valuations team also monitors relevant
market indices on a weekly basis and updates
valuations in a manner consistent with our external
valuer’s (S&P Global) most recent valuation report
where appropriate.
Continued market volatility has meant that valuations
continue to be reviewed much more frequently, in
some instances resulting in valuation movements.
The data below quantifies the revaluations carried
out during the year to 31 January 2024, however
does not reflect the ongoing monitoring of the
private company investment portfolio.
Shin Nippon*
Instruments (lines of stock reviewed) 4
Revaluations performed
20
Percentage of portfolio revalued at least 4 times
100%
Percentage of portfolio revalued 5+ times 50%
In the year to 31 January 2024, we have seen a
number of the investments in the portfolio raise
additional capital at flat and increased valuations,
with private investments now seeking public market
listings in the near term. The average movement in
company valuations and share prices for those are
shown below.
Average
movement
in company
valuation
Average
movement
in share price
Shin Nippon* 25.6% 15.2%
Baillie Gifford –
valuing private
companies
* Data reflecting period 1 February 2023 – 31 January 2024 to align with the Company’s reporting period end.
43
Baillie Gifford Shin Nippon PLC
Private companies summary
Historical snapshot
Since our first investment in private companies in 2017, Shin Nippon has deployed £20,140,000 of capital
in this area.
Portfolio activity – year to 31 January 2024
No new capital was deployed in private companies during the year. No private companies listed or were
taken-over during the year.
Private exposure (31 January 2024)
Gojo & Company 1.3% (£6,807,000)
Spiber 1.1% (£6,172,000)
JEPLAN 1.0% (£5,372,000)
Moneytree K.K. 0.3% (£1,401,000)
Valuation movements – year to 31 January 2024
Gojo & Company Spiber
JEPLAN
Moneytree K.K.
Shin Nippon 25.6%
Average change at company level
Year to 31 January 2024
Valuation changes
60%
0%
20%
40%
(20%)
(40%)
Source: Baillie Gifford. This graph shows the change in valuation in the private company investments for the year to 31 January 2024 in local currency.
Strategic report
44
Annual Report and Financial Statements 2024
Portfolio by
investment theme
as at 31 January 2024
Net liquid assets represent 0.8% of total assets.*
* See Glossary of terms and Alternative Performance Measures on pages 129 to 132.
Private company (unlisted) investment.
Total
assets
*
%
●
Global brands 7. 3
●
Healthcare 11.3
●
Real estate and niche financials 11.9
●
Online disruptors 22.3
●
Outsourcing/services 11.4
●
Niche manufacturers 35.0
Descente
Shoei
Yonex
I-ne
Snow Peak
Akatsuki
Cosmos
Pharmaceuticals
Asahi Intecc
MatsukiyoCocokara
Nakanishi
Noritsu Koki
Peptidream
WDB Holdings
Cellsource
Lifenet Insurance
GA Technologies
Wealthnavi
eGuarantee
Katitas
Gojo & Company Inc
Class D Preferred
SpiderPlus
Sho-Bond
Technopro Holdings
SIIX
Outsourcing
Avex Group
Vector
Seria
oRo
Nihon M&A Center
Megachips
Horiba
Toyo Tanso
Anest Iwata
Nifco
JEOL
OSG
Optex
Kumiai Chemical
Kitz
Nikkiso
Nittoku
Torex Semiconductor
Tsugami
SWCC
KH Neochem
Iriso Electronics
Spiber
JEPLAN
Kohoku Kogyo
Harmonic Drive
Systems
Nippon Ceramic
Inter Action
DaikyoNishikawa
Nabtesco
Shima Seiki
Litalico
GMO Financial Gate
Bengo4.com
Raksul
Appier Group
Enechange
Infomart
Cybozu
Kamakura Shinsho
GMO Payment
Gateway
Oisix
Demae-Can
Weathernews
Kitanotatsujin
Istyle
Crowdworks
Jade Group
MonotaRO
Moneytree K.K.
Class B Preferred
M3
% of total assets
0–1% of Holding
1–2% of Holding
2–3% of Holding
Box height and shading represents stock
portfolio weight.
45
Baillie Gifford Shin Nippon PLC
List of
investments
as at 31 January 2024
Name
Business
2024
Value
£’000
% of
total
assets
#
Absolute
†
performance
%
2023
Value
£’000
GMO Financial Gate Face-to-face payment terminals and processing
services
13,482 2.4 8.0 10,181
Megachips Electronic components 13,289 2.4 57.5 10,209
Litalico Provides employment support and learning
support services for people with disabilities
13,272 2.4 (29.1) 17,296
Cosmos Pharmaceuticals Drugstore chain 12,231 2.2 8.3 9,900
Toyo Tanso Electronics company 12,219 2.2 6.5 14,181
Lifenet Insurance Online life insurance 12,017 2.2 (18.0) 13,364
Sho-Bond Infrastructure reconstruction 12,017 2.2 4.5 12,445
Horiba Manufacturer of measuring instruments 11,742 2.2 78.1 7,775
GA Technologies Interactive media and services 11,586 2.1 5.0 11,594
Anest Iwata Manufactures compressors and painting machines 10,924 2.0 33.9 7,852
Wealthnavi Digital robo wealth-management 10,763 2.0 5.6 7,074
Asahi Intecc Specialist medical equipment 10,658 1.9 8.2 8,774
JEOL Manufacturer of scientific equipment 10,589 1.9 57.6 6,878
Nifco Value-added plastic car parts 10,387 1.9 0.6 10,574
Descente Manufactures athletic clothing 10,284 1.9 (16.3) 15,573
Shoei Manufactures motor cycle helmets 9,917 1.8 (29.7) 15,876
MatsukiyoCocokara Retail company 9,887 1.8 8.5 14,731
Nakanishi Dental equipment 9,721 1.8 (22.8) 16,153
Bengo4.com Online legal consultation 9,371 1.7 29.2 6,488
Optex Infrared detection devices 9,190 1.7 (23.8) 13,314
Top 20 223,546 40.7
OSG Manufactures machine tool equipment 9,168 1.7 (11.6) 11,135
Technopro IT staffing 9,094 1.7 (25.0) 15,571
Raksul Internet based services 8,843 1.6 (28.3) 12,867
SIIX Out-sources overseas production 8,340 1.5 (0.9) 6,579
Noritsu Koki Holding company with interests in biotech
and agricultural products
8,183 1.5 25.0 8,886
Appier Group Software as a service company providing
AI platforms
8,128 1.5 22.8 * –
Katitas Real estate services 8,072 1.5 (48.6) 12,455
eGuarantee Guarantees trade receivables 8,053 1.5 (30.2) 12,543
*
Figures relate to part period returns where the investment has been purchased in the period.
#
See Glossary of terms and Alternative Performance Measures on pages 129 to 132.
†
Absolute performance (in sterling terms) has been calculated on a total return basis over the period 1 February 2023 to 31 January 2024.
Strategic report
46
Annual Report and Financial Statements 2024
Name
Business
2024
Value
£’000
% of
total
assets
#
Absolute
†
performance
%
2023
Value
£’000
Enechange IT service management company 7,767 1.4 0.0 6,922
Infomart Internet platform for restaurant supplies 7,714 1.4 (16.8) 7,751
Kumiai Chemical Specialised agrochemicals manufacturer 7,638 1.4 (14.2) 8,200
Cybozu Develops and markets internet and intranet
application software for businesses
7,470 1.3 (25.9) 10,534
I-ne Hair care range 7,290 1.3 (33.2) 3,111
Kitz Industrial valve manufacturer 7,127 1.3 31.5 5,352
Outsourcing Employment placement services 7,116 1.3 52.9 7,076
Nikkiso Industrial pumps and medical equipment 6,958 1.3 (5.3) 5,017
Avex Group Entertainment management and distribution 6,916 1.3 (28.2) 8,960
Yonex Sporting goods 6,913 1.3 (17.2) 9,828
SpiderPlus Construction project management platform 6,811 1.3 (8.3) 5,347
Gojo & Company Inc
Class D Preferred
Diversified financial services 6,807 1.3 20.5 5,650
SWCC Electric wire and cable manufacturer 6,756 1.2 53.1 * –
Torex Semiconductor Semiconductor company 6,380 1.2 (42.7) 12,857
Nittoku Coil winding machine manufacturer 6,364 1.2 (38.4) 6,403
Tsugami Manufacturer of automated machine tools 6,357 1.2 (25.1) 12,250
Spiber
Textiles 6,172 1.1 20.3 5,131
Vector PR Company 6,073 1.1 (22.4)* –
Iriso Electronics Specialist auto connectors 5,962 1.1 (30.1) 8,500
KH Neochem Chemical manufacturer 5,800 1.1 (25.3) 7,436
Kamakura Shinsho Information processing company 5,732 1.1 (48.7) 8,937
Seria Discount retailer 5,712 1.0 (16.5) 7,120
Harmonic Drive Systems Robotic components 5,620 1.0 (28.0) 9,342
Kohoku Kogyo Manufacturer of undersea cable lead terminals 5,429 1.0 (30.7) 4,374
JEPLAN
Chemical PET recycling 5,372 1.0 (5.0) 5,653
Peptidream Drug discovery and development platform 5,069 0.9 (44.1) 7,829
Nippon Ceramic Electronic component manufacturer 4,852 0.9 (1.2) 4,882
Demae-Can Online meal delivery service 4,722 0.9 (14.5) 3,947
GMO Payment Gateway Online payment processing 4,674 0.9 (34.2) 7,351
oRo Develops and provides enterprise planning
software
4,667 0.9 34.2 2,991
Oisix Organic food website 4,375 0.9 2.6 * –
Inter Action Semiconductor equipment 4,210 0.8 (32.5) 6,813
DaikyoNishikawa Automobile part manufacturer 4,203 0.8 8.5 2,837
Weathernews Weather information services 4,155 0.8 (33.4) 6,935
WDB Holdings Human resource services 4,120 0.8 (4.3) 4,465
Nabtesco Robotic components 4,086 0.8 (33.4) 6,449
Crowdworks Crowd sourcing services 4,054 0.7 (29.8) 5,481
Istyle Beauty product review website 3,928 0.7 (27.6) 1,516
Kitanotatsujin Online retailer 3,759 0.7 (39.5) 7,492
Jade Group Ecommerce services provider 3,633 0.7 65.3 2,401
Private company (unlisted) investment.
* Figures relate to part period returns where the investment has been purchased in the period.
# See Glossary of terms and Alternative Performance Measures on pages 129 to 132.
† Absolute performance (in sterling terms) has been calculated on a total return basis over the period 1 February 2023 to 31 January 2024.
47
Baillie Gifford Shin Nippon PLC
Name
Business
2024
Value
£’000
% of
total
assets
#
Absolute
†
performance
%
2023
Value
£’000
Shima Seiki Machine industry company 3,498 0.6 (33.3) 5,402
Snow Peak Designs & manufactures outdoor lifestyle goods 3,470 0.6 (63.7) 14,943
MonotaRO Online business supplies 3,304 0.6 (37.9) 6,552
Nihon M&A Center M&A advisory services 2,307 0.4 (40.3) 7,907
Cellsource Company engaged in regenerative medicine 2,026 0.4 (31.4)* –
Akatsuki Mobile games developer 2,004 0.4 2.2 2,833
M3 Online medical services 1,501 0.3 (42.1) 3,454
Moneytree K.K.
Class B Preferred
AI based fintech platform 1,401 0.3 (39.4) 2,312
Total investments 539,701 99.2
Net liquid assets
#
4,566 0.8
Total assets
#
544,267 100.0
Bank loans (86,475) (15.9)
Shareholders’ funds 457,792 84.1
†
Absolute performance (in sterling terms) has been calculated on a total return basis over the period 1 February 2023 to 31 January 2024.
Source: Baillie Gifford/Revolution and relevant underlying index data providers. See disclaimer on page 127.
* Figures relate to part period returns where the investment has been purchased in the period.
Private company (unlisted) investment.
#
See Glossary of terms and Alternative Performance Measures on pages 129 to 132.
Listed equities
%
Private company
investments
*
%
Net liquid
assets
†
%
Total
assets
†
%
31 January 2024 95.5 3.7 0.8 100.0
31 January 2023 95.8 3.0 1.2 100.0
*
Includes holdings in ordinary shares and preference shares.
†
See Glossary of terms and Alternative Performance Measures on pages 129 to 132.
Past performance is not a guide to future performance.
Strategic report
48
Annual Report and Financial Statements 2024
Business model
Business and status
Baillie Gifford Shin Nippon PLC (‘the Company’)
is a public company limited by shares and is
incorporated in Scotland. 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 order to spread risk. The
Company has a fixed share capital although, subject
to shareholder approval sought annually, it may
purchase its own shares or issue shares. The price
of shares is determined, like other quoted 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
Baillie Gifford Shin Nippon’s objective is to pursue
long term capital growth through investment
principally in small Japanese companies which
are believed to have above average prospects for
growth. A small company is considered to be one
that typically has either market capitalisation or
turnover of less than ¥150 billion at the time of initial
investment.
The portfolio is constructed through the identification
of individual companies which offer long term growth
potential, typically over a five year horizon. The
portfolio is actively managed and does not seek
to track the comparative index, 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 80 companies. Although sector
concentration and the thematic characteristics of
the portfolio are carefully monitored, there are no
maximum limits to deviation from comparative index
stock or sector weights.
Exposure to any single company is limited to 5% of
the Company’s total assets, measured at the time of
investment. Exposure to a single company that, as a
result of performance, exceeds 5% of the Company’s
total assets is subject to particular scrutiny but may
be maintained at a level in excess of 5% where the
Managers are convinced of the ongoing merits of the
investment case.
Business review
49
Baillie Gifford Shin Nippon PLC
The Company may invest in UK and Overseas
domiciled collective investment schemes, including
UK listed investment trusts, that invest principally in
Japanese securities. On acquisition, no more than
15% of the Company’s total assets will be invested
in such companies or funds.
The portfolio is expected to consist of predominantly
quoted equity holdings, however unlisted investments
may also be held. Unlisted investments shall not
exceed 10% of the total assets of the Company in
aggregate, measured at the time of investment.
From time to time, fixed interest instruments, or non-
equity investments, may be held on an opportunistic
basis. The Company may use derivatives which will
be principally, but not exclusively, for the purpose of
efficient portfolio management (i.e. for the purpose
of reducing, transferring or eliminating investment
risk in its investments, including protection against
currency risks).
The Company recognises the long-term advantages
of gearing. Although the Company may have
maximum equity gearing of 50% of shareholders’
funds, the Board would seek to have a maximum
equity gearing level of 30% of shareholders’ funds
at the time of drawdown.
Borrowings
Borrowings are typically invested in securities when
it is considered that investment grounds merit the
Company taking a geared position to securities.
Gearing levels, and the extent of equity gearing,
are discussed by the Board and Managers at every
Board meeting. The Managers are tasked with
ensuring that gearing is managed efficiently and
within the parameters set by the Board and any loan
covenants.
Facility
amount
Facility
type Lender Maturing Drawings
¥5,000
million
Fixed rate ING Bank N.V. 8 November
2024
Fully
drawn
¥2,100
million
Fixed rate ING Bank N.V. 18 December
2024
Fully
drawn
¥2,000
million
Revolving
credit
ING Bank N.V. 3 March
2026
Fully
drawn
¥7,000
million
Revolving
credit
ING Bank N.V. 23 November
2026
Fully
drawn
The main covenants relating to the loans are
that borrowings should not exceed 35% of the
Company’s adjusted net asset value and the
Company’s net asset value should be at least
£225 million. There were no breaches in the loan
covenants during the year.
Strategic report
50
Annual Report and Financial Statements 2024
The Board also has regard to the total return of the
Company’s principal comparative index (MSCI Japan
Small Cap Index (total return and 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. Discussion on
the current year’s performance is included in the
Chair’s statement on pages 7 to 10. The one, five
and ten year records of the KPIs are shown on
pages 26 to 30.
Key performance indicators
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 67. These KPIs are
established industry measures
and an explanation of how they
are calculated can be found in the
Glossary of terms and Alternative
Performance Measures (‘APM’)
on pages 129 to 132.
Share price and net asset
value total returns (APM)
The total return is the return to
shareholders after reinvesting
any net dividend on the date that
the share price goes ex-dividend.
● NAV total
return
● Share price
total return
1 year 5 years 10 years
(30)
150
120
90
60
50
0
%
Share price discount/premium
(APM)
As stock markets 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. 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
1 year 5 years10 years
(12)
2
(4)
(8)
%
0
(6)
(2)
(10)
Ongoing charges (APM)
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 movement
2014
%
20242018 20202016 2022
0.6
1.2
1.0
0.8
Performance
51
Baillie Gifford Shin Nippon PLC
Decreasing RiskIncreasing Risk No Change
Principal and emerging risks
As explained on pages 75 and 76 there is a process for identifying, evaluating and managing the 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, regulatory compliance, solvency or liquidity. There have been no material changes to the
principal risks during the year. A description of these risks and how they are being managed or mitigated
is set out below.
The Board considers the heightened macroeconomic and geopolitical concerns to be factors which
exacerbate existing risks, rather than discrete risks, within the context of an investment trust.
Their impact is considered within the relevant risks.
Financial
risk
What is the risk?
The Company’s assets consist
mainly of listed securities
(96.3% of the investment
portfolio) and its principal
financial 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 on
pages 109 to 115.
How is it managed?
The Board has, in particular,
considered the impact of
heightened market volatility
during recent months due to
macroeconomic factors such as
higher inflation, interest
rates and geopolitical concerns.
To mitigate this risk the Board
considers at each meeting various
portfolio metrics including
individual stock performance and
weightings, the top and bottom
contributors to performance
and relative sector weightings
against the comparative index.
The portfolio manager provides
rationale for stock selection
decisions. A comprehensive
strategy meeting is held annually
to facilitate challenge of the
Company’s strategy. The Board
has considered the potential
impact on the yen/sterling
exchange rate of various
geopolitical events. The value
of the Company’s investment
portfolio would be affected by any
impact, positively or negatively,
on sterling but would be partially
offset by the effect of exchange
movements on the Company’s yen
denominated borrowings.
Current assessment of risk
Market risk is increasing
due to increased volatility
as a result of heightened
macroeconomic and
geopolitical concerns.
Strategic report
52
Annual Report and Financial Statements 2024
Decreasing RiskIncreasing Risk No Change
Private
company
(unlisted)
investment
risk
What is the risk?
The Company’s liquidity risk
could be increased by its
investment in private company
securities. These assets may
be more difficult to buy or sell,
so changes in their prices may
be greater than for quoted
investments.
How is it managed?
To mitigate this risk, the Board
considers the private company
securities in the context of the
overall investment strategy and
provides guidance to the Managers
on the maximum exposure to
private company securities. The
investment policy limits the amount
which may be invested in private
company securities to 10% of the
total assets of the Company in
aggregate, measured at the time
of investment.
Current assessment of risk
There has been no change
to the number of private
company investments during
the period.
Investment
strategy risk
What is the risk?
Pursuit of an investment
strategy to fulfil the Company’s
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 level of
discount/premium to net asset
value at which the shares trade
and movements in the share
register and raises any matters
of concern with the Managers.
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.
Environmental
social 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.
How is it managed?
This is mitigated by the Managers’
strong ESG stewardship and
engagement policies which are
available to view on the Managers’
website, bailliegifford.com, and
which have been reviewed and
endorsed by the Company, and
which have been fully integrated
into the investment process as
well as the extensive up-front
and ongoing due diligence which
the Manager undertakes on each
investee company. Due diligence
includes assessment of the risks
inherent in climate change
(see page 77).
Current assessment of risk
The Manager continues
to employ strong ESG
stewardship and
engagement policies.
