Baillie GiffordJapan - Baillie Gifford Japan Trust Final Results
29/10/2024 07:00
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RNS Number : 9484J Baillie Gifford Japan Trust PLC 29 October 2024
RNS Announcement
The Baillie Gifford Japan Trust PLC
Legal Entity Identifier: 54930037AGTKN765Y741
Regulated Information Classification: Additional regulated information
required to be disclosed under the applicable laws and regulations.
Results for the year to 31 August 2024
Over the year to 31 August 2024, The Baillie Gifford Japan Trust PLC's net
asset value total return per share was 10.0% compared to the 14.7% total
return in the TOPIX index (in sterling terms). In this period the Company's
share price total return was 4.4%.
Over the five years to the end of August 2024, the NAV total return was 12.6%
and over ten years 151.8% compared to the TOPIX total return of 36.7% and
140.0% respectively.
· A final dividend of 10p per ordinary share (2023: 10p per ordinary
share) will be put to shareholders for approval at the Annual General Meeting.
· The Board is pleased to announce a change to the Investment
Management fee structure, by way of the removal of the 0.75% fee rate on the
first £50 million of net assets. This results in an annual saving of
approximately £50,000 for the Company.
· There was modest outperformance of the benchmark in the second half
of the year but this was not sufficient to offset the effects of the first
half of the year.
· The most significant positive contributors to performance were
Rakuten (+1.9ppt), where the company's mobile telecoms network, following
heavy investment, is now close to breakeven, as continued acquisition of new
customers has encouraged the market to recognise the potential; and SWCC Showa
(+0.8ppt), where the shares went up 2.7x as its high voltage cable business
has prospered.
· During the period six new investments were made. These were Nippon
Paint, Kansai Paint, Eisai (drug developer), Nakanishi (dental drill
handsets), Kose (skincare) and Daikin (air conditioning and heat pumps). Five
positions were sold during the period while gearing rose slightly to 18%. In
addition, the Company undertook a successful private placement debt raise.
· The Managers increasingly feel that the new normal post-Covid is
similar to the old normal pre-Covid - limited global economic expansion,
controlled inflation, with opportunities and risks being presented by
technology changes. This makes growth a scarce and valuable feature of a
business and presents conditions which are more favourable to their investment
style than the recent rapid economic expansion.
For a definition of terms see Glossary of Terms and Alternative Performance
Measures. Source: Refinitiv/Baillie Gifford. See disclaimer at the end of this
announcement.
The Baillie Gifford Japan Trust PLC aims to achieve long-term capital growth
principally through investment in medium to smaller sized Japanese companies,
which are believed to have above average prospects for growth. At 31 August
2024, the Company had total assets of £889.0m (before deduction of bank loans
of £140.6m).
The Company is managed by Baillie Gifford, an Edinburgh based fund management
group with around £220.0bn under management and advice as at 28 October
2024.
Past performance is not a guide to future performance. The value of an
investment and any income from it is not guaranteed and may go down as well as
up and investors may not get back the amount invested. This is because the
share price is determined by the changing conditions in the relevant stock
markets in which the Company invests and by the supply and demand for the
Company's shares.
You should view your investment as long term. You can find up to date
performance information about The Baillie Gifford Japan Trust PLC on the
Company website at japantrustplc.co.uk. (http://www.japantrustplc.co.uk/)
See disclaimer at the end of this announcement.
Approved by the Board on 28 October 2024
For further information please contact:
Naomi Cherry - Client Director
Baillie Gifford & Co
Tel: 0131 474 5548
Jonathon Atkins, Four Communications
Tel: 020 3920 0555 or 07872 495396
Chairman's Statement
Introduction
This year has marked several significant milestones for Japan: its market has
smashed through the previous peak achieved all the way back in 1989 to reach
new highs, and its central bank has claimed victory over the country's
multi-decade battle with deflation, as Japan became the world's last country
to end its negative interest rate policy. While the Company has continued to
face challenges as growth investing remained out of favour, these factors
strengthen the Board's support for the Managers and conviction that the
portfolio is well positioned to generate attractive long-term returns for
investors.
Performance
In the year to 31 August 2024, the net asset value ("NAV") total return was
10.0% and, as market sentiment continued to be poor, the share price
total return was a modest 4.4%. The comparative index (TOPIX, total return
sterling terms) appreciated by 14.7% over the same period.
The Company's objective is to achieve long-term capital growth, and the NAV
returns remain ahead of the benchmark on a 10-year time horizon.
While performance is carefully examined at every Board meeting, in June 2023,
the Board, in collaboration with the Managers, conducted a more thorough
analysis of the Company's performance over the previous five years, looking at
both process and outcomes. The Company's investment strategy is explicitly
growth-orientated. The vast majority of the Company's assets are invested in
companies with higher than average growth prospects. The Board remains highly
supportive of this investment strategy; the Japanese equity market is vast and
rich in opportunity but the broader Japanese economy itself grows slowly due
to structural factors. Therefore, the Board believes companies demonstrating
idiosyncratic growth should command premium valuations and outperform over
time. The Manager invests on a bottom-up basis, focusing on identifying the
most attractive growth companies and largely ignoring macro factors.
However, investors should note that there are certain market environments
which do not favour growth investing and in which the Company may be more
likely to underperform both its benchmark and more value-focused peers. While
it is not possible to be prescriptive on this issue, an environment of rising
inflation and interest rates, such as that which we have seen since 2022,
tends to be unfavourable for growth stocks' relative performance. That said,
it is interesting to note that the Company's share price outperformed its
benchmark in the second half of the year as the market began to focus on the
earnings growth of its portfolio holdings.
Gearing and Borrowing
The Board believes borrowing will enhance long-term returns to investors. Net
gearing increased from 17.0% to 18.1% for the year ending 31 August 2024. The
Board is pleased to announce that in July 2024, the Company secured JPY12
billion of fixed rate, senior, unsecured private notes split across three
tranches of JPY4 billion, maturing in 5, 10 and 14 years from the funding
date of 20 November 2024. The new funding has a competitive average interest
rate of 2.05%, with proceeds of this funding to be used to repay the existing
JPY9.3 billion ING bank debt maturing in November 2024 and the JPY2.6 billion
Mizuho revolving credit facility maturing in March 2025.
Dividend
The Board is recommending a dividend of 10p per ordinary share (2023: 10p per
ordinary share). This will be put to shareholders for approval at the Annual
General Meeting ("AGM") to be held on 11 December 2024. If approved, the
dividend will be paid on 18 December to shareholders on the register at close
of business on 14 November 2024. A dividend reinvestment plan (DRIP) is
available to shareholders who would prefer to invest their dividends in the
shares of the Company. For those shareholders electing to receive the DRIP,
the last date for receipt of DRIP elections is 27 November 2024.
Share Capital and Discount Management
Over the course of the year, the share price discount to NAV widened from 6.7%
to 11.6%. During this period, the Company bought back 5,515,000 shares at a
cost of approximately £39.2 million, representing approximately 6% of the
Company's opening issued share capital. Share buybacks serve to improve market
liquidity and enhance NAV per share for existing shareholders. These shares
are held in treasury and are available to be reissued, at a premium, when
market conditions allow.
Your Board believes it is important that the Company retains the power to buy
back equity during the year and is therefore seeking to renew this facility at
the AGM. Further details of the buy back facility can be found on page 45 of
the Annual Report and Financial Statements.
The Company also has authority to issue new shares and to reissue any shares
held in treasury for cash on a non-pre-emptive basis. Shares are only issued
or reissued at a premium to net asset value, thereby enhancing net asset value
per ordinary share for existing shareholders. The Directors are, once again,
seeking 10% share issuance authority at the AGM. This authority would expire
at the conclusion of the AGM in 2025.
Fees
The Board is pleased to announce a change to the Investment Management fee
structure, by way of the removal of the 0.75% fee rate on the first
£50 million of net assets. This results in an annual saving of £50,000 for
the Company. As a result of this fee amendment, the fee payable to the
Managers, with effect from 1 September 2024, is 0.65% on the first £250
million of net assets and 0.55% on the remaining net assets.
Annual General Meeting (AGM)
The Company's AGM is scheduled for 11 December 2024 at Baillie Gifford's
offices in Edinburgh. The Board encourages all shareholders to attend in
person but also to exercise their votes by completing and submitting a form of
proxy. Shareholders who hold their shares via a platform, can find further
details on page 96 of the Annual Report and Financial Statements as to how to
vote their shares via their platform.
We also encourage shareholders to monitor the Company's website at
japantrustplc.co.uk where any updates will be posted and market announcements
will be made, as appropriate. Should shareholders have questions for the Board
or the Managers or any queries as to how to vote, they are welcome to submit
these by email to trustenquiries@bailliegifford.com or call 0800 917 2112.
Information on the resolutions can be found on pages 88 and 89 of the Annual
Report and Financial Statements. The Directors consider that all resolutions
to be put to shareholders are in their and the Company's best interests as a
whole and recommend that shareholders vote in their favour.
In particular, shareholders have the right to vote annually on whether the
Company should continue in business and will have the opportunity to do so
again this year. Last year, the Company again received support for its
continuation with 91% of votes cast in favour. Your Directors believe there
are attractive opportunities in selected, well-run Japanese companies
benefiting the long-term favourable outlook for the Japan Trust. To that end,
my fellow Directors and I intend, where possible, to vote our own
shareholdings in favour of the resolution and hope that all shareholders will
feel disposed to do likewise.
Board
The Board is cognisant of good corporate governance practice and as such I
should also like to remind shareholders of my intention to step down from the
Board at the AGM to be held in 2025. This would mean that I serve 10 years in
total on the Board with just over three of those years as Chairman, a role to
which I was appointed following the untimely death of Keith Falconer. The
Board is pleased to announce that Sam Davis will be my successor. Sam joined
the Board in 2021 and is currently Chair of the Management Engagement
Committee. I am confident that he will be an effective leader of your Company
following my retirement towards the end of next year.
Outlook
The Board is encouraged by the recent improvement in absolute and relative
performance, albeit that the Company lagged its benchmark over the year as a
whole. We are hopeful that this welcome pickup will continue in the months and
years ahead. The portfolio's significant exposure to founder-owner businesses
and its holdings in the areas of digitalisation and the internet, automation,
robotics and healthcare are especially encouraging.
David Kidd
Chairman
28 October 2024
Managers' Review
Introduction
During the past year we have had a period of economic normalisation despite
various serious geopolitical events. Inflation seems to be coming under
control in many Western economies with consequent interest rate reductions.
Meanwhile with inflation becoming better established in Japan we have seen the
very early steps in interest rate normalisation. AI has continued to develop,
although the process of embedding it in everyday life is still at a relatively
early stage. The Yen has been volatile through the year but more recently has
strengthened relative to the dollar, although to nowhere near a level where
we would consider it to be excessively strong.
Performance Review
During the year the Company's NAV total return of +10.0% compared with +14.7%
for the TOPIX index in sterling terms ('TOPIX'). In the second half of the
year the NAV total return was +2.0% compared with +1.5% for the TOPIX but this
very modest outperformance was not sufficient to offset the weak performance
in the first half of the year. Over 5 years the cumulative NAV total return
was +12.6% and over 10 years +151.8%. This compares to increases in the TOPIX
of +36.7% over 5 years and +140.0% over 10 years.
The most significant positive contributors to performance were Rakuten
(+1.9ppt), where the company's mobile telecoms network, following heavy
investment, is now close to breakeven, as continued acquisition of new
customers has encouraged the market to recognise the potential; and SWCC Showa
(+0.8ppt), where the shares went up 2.7x as its high voltage cable business
has prospered. On the other hand, Shiseido (-1.2ppt) has continued to struggle
against a background of weak Chinese demand for cosmetics and Rohm (-0.8ppt)
has suffered from increased competition in the Silicon Carbide market. Because
the Company delivered a positive return in Yen over the year, gearing made a
positive contribution to performance (+1.7ppt).