53
Baillie Gifford Shin Nippon PLC
Decreasing RiskIncreasing Risk No Change
Discount
risk
What is the risk?
The discount/premium at
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
confidence in the Company and
shareholders selling their shares
will get less than the net asset
value of those shares.
How is it managed?
To manage this risk, the
Board monitors the level of
discount/premium at which the
shares trade and the Company
has authority to 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 discount
widened during the year. Over
the year to 31 January 2024
and the Company bought
back 4,395,000 shares to be
held in treasury. The Board
continue to closely monitor
the discount and the impact
of the current buyback
programme being deployed.
Regulatory
risk
What is the risk?
Failure to comply with
applicable legal and regulatory
requirements such as the
tax rules for investment trust
companies, the FCA Listing
Rules and the Companies Act
could lead to suspension of the
Company’s Stock Exchange
listing, financial penalties, a
qualified audit report or the
Company being subject to tax
on capital gains.
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.
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 breaches
of cyber security.
How is it managed?
To mitigate this risk, the Audit
Committee receives six-monthly
reports from the Depositary
confirming safe custody of the
Company’s assets held by the
Custodian. Cash and portfolio
holdings are independently
reconciled to the Custodian’s
records by the Managers who
also agree uncertificated private
portfolio holdings to confirmations
from investee companies. 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.
Current assessment of risk
All control procedures are
working effectively.
Strategic report
54
Annual Report and Financial Statements 2024
Decreasing RiskIncreasing Risk No Change
Small
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 companies and the relative
industry weightings against the
comparative index are considered
at each Board meeting.
Current assessment of risk
No change in small
company risk.
Operational
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. The Audit Committee
reviews Baillie Gifford’s Report
on Internal Controls and reports
by other key third party providers
are reviewed by Baillie Gifford
on behalf of the Board and a
summary of the key points is
reported to the Audit Committee
and any concerns investigated.
The other key third party service
providers have not experienced
significant operational difficulties
affecting their respective services
to the Company.
Current assessment of risk
All control procedures are
working effectively.
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 confidentiality, integrity 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 report 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
All control procedures are
working effectively.
55
Baillie Gifford Shin Nippon PLC
Decreasing RiskIncreasing Risk No Change
Leverage risk
What is the risk?
The Company may borrow
money for investment purposes.
If the investments fall in value,
any borrowings will magnify
the impact of this loss. If
borrowing facilities are not
renewed, the Company may
have to sell investments
to repay borrowings. The
Company can also make use
of derivative contracts.
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 majority of the
Company’s investments are in
quoted securities that are readily
realisable. Further information
on leverage can be found on
page 124 and the Glossary
of terms and Alternative
Performance Measures on
pages 129 to 132.
Current assessment of risk
The ¥5,000 million and
¥2,100 million fixed
rate facilities mature on
8 November 2024 and
18 December 2024. The
Company’s revolving credit
facilities can be repaid with no
penalties, should the decision
be taken to reduce gearing.
Gearing has increased during
the year due to the draw
down of the ¥2,000 million
revolving credit facility on
3 March 2023.
Political and
associated
financial risk
What is the risk?
The Board is of the view that
political change in areas in
which the Company invests or
may invest may have financial
consequences for the Company.
How is it managed?
Political developments are closely
monitored and considered by the
Board. The Board has particular
regard to macroeconomic and
geopolitical tensions, and
monitors portfolio diversification
by revenue stream where
appropriate to mitigate against
the negative impact of military
action or trade barriers.
Current assessment of risk
This risk is increasing
as governments and
consumers around the world
continue to assess the
impact of geopolitical and
macroeconomic tensions.
Emerging risk
As explained on pages 75 and 76 of the Annual Report and Financial Statements, the Board has regular
discussions on principal risks and uncertainties, including any risks which are not an immediate threat but
could arise in the longer term. The Board considers that the key emerging risks arise from the
interconnectedness of global economies and the related exposure of the investment portfolio to external
and emerging threats such as the societal and financial implications of escalating geopolitical tensions,
cyber security risks including developing AI and quantum computing capabilities, and new coronavirus
variants or similar public health threats. This is mitigated by the Managers’ close links to the investee
companies and their ability to ask questions on contingency plans. The Managers believe the impact of
such events may be to slow growth rather than to invalidate the investment rationale over the long term.
Strategic report
56
Annual Report and Financial Statements 2024
Viability statement
In accordance with provision 31 of the UK Corporate
Governance Code the Directors have assessed the
prospects of the Company over a period of five
years. The Directors continue to believe this period
to be appropriate as it reflects the Company’s
longer 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 there to be any significant change
to the current principal 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 from
operating over a period of five years. The Directors
continue to believe that the prospects for Japanese
small companies remain positive over the long term.
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 51 to 55 and
in particular the impact of market risk where a
significant fall in Japanese small equities markets
would adversely impact the value of the investment
portfolio. The Directors have also considered the
Company’s leverage and liquidity in the context
of the secured bank loans which are due to
expire between November 2024 and March 2026.
Although the Directors do not envisage difficulty
with refinancing these facilities, the majority of the
investments are quoted securities which are readily
realisable and could be sold to repay borrowings if
required. Similarly, investments can be realised to
meet expenses to the extent that they exceed the
portfolio income. Specific leverage and liquidity
stress testing was conducted during the year.
Stress tests are applied to the portfolio to identify
the commitment leverage of the Company in two
scenarios: (i) gross assets reduce by 25%; and
(ii) gross assets reduce by 50%. Stress tests are
also performed to determine the impact on revenue
earnings per share as a result of an increase and
decrease in projected portfolio income of 25%.
Consideration is also given to the risk of further
market deterioration and no matters of concern were
noted. 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.
Based on the Company’s processes for monitoring
revenue projections, share price premium/discount,
the Managers’ compliance with the investment
objective, asset allocation, the portfolio risk profile,
leverage, counterparty exposure, liquidity risk and
financial controls, the Directors have concluded that
there is a reasonable expectation that the Company
will be able to continue in operation and meet its
liabilities as they fall due over the next five years.
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
benefit of its members as a whole, and in doing
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 and having regard to Baillie Gifford
Shin Nippon being an externally-managed investment
company with no employees, the Board considers
that the Company’s key stakeholders are its existing
and potential new shareholders, its externally-
appointed Managers (Baillie Gifford) and other
professional service providers (corporate broker,
registrar, auditor and depositary), lenders, portfolio
companies, 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 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.
57
Baillie Gifford Shin Nippon PLC
The Board’s methods for assessing the Company’s progress in the context of its stakeholders’ interests are
set out on the following pages.
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
an opportunity 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 Chair 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, in order to gauge shareholder sentiment first
hand. Shareholders may also communicate with members of
the Board at any time by writing to them at the Company’s
registered office or to the Company’s broker. These
communication opportunities help inform the Board when
considering how best to promote the success of the Company
for the benefit of all shareholders over the long term.
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
operations including fulfilment of regulatory
and taxation reporting requirements, to
Baillie Gifford. Baillie Gifford is therefore
responsible for the substantial activities of
the Company and has the most immediate
influence on its conduct towards the other
stakeholders, subject to the oversight and
strategic direction provided by the Board.
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.
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 investee companies have an interest in
understanding their shareholders’ investment
rationale in order to assure themselves
that long-term business strategies will be
supported.
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. The Board’s review of the Managers includes
an assessment of their ESG approach and its application in
making investment decisions. The Board regularly reviews
Governance Engagement reports, which document the
Managers’ interactions with investee companies on ESG
matters (see pages 24 and 25).
Broker The Company’s broker provides an interface
between the Company’s Board and its
institutional shareholders.
The Company’s broker regularly attends Board meetings,
and provides reports to those meetings, in order to keep the
Board apprised of shareholder and wider market sentiment
regarding the Company. They also arrange forums for
shareholders to meet the Chair, or other Directors, outwith
the normal general meeting cycle.
Registrar The Company’s registrar provides an
interface with those shareholders who
hold the Company’s shares directly.
The Company Secretaries liaise with the registrar to
ensure the frequency and accuracy of communications
to shareholders is appropriate, and monitor shareholder
correspondence to ensure that the level of service provided
by the registrar is acceptable. The Manager’s risk function
reviews the registrars’ internal controls report and reports on
the outcome of this review to the Board.
Strategic report
58
Annual Report and Financial Statements 2024
Stakeholder Why we engage How we engage and what we do
Auditor The Company’s Auditor has a responsibility
to provide an opinion on the Financial
Statements as set out in the Auditor’s report
to the Members on pages 88 to 95.
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.
Depositary
and custodian
The depositary is responsible for the
safekeeping of the Company’s financial
instruments, as set out in more detail on
page 67.
The depositary provides the Audit Committee with a report
on its monitoring activities. The Board and Managers seek to
engage with the depositary and custodian 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.
Lenders Lenders such as holders of debt instruments
(debentures, bonds and private placement loan
notes) and banks providing fixed or revolving
credit facilities provide the Company’s gearing
as described on page 49 and have an interest
in the Company’s ongoing financial health
and viability.
The Company’s legal advisers review all legal agreements
in connection with the Company’s debt arrangements
and advise the Board on the appropriateness of the terms
and covenants therein. The Managers and Secretaries
ensure that the frequency and accuracy of reporting on,
for example, covenant certification, is appropriate and
that correspondence from the lenders receives a prompt
response.
AIC/industry peers 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.
The Company is a member of the AIC, and the Directors
and/or the Managers and Secretaries (as appropriate)
participate in technical reviews, requests for feedback on
proposed legislation or regulatory developments, corporate
governance discussions and/or training.
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
without having an influence on the society
in which it operates or utilising the planet’s
resources. Through its third-party relationships,
as noted above, the Company seeks to be
a positive influence and, in circumstances
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 form the principal forms of
direct engagement with wider society and in respect of the
environment (commercial, financial, and in terms of planetary
health and resources).
59
Baillie Gifford Shin Nippon PLC
The Board recognises the importance of keeping
the interests of the Company and its stakeholders,
in aggregate, firmly front of mind in its key decision
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:
• the buying back of 4,395,000 of the Company’s
own 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
insufficient, and on terms that enhance net asset
value for remaining shareholders;
• arranging a three year ¥2,000 million secured
revolving credit facility on 3 March 2023 from
ING Bank N.V. and refinancing the expiring
¥7,000 million fixed rate facility with a three year
secured revolving credit facility from ING Bank N.V.,
for the purpose of investing in exciting Japanese
small cap opportunities, which the Board believes
will enhance long term returns for shareholders;
• committing to a one-off performance-triggered
tender offer for up to 15% of the Company’s
issued share capital given the period of poor
performance;
• the appointment of Ms AE Rotheroe as Chair of
the Nomination Committee to provide additional
challenge where necessary on matters such as
Board succession and refreshment; and
• the recommendation of a final dividend of 0.80p
per share, being the minimum required to maintain
the Company’s investment trust status and the
retention of funds for investment in order to
deliver capital growth within the portfolio.
Employees, human rights and
community issues
The Board recognises the requirement to provide
information about employees, human rights and
community issues. The Company has no employees.
All its Directors are non-executive and all its functions
are outsourced. There are therefore, 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 are provided below.
Board representation
At 31 January 2024 the Board comprises five
Directors, three male and two female. The Company
has no employees. The Board’s policy and
disclosures on diversity are set out on page 74.
Environmental, social and governance policy
Details of the Company’s policy on socially responsible
investment can be found under ‘Corporate governance
and stewardship’ on page 77 and the Managers’
approach to stewardship and examples of portfolio
company engagement are set out on pages 18 to 25.
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 trafficking statement. In any event, the
Company 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.
Future developments of the Company
The outlook for the Company for the next year is set
out in the Chair’s statement on pages 7 to 10 and in
the Managers’ report on pages 12 to 16.
The Strategic report which includes pages 7 to 59
was approved by the Board on 22 March 2024.
Jamie Skinner
Chair
Governance
report
This governance report, which includes
pages 60 to 86 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.
61
Baillie Gifford Shin Nippon PLC
Directors and
management
Directors
Jamie Skinner
Chair
Appointed 2018
Chair in 2023
Jamie Skinner was appointed a Director in 2018
and became Chair of the Audit Committee shortly
thereafter. He was appointed Chair in May 2023.
Jamie is a chartered accountant and a fellow of the
Chartered Institute for Securities and Investment.
He joined Cazenove & Co in 1989 as a corporate
finance executive working principally on investment
companies and also other sector IPO activity, and
in 1995 he was appointed Managing Director of the
Johannesburg office. In 1999 he joined Martin Currie
Investment Management Limited as a director and
in 2014 was appointed Head of Client Services.
He served as President and CEO of The China
Fund, Inc. until 2012, President and CEO of The
Taiwan Fund, Inc. until 2014 and President of the
Martin Currie Business Trust until 2015. He also
served on the boards of Martin Currie, Inc. and the
Martin Currie Japan Absolute Return Fund up to his
retirement from Martin Currie on 31 July 2018. He
was a non-executive director of Ediston Property
Investment Company plc from 2018 until it went
into voluntary liquidation on 6 January 2024.
Other commitments
Jamie is a non-executive director of the Asian
Opportunities Absolute Return Fund Limited
and Audit Chair of the Ashoka India Equity
Trust plc. He is also Chairman of Finance at the
Royal & Ancient Golf Club of St Andrews and
is the investment trustee of the Wilson Christie
Foundation.
Contribution to the Board
Jamie brings long experience of investment trusts
from a corporate finance perspective and as
head of a client service team responsible for the
management of several funds. He has also been
a member of investment boards for many years,
serving in various capacities, including audit,
remuneration, nomination and marketing.
Governance report
62
Annual Report and Financial Statements 2024
Professor Sethu
Vijayakumar
Director
Appointed 2018
Professor Sethu Vijayakumar was appointed Director in 2018 and
is the Senior Independent Director. He is the Professor of Robotics
at the University of Edinburgh and the (Founding) Director of the
Edinburgh Centre for Robotics. He holds additional responsibility as
the Programme Director for Artificial Intelligence at The Alan Turing
Institute, London, where he helps shape the UK National roadmap in
Robotics and Autonomous Systems. He is a world-renowned roboticist,
pioneering the data driven control of several iconic robotic platforms
including a recent collaboration with the NASA Johnson Space Centre
on the Valkyrie humanoid robot being prepared for unmanned robotic
pre-deployment missions to Mars. He is a Fellow of the Royal Society
of Edinburgh, a judge on BBC Robot Wars and winner of the 2015
Tam Dalyell Prize for Excellence in engaging the public with science.
Sethu has strong ties with Japan having spent seven years in Tokyo
during his PhD and postdoctoral training, still closely collaborates with
several R&D firms and multinationals on translational research projects
and is a fluent Japanese speaker.
Other commitments
Sethu holds the Chair of Robotics at the University of Edinburgh and is
the Programme Director for AI and Robotics at the Alan Turing Institute,
the UK’s National Institute for AI and Data Science.
Contribution to the Board
Sethu brings his substantial experience of working close to the latest
advances in technology as well as the startup ecosystem – especially
in the context of Japanese industries, SMEs, large scale governmental
initiatives and academia. His advisory and reviewer roles of large-
scale European R&D funding instruments such as Horizon 2020, DFG
and ERC as well as the Japanese JST Moonshot projects gives him
excellent visibility of current trends in cutting edge solutions to global
challenges.
63
Baillie Gifford Shin Nippon PLC
Kevin Troup was appointed to the Board in 2020. He became the Chair
of the Audit Committee in May 2023. Kevin qualified as a Chartered
Accountant in London in 1995 with Coopers & Lybrand. He was then
an Investment Manager managing Japanese small and mid caps with
Scottish Life from 1995. In 2000 he joined Martin Currie Investment
Management managing Japanese Smaller Companies and gained further
Japanese investment experience with Standard Life Investments from
2010 until retiring in 2018.
Other commitments
Kevin is Chair of the Risk, Audit and Compliance Committee at BT
Pension Scheme Management Limited (trading as Brightwell) and is
a director at Baring Fund Managers Limited and at European Assets
Trust plc, another smaller companies Investment Trust. He is a director
of Kintail Trustees Limited, the corporate trustee of The Robertson
Trust charity where he is Chair of the Investment Committee.
Contribution to the Board
Kevin brings Audit, Risk, Compliance and smaller company Investment
experience from across the Financial Services spectrum, including
Investment Trusts, open-ended funds and Pension schemes.
Kevin Troup
Director
Appointed 2020
Abigail Rotheroe was appointed to the Board in 2022 and is Chair
of the Nomination Committee. Abigail is a CFA® charterholder whose
investment career began at Schroder Capital Management in 1987
as an analyst on the Japanese desk. She worked in Hong Kong for
Schroders and then HSBC, managing specialist Asia/Pacific equity
portfolios for Japanese clients. On her return to London in 1994, she
joined Threadneedle Investments with responsibility for the
Threadneedle Asia Growth Fund, Threadneedle Asia and Pacific inc.
Japan Growth Fund and the TIML India Fund. Since 2013 Abigail has
been involved in social and impact investing and in her most recent
role was Investment Director of Snowball Impact Management which
she left in August 2022.
Other commitments
Abigail is a non-executive director of Templeton Emerging Markets
Investment Trust plc, HydrogenOne Capital Growth plc and Greencoat
UK Wind PLC. She is an Investment Committee member/co-optee of
Joseph Rowntree Charitable Trust, Worthstone, The Robertson Trust
and the Archbishop’s Council and a member of WHEB’s Investment
Advisory Committee.
Contribution to the Board
Abigail brings Japanese equity experience alongside her background
as a retail asset manager, analyst and most recently an investment
company investor. She also brings knowledge of sustainable and
responsible investment.
Abigail Rotheroe
Director
Appointed 2022
Governance report
64
Annual Report and Financial Statements 2024
Claire Finn was appointed to the Board in 2021.
Claire began her career in Japan in 1995 before
moving back to the UK in 1999. She worked for
Tokyo Mitsubishi Bank in London from 1999 to 2001.
In 2001 she joined Henderson Global Investors
undertaking roles in client service and product
development. In 2005 Claire joined Merrill Lynch
Investment Managers (MLIM) as Vice President of
Product Development. MLIM was subsequently
bought by BlackRock and Claire moved into the
distribution team, rising to the position of Managing
Director of Defined Contributions, Unit Linked and
Platforms. Claire left BlackRock in 2018 and
transitioned to a portfolio career in 2019.
Other Commitments
Claire is currently the chair of UBS Asset Management
Life Limited, and a director of The Law Debenture
Corporation PLC, Octopus Apollo VCT PLC, Artemis
Fund Managers Limited and Sparrows Capital Limited.
Contribution to the Board
Claire brings investment management experience
including distribution to retail and institutional
investors, product development and corporate
governance. She has also lived and worked in
Japan and speaks Japanese fluently.
The Directors listed on the prior pages were in office
during the year to 31 January 2024 and remained in
office as at 22 March 2024.
All Directors are members of the Nomination and
Audit Committees with the exception of Mr Skinner
who stepped down from the Audit Committee on
being appointed Chair of the Board in May 2023.
Claire Finn
Director
Appointed 2021
65
Baillie Gifford Shin Nippon PLC
Praveen joined Baillie Gifford in 2008 and is
an Investment Manager in the Japanese Equities
Team. He became Manager of Baillie Gifford
Shin Nippon in 2015. Praveen is also the Manager
of the Baillie Gifford Japanese Smaller Companies
Fund, Deputy Manager of The Baillie Gifford
Japan Trust, and was a founding member of the
Baillie Gifford International Smaller Companies
Strategy. Praveen graduated BEng in Computer
Science from Bangalore University in 2001 and
gained an MBA from the University of Cambridge
in 2008. He previously worked for FKI Logistex
as a management consultant. After completing
the investment graduate trainee programme
Praveen joined the Japanese Equities Team
as an Investment Manager in 2011.