Portfolio
During the period we bought 6 new holdings and sold 5. We found more
opportunities in the paint sector with new holdings in Nippon Paint and
Kansai Paint, which join existing holding Chugoku Marine Paint. Our research
has led us to conclude that paint is an excellent product with significant
pricing power, as the overall cost of completing the job is largely driven by
labour costs. As a result, the price paid for the paint is less important,
making availability and quality the key factors that influence purchasing
decisions. Nippon Paint has developed a strong position in Chinese decorative
paint through its longstanding Nipsea business, while Kansai Paint has a
strong position in Indian automotive paint. We expect good volume growth from
both areas over time which, combined with favourable pricing dynamics, should
result in good long-term profit growth.
We also found opportunities in healthcare which remains an area of interest to
growth investors as the combination of scientific advances and aging global
populations creates a favourable environment. We bought a holding in Eisai,
the first company to bring to market an approved drug for treating the
underlying cause of Alzheimer's disease. The disease represents a huge unmet
medical need and estimates suggest that it is responsible for 1 in 10 deaths
in the UK. The drug, Leqembi, works by reducing the level of damaging amyloid
protein in the brain and has been shown in large clinical trials to reduce
significantly the rate of cognitive decline. It has been approved in Japan,
the US, China and the UK (although is not available on the NHS currently). We
also bought a holding in Nakanishi, which makes dental drill handsets, and has
been steadily taking share in the valuable US market due to the very high
quality of its products.
We took a holding in Kose, a family run skincare company with leading brands
including Decorté and Jill Stuart, where we expect a long growth runway as a
result of rising Asian wealth. Just prior to the year end and following share
price weakness, we took a holding in Daikin, a leader in air conditioning and
heat pumps. Daikin's products are likely to play an increasingly important
role in cooling and heating buildings due to the challenges posed by
heatwaves, while also being capable of operating without emitting carbon if a
renewable electricity source is used.
Of the 5 holdings sold, Outsourcing was subject to a management buyout at an
attractive price, MS&AD Insurance shares performed very strongly following
a management commitment to reduce cross-holdings significantly, and Denso,
Iida Group, and Itochu are all businesses where the forward looking growth
prospects seem increasingly difficult.
Given our focus on the prospects for individual businesses, it is unsurprising
that we have built a portfolio that is quite different to a Japanese market
dominated by large, traditional, and highly cyclical businesses. The major
portfolio exposures remain internet and digitalisation, automation and
robotics with additional areas of focus in Asian consumer stocks and
healthcare. We actively avoid areas where we think long-term prospects are
poor, which currently includes car manufacturers, steel companies, and
old-fashioned industrial conglomerates. We also continue to believe that
having a founder in charge of a business is effective in aligning the
interests of management and shareholders. For your Company, 32% of the
portfolio has a founder-owner in charge, compared with 7% of the TOPIX as a
whole (source: MSCI).
Key internet and digitalisation stocks include Softbank, Rakuten, SBI, GMO
Internet, Recruit and CyberAgent. As well as its holding in ARM, which has a
near-monopoly in mobile phone chip design, SoftBank has broad exposure to
leading early-stage AI and digitisation companies through its Vision Funds.
Rakuten and CyberAgent have both invested heavily in developing new businesses
in recent years and both are close to the point where those investments begin
to make a positive contribution to profits. SBI continues to gain market share
within the financial industry in Japan, while GMO Internet provides exposure
to datacentres. Finally, Recruit is working on simplifying labour-intensive
hiring processes. Although it is not a new concept, the ability of
internet-based businesses to offer a compelling triad of cheaper, better, and
quicker services continues to enable them to take market share from more
traditional operators.
Major automation and robotics positions include Fanuc, Kubota, Keyence and
Misumi. Each of these businesses allows their customers to improve efficiency,
quality and consistency of their production and we continue to believe
developments in machine vision will expand the opportunities available in this
area.
Asian consumer stocks include those in skincare such as Shiseido, Pola Orbis
and Kose, and those in paint as already noted which are very durable and high
returning businesses. Meanwhile in healthcare we have exposure to several
companies including Olympus, which makes endoscopes, and Sysmex, which
produces blood analysers as well as the recently bought Eisai.
Outlook
The obvious question on shareholders' minds following a 5-year period with a
disappointing relative outcome will be whether they should remain confident in
the prospects for their Company's portfolio. Nothing in life is guaranteed but
we believe there are both philosophical and practical reasons for optimism.
Philosophically we think that shareholders should draw comfort from the
consistent approach being applied, which has been successful for long periods
in the past, the low turnover of the portfolio, which means that future
returns are dominated by business performance rather than trading activities,
and the lack of recent interest in what the Company is offering, which means
that it is unlikely that we are at a peak of optimism where everything is
already in the price. Furthermore, Japan remains a useful diversifier for a UK
based investor that benefits from an established and stable political system,
the rule of law, and an increasing focus on shareholders.
Practically, it feels increasingly that the new normal post-Covid is similar
to the old normal pre-Covid - limited global economic expansion, controlled
inflation, with opportunities and risks being presented by technology changes.
This makes growth a scarce and valuable feature of a business and presents
conditions that we believe are more favourable to our style than the recent
rapid economic expansion coupled with high inflation which has enabled even
weak businesses to show profit growth. Finally, although the portfolio that
the Company holds has demonstrated more sales growth than the market over the
past 5 years the gap between the portfolio and the market is forecast to widen
with the Company's portfolio forecast to grow by 9.2% p.a. over the next 3
years versus 3.1% p.a. for the market; and earnings growth of the portfolio is
also forecast to be more rapid (source: Factset). If this superior business
growth materialises as anticipated, we are confident we will be able to report
on more share price success over the coming years and build on the very modest
outperformance over the last half year.
Baillie Gifford
28 October 2024
For a definition of terms, see Glossary of Terms and Alternative Performance
Measures.
Past performance is not a guide to future performance.
Relative Contribution
Top Ten Relative Stock Contributors
Year to 31 August 2024
Name Portfolio Index Relative
(average (average contribution
weight) weight) %
% %
Rakuten 4.0 0.2 1.9
SWCC Showa 0.9 0.0 0.8
DMG Mori 2.3 0.1 0.5
MS&AD Insurance 1.4 0.4 0.5
Sumitomo Mitsui Trust Bank 4.1 0.3 0.5
Recruit 2.4 1.3 0.5
SoftBank Group 6.0 1.0 0.5
Outsourcing 0.4 0.0 0.4
Daikin Industries 0.0 0.7 0.4
Seria 1.2 0.0 0.3
Bottom Ten Relative Stock Contributors
Year to 31 August 2024
Name Portfolio Index Relative
(average (average contribution
weight) weight) %
% %
Shiseido 1.9 0.3 (1.2)
Rohm 1.6 0.1 (1.0)
Hitachi 0.0 1.7 (0.8)
Oisix 1.8 0.0 (0.7)
M3 0.9 0.1 (0.7)
TKP 1.0 0.0 (0.6)
Pola Orbis 1.6 0.0 (0.6)
Kubota 2.4 0.3 (0.6)
Unicharm 1.9 0.3 (0.5)
Tokio Marine 0.0 1.2 (0.4)
Top Ten Relative Stock Contributors
5 years to 31 August 2024
Name Portfolio Index Relative
(average (average contribution
weight) weight) %
% %
SoftBank Group 5.7 1.5 1.3
MS&AD Insurance 1.7 0.4 1.3
Inpex 1.2 0.2 1.0
DMG Mori 1.7 0.0 0.9
DENSO 1.9 0.6 0.8
Sumitomo Mitsui Trust Bank 3.0 0.3 0.8
SWCC Showa 0.2 0.0 0.8
Itochu 2.1 1.0 0.7
M3 0.5 0.3 0.7
Recruit 1.6 1.3 0.6
Bottom Ten Relative Stock Contributors
5 years to 31 August 2024
Name Portfolio Index Relative
(average (average contribution
weight) weight) %
% %
CyberAgent 2.6 0.1 (1.8)
Shiseido 1.2 0.5 (1.6)
GA Technologies 0.9 0.0 (1.5)
Oisix 0.7 0.0 (1.5)
Hitachi 0.0 1.2 (1.4)
Sato 1.7 0.0 (1.4)
Pola Orbis 1.3 0.0 (1.3)
Mitsubishi 0.0 1.8 (1.1)
FANUC 2.8 0.8 (1.1)
Misumi 2.4 0.2 (1.1)
Source: Revolution and relevant underlying index providers. Baillie Gifford
Japan Trust relative to TOPIX total return (in sterling terms).
See disclaimer at end of this announcement.
Portfolio Positioning
As at 31 August 2024
Holding period Secular Growth(1) 53.1%(*) Growth Stalwarts(2) 16.9%(*) Special Situations(3) 13.9%(*) Cyclical Growth(4) 16.1%(*)
>10 Years Rakuten 5.6 Park24 0.9 SoftBank Group 6.3 Sumitomo Mitsui Trust Bank 4.4
41.5%
SBI Holdings 3.9 Sawai Pharmaceutical 0.3 Sony 3.0 Sumitomo Metal Mining 1.6
GMO Internet 2.8 Tokyo Tatemono 1.0 Nifco 1.3
CyberAgent 2.6
Kubota 2.1
Misumi 2.0
Sysmex 1.6
Broadleaf 0.9
SMC 0.8
Digital Garage 0.4
5-10 years FANUC 2.7 mixi 2.5 Murata Manufacturing 1.5
23.4%
Recruit 2.6 Colopl 1.1 DMG Mori 1.5
Keyence 1.9
Sato 1.8
MonotaRO 1.6
Raksul 1.0
Topcon 0.9
Nidec 0.9
Mercari 0.7
PeptiDream 0.6
Noritsu Koki 0.6
Rizap 0.5
Istyle 0.4
Infomart 0.3
Nippon Ceramic 0.3
<5 years Oisix 1.9 Calbee 3.0 Bridgestone 1.5
35.1%
Eisai 1.6 Nintendo 1.9 SWCC Showa 1.3
GA Technologies 1.4 Unicharm 1.8 Rohm 1.3
Seria 1.3 Pola Orbis 1.7 Chugoku Marine Paints 1.3
TKP 1.0 Shiseido 1.4 Shima Seiki 0.4
M3 0.9 Olympus 1.2
Lifenet Insurance 0.9 Sugi 0.9
LY Corp 0.7 Kose 0.9
Daikin Industries 0.6 Nippon Paint 0.9
freee K.K. 0.5 Kao 0.8
Vector 0.5 Kansai Paint 0.7
Nakanishi 0.5 Pigeon 0.5
Demae-can 0.5
Bengo4.com 0.5
Nihon M&A Center 0.5
BASE 0.3
(*) % of total investments.
(1) Secular Growth: Opportunity to grow rapidly but where there are a number
of potential outcomes.
(2) Growth Stalwarts: Growth is less rapid but more predictable.
(3) Special Situations: Performance has not been good but there is a reason to
believe improvements are underway.
(4) Cyclical Growth: Earnings do not rise every year but are expected to be
higher from one cycle to the next.