Managers and secretaries
The Company has appointed Baillie Gifford & Co
Limited, a wholly owned subsidiary of Baillie Gifford
& Co, as its Alternative Investment Fund Manager
and Company Secretaries. Baillie Gifford & Co
Limited has delegated portfolio management
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
firm formed in 1927 out of the legal firm Baillie
& Gifford, WS, which had been involved in
investment management since 1908.
Baillie Gifford is one of the largest investment trust
managers in the UK and currently manages twelve
investment trusts. Baillie Gifford also manages unit
trusts and 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 totalled
around £227 billion at 20 March 2024. Based in
Edinburgh, it is one of the leading privately owned
investment management firms in the UK, with
57 partners and a staff of around 2,000.
Baillie Gifford & Co Limited and Baillie Gifford & Co
are both authorised and regulated by the Financial
Conduct Authority.
Praveen Kumar
Investment Manager
Appointed 2015
Governance report
66
Annual Report and Financial Statements 2024
The Directors present their report
together with the audited Financial
Statements of the Company for
the year to 31 January 2024.
Directors’
report
Corporate governance
The Corporate governance report is set out on pages
71 to 77 and forms part of this Report.
Managers and Company Secretaries
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 has delegated portfolio
management 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.
The Investment Management Agreement 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 Agreement is terminable on not
less than six months’ notice. Compensation fees
would only be payable in respect of the notice period
if termination were to occur sooner. The annual
management fee is 0.75% on the first £50m of net
assets, 0.65% on the next £200m of net assets and
0.55% on the remainder. The fees are calculated
and paid on a quarterly basis.
The Board as a whole fulfils the function of the
Management Engagement Committee.
67
Baillie Gifford Shin Nippon PLC
The Board reviews investment performance and
monitors the arrangements for the provision of
investment management and secretarial services
to the Company on a continuous basis. A formal
evaluation of the Managers by the Board is
conducted annually. The Board’s annual evaluation
considers, amongst others, the following topics as
recommended by the AIC Guide ‘Evaluation of the
Manager’:
• Quality of Team;
• Investment Management;
• Commitment of Manager;
• Managing the Company;
• Promotion;
• Shareholders; and
• Management Agreement.
Following the most recent evaluation in November
2023, the Board is in agreement that the continuing
appointment of Baillie Gifford & Co Limited as
AIFM and the delegation of investment management
services to Baillie Gifford & Co on the terms
agreed, is in the interest of shareholders as a whole.
This is due to: the strength and experience of the
investment management team; the Managers’
commitment to the investment trust sector as a
whole and to the Japanese markets in particular;
and the potential for good long-term investment
performance in relation to investment policy and
strategy. The Board also recognises the high quality
of the Managers’ secretarial, administrative and
corporate governance functions.
The Board considers that maintaining a low ongoing
charges ratio is in the best interest of shareholders.
The Board continues to give careful consideration to
the basis of the management fee.
Depositary
In accordance with the AIFM Regulations, the AIFM
must appoint a depositary to the Company. The
Bank of New York Mellon (International) Limited has
been appointed as the Company’s depositary.
The depositary’s responsibilities include cash
monitoring, safe keeping of the Company’s financial
instruments, verifying ownership and maintaining
a record of other assets and monitoring the
Company’s compliance with investment limits and
leverage requirements. The custody function is
also undertaken by The Bank of New York Mellon
(International) Limited (‘the custodian’).
Directors
Information about the Directors, including their
relevant experience and contribution to the Board,
can be found on pages 61 to 64.
In accordance with the principles of the UK
Corporate Governance Code, all Directors will retire
at the Annual General Meeting and offer themselves
for re-election.
Following formal performance evaluation the Board
considers that the performance of the Directors
continues to be effective and each remains
committed to the Company. Their contribution to the
Board is greatly valued and the Board recommends
their re-election to shareholders.
Director indemnification and insurance
The Company has entered into qualifying third
party deeds of indemnity in favour of each of the
Directors. The deeds 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 are not indemnified in respect of liabilities
to the Company, any regulatory or criminal fines,
any costs incurred in connection with criminal
proceedings in which the Director is convicted or
civil proceedings brought by the Company in which
judgement is given against him or her. In addition,
the indemnity does not apply to any liability to the
extent that it is recovered from another person.
The indemnities were in force during the year to
31 January 2024 and up to the date of approval of
this report.
The Company maintains Directors’ and Officers’
Liability Insurance.
Conflicts of interest
Each Director submits a list of potential conflicts of
interest and time commitments to the Nomination
Committee on an ongoing basis. The Committee
considers these carefully, taking into account the
circumstances surrounding them and makes a
recommendation to the Board on whether or not
the potential conflicts should be authorised. Board
authorisation is for a period of one year. Having
considered the lists of potential conflicts and time
commitments there were no situations which gave
rise to a direct or indirect interest of a Director which
conflicted with the interests of the Company.
Governance report
68
Annual Report and Financial Statements 2024
Dividend
As a result of a net revenue return of £2,944,000
the revenue reserve has moved from a deficit to
a surplus. To ensure investment trust status is
maintained, the Company is required to make a
dividend distribution and the Board recommends
a final dividend of 0.80p per ordinary share. If
approved, the recommended final dividend will
be paid on 30 May 2024 to shareholders on the
register at the close of business on 19 April 2024.
The ex-dividend date is 18 April 2024.
The Company’s dividend payment policy in respect
of ordinary shares is to pay a single final dividend
that will be broadly the minimum distribution to
maintain investment trust status.
Share capital
Capital structure
The Company’s capital structure (excluding treasury
shares) consists of 309,757,485 ordinary shares
of 2 pence each at 31 January 2024 (2023 –
314,152,485 ordinary shares of 2 pence each).
At 31 January 2024, 4,495,000 shares were held in
treasury (2023 – 100,000). 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 page 120.
Major interests in the Company’s shares
The Company has not received any notification of
major interests of 3.0% or more (for directly held
interests) in the voting rights of the Company as
at 31 January 2024. The Company has received
notification of the following interests of 5.0% or
more (for indirectly held interests) in the voting rights
of the Company as at 31 January 2024.
Name
No. of ordinary
2p shares held
at 31 January
2024
% of
issue
1607 Capital Partners LLC 34,603,103 11.1
City of London Investment
Management Company Limited
15,606,839 5.0
Subsequent to the year end on 7 February 2024 the
Company received notification that 1607 Capital
Partners LLC held 37,142,821 shares being 12.0%
of the shares in issue.
There have been no further notifications of major
interests in the Company’s shares intimated up to
20 March 2024.
Analysis of shareholders at 31 January
2024
Number of
shares held
2024
%
2023
Number of
shares held
2023
%
Institutions 94,021,627 30.4 65,041,159 20.7
Intermediaries 208,787,058 6 7. 4 243,076,078 77.4
Individuals* 3,869,472 1.2 4,645,021 1.5
Marketmakers 3,079,328 1.0 1,390,227 0.4
309,757,485 100.0 314,152,485 100.0
*
Includes all holdings under 5,000 shares.
Annual General Meeting
Share issuance authority
At the last Annual General Meeting, the Directors
were granted authority to issue shares up to an
aggregate nominal amount of £2,094,140.47 and
to issue shares or sell shares held in treasury for
cash on a non pre-emptive basis for cash up to
an aggregate nominal amount of £628,304.97
representing 10% of the issued share capital of the
Company as at 17 March 2023. Such authorities
will expire at the conclusion of the Annual General
Meeting to be held on 23 May 2024.
69
Baillie Gifford Shin Nippon PLC
Resolution 11 in the Notice of Annual General
Meeting seeks a general authority for the Directors
to issue ordinary shares up to an aggregate
nominal amount of £2,042,345.65. This amount
represents 33.33% of the nominal value of the
issued share capital excluding treasury shares at
20 March 2024 and meets institutional guidelines.
No issue of ordinary shares will be made pursuant
to the authorisation in Resolution 11 which would
effectively alter the control of the Company without
the prior approval of shareholders in general meeting.
Resolution 12, which is proposed as a special
resolution, seeks authority for the Directors to
issue shares or sell shares held in treasury on
a non pre-emptive basis for cash (i.e. without
first offering such shares to existing shareholders
pro-rata to their existing holdings) up to an
aggregate nominal amount of £612,764.97
(representing 10% of the issued ordinary share
capital of the Company excluding treasury shares
as at 20 March 2024). The authorities sought
in Resolutions 11 and 12 will continue until the
conclusion of the Annual General Meeting to
be held in 2025 or on the expiry of 15 months
from the passing of the resolutions, if earlier.
Such authorities will only be used to issue shares
or 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. During the year to
31 January 2024 the Company issued no shares.
Between 1 February and 20 March 2024 the
Company issued no further shares.
7,870,000 shares were held in treasury as at
20 March 2024.
Market purchases of own shares by the Company
At the last Annual General Meeting, the Company
was granted authority to purchase up to 47,091,457
ordinary shares (equivalent to 14.99% of its
issued share capital). This authority expires at the
forthcoming Annual General Meeting. The Directors
are seeking shareholders’ approval at the Annual
General Meeting to renew the authority to make
market purchases of ordinary shares up to an
amount representing approximately 14.99% of the
Company’s ordinary shares in issue at the date of
passing of the Resolution, such authority to expire
at the Annual General Meeting of the Company to
be held in 2025.
4,395,000 shares were bought back during the year
under review. Between 1 February and 20 March 2024
the Company bought back 3,375,000 shares.
The principal reasons for share buy backs are:
i. to enhance net asset value for continuing
shareholders by purchasing shares at a discount
to the prevailing net asset value; and
ii. to address any imbalance between the supply of
and 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:
a. sell such shares (or any of them) for cash (or its
equivalent under the Companies Act 2006); or
b. cancel such shares (or any of them).
All buy backs will initially be held in treasury. Shares
will only be sold from treasury at a premium to the
net asset value per ordinary share.
The Company shall not be entitled to exercise the
voting rights attaching to treasury shares or be
entitled to any dividend distributions.
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:
i. 5% above the average closing price on the
London Stock Exchange of an ordinary share over
the 5 business 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.
The minimum price (exclusive of expenses) that
may be paid will be the nominal value of an ordinary
share. Purchases of shares will be made within
guidelines established, from time to time, by the
Board. The Company does not have any warrants or
options in issue. Your attention is drawn to Resolution
13 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
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Annual Report and Financial Statements 2024
Financial instruments
The Company’s financial instruments comprise
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 financial risk management objectives and
policies arising from its financial instruments and
the exposure of the Company to risk are disclosed
in note 19 to the Financial Statements.
Articles of Association
The Company’s Articles of Association may only be
amended by special resolution at a general meeting
of shareholders.
Disclosure of information to Auditor
The Directors confirm that so far as each of
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
Johnston Carmichael LLP are willing to continue
in office and in accordance with section 489
and section 491(1) of the Companies Act 2006,
resolutions concerning their reappointment and
remuneration will be submitted to the Annual
General Meeting.
Post balance sheet events
The Directors confirm that there have been no
significant post balance sheet events which require
adjustment of, or disclosure in, the Financial
Statements or notes thereto up to 22 March 2024.
Greenhouse gas emissions and Streamlined
Energy and Carbon Report (‘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
reasons set out above, the Company considers
itself to be a low energy user and therefore is not
required to disclose energy and carbon information
under the SECR regulations.
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 beneficial holdings of shares which amount
in aggregate to 91,689 shares, representing
approximately 0.03% of the issued share capital
of the Company at 31 January 2024.
On behalf of the Board
Jamie Skinner
Chair
22 March 2024
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Baillie Gifford Shin Nippon PLC
Compliance
The Board confirms that the Company has complied
throughout the year under review with the relevant
provisions of the Code and the recommendations of
the AIC Code. The Code includes provisions relating
to the role of the chief executive, executive directors’
remuneration and the need for an internal audit
function. Given that the Company is an externally-
managed investment trust, the Board considers
these provisions are not relevant to the Company
(the need for an internal audit function specific to
the Company has been addressed on page 79).
The FRC has confirmed that AIC member companies
who report against the AIC Code will be meeting
their obligations in relation to the UK Code (the AIC
Code can be found at theaic.co.uk).
The Board
The Board comprises five Directors, all of whom
are non-executive. The Board appoints the
Managers and Secretaries and approves the
terms of the investment management agreement.
It has a number of matters reserved for its approval
including strategy, investment policy, currency
hedging, gearing, share buy back and issuance
policy, treasury matters, dividend and corporate
governance policy. A separate meeting devoted to
strategy is held each year. The Board also reviews
the financial statements, investment transactions,
revenue budgets and investment performance.
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
principles of the Association of
Investment Companies (‘AIC’)
Code of Corporate Governance
were applied throughout the
financial year. The AIC Code
provides a framework of best
practice for investment companies
and can be found at theaic.co.uk.
Governance report
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Annual Report and Financial Statements 2024
Board of Directors
Comprises independent
non-executive directors*
Chair: Jamie Skinner
Senior Independent Director:
Professor Sethu Vijayakumar
Audit
Committee
Chair: Kevin Troup
Purpose: The primary purpose of the
Company’s Audit Committee is to provide
oversight of the financial reporting process,
the audit process, the Company’s system
of internal controls and compliance with
laws and regulations.
Nomination
Committee
Chair: Abigail Rotheroe
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.
Third-party service providers
appointed by the Board
Alternative Investment Fund Managers and Company Secretaries:
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
Johnston
Carmichael LLP
Auditor
The Bank of
New York Mellon
(International) Limited
Depositary
Computershare
Investor Services
PLC
Registrar
Winterflood
Securities Ltd
Company broker
* The independent non-executive directors are made up of Claire Finn, Abigail Rotheroe, Jamie Skinner, Kevin Troup and Professor Sethu Vijayakumar.
Further details on their experience and contribution to the Board can be found on pages 61 to 64.
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Baillie Gifford Shin Nippon PLC
Full and timely information is provided to the Board
to enable the Board to function effectively and to
allow Directors to discharge their responsibilities.
The Chair is responsible for organising the business
of the Board, ensuring its effectiveness and
setting its agenda. Following the retirement of
Mr MN Donaldson at the conclusion of the Annual
General Meeting in May 2023, Mr J Skinner became
the Chair. Mr KJ Troup replaced Mr J Skinner as the
Audit Committee Chair. 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 executive
officer. Professor S Vijayakumar is the Senior
Independent Director.
The Directors believe that the Board has a balance
of skills and experience that enable 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 61 to 64.
The Directors recognise the importance of Board
succession planning. The composition of the Board
and the succession plan are reviewed annually
to ensure there is an appropriate balance of skills,
experience, length of service and diversity.
There is an agreed procedure for Directors to seek
independent professional advice if necessary at the
Company’s expense.
Appointments
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 seek election by shareholders at the next
Annual General Meeting.
Independence of Directors
In accordance with the principles of the UK
Corporate Governance Code, all Directors will offer
themselves for re-election annually.
All the Directors are considered by the Board to
be independent of the Company and the Managers
and free of any business or other relationship
that could interfere with the exercise of their
independent judgement.
The Board is not controlled by long serving Directors.
Policy on tenure of the Chair
The Board recognises the importance of an
independent and effective chair. In the absence
of exceptional circumstances, the Chair will retire
at the Annual General Meeting following the ninth
anniversary of their appointment in accordance
with the UK Code of Corporate Governance.
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
Board considers that it meets sufficiently regularly
to discharge its duties effectively.
Directors’ attendance at meetings
Board
Audit
Committee
Nomination
Committee
Number of meetings 4 3 1
MN Donaldson* 1 – –
CEC Finn 4 3 1
AE Rotheroe 4 3 1
J Skinner
†
4 1 1
KJ Troup 4 3 1
S Vijayakumar 4 3 1
*
MN Donaldson is not a member of the Audit Committee but was in
attendance. MN Donaldson retired from the Board at the conclusion of
the Annual General Meeting held in May 2023.
†
J Skinner stood down from the Audit Committee on becoming Chair but
was in attendance by invitation at the Interim Audit Committee meetings
The table above only shows the attendance of Committee members.
The table above shows the attendance record for
the core Board and Committee meetings held during
the year. The Annual General Meeting was attended
by all the Directors serving at that date.
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Annual Report and Financial Statements 2024
Nomination Committee
The Nomination Committee consists of the
whole Board due to the small size of the Board.
Ms AE Rotheroe was appointed the Chair of the
Nomination Committee with effect from 1 February
2023. The Committee meets at least annually
and at such other times as may be required. The
Committee has written terms of reference that
include reviewing 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 also responsible
for considering Directors’ potential conflicts of
interest and for making recommendations to the
Board on whether or not the potential conflicts
should be authorised.
The Committee’s terms of reference are available
on request from the Company and on the Company’s
website: shinnippon.co.uk.
Board diversity
Diversity policy
Appointments to the Board are made on merit
and based on objective criteria, including the
promotion of diversity of gender, social and ethnic
backgrounds, and cognitive and personal strengths.
The priority in succession planning and appointing
new Directors is to identify candidates with the best
range of skills and experience to complement those
of the 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
defined by the Office of National Statistics (‘ONS’)
criteria. As an externally managed investment
company with no chief executive officer (CEO) or
chief financial officer (CFO), the roles which qualify
as senior under FCA guidance are Chair and Senior
Independent Director (SID). The Board also considers
Audit Committee Chair and Nomination Committee
Chair to represent senior roles within this context.
At 31 January 2024, which shall be used as the
reference date for the disclosures in accordance
with the Listing Rules 9.8.6R(9), the Board met
the target on percentage of women and on ethnic
background but not the target of a woman in a
senior role as classified by the FCA. The Board
considers that its small size is the principal reason
why the other Listing Rule targets were not met.
The Board supports, and is ambitious to meet, all
the Listing Rule diversity targets and will continue
to review its size and composition both as part of its
refreshment cycle and more widely. There have
been no changes to Board membership between
31 January 2024 and 22 March 2024.
Number of
Board members
Percentage
of the Board
Senior
roles
Men 3 60% 2 *
Women 2 40% 0
†
Prefer not to say – – –
*
The Board also considers Audit Committee Chair to be a senior role.
The role of Audit Committee Chair is currently held by a man.
†
The Board also considers Nomination Committee Chair to be a senior role.
The role of Nomination Committee Chair is currently held by a woman.
Number of
Board members
Percentage
of the Board
Senior
roles
White British or
Other White (including
minority white groups)
4 80% 1 *
Asian/Asian British 1 20% 1
Prefer not to say – – –
*
The Board also considers Audit Committee Chair and Nomination
Committee Chair to be senior roles. The ethnic background of
the Audit Committee Chair is white. The ethnic background of the
Nomination Committee Chair is white.
Board composition
The Committee reviewed the composition of the
Board during the year in consideration of succession
planning and developing a diverse pipeline.
Performance evaluation
An appraisal of the Chair, each Director and a
performance evaluation and review of the Board
as a whole and its Committees was carried out on
22 November 2023. The Chair and each Director
completed a performance evaluation questionnaire.
Each Director had an interview with the Chair and
the Directors reviewed the Chair’s performance.
The appraisals and evaluations considered amongst
other criteria the balance of skills of the Board, training
and development requirements, the contribution of
individual Directors and the overall effectiveness
of the Boards and its Committees. Following this
process it was concluded that there was a diverse
range of skills within the Board and that the
performance of each Director, the Chair, the Board
and its Committees continues to be effective and
each Director remains committed to the Company.
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Baillie Gifford Shin Nippon PLC
A review of the Chair’s and other Directors’
commitments was carried out on 22 November 2023
and the Nomination Committee is satisfied that they
are capable of devoting sufficient time to the Company.
Induction and training
New Directors are provided with an induction
programme which is tailored to the particular
circumstances of the appointee. Regular briefings are
provided on changes in regulatory requirements that
could affect the Company and Directors. Directors
receive other relevant training as necessary.
Remuneration
As all the Directors are non-executive, there is
no requirement for a separate Remuneration
Committee. Directors’ fees are considered by
the Board as a whole within the limits approved
by shareholders. The Company’s policy on
remuneration is set out in the Directors’
Remuneration report on pages 81 to 84.
Management Engagement Committee
The Directors have considered that a separate
Management Engagement Committee is not required
given the small size of the Board.
Audit Committee
The report of the Audit Committee is set out on
pages 78 to 80.
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.
The Board confirms that there is an ongoing
process for identifying, evaluating and managing
the significant risks faced by the Company in
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 are defined and formalised within
a service level 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 Internal Controls of Service
Organizations made available to Third Parties. This
report is independently reviewed by Baillie Gifford
& Co’s Auditor and a copy 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.
Where changes in risk have been identified during
the year they also provide a mechanism to assess
whether further action is required to manage
these risks.
The Directors confirm that they have reviewed the
effectiveness of the Company’s risk management
and internal controls systems, which accord with
the FRC ‘Guidance on Risk Management, Internal
Control and Related Financial and Business
Reporting’, and they have procedures in place
to review their effectiveness on a regular basis.
No significant weaknesses were identified in the
year under review and up to the date of this Report.
The Board confirms that these procedures have
been in place throughout the Company’s financial
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 acted as the
Company’s Depositary and Baillie Gifford & Co
Limited as its AIFM.
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Annual Report and Financial Statements 2024
The depositary’s responsibilities include cash
monitoring, safe keeping of the Company’s financial
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 loss of financial instruments held in custody.
The depositary will ensure that any delegate
segregates the assets of the Company. The
Company’s depositary also acts as the Company’s
custodian. The custodian prepares reports on its key
controls and safeguards which are independently
reviewed by their 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 investigated.
The depositary provides the Audit Committee with
half-yearly reports on its monitoring activities.
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
objectives, strategy and risk profile of the portfolio.
These limits, including leverage (see page 124),
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 undertaken by Baillie Gifford’s
Business Risk Department are escalated to the
AIFM and reported to the Board along with remedial
measures being taken.
Going concern
In accordance with the Financial Reporting
Council’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
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, in particular, considered
the impact of heightened market volatility, owing
to macroeconomic and geopolitical concerns. The
Board has reviewed the results of specific leverage
and liquidity stress testing, but does not believe
the Company’s going concern status is affected.
Stress tests are applied to the portfolio to identify
the commitment leverage of the Company in two
scenarios: (i) gross assets reduce by 25%; and
(ii) gross assets reduce by 50%. Stress tests are
also performed to determine the impact on revenue
earnings per share as a result of an increase and
decrease in projected portfolio income of 25%.
The Company’s assets, which are primarily
investments in quoted securities and are readily
realisable (Level 1) exceed its liabilities significantly
and could be sold to repay borrowings if required.
All borrowings require the prior approval of the
Board. Gearing levels and compliance with loan
covenants are reviewed by the Board on a regular
basis. The Company’s loan facilities do not mature
until at least November 2024 as shown in note 11
on page 107. As at 31 January 2024, the Company
had a net current liability of £81.9 million primarily
as a result of the fixed rate facilities maturing in
November and December 2024 and the revolving
credit facilities which are repayable on a three
monthly basis although the facilities themselves
do not mature until 2026. 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.
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 56, that the Company
will continue in operational existence for a period of
at least twelve months from the date of approval of
these Financial Statements.
Relations with shareholders
The Board places great importance on communication
with shareholders. The Company’s Investment
Manager meets regularly with shareholders and
their representatives and reports to the Board.
The Company broker and the Managers’ sales team
also have regular contact with current and potential
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Baillie Gifford Shin Nippon PLC
shareholders. The Chair and Directors are available
to meet with shareholders as appropriate and did so
in the year ended 31 January 2024. Shareholders
wishing to communicate with any members of
the Board may do so by writing to them at the
Company’s registered office, emailing the Managers
at trustenquiries@bailliegifford.com or through
the Company’s broker, Winterflood Securities Ltd
(see contact details in Company information on
page 133).
The Company’s Annual General Meeting 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
shinnippon.co.uk subsequent to the meeting.
The notice period for the Annual General Meeting
is at least twenty working days.
Shareholders and potential investors may obtain
up-to-date information on the Company at
shinnippon.co.uk.
Corporate governance and stewardship
The Company has given discretionary voting powers
to Baillie Gifford & Co. 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 have 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
investment returns. The Managers’ stewardship
principles and examples of portfolio company
engagement are set out on pages 18 to 25 and the
statement of compliance with the UK Stewardship
Code can be found on the Managers’ website at
bailliegifford.com. The Managers’ policy has been
reviewed and endorsed by the Board. Baillie Gifford
& Co has considered the Sustainable Finance
Disclosure Regulation (‘SFDR’) and further details
can be found on page 128.
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’ pursuit of long term
growth opportunities typically involves investment
in entrepreneurial, disruptive and technology-driven
businesses. These companies are often capital-light
with a low carbon footprint. The Managers’ report
provides some examples of new investments that
address ESG themes, including climate change.
The Manager has engaged an external provider to
map the carbon footprint of the portfolio, using the
information to prioritise engagement and understand
what higher emitting companies are doing to
manage climate risk better. This analysis estimates
that the carbon intensity of the Shin Nippon portfolio
is 70% lower than the comparative index (MSCI
Japan Small Cap Index). Carbon intensity measures
the carbon efficiency of the portfolio per unit of
output and assesses the portfolio’s exposure to
carbon-intensive companies.
Baillie Gifford’s Task Force on Climate-Related
Financial Disclosures (‘TCFD’) Climate Report
is available on the Managers’ website at
bailliegifford.com. A Shin Nippon-specific TCFD
climate report is also available on the Company’s
page of the Managers’ website at shinnippon.co.uk.
The Managers are signatories to the United Nations
Principles for Responsible Investment, the Net Zero
Asset Managers initiative and the Carbon Disclosure
Project and are also members of the Asian Corporate
Governance Association and International Corporate
Governance Network.
On behalf of the Board
Jamie Skinner
Chair
22 March 2024
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Annual Report and Financial Statements 2024
The Audit Committee consists of
all Directors with the exception of
the Chair, Mr Skinner who attends
by invitation. The members of
the Committee consider that
they have the requisite financial
skills and experience to fulfil the
responsibilities of the Committee.
Mr K Troup, Chair of the Committee,
is a Chartered Accountant.
Audit
Committee report
The Committee’s authority and duties are clearly
defined within its written terms of reference
which are available on request from the Company
Secretaries and at shinnippon.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
Managers being present.
Main activities of the Committee
The Committee met three times during the year.
KPMG LLP attended the meeting in March 2023
and Johnston Carmichael LLP attended the meeting
in September 2023. The external auditor is not
required to attend the additional Audit Committee
meeting. Baillie Gifford & Co’s Internal Audit and
Compliance Departments and the AIFM’s permanent
risk function provided reports on their monitoring
programmes for these meetings.
The matters considered, monitored and reviewed
by the Committee during the course of the year
included the following:
• the results announcement and the Annual and
Interim Reports;
• the Company’s accounting policies and practices
and the implementation of the Managers’ valuation
policy for investments in private (unlisted)
companies;
• the regulatory changes impacting the Company;
• the fairness, balance and understandability of
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;
• the effectiveness of the Company’s internal
control and risk management systems;
79
Baillie Gifford Shin Nippon PLC
• re-appointment, remuneration and engagement
letter of the external Auditor;
• whether the audit services contract should be put
out to tender;
• the policy on the engagement of the external
Auditor to supply non-audit services;
• the independence and objectivity of the external
Auditor and the effectiveness of the external audit
process;
• the need for the Company to have its own internal
audit function;
• internal controls reports received from the
Managers and Custodian;
• written assurance from the Company’s key
third party service providers regarding whether
they have been aware of any fraud or had any
suspicions of fraud over the Company’s financial
year; and
• the arrangements in place within Baillie Gifford
& Co whereby their staff may, in confidence, raise
concerns about possible improprieties in matters
of financial reporting or other matters.
Internal audit
The Committee continues to believe that the
compliance and internal controls systems and the
internal audit function in place within the Managers
provide sufficient assurance that a sound system
of internal control, which safeguards shareholders’
investment and the Company’s assets, is maintained.
An internal audit function, specific to the Company
is therefore considered unnecessary.
Financial reporting
The Committee considers that the most significant
issues likely to affect the Financial Statements are
the existence and valuation of quoted investments,
as they represent 95.5% of total assets.
Quoted investments
The majority of the investments are in quoted
securities and market prices are readily available
from independent external pricing sources. The
Committee reviewed Baillie Gifford’s Report on
Internal Controls which details the controls in place
regarding the recording and pricing of investments.
The Managers agreed the prices of all the quoted
investments at 31 January 2024 to external
price sources and the holdings were agreed to
confirmations from the Company’s Custodian.
Private company (unlisted) investments
The Committee reviewed the Managers’ valuation
approach for investments in private (unlisted)
companies (as described on page 42) and
approved the valuations of the private company
(unlisted) investments following a detailed review
of the valuation of each investment and relevant
challenge where appropriate. The Managers agreed
the holdings in certificated form to confirmations
from the Company’s custodian and holdings
of uncertificated private company (unlisted)
investments were agreed to confirmations from
the relevant investee companies.
The Managers confirmed to the Committee that they
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 75 and 76.
No significant weaknesses were identified in the
year under review.
External Auditor
To fulfil its responsibility regarding the
independence of the external Auditor, the
Committee reviewed:
• the audit plan for the current year;
• a report from the Auditor describing their
arrangements to manage Auditor independence
and received confirmation of their independence;
and
• the proposed audit fee and extent of non-audit
services provided by the external Auditor. For the
year to 31 January 2024 the proposed audit fee
was £39,500 and there were no non-audit fees
for the year to 31 January 2024 (2023 – nil).
To assess the effectiveness of the external Auditor,
the Committee reviewed and considered:
• the Auditor’s fulfilment of the agreed audit plan;
and
• feedback from the Secretaries on the performance
of the audit team.
Governance report
80
Annual Report and Financial Statements 2024
To fulfil its responsibility for oversight of the external
audit process the Committee considered and
reviewed:
• the Auditor’s engagement letter;
• the Auditor’s proposed audit plan;
• the audit fee; and
• a report from the Auditor on the conclusion of
the audit.
The audit partner responsible for the audit will be
rotated at least every five years in accordance with
professional and regulatory standards in order to
protect independence and objectivity and to provide
fresh challenge to the business. Mr Sutherland,
the current audit partner has held this role since
May 2023 and will continue as audit partner until
the conclusion of the 2028 audit.
Johnston Carmichael LLP have confirmed that they
believe they are independent within the meaning
of regulatory and professional requirements and
that the objectivity of the audit partner and staff
is not impaired.
Having carried out the review described above,
the Committee is satisfied that the Auditor remains
independent and effective for the purposes of this
year’s audit.
There are no contractual obligations restricting the
Committee’s choice of external Auditor.
Audit tender
Following the audit tender process conducted during
the year to 31 January 2023, the Board unanimously
decided to appoint Johnston Carmichael LLP as
Auditor with effect from the audit of the Financial
Statements for the year to 31 January 2024.
In recognition of underlying audit rotation
requirements, the Committee intends to undertake
a further tender process during the year to
31 January 2033.
Accountability and audit
The respective responsibilities of the Directors
and the Auditor in connection with the Financial
Statements are set out on pages 85 to 95.
On behalf of the Board
Kevin Troup
Audit Committee Chair
22 March 2024
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Baillie Gifford Shin Nippon PLC
Directors’
remuneration report
Statement by the Chair
The Directors’ Remuneration Policy is subject to
shareholder approval every three years or sooner
if an alteration to the policy is proposed. The
Remuneration Policy which is set out below
was approved at the Annual General Meeting in
May 2023. No changes are proposed to the policy
and an ordinary resolution for the approval of the
Remuneration Policy will be put to the members
at the Annual General Meeting in May 2026.
The Board reviewed the level of fees during the
year and it was agreed that from 1 February 2024
the Directors’ fees would increase to £29,000 from
£28,000 and the additional fee for the Chair of the
Audit Committee would be increased to £5,000 from
£4,000. The fee for the Chair remained unchanged
at £42,000, and the additional fee for the Chair
of the Nomination Committee remained at £1,000.
The Directors’ fees were last increased on
1 February 2023.
Directors’ remuneration policy
The Board is composed wholly of non-executive
Directors, none of whom has a service contract
with the Company. There is no separate remuneration
committee and the Board as a whole considers
changes to Directors’ fees from time to time.
Baillie Gifford & Co Limited, the Company
Secretaries, provide comparative information when
the Board considers the level of Directors’ fees.
This report has been prepared in
accordance with the requirements
of the Companies Act 2006.
Governance report
82
Annual Report and Financial Statements 2024
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
the fees paid to the Directors should reflect the
experience of the Board as a whole, be fair and
should take account of the level of fees paid by
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
other remuneration or benefits apart from the
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 loss of office.
Limit on Directors’ remuneration
The fees for the non-executive Directors are payable
monthly in arrears and are determined within the
limit set out in the Company’s Articles of Association
which is currently £250,000 in aggregate. Any
change to this limit requires shareholder approval.
The basic and additional fees payable to Directors in
respect of the year ended 31 January 2024 and the
expected fees payable in respect of the year ending
31 January 2025 are set out in the following table.
The fees payable to the Directors in the subsequent
financial periods will be determined following an
annual review of the Directors’ fees.
Expected
fees for the
year ending
31 Jan 2025
£
Fees as at
31 Jan 2024
£
Chair’s fee 42,000 42,000
Non-executive Director fee 29,000 28,000
Additional fee for Chair of the
Audit Committee
5,000 4,000
Additional fee for Chair of the
Nomination Committee
1,000 1,000
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 (see ‘Limit on
Directors’ Remuneration’ above)
250,000 250,000
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 Johnston Carmichael LLP’s report on page 88.
Directors’ remuneration for the year (audited)
The Directors who served during the year received the following remuneration in the form of fees and
taxable benefits. This represents the entire remuneration paid to the Directors.
Name
2024
Fees
£
2024
Taxable
benefits *
£
2024
Total
£
2023
Fees
£
2023
Taxable
benefits *
£
2023
Total
£
MN Donaldson (retired 17 May 2023) 12,600 533 13,133 42,000 – 42,000
CEC Finn 28,000 3,078 31,078 28,000 1,681 29,681
AE Rotheroe (appointed 1 March 2022) 29,000 2,893 31,893 25,667 961 26,628
J Skinner (Chair) 39,090 840 39,930 32,000 – 32,000
MR Somerset Webb (retired 12 May 2022) – – – 7,969 – 7,969
KJ Troup 30,836 659 31,495 28,000 – 28,000
S Vijayakumar 28,000 504 28,504 28,000 – 28,000
167,526 8,507 176,033 191,636 2,642 194,278
*
Comprises travel and subsistence expenses incurred by Directors in the course of travel to attend Board and Committee meetings held at the Company’s
registered office in Edinburgh. These amounts have been grossed up for income tax.
83
Baillie Gifford Shin Nippon PLC
Annual percentage change in remuneration
This represents the annual percentage change in the total remuneration paid to the Directors.
Name
% change
from 2023
to 2024
% change
from 2022
to 2023
% change
from 2021
to 2022
% change
from 2020
to 2021
MN Donaldson (retired 17 May 2023) (68.7) * 12.0 – 8.7
CEC Finn (appointed 1 November 2021) 4.7 374.9 * n/a * –
AE Rotheroe (appointed 1 March 2022) 19.8 * n/a * – –
J Skinner (Chair) 24.8 * 12.3 (0.1) 14.5
MR Somerset Webb (retired 12 May 2022) n/a (68.1) * – 6.1
KJ Troup 12.5 * 12.0 9.1
n/a *
S Vijayakumar 1.8 12.0 – 8.7
*
These percentage movements reflect the Directors’ retirement/appointment or change in role in the period. Mr Donaldson retired at the conclusion of
the AGM on 17 May 2023. Mr Skinner became Chair of the Board and Mr Troup became Chair of the Audit Committee at that date. Ms Rotheroe became
Chair of the Nomination Committee with effect from 1 February 2023.
Directors’ interests (audited)
Name
Nature
of interest
Ordinary 2p
shares held
at 31 Jan
2024
Ordinary 2p
shares held
at 31 Jan
2023
MN Donaldson Beneficial n/a 100,000
CEC Finn Beneficial 10,000 10,000
AE Rotheroe Beneficial 20,189 10,000
J Skinner Beneficial 17,500 17,500
KJ Troup Beneficial 30,000 30,000
S Vijayakumar Beneficial 14,000 –
The Directors are not required to hold shares in the
Company. The Directors at the year end, and their
interests in the Company, were as shown above.
MN Donaldson retired from the Board at the AGM on
17 May 2023. There have been no other changes in
the Directors’ interests up to 20 March 2024.
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, 99.2% were in favour, 0.5%
were against and votes withheld were 0.3%. At the
last Annual General Meeting at which the Directors’
Remuneration Policy was considered (May 2023),
99.2% were in favour, 0.6% were against and votes
withheld were 0.2%.
Relative importance of spend on pay
The table below shows the actual expenditure during
the year in relation to Directors’ remuneration and
distributions to shareholders.
2024
£’000
2023
£’000
Change
%
Directors’ remuneration 176 194 (9.3)
Share buy-backs 5,750 154 3,634
Directors’ service details
Name
Date of
appointment
Due date for
re-election
S Vijayakumar 1 September 2018 AGM in 2024
J Skinner 7 December 2018 AGM in 2024
KJ Troup 1 March 2020 AGM in 2024
CEC Finn 1 November 2021 AGM in 2024
AE Rotheroe 1 March 2022 AGM in 2024
Governance report
84
Annual Report and Financial Statements 2024
Cumulative to 31 January
20242014 2016 2019 2021 20232015 20182017 2020 2022
● Baillie Gifford Shin Nippon’s
share price
*
Source: LSEG and underlying data providers. See disclaimer on page 127.
* Total return (assuming net dividends are reinvested). See Glossary of
terms and Alternative Performance Measures on pages 129 to 132.
†
The comparative index is the MSCI Japan Small Cap Index (total return
and in sterling terms). See disclaimer on page 127.
● Comparative
index
†
● FTSE All-share
index
*
0
400
300
200
100
Company performance
The following graph compares the total return
(assuming all dividends are reinvested) to ordinary
shareholders compared to the total shareholder
return on a notional investment made up of shares in
the component parts of the Company’s comparative
index. 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. The share price total
return is also compared to the FTSE All-Share Index.
This index is a widely used measure of performance
for UK listed companies.
Performance graph
(figures have been rebased to 100 at 31 January 2014)
Past performance is not a guide to future performance.
Approval
The Directors’ remuneration report on pages
81 to 84 was approved by the Board of Directors
and signed on its behalf on 22 March 2024.
Jamie Skinner
Chair
85
Baillie Gifford Shin Nippon PLC
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and disclose
with reasonable accuracy at any time the financial
position of the Company and enable them to ensure
that its 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 law 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.
The Directors are responsible for ensuring the
Annual Report and the Financial Statements
are made available on a website. The Directors
have delegated operational responsibility to the
Managers for the maintenance and integrity of
the corporate and financial information included
on the Company’s website. Legislation in the
United Kingdom governing the preparation and
dissemination of Financial Statements may differ
from legislation in other jurisdictions.