List of Investments
As at 31 August 2024
Name Business 2024 2024 Absolute(*) Relative(*)
Value % of total performance performance
£'000 investments % %
SoftBank Group Information, communication and utilities 55,926 6.3 24.5 8.5
Rakuten Commerce and services 49,690 5.6 76.5 53.9
Sumitomo Mitsui Trust Bank Financials 38,903 4.4 31.4 14.6
SBI Holdings Financials 34,395 3.9 19.9 4.5
Calbee Pharmaceuticals and food 26,617 3.0 8.9 (5.1)
Sony Electricals and electronics 26,447 3.0 13.4 (1.2)
GMO Internet Information, communication and utilities 24,468 2.8 4.6 (8.8)
FANUC Electricals and electronics 23,915 2.7 1.3 (11.7)
Recruit Commerce and services 23,071 2.6 67.8 46.2
CyberAgent Commerce and services 22,648 2.6 6.7 (7.0)
mixi Commerce and services 21,731 2.5 13.7 (0.9)
Kubota Manufacturing and machinery 18,803 2.1 (13.5) (24.6)
Misumi Commerce and services 17,403 2.0 5.3 (8.2)
Keyence Electricals and electronics 17,279 1.9 11.1 (3.1)
Oisix Retail 17,268 1.9 (25.3) (34.9)
Nintendo Manufacturing and machinery 16,778 1.9 24.6 8.6
Sato Manufacturing and machinery 16,019 1.8 (3.7) (16.0)
Unicharm Chemicals and other materials 15,582 1.8 (15.2) (26.0)
Pola Orbis Chemicals and other materials 14,643 1.7 (22.2) (32.2)
Eisai(#) Pharmaceuticals and food 14,220 1.6 1.7(†) (2.2)(†)
MonotaRO Retail 14,040 1.6 29.9 13.2
Sumitomo Metal Mining Chemicals and other materials 14,039 1.6 (11.2) (22.6)
Sysmex Electricals and electronics 13,771 1.6 6.1 (7.5)
Murata Manufacturing Electricals and electronics 13,651 1.5 9.2 (4.8)
DMG Mori Manufacturing and machinery 13,357 1.5 29.0 12.4
Bridgestone Manufacturing and machinery 13,329 1.5 (0.3) (13.1)
GA Technologies Information, communication and utilities 12,614 1.4 (15.5) (26.4)
Shiseido Manufacturing and machinery 12,043 1.4 (46.3) (53.2)
SWCC Showa Electricals and electronics 11,926 1.3 170.5 135.8
Seria Retail 11,866 1.3 47.1 28.3
Nifco Chemicals and other materials 11,551 1.3 (15.3) (26.2)
Rohm Electricals and electronics 11,547 1.3 (41.3) (48.8)
Chugoku Marine Paints Chemicals and other materials 11,090 1.3 41.2 23.1
Olympus Pharmaceuticals and food 10,843 1.2 30.9 14.1
Colopl Information, communication and utilities 9,817 1.1 (9.3) (20.9)
TKP Real estate and construction 9,302 1.0 (38.3) (46.2)
Raksul Information, communication and utilities 9,063 1.0 (16.2) (27.0)
Tokyo Tatemono Real estate and construction 8,831 1.0 25.6 9.5
Park24 Real estate and construction 8,391 0.9 (18.5) (29.0)
Broadleaf Information, communication and utilities 8,281 0.9 32.9 15.8
Topcon Manufacturing and machinery 8,248 0.9 (13.9) (25.0)
Nidec Electricals and electronics 8,237 0.9 (24.1) (33.9)
M3 Commerce and services 7,712 0.9 (53.0) (59.0)
Sugi Retail 7,664 0.9 12.9 (1.6)
Kose(#) Consumer staples 7,662 0.9 15.9(†) 17.2(†)
Lifenet Insurance Financials 7,594 0.9 68.9 47.2
Nippon Paint(#) Chemicals and other materials 7,541 0.9 (9.6)(†) (11.8)(†)
Kao Chemicals and other materials 7,473 0.8 14.3 (0.4)
SMC Manufacturing and machinery 7,212 0.8 (7.5) (19.4)
Mercari Information, communication and utilities 6,569 0.7 (31.0) (39.9)
LY Corp Communication services 6,474 0.7 (10.9) (22.3)
Kansai Paint(#) Chemicals and other materials 6,007 0.7 5.7(†) 3.0(†)
Daikin Industries(#) Manufacturing and machinery 5,746 0.6 3.2(†) 2.1(†)
PeptiDream Pharmaceuticals and food 5,377 0.6 32.0 15.1
Noritsu Koki Manufacturing and machinery 5,197 0.6 45.2 26.5
Rizap Commerce and services 4,718 0.5 51.0 31.7
Pigeon Manufacturing and machinery 4,592 0.5 (6.1) (18.2)
freee K.K. Information, communication and utilities 4,506 0.5 (11.9) (23.2)
Vector Information, communication and utilities 4,469 0.5 (30.7) (39.6)
Nakanishi(#) Manufacturing and machinery 4,425 0.5 11.8(†) 13.1(†)
Demae-can Information, communication and utilities 4,423 0.5 (36.6) (44.7)
Bengo4.com Commerce and services 4,140 0.5 (36.9) (45.0)
Nihon M&A Center Commerce and services 3,930 0.5 (17.5) (28.0)
Shima Seiki Manufacturing and machinery 3,498 0.4 (31.5) (40.3)
Istyle Information, communication and utilities 3,420 0.4 1.8 (11.2)
Digital Garage Information, communication and utilities 3,063 0.4 (24.0) (33.7)
Infomart Commerce and services 3,012 0.3 (36.6) (44.7)
Sawai Pharmaceutical Pharmaceuticals and food 3,006 0.3 30.6 13.9
Nippon Ceramic Electricals and electronics 2,632 0.3 (3.3) (15.7)
BASE Information, communication and utilities 2,630 0.3 (28.6) (37.8)
Total investments 886,335 100.0
Net liquid assets 2,616
Total assets 888,951
Bank loans (140,572)
Equity shareholders' funds 748,379
(*) Absolute and relative performance have been calculated on a total
return basis over the period 1 September 2023 to 31 August 2024. For
investments held for part of the year, the return is for the period they were
held. Absolute performance is in sterling terms; relative performance is
against TOPIX total return (in sterling terms).
(†) Figures relate to part period returns.
(#) New purchase during the year. Complete sales in the year were DENSO,
lida Group Holdings, Itochu, MS&AD Insurance and Outsourcing.