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
Financial Statements for each financial year. Under
that law they are required to prepare the Financial
Statements in accordance with 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
the Financial Statements unless they are satisfied
that they give a true and fair view of the state of
affairs of the Company and of its profit or loss for
that period. In preparing these Financial Statements,
the Directors are required to:
• select suitable accounting policies and then apply
them consistently;
• make judgements and estimates that are
reasonable and prudent;
• state whether applicable United Kingdom
accounting standards have been followed, subject
to any material departures disclosed and explained
in the Financial Statements;
• assess the Company’s ability to continue as a
going concern, disclosing, as applicable, matters
related to going concern; and
• use the going concern basis of accounting unless
they either intend to liquidate the Company or to
cease operations, or have no realistic alternative
but to do so.
Statement of Directors’
responsibilities
in respect of the Annual Report and the Financial Statements
Governance report
86
Annual Report and Financial Statements 2024
Responsibility Statement of the Directors
in respect of the Annual Financial Report
We confirm that to the best of our knowledge:
• the Financial Statements which have been
prepared in accordance with the applicable set
of accounting standards, give a true and fair
view of the assets, liabilities, financial position
and net return of the Company;
• the Strategic report/Directors’ report 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 the Company and
business faces; and
• 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 position and performance,
business model and strategy.
On behalf of the Board
Jamie Skinner
Chair
22 March 2024
Financial
report
The Financial Statements for the
year to 31 January 2024 are set
out on pages 88 to 115 have been
prepared in accordance with
FRS 102 ‘The Financial Reporting
Standard applicable in the UK
and Republic of Ireland’.
Financial report
88
Annual Report and Financial Statements 2024
Independent
Auditor’s report
to the members of Baillie Gifford Shin Nippon PLC
listed public interest entities, and we have fulfilled
our other ethical responsibilities in accordance with
these requirements.
We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for
our opinion.
Our approach to the audit
We planned our audit by first obtaining an
understanding of the Company and its environment,
including its key activities delegated by the Board
to relevant approved third-party service providers
and the controls over provision of those services.
We conducted our audit using information
maintained and provided by Baillie Gifford & Co
Limited (the ‘Investment Manager’, the ‘Company
Secretary,’ and ‘Administrator’), The Bank of New
York Mellon (International) Limited (the ‘Custodian’,
and the ‘Depositary’) and Computershare Investor
Services PLC (the ‘Registrar’) to whom the Company
has delegated the provision of services.
We tailored the scope of our audit to reflect our risk
assessment, taking into account such factors as
the types of investments within the Company, the
involvement of the Administrator, the accounting
processes and controls, and the industry in which
the Company operates.
The scope of our audit was influenced by our
application of materiality. We set certain quantitative
thresholds for materiality. These together with
qualitative considerations, helped us to determine
the scope of our audit and the nature, timing and
extent of our audit procedures on the individual
financial statement line items and disclosures and
in the evaluation of the effect of misstatements,
both individually and in aggregate on the financial
statements as a whole.
Opinion
We have audited the financial statements of
Baillie Gifford Shin Nippon PLC (‘the Company’),
for the year ended 31 January 2024, which
comprise the Income Statement, the Balance
Sheet, the Statement of changes in equity, the
Cash flow statement, and the related notes,
including significant accounting policies.
The financial reporting framework that has been
applied in their preparation is applicable law and
United Kingdom Accounting Standards, including
Financial Reporting Standard 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:
• give a true and fair view of the state of Company’s
affairs as at 31 January 2024 and of its net return
for the year then ended;
• have been properly prepared in accordance with
United Kingdom Generally Accepted Accounting
Practice; and
• have been prepared in accordance with the
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 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
89
Baillie Gifford Shin Nippon PLC
Key Audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial statements of the current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) that we identified. These matters included 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 forming our opinion thereon, we do not provide a separate opinion
on these matters.
We summarise below the key audit matters in arriving at our audit opinion above, together with how
our audit addressed these matters and the results of our audit work in relation to these matters.
Key Audit Matter How our audit addressed the key audit matter and our conclusions
Valuation and ownership of listed investments
(as per page 79 (Audit Committee report), page 100 (Principal
accounting policies) and Note 9.)
At 31 January 2024 the valuation of the level 1, listed
investments portfolio was £519.9m.
There is a risk that the listed investments held at fair value may
not be actively traded and the listed prices may not therefore
be reflective of fair value.
Additionally, there is a risk that the Company does not have
proper legal title to the listed investments recorded as held
at year end.
As this is the largest component of the Company’s Balance
Sheet, and a key driver of the Company’s net assets and total
return, this has been designated as a key audit matter, being one
of the most significant assessed risks of material misstatements
due to error.
We assessed controls reports provided by the custodian
and administrator to evaluate the design of the process and
implementation of key controls.
We compared market prices and exchange rates applied to all
investments held at 31 January 2024 to an independent third-
party source and recalculated the listed investment valuations.
We obtained average trading volumes from an independent
third-party source for all listed investments held at year end and
assessed their liquidity.
We assessed trading activity and challenged management’s
assessment for evidence of an active market.
We agreed 100% of listed investments held at year end to the
independently received custodian report.
From our completion of these procedures, we identified
no material misstatements in relation to the valuation and
ownership of the listed investments.
Financial report
90
Annual Report and Financial Statements 2024
Key Audit Matter How our audit addressed the key audit matter and our conclusions
Valuation and ownership of unlisted investments
(as per page 79 (Audit committee report), pages 100 and 101
(Principal accounting policies) and Note 9.)
At 31 January 2024 the valuation of the level 3, unlisted portfolio
was £19.8m.
The Company determines the fair value of unlisted investments
in accordance with the revised International Private Equity and
Venture Capital (IPEV) valuation guidelines. Management is
required to estimate the valuation of unlisted investments, which
requires them to select an appropriate valuation method and
appropriate inputs.
There is significant valuation estimation required and a risk that
the unlisted investments are recorded in error if the Company
does not have proper legal title at year end. Therefore, this has
been designated as a key audit matter, being one of the most
significant assessed risks of material misstatements due to fraud
or error.
We have performed a walkthrough of the unlisted investment
valuation process to evaluate the design of the process and
implementation of key controls.
We obtained evidence that the Manager’s Valuation Committee
review the valuation of the unlisted investments.
We obtained evidence of the Board’s challenge and approval
of the valuation of the unlisted investments.
For all unlisted investments, we:
• Assessed the degree to which the valuations are subject to
estimation uncertainty and the degree to which the selection
and application of the valuation method, assumptions
and data are affected by complexity and subjectivity to
understand the specific risks of each valuation.
• Based on the specific risks identified for each investment,
we engaged our specialist corporate finance team, on a
sample basis, to challenge the appropriateness of certain
judgements, such as trading multiples.
• Obtained an understanding of the sector for each investee
company for the period being audited, making enquiries
of management.
• Corroborated data used in the valuation models to
independent sources, assessing if market conditions meet
management’s expectations and any forecasts used in the
valuation models are suitable, consistent and the data is
relevant and reliable, including considering any contradictory
data identified.
• Reperformed the calculation of the valuation models to
ensure mathematical accuracy.
• Assessed whether the valuation methodologies were in line
with accounting policies, FRS 102 and IPEV guidelines.
• Where appropriate, based on the valuation methodology
applied, we developed an auditor’s point estimate or range.
We have agreed 100% of unlisted investments held at year
end to an independently received email confirmation from each
portfolio company.
From our completion of these procedures, we identified
no material misstatements in relation to the valuation and
ownership of the unlisted investments.
91
Baillie Gifford Shin Nippon PLC
Key Audit Matter How our audit addressed the key audit matter and our conclusions
Revenue recognition, including allocation of special dividends
as revenue or capital returns
(as per page 101 (Principal accounting policies) and Note 2.)
Investment income recognised to 31 January 2024 was £8.9m,
consisting primarily of dividend income from listed investments.
Revenue-based performance metrics are often one of the
key performance indicators for stakeholders. The investment
income received by the Company during the year directly impacts
these metrics and the minimum dividend required to be paid by
the Company.
There is a risk that revenue is incomplete or inaccurate through
failure to recognise income entitlements or failure to appropriately
account for their treatment. It has therefore been designated as
a key audit matter being one of the most significant assessed
risks of material misstatement due to fraud or error.
Additionally, there is a further risk of incorrect allocation of special
dividends as revenue or capital returns as judgement is required
in determining their allocation within the Income Statement.
We assessed controls reports provided by the Administrator
to evaluate the design of the process and implementation
of key controls.
We confirmed that income is recognised and disclosed in
accordance with the AIC SORP by assessing the accounting
policies.
We recalculated 100% of dividends due to the Company from
listed investments based on investment holdings throughout
the year and announcements made by investee companies.
We agreed a sample of dividends received to bank statements.
We assessed the completeness of the special dividend
population and determined whether special dividends
recognised are revenue or capital in nature with reference
to the underlying commercial circumstances of the investee
companies’ dividend payment.
From our completion of these procedures, we identified
no material misstatements in relation to revenue recognition,
including allocation of special dividends as revenue or
capital returns.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable
that the economic decisions of a reasonably knowledgeable person would be changed or influenced.
We use materiality in determining the nature and extent of our work and in evaluating the results of that work.
Materiality measure Value
Materiality for the financial statements as a whole
– We have set materiality as 1% of net assets as we
believe that net assets is the primary performance
measure used by investors and is the key driver of
shareholder value. It is also the standard industry
benchmark for materiality for investment trusts and
we determined the measurement percentage to be
commensurate with the risk and complexity of the
audit and the Company’s listed status.
£4.58m
Performance materiality – Performance materiality
represents amounts set by the auditor at less than
materiality for the financial statements as a whole,
to reduce to an appropriately low level the probability
that the aggregate of uncorrected and undetected
misstatements exceeds materiality for the financial
statements as a whole.
In setting this we consider the Company’s overall
control environment and any experience of the audit
that indicates a lower risk of material misstatements.
Based on our judgements of these factors we have
set performance materiality at 50% of our overall
financial statement materiality as this is our first
year as auditor.
£2.29m
Materiality measure Value
Specific materiality – Recognising that there are
transactions and balances of a lesser amount which
could influence the understanding of users of the
financial statements we calculate a lower level of
materiality for testing such areas.
Specifically, given the importance of the distinction
between revenue and capital for the Company,
we applied a separate testing threshold for the
revenue column of the Income Statement, set at
the higher of 5% of the revenue net return on
ordinary activities before taxation and our Audit
Committee Reporting Threshold.
We have also set a separate specific materiality in
respect of related party transactions and Directors’
remuneration.
We used our judgement in setting these thresholds
and considered our experience and industry
benchmarks for specific materiality.
£0.23m
Audit Committee reporting threshold – We agreed
with the Audit Committee that we would report
to them all differences in excess of 5% of
overall materiality in addition to other identified
misstatements that warranted reporting on qualitative
grounds, in our view. For example, an immaterial
misstatement as a result of fraud.
£0.23m
During the course of the audit, we reassessed initial materiality and found no reason to alter the basis of
calculation used at year-end.
Financial report
92
Annual Report and Financial Statements 2024
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 this 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 information given in the Strategic report
and the Directors’ report for the financial year for
which the financial statements are prepared is
consistent with the financial statements; and
• The Strategic report and the Directors’ report have
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 course of the audit, we have not identified
material misstatements in the Strategic report or
the 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:
• Adequate accounting records have not been kept
by the Company, or returns adequate for our audit
have not been received from branches not visited
by us; or
• The financial statements and the part of the
Directors’ remuneration report to be audited are
not in agreement with the accounting records and
returns; or
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:
• Evaluating management’s method of assessing
going concern, including consideration of market
conditions and uncertainties;
• Assessing and challenging the forecast cashflows
and associated sensitivity modelling including
assessment of the loan covenants used by the
Directors in support of their going concern
assessment;
• Obtaining and recalculating management’s
assessment of the Company’s ongoing
maintenance of investment trust status; and
• Assessing the adequacy of the Company’s
going concern disclosures included in the
Annual Report.
Based on the work we have performed, we have
not identified any material uncertainties relating to
events or conditions that, individually or collectively,
may cast significant doubt on the Company’s
ability to continue as a going concern for a period
of at least twelve months from when the financial
statements are authorised for issue.
In relation to the Company’s reporting on how it
has 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.
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 our report, we do not
express any form of assurance conclusion thereon.
93
Baillie Gifford Shin Nippon PLC
• Certain disclosures of Directors’ remuneration
specified by law are not made; or
• We have not received all the information and
explanations we require for our audit; or
• A corporate governance statement has not
been prepared by the Company.
Corporate governance statement
The Listing Rules require us to review 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 specified for our review.
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:
• The Directors’ statement with regards to the
appropriateness of adopting the going concern
basis of accounting and any material uncertainties
identified set out on page 76;
• The Directors’ explanation as to its assessment
of the Company’s prospects, the period this
assessment covers and why the period is
appropriate set out on page 56;
• The Directors’ statement on whether it has a
reasonable expectation that the Company will be
able to continue in operation and meet its liabilities
set out on page 76;
• The Directors’ statement on fair, balanced and
understandable set out on page 86;
• The Board’s confirmation that it has carried out a
robust assessment of the emerging and principal
risks set out on pages 51 to 55;
• The section of the annual report that describes the
review of the effectiveness of risk management
and internal control systems set out on pages 75
and 76; and
• The section describing the work of the Audit
Committee set out on pages 78 to 80.
Responsibilities of Directors
As explained more fully in the Directors’
responsibilities statement set out on pages 85 and
86, the Directors are responsible for the preparation
of the financial statements and for being satisfied
that they give a true and fair view, 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
influence the economic decisions of users taken
on the basis of these financial statements.
A further description of our responsibilities for
the audit of the financial statements is located
on the Financial Reporting Council’s website at:
http://www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
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 material misstatements in
respect of irregularities, including fraud. The extent
to which our procedures are capable of detecting
irregularities, including fraud is detailed below.
Financial report
94
Annual Report and Financial Statements 2024
We assessed whether the engagement team
collectively had the appropriate competence and
capabilities to identify or recognise non-compliance
with laws and regulations by considering their
experience, past performance and support available.
All engagement team members were briefed on
relevant identified laws and regulations and potential
fraud risks at the planning stage of the audit.
Engagement team members were reminded to remain
alert to any indications of fraud or non-compliance
with laws and regulations throughout the audit.
We obtained an understanding of the legal and
regulatory frameworks that are applicable to the
Company and the sector in which it operates,
focusing on those provisions that had a direct
effect on the determination of material amounts
and disclosures in the financial statements. The
most relevant frameworks we identified include:
• Companies Act 2006;
• FCA listing and DTR rules;
• The principles of the UK Corporate Governance
Code applied by the AIC Code of Corporate
Governance (the ‘AIC Code’);
• Industry practice represented by the Statement of
Recommended Practice: Financial Statements of
Investment Trust Companies and Venture Capital
Trusts (‘the SORP’) issued in July 2022;
• Financial Reporting Standard 102; and
• The Company’s qualification as an investment
trust under section 1158 of the Corporation Tax
Act 2010.
We gained an understanding of how the Company
is complying with these laws and regulations by
making enquiries of management and those charged
with governance. We corroborated these enquiries
through our review of relevant correspondence with
regulatory bodies and board meeting minutes.
We assessed the susceptibility of the Company’s
financial statements to material misstatement,
including how fraud might occur, by meeting with
management and those charged with governance
to understand where it was considered there
was susceptibility to fraud. This evaluation also
considered how management and those charged
with governance were remunerated and whether
this provided an incentive for fraudulent activity. We
considered the overall control environment and how
management and those charged with governance
oversee the implementation and operation of
controls. We identified a heightened fraud risk in
relation to the valuation and ownership of unlisted
investments and the allocation of special dividends
as revenue or capital returns (audit procedures
performed in response to these risks are set out
in the section on key audit matters above) and
management override (procedures in response to
this risk are included below).
In addition to the above, the following procedures
were performed to provide reasonable assurance
that the financial statements were free of material
fraud or error:
• Reviewing minutes of meetings of those charged
with governance for reference to: breaches
of laws and regulation or for any indication of
any potential litigation and claims; and events
or conditions that could indicate an incentive
or pressure to commit fraud or provide an
opportunity to commit fraud;
• Performing audit work procedures over the risk
of management override of controls, including
testing of journal entries and other adjustments
for appropriateness, recalculating the investment
management fee, evaluating the business rationale
of significant transactions outside the normal
course of business and reviewing judgements made
by management in their calculation of accounting
estimates for potential management bias;
• Completion of appropriate checklists and use
of our experience to assess the Company’s
compliance with the Companies Act 2006 and the
Listing Rules; and
• Agreement of the financial statement disclosures
to supporting documentation.
Our audit procedures were designed to respond to
the risk of material misstatements in the financial
statements, recognising that 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 intentional concealment, forgery,
collusion, omission or misrepresentation. There are
inherent limitations in the audit procedures described
above and the further removed non-compliance
with laws and regulations is from the events and
transactions reflected in the financial statements, the
less likely we would become aware of it.
95
Baillie Gifford Shin Nippon PLC
Other matters which we are required
to address
Following the recommendation of the Audit Committee,
we were appointed by the Board on 17 May 2023 to
audit the financial statements for the year ended
31 January 2024 and subsequent financial periods.
The period of our total uninterrupted engagement is
one year, covering the year ended 31 January 2024.
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
our audit.
Our audit opinion is consistent with the additional
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.
Richard Sutherland (Senior Statutory Auditor)
For and on behalf of Johnston Carmichael LLP
Statutory Auditor
Edinburgh, United Kingdom
22 March 2024
Financial report
96
Annual Report and Financial Statements 2024
For the year ended 31 January
Notes
2024
Revenue
£’000
2024
Capital
£’000
2024
Total
£’000
2023
Revenue
£’000
2023
Capital
£’000
2023
Total
£’000
Losses on investments 9 – (97,913) (97,913) – (12,749) (12,749)
Currency gains 14 – 13,058 13,058 – 2,214 2,214
Income 2 8,870 – 8,870 9,617 – 9,617
Investment management fee 3 (2,878) – (2,878) (3,154) – (3,154)
Other administrative expenses 4 (628) – (628) (679) – (679)
Net return before finance costs
and taxation
5,364 (84,855) (79,491) 5,784 (10,535) (4,751)
Finance costs of borrowings 5 (1,533) – (1,533) (1,332) – (1,332)
Net return before taxation 3,831 (84,855) (81,024) 4,452 (10,535) (6,083)
Tax on ordinary activities
6
(887) – (887) (962) – (962)
Net return after taxation 2,944 (84,855) (81,911) 3,490 (10,535) (7,045)
Net return per ordinary share 7 0.94p (27.13p) (26.19p) 1.11p (3.35p) (2.24p)
Note: Dividends per share payable
and paid in respect of the year
8 0.80p –
The total column of this statement is the profit and loss account of the Company. The supplementary revenue and capital return columns are prepared
under 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 all gains and losses of the Company have been reflected in the above statement.
The accompanying notes on pages 100 to 115 are an integral part of the Financial Statements.
Income
statement
97
Baillie Gifford Shin Nippon PLC
As at 31 January
Notes
2024
£’000
2024
£’000
2023
£’000
2023
£’000
Fixed assets
Investments held at fair value through profit or loss 9 539,701 625,922
Current assets
Debtors 10 3,521 3,047
Cash at bank 19 2,965 6,946
6,486 9,993
Creditors
Amounts falling due within one year 11 (88,395) (46,154)
Net current liabilities (81,909) (36,161)
Total assets less current liabilities 457,792 589,761
Creditors
Amounts falling due after more than one year 12 – (44,308)
Net assets 457,792 545,453
Capital and reserves
Share capital 13 6,285 6,285
Share premium account 14 260,270 260,270
Capital redemption reserve 14 21,521 21,521
Capital reserve 14 167,114 257,719
Revenue reserve 14 2,602 (342)
Shareholders’ funds 457,792 545,453
Net asset value per ordinary share* 15 147.8p 173.6p
The Financial Statements of Baillie Gifford Shin Nippon PLC (Company Registration Number SC093345)
on pages 96 to 115 were approved and authorised for issue by the Board and were signed on its behalf on
22 March 2024.
Jamie Skinner
Chair
* See Glossary of terms and Alternative Performance Measures on pages 129 to 132.