Source: LSEG/Baillie Gifford and relevant underlying index providers. See
disclaimer at end of this announcement.
Past performance is not a guide to future performance.
Income Statement
For the year ended 31 August
Notes 2024 2024 2024 2023 2023 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on investments - 51,567 51,567 - (70,082) (70,082)
Currency gains - 4,776 4,776 - 17,005 17,005
Income 2 15,803 - 15,803 18,707 - 18,707
Investment management fee 3 (4,297) - (4,297) (4,448) - (4,448)
Other administrative expenses (715) - (715) (688) - (688)
Net return before finance costs and taxation 10,791 56,343 67,134 13,571 (53,077) (39,506)
Finance costs of borrowings (1,795) - (1,795) (1,869) - (1,869)
Net return on ordinary activities before taxation 8,996 56,343 65,339 11,702 (53,077) (41,375)
Tax on ordinary activities (1,580) - (1,580) (1,870) - (1,870)
Net return on ordinary activities after taxation 7,416 56,343 63,759 9,832 (53,077) (43,245)
Net return per ordinary share 4 8.23p 62.55p 70.78p 10.52p (56.79p) (46.27p)
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 the Company does not
have any other comprehensive income and the net return after taxation is both
the profit and total comprehensive income for the year.
Balance Sheet
As at 31 August
Notes 2024 2024 2023 2023
£'000 £'000 £'000 £'000
Fixed assets
Investments 886,335 858,486
Current assets
Debtors 2,871 1,811
Cash and cash equivalents 5,305 6,030
8,176 7,841
Creditors
Amounts falling due within one year 6 (146,132) (1,641)
Net current (liabilities)/assets (137,956) 6,200
Total assets less current liabilities 748,379 864,686
Creditors
Amounts falling due after more than one year 6 - (131,723)
Net assets 748,379 732,963
Capital and reserves
Share capital 4,717 4,717
Share premium 213,902 213,902
Capital redemption reserve 203 203
Capital reserve 514,122 496,965
Revenue reserve 15,435 17,176
Equity shareholders' funds 748,379 732,963
Net asset value per ordinary share 855.0p 787.7p
Statement of Changes in Equity
For the year ended 31 August 2024
Share Share Capital Capital Revenue Shareholders'
capital premium redemption reserve reserve funds
£'000 account reserve £'000 £'000 £'000
£'000 £'000
Shareholders' funds at 1 September 2023 4,717 213,902 203 496,965 17,176 732,963
Ordinary shares bought back - - - (39,186) - (39,186)
Return on ordinary activities after taxation - - - 56,343 7,416 63,759
Dividends paid during the year - - - - (9,157) (9,157)
Shareholders' funds at 31 August 2024 4,717 213,902 203 514,122 15,435 748,379
For the year ended 31 August 2023
Share Share Capital Capital Revenue Shareholders'
capital premium redemption reserve reserve funds
£'000 account reserve £'000 £'000 £'000
£'000 £'000
Shareholders' funds at 1 September 2022 4,717 213,902 203 556,414 15,770 791,006
Ordinary shares bought back - - - (6,372) - (6,372)
Net return on ordinary activities after taxation - - - (53,077) 9,832 (43,245)
Dividends paid in the year - - - - (8,426) (8,426)
Shareholders' funds at 31 August 2023 4,717 213,902 203 496,965 17,176 732,963
.
Cash Flow Statement
For the year ended 31 August
Notes 2024 2024 2023 2023
£'000 £'000 £'000 £'000
Cash flows from operating activities
Net return on ordinary activities before taxation 65,339 (41,375)
Adjustments to reconcile company profit before tax to net cash flow from
operating activities
Net (gains)/losses on investments (51,567) 70,082
Currency gains (4,776) (17,005)
Finance costs of borrowings 1,795 1,869
Other capital movements
Changes in debtors (250) 412
Changes in creditors 22 (39)
Taxation
Overseas withholding tax incurred (1,580) (1,912)
Cash from operations(†) 8,983 12,032
Interest paid (1,783) (1,961)
Net cash inflow from operating activities 7,200 10,071
Cash flows from investing activities
Acquisitions of investments (103,973) (99,512)
Disposals of investments 128,098 101,483
Net cash inflow from investing activities 24,125 1,971
Cash flows from financing activities
Ordinary shares bought back (36,519) (7,926)
Dividends paid (9,157) (8,426)
Bank loans drawn down 184,231 107,124
Bank loans repaid (170,352) (106,131)
Net cash outflow from financing activities (31,797) (15,359)
Decrease in cash and cash equivalents (472) (3,317)
Exchange movements (253) (1,670)
Cash and cash equivalents at start of period 6,030 11,017
Cash and cash equivalents at end of period* 5,305 6,030
(*) Cash and cash equivalents represent cash at bank and short-term money
market deposits repayable on demand.
(†) Cash from operations includes dividends received of £15,810,000
(2023 - £19,122,000) and interest received of £3,000 (2023 - £3,000).
Notes to the Financial Statements
1. Principal Accounting Policies
The Financial Statements for the year to 31 August 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.
The Financial Statements have also been prepared in accordance with the
Companies Act 2006, and with the AIC's Statement of Recommended Practice
'Financial Statements of Investment Trust Companies and Venture Capital
Trusts' issued in November 2014 and updated in July 2022 with consequential
amendments.
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 macroeconomic and geopolitical
concerns, including inflation and interest rates. It has reviewed the results
of specific leverage and liquidity stress testing and does not believe the
Company's going concern status is affected. In addition, the Company is
subject to an annual continuation vote which in previous years has been passed
with a significant majority. The Directors have no reason to believe that the
vote will not continue to be in favour based on their assessment of the
Company's performance and the views collated from shareholders. The Company's
assets, the majority of which are investments in quoted securities which are
readily realisable, exceed its liabilities significantly. All borrowings
require the prior approval of the Board. Gearing levels and compliance with
borrowing covenants are reviewed by the Board on a regular basis.
The Company has continued to comply with the investment trust status
requirements of section 1158 of the Corporation Tax Act 2010 and the
Investment Trust (Approved Company) (Tax) Regulations 2011. The Company's
primary third party suppliers, including its Managers and Secretaries,
Depositary and Custodian, Registrar, Auditor and Broker, are not experiencing
significant operational difficulties affecting their respective services to
the Company.
In preparing these Financial Statements, the Directors have considered the
impact of climate change risk as a principal risk set out on pages 36 and 37
of the Annual Report and Financial Statements, and have concluded that it does
not have a material impact on the Company's investments. The Directors
consider the impact of climate change on the value of the investments included
in the Financial Statements to already be reflected in their prices as quoted
on a stock exchange.
Accordingly, the Financial Statements have been prepared on a going concern
basis as it is the Directors' opinion, having assessed the principal and
emerging risks and other matters set out in the Viability Statement on page 29
of the Annual Report and Financial Statements which assesses the prospects of
the Company over a period of five years, that the Company will continue in
operational existence until at least 31 October 2025, which is for a period of
at least twelve months from the date of approval of these Financial
Statements.
In order to better reflect the activities of the Company and in accordance
with guidance issued by the AIC, supplementary information which analyses the
Income Statement between items of a revenue and capital nature has been
presented.
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 and presentation currency to
be sterling, (see consideration in accounting policy (j) on page 73 of the
Annual Report and Financial Statements), as the Company's shareholders are
predominantly based in the UK, the Company pays its dividends and expenses in
sterling and the Company and its Investment Manager, who are subject to the
UK's regulatory environment, are also UK based.
2. Income
2024 2023
£'000 £'000
Income from investments
Overseas dividends 15,800 18,704
Other income
Deposit interest 3 3
Total income 15,803 18,707
Special dividends received during the year amounted to £93,000 (2023 -
£471,000) with £93,000 (2023 - £471,000) classed as revenue and none (2023
- none) classed as capital.
3. Investment Management Fee - All Charged to Revenue
2024 2023
£'000 £'000
Investment management fee 4,297 4,448
Details of the Investment Management Agreement are disclosed on page 42 of the
Annual Report and Financial Statements. For the year to 31 August 2024 and
2023, the annual management fee is 0.75% on the first £50 million of net
assets, 0.65% on the next £200 million of net assets and 0.55% on the
remaining net assets, calculated and payable quarterly. With effect from 1
September 2024, the annual management fee will be 0.65% on the first
£250 million of net assets and 0.55% on the remaining net assets, calculated
and payable quarterly.
4. Net Return Per Ordinary Share
2024 2024 2024 2023 2023 2023
Revenue Capital Total Revenue Capital Total
Net return per ordinary share 8.23p 62.55p 70.78p 10.52p (56.79p) (46.27p)
Revenue return per ordinary share is based on the net revenue profit after
taxation of £7,416,000 (2023 - net revenue profit of £9,832,000) and on
90,078,258 (2023 - 93,451,827) ordinary shares, being the weighted average
number of ordinary shares in issue (excluding treasury shares) during the
year.
Capital return per ordinary share is based on the net capital profit for the
financial year of £56,343,000 (2023 - net capital loss of £53,077,000) and
on 90,078,258 (2023 - 93,451,827) ordinary shares, being the weighted average
number of ordinary shares in issue (excluding treasury shares) during the
year.
Total return per ordinary share is based on the total profit for the financial
year of £63,759,000 (2023 - total loss of £43,245,000) and on 90,078,258
(2023 - 93,451,827) ordinary shares, being the weighted average number of
ordinary shares in issue (excluding treasury shares) during the year.
There are no dilutive or potentially dilutive shares in issue.
5. Ordinary Dividends
Set out below are the total dividends paid and 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. The revenue available for
distribution out of current year profits by way of dividend for the year is
£7,416,000. The revenue reserve and the capital reserve (to the extent it
constitutes realised profits) are distributable by way of dividend.
2024 2023 2024 2023
£'000 £'000
Amounts recognised as distributions in the year:
Previous year's final (paid 20 December 2023. 2022 dividend paid on 10.00p 9.00p 9,157 8,426
21 December 2022)
2024 2023 2024 2023
£'000 £'000
Dividends paid and payable in respect of the year:
Proposed final dividend (payable 18 December 2024. 2023 dividend paid 10.00p 10.00p 8,753(*) 9,305
20 December 2023)
(*) Based on ordinary shares in issue at 31 August 2024.
6. Total borrowings at 31 August 2024 were ¥26.9 billion (2023 -
¥24.3 billion) and a detailed in note 11 on page 77 of the Annual Report
and Financial Statements.
7. The transaction costs of purchases and sales were £49,000
(2023 - £34,000) and £45,000 (2023 - £29,000) respectively.
8. The Company's authority permits it to hold shares bought back
in 'treasury'. Such treasury shares may be subsequently either sold for cash
at a premium to net asset value per ordinary share or cancelled. In the year
to 31 August 2024, 5,515,000 shares with a nominal value of £276,000,
representing 5.9% of the issued share capital at 31 August 2023, were bought
back at a cost of £39,186,000 and held in treasury (31 August 2023 - 851,845
shares with a nominal value of £42,600 representing 0.9% of the issued share
capital at 31 August 2022, were bought back at a cost of £6,372,000 and held
in treasury). At 31 August 2024 the Company had authority to buy back
12,484,261 ordinary shares. Over the period from 1 September to 24 October a
further 1,445,000 shares have been bought back and held in treasury at a cost
of £10,639,000.
Under the provisions of the Company's Articles, the share
buy-backs are funded from the capital reserve.
In the year to 31 August 2024, the Company sold no
ordinary shares from treasury (2023 - no ordinary shares). The Company issued
no further ordinary shares (2023 - no ordinary shares). As at 31 August 2024
the Company had the authority to issue 9,184,261 ordinary shares. Over the
period from 1 September 2024 to 24 October 2024 no further shares were issued
by the Company.