The accompanying notes on pages 100 to 115 are an integral part of the Financial Statements.
Balance
sheet
Financial report
98
Annual Report and Financial Statements 2024
For the year ended 31 January 2024
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 February 2023 6,285 260,270 21,521 257,719 (342) 545,453
Ordinary shares bought back into treasury 14 – – – (5,750) – (5,750)
Net return on ordinary activities after taxation 7 – – – (84,855) 2,944 (81,911)
Shareholders’ funds at 31 January 2024 6,285 260,270 21,521 167,114 2,602 457,792
For the year ended 31 January 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 February 2022 6,285 260,270 21,521 268,408 (3,832) 552,652
Ordinary shares bought back into treasury 14 – – – (154) – (154)
Net return on ordinary activities after taxation 7 – – – (10,535) 3,490 (7,045)
Shareholders’ funds at 31 January 2023 6,285 260,270 21,521 257,719 (342) 545,453
The accompanying notes on pages 100 to 115 are an integral part of the Financial Statements.
Statement of
changes in equity
99
Baillie Gifford Shin Nippon PLC
The accompanying notes on pages 100 to 115 are an integral part of the Financial Statements.
For the year ended 31 January
Notes
2024
£’000
2024
£’000
2023
£’000
2023
£’000
Cash flows from operating activities
Net return on ordinary activities before taxation (81,024) (6,083)
Net losses on investments 97,913 12,749
Currency gains (13,058) (2,214)
Finance costs of borrowings 1,533 1,332
Overseas withholding tax (922) (892)
Decrease/(increase) in debtors, accrued income
and prepaid expenses
351 (681)
Increase in creditors 150 27
Cash inflow from operations 4,943 4,238
Interest paid (1,462) (1,292)
Net cash inflow from operating activities 3,481 2,946
Cash flows from investing activities
Acquisitions of investments (91,610) (137,003)
Disposals of investments 78,423 108,576
Net cash outflow from investing activities (13,187) (28,427)
Ordinary shares bought back into treasury and stamp duty thereon 14 (5,750) (154)
Bank loans repaid 12,313 –
Net cash inflow/(outflow) from financing activities 6,563 (154)
Decrease in cash and cash equivalents (3,143) (25,635)
Exchange movements (838) (924)
Cash and cash equivalents at 1 February 19 6,946 33,505
Cash and cash equivalents at 31 January* 19 2,965 6,946
*
Cash and cash equivalents represent cash at bank and deposits repayable on demand.
Cash flow
statement
Financial report
100
Annual Report and Financial Statements 2024
01 Principal accounting policies
The Financial Statements for the year to 31 January 2024
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.
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 convention,
modified to include the revaluation of fixed asset
investments and derivative financial instruments at fair
value through profit or loss, and on the assumption 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 reviewed the
results of specific leverage and liquidity stress testing,
but does not believe the Company’s going concern status
is affected. The Company’s assets, which are primarily
investments in quoted securities and are readily realisable
(Level 1) exceed its liabilities significantly and could be
sold to repay borrowings if required.
All borrowings require the prior approval of the Board.
Gearing levels and compliance with loan covenants
are reviewed by the Board on a regular basis. As at
31 January 2024, the Company had a net current
liability of £81.9 million primarily as a result of the fixed
rate facilities maturing in November and December 2024
and the revolving credit facilities which mature on a
three monthly basis.
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.
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, as set out in the Viability Statement on
page 56, that the Company will continue in operational
existence for a period of at least twelve months from the
date of approval of these Financial Statements.
The Financial Statements have been prepared in
accordance with the Companies Act 2006, applicable
United Kingdom Accounting Standards 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.
In order to reflect better the activities of the Company
and in accordance with guidance issued by the AIC,
supplementary information which analyses the profit
and loss account between items of a revenue and capital
nature has been presented in the Income statement.
The Company has only one material segment being that
of an investment trust company, investing principally in
small Japanese companies.
Financial assets and financial liabilities are recognised 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
currency to be sterling as the Company’s shareholders
are predominantly based in the UK, and the Company
and its investment manager, who are subject to the UK’s
regulatory environment are also UK based.
b. Investments
Purchases and sales
Purchases and sales of investments are accounted for
on a trade date basis. All investments are designated
as valued at fair value through profit or loss upon initial
recognition and are measured at subsequent reporting
dates at fair value.
Listed investments
The fair value of listed security investments is bid value
or, in the case of holdings on certain recognised overseas
exchanges, at last traded prices.
Private company investments
Private company investments are valued at fair value by
the Directors following a detailed review and appropriate
challenge of the valuations proposed by the Managers.
The Managers’ private company investment policy applies
techniques consistent with the International Private Equity
and Venture Capital Valuation Guidelines 2022 (‘IPEV’).
Notes to the
Financial Statements
101
Baillie Gifford Shin Nippon PLC
The techniques applied are predominantly market-based
approaches. The market-based approaches available
under IPEV are set out below and are followed by an
explanation of how they are applied to the Company’s
private company portfolio:
• Multiples;
• Industry valuation benchmarks; and
• Available market prices.
The nature of the private company portfolio currently
will influence the valuation technique applied. The
valuation approach recognises that, as stated in the
IPEV Guidelines, the price of a recent investment,
if resulting from an orderly transaction, generally
represents fair value as at the transaction date and
may be an appropriate starting point for estimating fair
value at subsequent measurement dates. However,
consideration is given to the facts and circumstances
as at the subsequent measurement date, including
changes in the market or performance of the investee
company. Milestone analysis is used where appropriate
to incorporate the operational progress of the investee
company into the valuation. Additionally, the background
to the transaction must be considered. As a result,
various multiples-based techniques are employed to
assess the valuations particularly in those companies
with established revenues. Discounted cashflows are
used where appropriate. An absence of relevant industry
peers may preclude the application of the Industry
Valuation Benchmarks technique and an absence of
observable prices may preclude the Available Market
Prices approach. All valuations are cross-checked
for reasonableness by employing relevant alternative
techniques.
The private company investments are valued according
to a three monthly cycle of measurement dates. The fair
value of the private company investments will be reviewed
before the next scheduled three monthly measurement
date on the following occasions:
• at the year end and half year end of the Company; and
• where there is an indication of a change in fair value as
defined in the IPEV guidelines (commonly referred to as
‘trigger’ events).
Gains and losses
Gains and losses on investments are recognised in the
Income statement as capital items. Gain and losses
arising from foreign exchange differences are recognised
in the Income statement and classified as a revenue or
capital item as appropriate.
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. Interest from fixed interest securities is recognised on
an effective yield basis.
iii. Overseas dividends include withholding tax deducted at
source.
iv. Interest receivable on bank deposits are recognised on
an accruals basis.
v. If scrip is taken in lieu of dividends in cash, the net
amount of the equivalent cash dividend 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.
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, in which case they are added to the cost
of the investment or deducted from the sale proceeds.
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
of net proceeds after issue, plus accrued finance costs.
The finance costs of such borrowings are allocated to
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
Current tax is provided at the amounts expected to be
paid or recovered. Deferred taxation is provided on an
undiscounted basis on all timing differences which have
originated but not reversed by the Balance sheet date,
calculated at the tax rates expected to apply when the
timing differences reverse, based on what has been
enacted or substantially enacted, relevant to the benefit
or liability. Deferred tax assets are recognised only to
the extent that it is more likely than not that there will be
taxable profits from which underlying timing differences
can be deducted.
h. Dividends payable
Dividends are not recognised in the Financial Statements
unless there is an obligation to pay at the balance sheet
date.
Financial report
102
Annual Report and Financial Statements 2024
i. 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, with the exception
of forward foreign exchange contracts which are valued
at the forward rate ruling 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 loss in the Income statement and
classified as a revenue or capital item as appropriate.
j. Share premium account
The balance classified as share premium represents:
• the excess of the proceeds of issuance of new shares
over the nominal value; and
• the proceeds of sales of shares held in treasury in
excess of the weighted average price paid by the
Company to repurchase the shares.
k. 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 are also funded from this reserve.
The capital reserve, to the extent it constitutes realised
profits, is distributable.
l. Capital redemption reserve
The nominal value of ordinary share capital repurchased
and cancelled is transferred out of the called-up share
capital and into the capital redemption reserve.
m. Revenue reser ve
The revenue profit or loss for the year is taken to or from
this reserve. The revenue reserve when in surplus may be
distributed by way of a dividend.
n. Single segment reporting
The Company is engaged in a single segment of business,
being investment business, consequently no business
segmental analysis is provided.
o. Significant accounting estimates and judgements
The preparation of the Financial Statements requires
the use of estimates, assumptions and judgements.
These estimates, assumptions and judgements affect
the reported amounts of assets and liabilities, at the
reporting date. While estimates are based on best
judgement using information and financial data available,
the actual outcome may differ from these estimates. The
key sources of estimation and uncertainty relate to the
assumptions used in the determination of the fair value
of the unlisted investments, which are detailed in note 9
on pages 105 and 106.
Judgements
The Directors consider that the preparation of the
Financial Statements involves the following key
judgements: (i) the determination of the functional
currency of the Company as sterling (see rationale in
1(a) above); and (ii) the fair valuation of the unlisted
investments. The key judgements in the fair valuation
process are: (i) the Managers’ determination of the
appropriate application of the International Private Equity
and Venture Capital Guidelines 2022 (‘IPEV’) to each
unlisted investment; and (ii) the Directors’ consideration
of whether each fair value is appropriate following
detailed review and challenge. The judgement applied
in the selection of the methodology used for determining
the fair value of each unlisted investment can have a
significant impact upon the valuation.
Estimates
The key estimate in the Financial Statements is the
determination of the fair value of the unlisted investments
by the Managers for consideration by the Directors. This
estimate is key as it significantly impacts the valuation
of the unlisted investments at the Balance sheet date.
The significance of this estimate has increased over the
year with the increase in private company investments
from 3.0% of total assets to 3.7% (see note 9). The fair
valuation process involves estimation using subjective
inputs that are unobservable (for which market data is
unavailable). The main estimates involved in the selection
of the valuation process inputs are:
i. the selection of appropriate comparable companies
in order to derive revenue multiples and meaningful
relationships between enterprise value, revenue and
earnings growth. Comparable companies are chosen
on the basis of their business characteristics and
growth patterns;
ii. the selection of a revenue metric (either historic or
forecast);
iii. the application of an appropriate discount factor to
reflect the reduced liquidity of unlisted companies
versus their quoted peers;
iv. the estimation of the probability assigned to an exit
being through an initial public offering (‘IPO’) or a
company sale;
v. the selection of an appropriate industry benchmark
index to assist with the valuation validation or the
application of valuation adjustments, particularly in the
absence of established earnings or closely comparable
peers; and
vi. the calculation of valuation adjustments derived from
milestone analysis (i.e. incorporating operational
success against the plan/forecasts of the business
into the valuation).
Fair value estimates are cross-checked to alternative
estimation methods where possible to improve the
robustness of the estimates. The risk of an over or under
estimation of fair values is greater when methodologies
are applied using more subjective inputs.
103
Baillie Gifford Shin Nippon PLC
02 Income
2024
£’000
2023
£’000
Income from investments
Listed overseas dividends 8,866 9,617
Other income
Deposit interest 4 –
Total income 8,870 9,617
Total income comprises
Dividends from financial assets designated at fair value through profit or loss 8,866 9,617
Interest from financial assets not at fair value through profit or loss 4 –
Total income 8,870 9,617
03 Investment management fee – all charged to revenue
2024
£’000
2023
£’000
Investment management fee 2,878 3,154
Details of the Investment Management Agreement are set out on page 66. Baillie Gifford & Co Limited’s annual management fee
is 0.75% on the first £50m of net assets, 0.65% on the next £200m of net assets and 0.55% on the remainder.
04 Other administrative expenses
2024
£’000
2023
£’000
General administrative expenses 221 191
Directors’ fees (see Directors’ remuneration report on page 82) 167 192
Auditor’s remuneration (statutory audit of the Company’s Financial Statements)* 40 58
Custody fees 51 52
Depositary fees 53 93
Registrar fees 21 20
Marketing expenses
†
75 73
628 679
*
The audit fee for the year to 31 January 2023 was £55,000. Audit fees of £3,000 related to the year to 31 January 2022 audit.
†
The Company is part of a marketing programme which includes all the investment trusts managed by the Managers. 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 Managers. The Managers match the Company’s marketing contribution and provide the resource to manage and run the programme.
05 Finance costs of borrowings
2024
£’000
2023
£’000
Interest on bank loans 1,533 1,332
The bank loan interest disclosed includes £23,000 paid (2023 – £37,000) in respect of yen deposits held at the custodian bank.
Financial report
104
Annual Report and Financial Statements 2024
06 Tax on ordinary activities
2024
£’000
2023
£’000
Analysis of charge in year
Overseas taxation (charged to revenue) 887 962
Factors affecting tax charge for year
The tax assessed for the year is higher (2023 – higher) than the average standard rate of
corporation tax in the UK of 24%* (2023 – 19%). The differences are explained below:
Net loss on ordinary activities before taxation (81,024) (6,083)
Net return on ordinary activities multiplied by the standard rate of corporation tax in the
UK of 24%* (2023 – 19%)
(19,446) (1,156)
Effects of:
Capital returns not taxable 20,365 2,002
Income not taxable (2,128) (1,827)
Overseas withholding tax 887 962
Taxable losses in year not utilised 1,209 981
Total tax charge for the year 887 962
*
A tax rate of 24% reflects the increase in the UK corporation tax rate from 19% to 25% from 1 April 2023.
As an investment trust, the Company’s capital gains are not subject to tax.
At 31 January 2024 the Company had a potential deferred tax asset of £12,386,000 (2023 – £11,118,000) on tax losses which are
available to be carried forward and offset against future taxable profits. A deferred tax asset has not been recognised on these
losses as it is considered unlikely that the Company will generate taxable profits in the future and it is not liable to tax on its
capital gains. The unrecognised deferred tax asset has been calculated using a corporation tax rate of 25% (2023 – 25%).
Due to the Company’s status as an investment trust, and the intention to continue meeting the conditions required to retain
approval for 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.
07 Net return per ordinary share
2024
Revenue
2024
Capital
2024
Total
2023
Revenue
2023
Capital
2023
Total
Net loss on ordinary activities
after taxation
0.94p (27.13p) (26.19p) 1.11p (3.35p) (2.24p)
Revenue return per ordinary share is based on the net revenue gain on ordinary activities after taxation of £2,944,000 (2023 –
gain of £3,490,000) and on 312,785,827 ordinary shares (2023 – 314,222,074) being the weighted average number of ordinary
shares in issue during the year.
Capital return per ordinary share is based on the net capital loss for the financial year of £84,855,000 (2023 – net capital loss of
£10,535,000) and on 312,785,827 ordinary shares (2023 – 314,222,074) being the weighted average number of ordinary shares
in issue during the year.
There are no dilutive or potentially dilutive shares in issue.
105
Baillie Gifford Shin Nippon PLC
08 Ordinary dividends
We set out below the total dividends proposed in respect of the financial year, which is the basis on which the requirements of
section 1158 of the Corporation Tax Act 2010 are considered. There is a revenue surplus at 31 January 2024 of £2,602,000 which
is available for distribution by way of a dividend payment (2023 – a revenue deficit of £342,000).
2024
p
2023
p
2024
£’000
2023
£’000
Amounts paid and payable in respect of the financial year:
Proposed final dividend per ordinary share (payable 30 May 2024) 0.80p – 2,478 –
09 Fixed assets – investments
As at 31 January 2024
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Quoted equities 519,949 – – 519,949
Unlisted securities – – 19,752 19,752
Total financial asset investments 519,949 – 19,752 539,701
As at 31 January 2023
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Quoted equities 607,176 – – 607,176
Unlisted securities – – 18,746 18,746
Total financial asset investments 607,176 – 18,746 625,922
Investments in securities are financial assets designated at fair value through profit or loss. In accordance with Financial
Reporting Standard 102, the tables provide an analysis of these investments based on the fair value hierarchy described below,
which reflects the reliability and significance of the information used to measure their fair value.
Fair value hierarchy
The fair value hierarchy used to analyse the basis on which the fair values of financial instruments held at fair value through the
profit or loss account are measured is described below. Fair value measurements are categorised on the basis of the lowest level
input that is significant to the fair value measurement.
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).
The valuation techniques used by the Company are explained in the accounting policies on pages 100 and 101.
Unlisted securities are categorised as Level 3. None of the financial liabilities are designated at fair value through profit or loss
in the Financial Statements.
Financial report
106
Annual Report and Financial Statements 2024
09 Fixed assets – investments (continued)
Fair value hierarchy (continued)
Quoted
securities
£’000
Unlisted
securities
£’000
†
2024
Total
£’000
2023
Total
£’000
Cost of investments at 1 February 2023 545,085 20,141 565,226 555,796
Investment holding gains/(losses) at 1 February 2023 62,091 (1,395) 60,696 55,061
Value of investments at 1 February 2023 607,176 18,746 625,922 610,857
Analysis of transactions during the year:
Purchases at cost 90,905 – 90,905 136,221
Sales proceeds received (79,213) – (79,213) (108,407)
(Losses)/gains on investments (98,919) 1,006 (97,913) (12,749)
Fair value of investments held at 31 January 2024 519,949 19,752 539,701 625,922
Cost of investments held at 31 January 2024 543,407 20,141 563,548 565,226
Investment holding (losses)/gains at 31 January 2024 (23,458) (389) (23,847) 60,696
Fair value of investments held at 31 January 2024 519,949 19,752 539,701 625,922
†
The unlisted security investments include holdings of preference shares in Moneytree K.K. and Gojo & Company, and ordinary shares in Spiber
and JEPLAN.
The company received £79,213,000 (2023 – £108,407,000) from investments sold in the year. The book cost of these
investments when they were purchased was £92,583,000 (2023 – £126,791,000). These investments have been revalued over
time and until they were sold any unrealised gains/losses were included in the fair value of the investments.
Transaction costs of £39,000 (2023 – £55,000) and £31,000 (2023 – £38,000) were suffered on purchases and sales respectively.
2024
£’000
2023
£’000
Net losses on investments
Losses on sales (13,370) (18,384)
Changes in investment holding gains (84,543) 5,635
(97,913) (12,749)
The loss on sales of £13,370,000 and decrease in investment holding gains of £84,543,000 include amounts relating to:
i) changes in local currency fair value of the investments; and, ii) movements in the yen/sterling exchange rate.
10 Debtors
2024
£’000
2023
£’000
Accrued income 2,248 2,566
Sales for subsequent settlement 1,156 366
Other debtors and prepayments 117 115
3,521 3,047
The debtors above are stated at amortised cost which is a reasonable approximation to fair value.
107
Baillie Gifford Shin Nippon PLC
11 Creditors – amounts falling due within one year
2024
£’000
2023
£’000
Purchases for subsequent settlement 525 1,230
Bank loans 86,475 43,705
Other creditors and accruals 1,395 1,219
88,395 46,154
Included in creditors is £704,000 (2023 – £825,000) in respect of the investment management fee.
The creditors above are stated at amortised cost which is a reasonable approximation to fair value.
The bank loans are stated after deducting the arrangement fees of £98,000 which are amortised over the terms of the loans.
Amortisation of the arrangement fees during the year was £45,000 (2023 – £49,000).
Borrowing facilities
At 31 January 2024
ING Bank N.V. – 3 year ¥5,000 million fixed rate loan at 1.400% maturing 8 November 2024.
ING Bank N.V. – 7 year ¥2,100 million fixed rate loan at 1.693% maturing 18 December 2024.
ING Bank N.V. – 3 year ¥2,000 million revolving credit facility maturing 3 March 2026. The rollover date is 8 March 2024.
ING Bank N.V. – 3 year ¥7,000 million revolving credit facility maturing 23 November 2026. The rollover date is 27 February 2024.
At 31 January 2023
ING Bank N.V. – 3 year ¥7,000 million loan at 1.400% maturing 27 November 2023.
ING Bank N.V. – 3 year ¥5,000 million loan at 1.400% maturing 8 November 2024.
ING Bank N.V. – 7 year ¥2,100 million loan at 1.693% maturing 18 December 2024.
The covenants during the year relating to the ING Bank N.V. loans were as follows:
(i) Total borrowings shall not exceed 35% of the Company’s net asset value; and
(ii) The Company’s minimum net asset value shall be £225 million.
There were no breaches in loan covenants during the year.
Security has been provided to ING Bank N.V. in respect of the loans by way of floating charges.
The interest rate, maturity profiles and fair value of the bank loans are shown in note 19.
12 Creditors – amounts falling due after more than one year
2024
£’000
2023
£’000
Bank loans – 44,308
13 Share capital
2024
Number
2024
£’000
2023
Number
2023
£’000
Allotted and fully paid ordinary shares of 2p each 309,757,485 6,195 314,152,485 6,283
Treasury shares of 2p each 4,495,000 90 100,000 2
314,252,485 6,285 314,252,345 6,285
At 31 January 2024 the Company had authority to buy back 43,046,457 shares. 4,395,000 shares were bought back during the
year (2023 – 100,000). Share buy-backs are funded from the capital reserve.
During the year the Company issued no shares on a non pre-emptive basis (2023 – no shares).
Between 1 February and 20 March 2024 the Company did not issue any shares. The Company bought back 3,375,000 shares.
Financial report
108
Annual Report and Financial Statements 2024
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 February 2023 6,285 260,270 21,521 257,719 (342) 545,453
Shares purchased for treasury – – – (5,750) – (5,750)
Net loss on disposal of investments – – – (13,370) – (13,370)
Changes in investment holding gains – – – (84,543) – (84,543)
Exchange differences on bank loans – – – 13,896 – 13,896
Exchange differences on settlement
of investment transactions
– – – (32) – (32)
Other exchange differences – – – (806) – (806)
Net revenue return for the year – – – – 2,944 2,944
At 31 January 2024 6,285 260,270 21,521 167,114 2,602 457,792
Share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Shareholders’
funds
£’000
At 1 February 2022 6,285 260,270 21,521 268,408 (3,832) 552,652
Shares purchased for treasury – – – (154) – (154)
Net loss on disposal of investments – – – (18,384) – (18,384)
Changes in investment holding gains – – – 5,635 – 5,635
Exchange differences on bank loans – – – 3,138 – 3,138
Exchange differences on settlement
of investment transactions
– – – (749) – (749)
Other exchange differences – – – (175) – (175)
Net revenue return for the year – – – – 3,490 3,490
At 31 January 2023 6,285 260,270 21,521 257,719 (342) 545,453
The capital reserve includes investment holding losses of £23,847,000 (2023 – gains of £60,696,0000) as disclosed in note 9.
The revenue reserve and the capital reserve (to the extent it constitutes realised profits) are distributable.
15 Net asset value per ordinary share
The net asset value attributable to the ordinary shareholders and the net asset value per ordinary share at the year end were
as follows:
2024 2023
Net asset value/shareholders’ funds* £457,792,000 £545,453,000
Number of ordinary shares in issue at year end
†
309,757,485 314,152,485
Shareholders’ funds per ordinary share/net asset value per ordinary share
(after deducting borrowings at book value)*
147.8p 173.6p
*
See Glossary of terms and Alternative Performance Measures on pages 129 to 132.
†
Excluding shares held in treasury.
16 Contingent liabilities, guarantees and financial commitments
There were no contingent liabilities, guarantees or financial commitments at either year end.
109
Baillie Gifford Shin Nippon PLC
17 Analysis of change in net debt
31 January
2023
£’000
Cash flows
£’000
Exchange
movement
£’000
Other
non-cash
changes
£’000
31 January
2024
£’000
Cash and cash equivalents
6,946 (3,143) (838) – 2,965
Loans due within one year (43,705) (12,313) 13,896 (44,353) (86,475)
Loans due in more than one year
(44,308) – – 44,308 –
(81,067) (15,456) 13,058 (45) (83,510)
18 Related Parties and transactions with the Managers
The Directors’ fees for the year are detailed in the Directors’ remuneration report on page 82. No Director has a contract of service
with the Company. During the years reported no Director was interested in any contract or other matter requiring disclosure
under section 412 of the Companies Act 2006. Details of Directors’ holdings at 31 January 2024 are detailed in the Directors’
Remuneration report on page 83.
Baillie Gifford & Co Limited has been appointed as the Company’s Alternative Investment Fund Manager (‘AIFM’) and Company
Secretaries. Details of the terms of the Investment Management Agreement are set out on page 66 and details of the fees during
the year and the balances outstanding at the year end are shown in note 3.
19 Financial instruments and risk management
As an Investment Trust, the Company invests in small Japanese company securities and makes other investments so as to achieve
its investment objective of long term capital growth. The Company borrows money when the Board and Managers have sufficient
conviction that the assets funded by borrowed monies will generate a return in excess of the cost of borrowing. In pursuing its
investment objective, the Company is exposed to various types of risk that are associated with the financial instruments and
markets in which it invests and could result in a reduction in the Company’s net assets.
These risks are categorised 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 Company may enter into derivative transactions as explained in the objective and policy on pages 48 and 49. No such
transactions were undertaken in the year under review.
The risk management policies and procedures outlined in this note have not changed substantially from the previous
accounting year.
Market risk
The fair value or future cash flows of a financial instrument or other investment held by the Company may fluctuate because 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 Managers both assess the exposure
to market risk when making individual investment decisions and monitor the overall level of market risk across the investment
portfolio on an ongoing basis. Details of the Company’s investment portfolio are shown in note 9.
i. Currency risk
The Company’s assets, liabilities and income are principally denominated in yen. The Company’s functional currency and that in
which it reports its results is sterling. Consequently, movements in the yen/sterling exchange rate will affect the sterling value of
those items.
The Managers monitor the Company’s yen exposure (and any other overseas currency exposure) and report to the Board on a
regular basis. The Managers assess 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 country in which a company is quoted is not necessarily where it earns its profits. The
movement in exchange rates on overseas earnings may have a more significant impact upon a company’s valuation than a simple
translation of the currency in which the company is quoted.
Yen borrowings are used periodically to limit the Company’s exposure to anticipated future changes in the yen/sterling exchange
rate which might otherwise adversely affect the value of the portfolio of investments. The Company may also use forward
currency contracts, although none have been used in the current or prior year.
Financial report
110
Annual Report and Financial Statements 2024
19 Financial instruments and risk management (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 January 2024
Investments
£’000
Cash and
deposits
£’000
Bank
loans
£’000
Other debtors
and creditors
£’000
Net
exposure
£’000
Yen 539,701 2,792 (86,475) 2,613 458,631
Total exposure to currency risk 539,701 2,792 (86,475) 2,613 458,631
Sterling – 173 – (1,012) (839)
539,701 2,965 (86,475) 1,601 457,792
At 31 January 2023
Investments
£’000
Cash and
deposits
£’000
Bank
loans
£’000
Other debtors
and creditors
£’000
Net
exposure
£’000
Yen 625,922 6,886 (88,013) 1,463 546,258
Total exposure to currency risk 625,922 6,886 (88,013) 1,463 546,258
Sterling – 60 – (865) (805)
625,922 6,946 (88,013) 598 545,453
Currency risk sensitivity
At 31 January 2024, 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 £45,863,000 (2023 – decreased by £54,626,000).
A 10% weakening of sterling against the yen, with all other variables held constant, would have had a similar but opposite effect
on the Financial Statement amounts.
ii. Interest rate risk
Interest rate movements may affect directly:
• the fair value of any investments in fixed interest rate securities;
• the level of income receivable on cash deposits;
• the fair value of the Company’s fixed-rate borrowings; and
• the interest payable on any variable rate borrowings which the Company may take out.
They may also impact upon the market value of the Company’s investments as the effect of interest rate movements upon the
earnings of a company may have a significant impact upon the valuation of that company’s equity.
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account
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.
The Company finances part of its activities through borrowings at approved levels. The amount of such borrowings and the
approved levels are monitored and reviewed regularly by the Board.
The interest rate risk profile of the Company’s financial assets and liabilities at 31 January 2024 is shown below. There was no
significant change to the interest rate risk profile during the year.
111
Baillie Gifford Shin Nippon PLC
19 Financial instruments and risk management (continued)
ii. Interest rate risk (continued)
Financial assets
2024
Fair value
£’000
2024
Weighted
average
interest rate
2023
Fair value
£’000
2023
Weighted
average
interest rate
Cash:
Yen 2,792 (0.40%) 6,886 (0.40%)
Sterling 173 4.07% 60 1.02%
2,965 6,946
The cash deposits generally comprise overnight call or short term money market deposits and earn interest at floating rates based
on prevailing bank base rates.
Financial liabilities
The interest rate risk profile of the Company’s financial liabilities at 31 January was:
2024
Book value
£’000
2024
Weighted
average
interest rate
2024
Weighted
average
period until
maturity
2023
Book value
£’000
2023
Weighted
average
interest rate
2023
Weighted
average
period until
maturity
Bank loans:
Yen denominated – fixed rate 38,126 1.5% 293 days 88,013 1.4% 480 days
Yen denominated – floating rate 48,349 1.8% 29 days – – –
Interest rate risk sensitivity
The sensitivity analysis below has been determined based on the exposure to interest rates at the Balance sheet date and with
the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the
case of instruments that have floating rates.
An increase of 1% in interest rates, with all other variables being held constant, would have decreased the Company’s total net
assets and total return on ordinary activities for the year ended 31 January 2024 by £175,000 (2023 – nil). This is mainly due to
the Company’s exposure to interest rates on its floating rate bank loans and cash balances. A decrease of 1% would have had
an equal but opposite effect.
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 Company’s exposure to changes in market prices relates to the fixed asset investments as disclosed
in note 9.
The Board manages the market price risks inherent in the investment portfolio by ensuring full and timely access to relevant
information from the 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 may well diverge from the comparative index.
Other price risk sensitivity
A full list of the Company’s investments is shown on pages 45 to 47. In addition, analysis of the portfolio by investment theme is
contained in the Strategic Report. 113.6% of the Company’s net assets are invested in listed equities (2023 – 111.3%). A 10%
increase in listed equity valuations at 31 January 2024 would have increased total assets and total return on ordinary activities
by £51,995,000 (2023 – £60,718,000). A decrease of 10% would have had an equal but opposite effect.
4.3% (2023 – 3.4%) of the Company’s net assets are invested in private company investments. The fair valuation of the private
company investments is influenced by the judgements and estimates made in the fair valuation process (see 1(o) on page 102).
A sensitivity analysis is provided below which recognises that the valuation methodologies employed involve subjectivity in their
significant unobservable inputs and illustrates the sensitivity of the valuations to these inputs. The inputs have been flexed by
+/-10% with the exception of the recent transaction price valuation approach as it does not involve significant subjectivity.
The table also provides the range of values for the key unobservable inputs.
Financial report
112
Annual Report and Financial Statements 2024
19 Financial instruments and risk management (continued)
iii. Other price risk (continued)
As at 31 January 2024 Significant unobservable inputs*
Valuation technique
Fair value as
at 31 January
2024
£’000
Key
unobservable
inputs
Other
unobservable
inputs
†
Range
Weighted
average
range #
Sensitivity
%
Sensitivity
to changes
in significant
unobservable inputs
Recent transaction
price
11,544 n/a
¶
a,b n/a n/a n/a n/a
Market approach using
comparable trading
multiples
8,208 EV/LTM
revenue
multiple
‡
a,b,c,e 6.6x –
6.9x
6.8x 10.0% If EV/LTM multiples
changed by
+/-10%, the fair
value would change
by £726,400 and
-£693,983.
Discount
for lack of
liquidity
f 10.0% n/a 10.0% If the illiquidity
discount is changed
by +/-10%, the fair
value would change
by £79,067 and
-£78,875.
As at 31 January 2023 Significant unobservable inputs*
Valuation technique
Fair value as
at 31 January
2023
£’000
Key
unobservable
inputs
Other
unobservable
inputs
†
Range
Weighted
average
range
#
Sensitivity
%
Sensitivity
to changes
in significant
unobservable inputs
Recent transaction
price
5,650 n/a
¶
a,b n/a n/a n/a n/a
Benchmark
performance
10,784 Selection of
comparable
companies
§
a,b,c,d (8.3%)
– 10.1%
0.4% n/a If input comparable
company performance
changed by +/10%,
the fair value would
change by £1,078,353
and -£1,078,353.
Market approach using
comparable trading
multiples
2,312 EV/LTM
revenue
multiple
‡
a,b,c,e 6.6x –
15.0x
9.7x 10.0% If EV/LTM multiples
changed by +/-10%,
the fair value would
change by £254,483
and -£222,057.
Discount
for lack of
liquidity
f 10.0% n/a 10.0% If the illiquidity
discount is changed
by +/-10%, the fair
value would change
by £31,568 and
-£31,466.
†
See explanation for other unobservable inputs on page 113 (sections ‘a’ to ‘f’ as relevant).
#
Weighted average is calculated by reference to the fair value of holdings as at the respective year-end. This therefore gives a clearer indication
of the typical multiple or adjustment being applied across the portfolio.
¶
Whilst a recent transaction price may be the most appropriate basis for a valuation, it will be corroborated by other techniques which factor in the
unobservable inputs noted in the above table. However, the transaction price itself is observable.
‡
Enterprise value (EV) divided by the last twelve months (LTM) revenue.
§
See explanation for the selection of comparable companies on page 113 section ‘c’. The percentage movements reflect the movement in overall
company value for the basket of comparable companies relevant to each holding since the most recent transaction or since the last assessed.
* Significant unobservable inputs
The variable inputs applicable to each broad category of valuation basis will vary depending on the particular circumstances
of each private company valuation. An explanation of each of the key variable inputs is provided below. The assumptions made
in the production of the inputs are described in note 1(o) on page 102.
113
Baillie Gifford Shin Nippon PLC
19 Financial instruments and risk management (continued)
iii. Other price risk (continued)
a. Application of valuation basis
Each investment is assessed independently, and the valuation basis applied will vary depending on the circumstances of each
investment. When an investment is pre-revenue, the focus of the valuation will be on assessing the recent transaction and the
achievement of key milestones since investment. Adjustments may also be made depending on the performance of comparable
benchmarks and companies. For those investments where a trading multiples approach can be taken, the methodology will
factor in revenue, earnings or net assets as appropriate for the investment, and where a suitable correlation can be identified
with the comparable companies then a regression analysis will be performed. Discounted cash flows will also be considered
where appropriate forecasts are available.
b. Probability estimation of liquidation events
The probability of a liquidation event such as a company sale, or alternatively an initial public offering (‘IPO’), is a key variable
input in the transaction-based and multiples-based valuation techniques. The probability of an IPO versus a company sale is
typically estimated from the outset to be 50:50 if there has been no indication by the company of pursuing either of these
routes. If the company has indicated an intention to IPO, the probability is increased accordingly to 75% and if an IPO has
become a certainty the probability is increased to 100%. Likewise, in a scenario where a company is pursuing a trade sale
the weightings will be adjusted accordingly in favour of a sale scenario, or in a situation where a company is underperforming
expectations significantly and therefore deemed very unlikely to pursue an IPO.
c. Selection of comparable companies
The selection of comparable companies is assessed individually for each investment at the point of investment, and the
relevance of the comparable companies is continually evaluated at each valuation. The key criteria used in selecting
appropriate comparable companies are the industry sector in which they operate, the geography of the company’s operations,
the respective revenue and earnings growth rates and the operating margins. Typically, between 4 and 10 comparable
companies will be selected for each investment, depending on how many relevant comparable companies are identified.
The resultant revenue or earnings multiples or share price movements derived will vary depending on the companies selected
and the industries in which they operate.
d. Selection of appropriate benchmarks
The selection of appropriate benchmarks is assessed individually for each investment. The industry and geography of
each company are key inputs to the benchmark selection, with either one or two key indices or benchmarks being used
for comparison.
e. Estimated sustainable earnings
The selection of sustainable revenue or earnings will depend on whether the company is sustainably profitable or not, and
where it is not then revenues will be used in the valuation. The valuation approach will typically assess companies based on
the last twelve months of revenue or earnings, as they are the most recent available and therefore viewed as the most reliable.
Where a company has reliably forecasted earnings previously or there is a change in circumstance at the business which will
impact earnings going forward, then forward estimated revenue or earnings may be used instead.
f. Application of illiquidity discount
The application of an illiquidity discount will be applied either through the calibration of a valuation against the most recent
transaction, or by application of a specific discount. The discount applied where a calibration is not appropriate is typically 10%,
reflecting the fact that the majority of the investments held are substantial companies with some secondary market activity.
Financial report
114
Annual Report and Financial Statements 2024
19 Financial instruments and risk management (continued)
iii. Other price risk (continued)
Liquidity risk
This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. Liquidity risk
is not significant in normal market conditions as the majority of the Company’s assets are in investments that are readily realisable.
The Company’s investment portfolio is in Japanese small-cap equities which are typically less liquid than larger capitalisation stocks.
The Managers monitor the liquidity of the portfolio on an ongoing basis and relevant guidelines are in place. The investment portfolio
is sufficiently liquid to allow stocks to be realised to repay borrowings if required.
The Board provides guidance to the Managers as to the maximum exposure to any one holding (see objective and policy on pages
48 and 49).
The maturity profile of the Company’s financial liabilities at 31 January was:
2024
£’000
2023
£’000
In less than one year:
– repayment of loan 86,491 43,723
– accumulated interest 537 1,178
In more than one year but not more than five years:
– repayment of loan – 44,348
– accumulated interest – 541
87,028 89,790
The Company has the power to take out borrowings, which gives it access to additional funding when required.
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:
• The Depositary is liable for the loss of financial instruments held in custody. The Depositary will ensure that any delegate
segregates the assets of the Company. The Managers monitors the Company’s risk by reviewing the custodian’s internal control
reports and reporting their findings to the Board;
• Investment transactions are carried out with a large number of brokers whose creditworthiness is reviewed by the Managers.
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;
• The creditworthiness of the counterparty to transactions involving derivatives, structured notes and other arrangements,
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 Managers; and
• At 31 January 2024 and 2023, all cash deposits were held with the custodian bank. The credit risk of the custodian is reviewed
as detailed above. Cash may also be held at banks that are regularly reviewed by the Managers. If the credit rating of a bank
where a cash deposit was held fell significantly, the Managers would endeavour to move the cash to an institution with a
superior credit rating.
115
Baillie Gifford Shin Nippon PLC
19 Financial instruments and risk management (continued)
iii. Other price risk (continued)
Credit risk exposure
The maximum exposure to credit risk at 31 January was:
2024
£’000
2023
£’000
Cash and deposits 2,965 6,946
Debtors 3,414 2,941
6,379 9,887
None of the Company’s financial assets are past due or impaired.
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
other financial assets and liabilities approximate to fair value with the exception of the long term borrowings which are stated at
amortised cost. The fair value of the loans is shown below.
Financial assets
2024
Book
value
£’000
2024
Fair *
value
£’000
2023
Book
value
£’000
2023
Fair *
value
£’000
Fixed rate yen bank loans 38,126 38,096 88,103 87,725
Floating rate yen bank loans† 48,349 48,349 – –
86,475 86,445 88,103 87,725
*
The fair value of each bank loan is calculated using methodologies consistent with International Private Equity and Venture Capital Valuation
(‘IPEV’) guidelines.
† All short-term floating rate borrowings are stated at book cost which is considered to be equal to their fair value given the facilities are revolving
credit facilities.
Capital management
The capital of the Company is its share capital and reserves as set out in note 14 together with its borrowings (see notes 11
and 12). The Company’s investment objective and policy is set out on pages 48 and 49. In pursuit of the Company’s objective,
the Board has a responsibility for ensuring the Company’s ability to continue as a going concern and details of the related risks
and how they are managed are set out on pages 51 to 55. The Company has the ability to buy back and issue shares (see pages
68 and 69) and changes to the share capital during the year are set out in note 13. The Company does not have any externally
imposed capital requirements other than the covenants on its loans which are detailed in note 11.
Shareholder
information
117
Baillie Gifford Shin Nippon PLC
Notice of Annual
General Meeting
The Annual General Meeting of the Company will
be held at The Cavendish London, 81 Jermyn Street,
St James’s, London SW1Y 6JF, on Thursday,
23 May 2024 at 11am.
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.
Notice is hereby given that the thirty ninth Annual
General Meeting of Baillie Gifford Shin Nippon PLC
will be held at The Cavendish London, 81 Jermyn
Street, St James’s, London SW1Y 6JF, on Thursday,
23 May 2024 at 11am for the purpose of considering
and, if thought fit, passing the following resolutions,
of which Resolutions 1 to 11 will be proposed as
ordinary resolutions and Resolutions 12 and 13 will
be proposed as special resolutions. All resolutions
are classified as ordinary business.
The Cavendish
London
Jermyn Street
St James’
Square
Ryder Street
St Jame’s Street
King Street
Christie’s
London
Regent Street
St. James’s
Post Office
The Royal
Automobile Club
Piccadilly
Park Pl
Pall Mall
Duke Street St James’s
Bury Street
01. To receive and adopt the Financial Statements
of the Company for the year ended 31 January
2024 with the Reports of the Directors and of
the Independent Auditor thereon.
02. To approve the Directors’ Annual Report on
Remuneration for the year ended 31 January
2024.
03. To declare a final dividend of 0.80p per
ordinary share.
04. To re-elect Ms CEC Finn as a Director of
the Company.
05. To re-elect Ms AE Rotheroe as a Director of
the Company.
06. To re-elect Mr J Skinner as a Director of the
Company.
07. To re-elect Mr KJ Troup as a Director of the
Company.
08. To re-elect Professor S Vijayakumar as a Director
of the Company.
Shareholder information
118
Annual Report and Financial Statements 2024
09. To re-appoint Johnston Carmichael LLP as
Independent Auditor of the Company to hold
office from the conclusion of this meeting until
the conclusion of the next Annual General
Meeting at which the Financial Statements are
laid before the Company.
10. To authorise the Directors to determine the
remuneration of the Independent Auditor of
the Company.
11. 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 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 £2,042,345.65 (representing
33.33% of the nominal value of the issued
share capital excluding treasury shares as at
20 March 2024), 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.
12. That, subject to the passing of Resolution 11
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, either pursuant to the
authority given by Resolution 12 above or by way
of the sale of treasury shares wholly 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 after
such expiry and the Directors may allot equity
securities in pursuance of any such offer or
agreement as if the power conferred hereby
had not expired; and
b. shall be limited to the allotment of equity
securities up to an aggregate nominal value
of £ 612,764.97 being approximately 10% of
the nominal value of the issued share capital
excluding treasury shares of the Company
as at 20 March 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 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 its
119
Baillie Gifford Shin Nippon PLC
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 45,926,734 being 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 the nominal value of that share;
c. the maximum price (excluding expenses)
which may be paid for each ordinary share
shall not be more than the higher of:
i. 5% above the average closing price on the
London Stock Exchange of an ordinary share
over the five business 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; 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 Company’s next Annual
General Meeting, 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 Managers and Secretaries
12 April 2024
Shareholder information
120
Annual Report and Financial Statements 2024
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 or telephone number
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
is signed or a certified copy thereof, must be
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 48 hours
(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 and/or by logging on to the website
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
Limited’s specifications, and must contain the
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 48 hours (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
service provider(s), to procure that his/her
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
system 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
in Regulation 35(5)(a) of the Uncertificated
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.
121
Baillie Gifford Shin Nippon PLC
08. Pursuant to Regulation 41 of the Uncertificated
Securities Regulations 2001 and section 311 of
the Companies Act 2006 the Company specifies
that to be entitled to attend and vote at the
AGM (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 48
hours (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
between him/her and the shareholder by whom
he/she was nominated, have a right to be
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, he/she may, under any such agreement, have
a 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 AGM, including
information required by section 311A of the
Companies Act 2006, is available from the
Company’s page of the Managers’ website at
shinnippon.co.uk.
13. Members have the right to ask questions at
the meeting in accordance with section 319A
of the Companies Act 2006.
14. As at 20 March 2024 (being the last practicable
date prior to the publication of this notice) the
Company’s issued share capital consisted of
306,382,485 ordinary shares excluding treasury
shares, carrying one vote each. Therefore, the
total voting rights in the Company as at 20
March 2024 were 306,382,485 votes.
15. Any person holding 3% or more of the total
voting rights of the Company who appoints
a person other than the Chair of the meeting
as his/her proxy will need to ensure that both
he/she and his/her proxy complies with their
respective disclosure obligations under the UK
Disclosure Guidance and Transparency Rules.
16. No Director has a contract of service with the
Company.
Shareholder information
122
Annual Report and Financial Statements 2024
Further shareholder
information
Baillie Gifford Shin Nippon is an investment
trust. Investment trusts offer investors the
following:
• participation in a diversified portfolio of shares;
• constant supervision by experienced professional
managers; and
• the Company is free from capital gains tax on
capital profits realised within its portfolio although
investors are still liable for capital gains tax on
profits when selling their investment.
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 Shin Nippon, 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
on Baillie Gifford’s website at shinnippon.co.uk,
Trustnet at trustnet.co.uk and on other financial
websites. Company factsheets are also available on
the Baillie Gifford website and are updated monthly.
These are available from Baillie Gifford on request.
Baillie Gifford Shin Nippon share identifiers
ISIN GB00BFXYH242
Sedol BFXYH24
Ticker BGS
Legal Entity Identifier X5XCIPCJQCSUF8H1FU83
The ordinary shares of the Company are listed on
the London Stock Exchange and their price is shown
in the Financial Times.
Key dates
The Annual Report and Financial Statements are
normally issued in March or early April and the
AGM is normally held during May. Any dividends,
if applicable, will be paid as a single final payment
shortly after the Company’s AGM.
Capital gains tax
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:
Apportioned
cost *
First day of
dealing value *
Cost of each ordinary share 9.45p 8.9p
Cost of fraction for warrant 0.55p 2.7p
10.00p
The cost for capital gains tax purposes to
shareholders who subscribed for the conversion
shares, subsequently converted into new ordinary
shares (with warrants attached) is apportioned
between the ordinary shares and the warrants as
set out in the placing and offer document dated
18 May 1994.
The attributable costs are:
Apportioned
cost *
First day of
dealing value *
Cost of each ordinary share 32.96p 35.6p
Cost of fraction for warrant 15.37p 16.6p
*
Adjusted for the five for one share split on 21 May 2018.
If shareholders are in any doubt as to their
personal taxation position they should consult their
professional advisers.
123
Baillie Gifford Shin Nippon PLC
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 3223.
This helpline also offers an automated self-service
functionality (available 24 hours a day, 7 days a
week) which allows you to:
• hear the latest share price;
• confirm your current share holding balance; and
• order Change of Address and Stock Transfer
forms.
By quoting the reference number on your share
certificate you can check your holding on the
Registrar’s website at investorcentre.co.uk.
They also offer a free, secure, share management
website service which allows you to:
• view your share portfolio and see the latest market
price of your shares;
• calculate the total market price of each
shareholding;
• view price histories and trading graphs;
• change address details; and
• use online dealing services.
To take advantage of this service, please log in at
investorcentre.co.uk and enter your Shareholder
Reference Number and Company Code (this
information can be found on your share certificate).
How to vote your shares
As a shareholder you have a say on how the Company
is run. The following link will take you through to The
Association of Investment Companies (AIC) website
where there is information on how to vote your shares
if you hold them via one of the major platforms:
theaic.co.uk/how-to-vote-your-shares.
Electronic proxy voting
If you hold stock in your own name you can choose
to vote by returning proxies electronically at
investorcentre.co.uk/eproxy.
If you have any questions about this service please
contact Computershare on 0370 889 3223.
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.
Where this has been received in a country where
the provision of such a service would be contrary to
local laws or regulations, this should be treated as
information only.
These Financial Statements have been approved
by the Directors of Baillie Gifford Shin Nippon PLC.
Baillie Gifford only provides information about its
products and does not provide investment advice.
The staff of Baillie Gifford and Baillie Gifford Shin
Nippon’s Directors may hold shares in Baillie Gifford
Shin Nippon and may buy or sell such shares from
time to time.
Shareholder information
124
Annual Report and Financial Statements 2024
Data protection
The Company is committed to ensuring the
confidentiality and security of any personal data
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 shinnippon.co.uk.
Alternative Investment Fund Managers
Regulations (‘AIFMR’)
In accordance with the 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 in the ‘Company information’
section on page 133) and the most recent numerical
remuneration disclosures in respect of the
AIFM’s relevant reporting period are available at
bailliegifford.com.
Leverage
The Company’s maximum and actual leverage levels
(see Glossary of terms and Alternative Performance
Measures on pages 129 to 132) at 31 January 2024
were as follows:
Gross
method
Commitment
method
Maximum limit 2.50:1 2.00:1
Actual 1.19:1 1.19:1
Automatic Exchange of Information
In order to fulfil its obligations under UK tax
legislation relating to the automatic exchange
of information, Baillie Gifford Shin Nippon PLC 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. Accordingly, Baillie Gifford Shin Nippon PLC
must provide information annually to the local tax
authority on the tax residencies of a number of
non-UK based certificated shareholders and
corporate entities.
Shareholders, excluding those whose shares are
held in CREST, who come on to the share register
will be sent a certification form for the 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.
125
Baillie Gifford Shin Nippon PLC
Communicating
with shareholders
Trust magazine Shin Nippon web page at shinnippon.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 Shin Nippon. 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
Baillie Gifford Shin Nippon on the Web
Up-to-date information about Baillie Gifford Shin
Nippon, including a monthly commentary, recent
portfolio information and performance figures, can
be found on the Company’s page of the Managers’
website at shinnippon.co.uk.
You can also find a brief history of Baillie Gifford
Shin Nippon, an explanation of the effects of gearing
and a flexible performance reporting tool.
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 Shin Nippon.
Client relations team contact details
You can contact the Baillie Gifford Client Relations
Team by telephone, email or post:
Telephone: +44 (0)800 917 2112
Your call may be recorded for training or monitoring
purposes.
Email: trustenquiries@bailliegifford.com
Website: bailliegifford.com
Baillie Gifford Client Relations Team
Calton Square
1 Greenside Row
Edinburgh EH1 3AN
Please note that Baillie Gifford is not permitted
to give financial advice. If you would like advice,
please ask an authorised intermediary.
Shareholder information
126
Annual Report and Financial Statements 2024
Manager Insights: Shin Nippon
by Praveen Kumar
Praveen Kumar gives an update on
Japanese smaller companies, touching on
investment performance, changes to the
portfolio and long-term outlook.
Japan’s secret superstars
by Joji Sakurai
The new generation of companies that
quietly captured key technology niches.
Japan’s hidden global champions
Citywire webinar
There’s more to Japan than manufacturing.
Discover the innovation that excites
Praveen Kumar.
127
Baillie Gifford Shin Nippon PLC
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.
MSCI Index data
Source: MSCI. The MSCI information may only be
used for your internal use, may not be reproduced
or redisseminated in any form and may not be
used as a basis for or a component of any financial
instruments or products or indices. None of the MSCI
information is intended to constitute investment
advice or a recommendation to make (or refrain from
making) any kind of investment decision and may
not be relied on as such. Historical data and analysis
should not be taken as an indication or guarantee
of any future performance analysis, forecast or
prediction.
The MSCI information is provided on an ‘as is’
basis and the user of this information assumes
the entire risk of any use made of this information.
MSCI, each of its affiliates and each other person
involved in or related to compiling, computing or
creating any MSCI information collectively, the
‘MSCI Parties’ expressly disclaims all warranties
(including, without limitation, any warranties of
originality, accuracy, completeness, timeliness,
non-infringement, merchantability and fitness for a
particular purpose) with respect to this information.
Without limiting any of the foregoing, in no event
shall any MSCI Party have any liability or any direct,
indirect, special, incidental, punitive, consequential
(including, without limitation, lost profits) or any
other damages (msci.com).
Shareholder information
128
Annual Report and Financial Statements 2024
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 Shin Nippon is
marketed in the EU by the AIFM, BG & 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
stewardship principles and guidelines as its
policy on integration of sustainability risks in
investment decisions.
Baillie Gifford & Co believes that a company
cannot be financially sustainable in the long run if
its approach to business is fundamentally out of
line with changing societal expectations. It defines
‘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.
To do this it looks beyond current financial
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
factors (environmental, social and/or governance
matters) which it believes will positively or negatively
influence the financial returns of an investment.
The likely impact on the return of the portfolio from
Sustainable Finance Disclosure
Regulation (‘SFDR’)
a potential or actual material decline in the
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 believes could create
beneficial long-term returns for 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 Manager’s approach to
sustainability can be found in the stewardship
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.
129
Baillie Gifford Shin Nippon PLC
Glossary of terms and Alternative
Performance Measures (‘APM’)
An alternative performance measure is a financial measure of historical or future financial performance,
financial position, or cash flows, other than a financial measure defined or specified in the applicable
financial reporting framework. The APMs noted below are commonly used measures within the investment
trust industry and serve to improve comparability between investment trusts.
Total assets
This is the Company’s definition of Adjusted Total Assets, being 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.
Net Asset Value (borrowings at book value)
Borrowings are valued at adjusted net issue proceeds. The Company’s yen denominated loans are valued at
their sterling equivalent and adjusted for their arrangement fees. The value of the borrowings on this basis is
set out in note 11 on page 107.
Net Asset Value (borrowings at fair value) (APM)
This is a widely reported measure across the investment trust industry. Borrowings are valued at an estimate
of their market worth. The Company’s yen denominated fixed rate loans are fair valued using methodologies
consistent with International Private Equity and Venture Capital Valuation (‘IPEV’) guidelines. The value of
the borrowings on this basis is set out in note 19 on page 115. A reconciliation from NAV (with borrowings at
book value) to NAV per ordinary share (with borrowings at fair value) is provided below.
31 January 2024 31 January 2023
NAV per ordinary share (borrowings at book value) 147.8p 173.6p
Shareholders’ funds (borrowings at book value) £457,792,000 £545,453,000
Add: book value of borrowings £86,475,000 £88,013,000
Less: fair value of borrowings (£86,445,000) (£87,725,000)
NAV (borrowings at fair value)
£457,822,000 £545,741,000
Shares in issue at year end 309,757,485 314,152,485
NAV per ordinary share (borrowings at fair value)
147.8p 173.7p
Shareholder information
130
Annual Report and Financial Statements 2024
Premium/discount (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 NAV per share from the share price 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.
2024
NAV (book)
2024
NAV (fair)
2023
NAV (book)
2023
NAV (fair)
Closing NAV per share 147.8p 147.8p 173.6p 173.7p
Closing share price 126.2p 126.2p 158.8p 158.8p
Discount (14.6%) (14.6%) (8.5%) (8.6%)
The average discount/premium (APM) as disclosed on page 8 is calculated by taking an average of the daily
discount/premium percentage using NAV (with borrowings at fair value) for the year to 31 January 2024.
Ongoing charges (APM)
The total expenses (excluding borrowing costs) incurred by the Company as a percentage of the average
NAV (with borrowings at fair value). The ongoing charges have been calculated on the basis prescribed by
the Association of Investment Companies.
A reconciliation from the expenses detailed in the Income statement on page 96 is provided below:
31 January 2024
£’000
31 January 2023
£’000
Investment management fee £2,878,000 £3,154,000
Other administrative expenses £628,000 £679,000
Total expenses (a) £3,506,000 £3,833,000
Average daily cum-income NAV
(with borrowings at fair value)
(b) £485,043,000 £521,337,000
Ongoing charges (a) as a percentage of (b) 0.72% 0.74%
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. The Company did not pay a dividend in the period, therefore, the one year total
returns for the share price and NAV per share at book and fair value are the same as the percentage
movements in the share price and NAV per share at book and fair value as detailed on page 26.
131
Baillie Gifford Shin Nippon PLC
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.
Gearing represents borrowings at book less cash and cash equivalents expressed as a percentage of
shareholders’ funds.
Gross gearing is the Company’s borrowings expressed as a percentage of shareholders’ funds.
31 January 2024 31 January 2023
Gearing
*
£’000
Gross gearing
†
£’000
Gearing
*
£’000
Gross gearing
†
£’000
Borrowings (a) 86,475 86,475 88,013 88,013
Cash and cash equivalents (b) 3,596 – 6,082 –
Shareholders’ funds (c) 457,792 457,792 545,453 545,453
18.1% 18.9% 15.0% 16.1%
*
Gearing: ((a) – (b)) ÷ (c), expressed as a percentage.
†
Gross gearing: (a) ÷ (c), expressed as a percentage.
Leverage
For the purposes of the 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 NAV 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 quoted equity
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.
Shareholder information
132
Annual Report and Financial Statements 2024
Net liquid assets
Net liquid assets comprise current assets less current liabilities, excluding borrowings.
Share split
A share split (or stock split) is the process by which a company divides its existing shares into multiple
shares. Although the number of shares outstanding increases, the total value of the shares remains the
same with respect to the pre-split value.
Treasury shares
The Company has the authority to make market purchases of its ordinary shares for retention as treasury
shares for future reissue, resale, transfer, or for cancellation. Treasury shares do not receive distributions
and the Company is not entitled to exercise the voting rights attaching to them.
Private (unlisted) company
A private (unlisted) company means a company whose shares are not available to the general public for
trading and not quoted on a stock exchange.
Turnover
Turnover is calculated as the minimum of purchases and sales in a month, divided by the average market
value of the portfolio, summed to get rolling 12 month turnover data.
133
Baillie Gifford Shin Nippon PLC
Company
information
Directors
Chair: J Skinner
CEC Finn
AE Rotheroe
KJ Troup
Professor S Vijayakumar
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
T: +44 (0)370 889 3223
Alternative Investment
Fund Managers, Secretaries
and Registered Office
Baillie Gifford & Co Limited
Calton Square
1 Greenside Row
Edinburgh EH1 3AN
T: +44 (0)131 275 2000
bailliegifford.com
Depositary
The Bank of New York Mellon
(International) Limited
160 Queen Victoria Street
London EC4V 4LA
Independent Auditor
Johnston Carmichael LLP
7–11 Melville Street
Edinburgh EH3 7PE
Company details
shinnippon.co.uk
Company Registration No. SC093345
ISIN: GB00BFXYH242
Sedol: BFXYH24
Ticker: BGS
Legal Entity Identifier:
X5XCIPCJQCSUF8H1FU83
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
Corporate Broker
Winterflood Securities Limited
Riverbank House
2 Swan Lane
London EC4R 3GA
shinnippon.co.uk
Calton Square, 1 Greenside Row, Edinburgh EH1 3AN
Telephone +44 (0)131 275 2000