9. The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 August 2024 or 2023 but is
derived from those accounts. Statutory accounts for 2023 have been delivered
to the registrar of companies, and those for 2024 will be delivered in due
course. The Auditor has reported on those accounts; their reports were (i)
unqualified, (ii) did not include a reference to any matters to which the
Auditor drew attention by way of emphasis without qualifying their report;
and, (iii) did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006.
10. The Annual Report and Financial Statements will be available on
the Company's page on the Managers' website japantrustplc.co.uk(‡) on or
around 7 November 2024.
(‡) Neither the contents of the Managers' website nor the contents of any
website accessible from hyperlinks on the Managers' website (or any other
website) is incorporated into, or forms part of, this announcement.
None of the views expressed in this document should be construed as advice to
buy or sell a particular investment.
Glossary of Terms and Alternative Performance Measures ('APM')
Total Assets
The total value of all assets held less all liabilities (other than
liabilities in the form of borrowings).
Net Asset Value
Also described as shareholders' funds, net asset value ('NAV') is the value of
total assets less liabilities (including borrowings). The NAV per ordinary
share is calculated by dividing this amount by the number of ordinary shares
in issue (excluding treasury shares). Borrowings are valued at their nominal
par value. Par value approximates to amortised cost. The Company's yen
denominated loans are valued at their sterling equivalent.
(Discount)/Premium (APM)
As stockmarkets and share prices vary, an investment trust's share price is
rarely the same as its NAV. When the share price is lower than the NAV per
ordinary share it is said to be trading at a discount. The size of the
discount is calculated by subtracting the NAV per ordinary share from the
share price and is usually expressed as a percentage of the NAV per ordinary
share. If the share price is higher than the NAV per ordinary share, this
situation is called a premium.
31 August 31 August
2024 2023
Net asset value per ordinary share (a) 855.0p 787.7p
Share price (b) 756.0p 735.0p
Discount ((b) - (a)) ÷ (a) (11.6%) (6.7%)
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.
2024 2024 2023 2023
NAV Share NAV Share
price price
Closing NAV per ordinary share/share price (a) 855.0p 756.0p 787.7p 735.0p
Dividend adjustment factor(*) (b) 1.0135 1.0150 1.0113 1.0113
Adjusted closing NAV per ordinary share/share price (c) = (a) x (b) 866.5p 767.3p 796.6p 743.3p
Opening NAV per ordinary share/share price (d) 787.7p 735.0p 842.4p 774.0p
Total return ((c) ÷ (d)) -1 10.0% 4.4% (5.4%) (4.0%)
(*) The dividend adjustment factor is calculated on the assumption that
the dividend of 10.00p (2023 - 9.00p) paid by the Company during the year was
invested into shares of the Company at the cum income NAV per ordinary
share/share price, as appropriate, at the ex-dividend date.
Turnover
Annual turnover of the investment portfolio shares is calculated on a rolling
12 month basis. The lower of purchases and sales for the 12 months is divided
by the average assets, with average assets being calculated on assets as at
each month's end.
Ongoing Charges (APM)
The total expenses (excluding borrowing costs) incurred by the Company as a
percentage of the average net asset value.
2024 2023
£'000 £'000
Investment management fee 4,297 4,448
Other administrative expenses 715 688
Total expenses (a) 5,012 5,136
Average net asset value(*) (b) £723,432 £764,686
Ongoing charges (a) ÷ (b) expressed as a percentage 0.69% 0.67%
(*) Average of daily net asset values calculated during the year.
Gearing (APM)
At its simplest, gearing is borrowing. Just like any other public company, an
investment trust can borrow money to invest in additional investments for its
portfolio. The effect of the borrowing on the shareholders' assets is called
'gearing'. If the Company's assets grow, the shareholders' assets grow
proportionately more because the debt remains the same. But if the value of
the Company's assets falls, the situation is reversed. Gearing can therefore
enhance performance in rising markets but can adversely impact performance in
falling markets. The level of gearing can be adjusted through the use of
derivatives which affect the sensitivity of the value of the portfolio to
changes in the level of markets.
Gearing is the Company's borrowings less cash and cash equivalents expressed
as a percentage of shareholders' funds.
Potential gearing is the Company's borrowings expressed as a percentage of
shareholders' funds.
2024 2023
Gearing(*) Potential Gearing(*) Potential
£'000 gearing(†) £'000 gearing(†)
£'000 £'000
Borrowings (a) 140,572 140,572 131,723 131,723
Cash and cash equivalents (b) 5,305 - 6,030 -
Shareholders' funds (c) 748,379 748,379 732,963 732,963
Gearing 18.1% 18.8% 17.1% 18.0%
(*) Gearing: ((a) - (b)) divided by (c), expressed as a percentage.
(†) Potential gearing: (a) divided by (c), expressed as a percentage.
Leverage (APM)
For the purposes of the UK Alternative Investment Fund Managers ('AIFM')
Regulations, leverage is any method which increases the Company's exposure,
including the borrowing of cash and the use of derivatives. It is expressed as
a ratio between the Company's exposure and its net asset value and can be
calculated on a gross and a commitment method. Under the gross method,
exposure represents the sum of the Company's positions after the deduction of
sterling cash balances, without taking into account any hedging and netting
arrangements. Under the commitment method, exposure is calculated without the
deduction of sterling cash balances and after certain hedging and netting
positions are offset against each other.
Active Share (APM)
Active share, a measure of how actively a portfolio is managed, is the
percentage of the portfolio that differs from its comparative index. It is
calculated by deducting from 100 the percentage of the portfolio that overlaps
with the comparative index. An active share of 100 indicates no overlap with
the index and an active share of zero indicates a portfolio that tracks the
index.
Sustainable Finance Disclosure Regulation ('SFDR')
The EU Sustainable Finance Disclosure Regulation ('SFDR') does not have a
direct impact in the UK due to Brexit, however, it applies to third-country
products marketed in the EU. As Baillie Gifford Japan is marketed in the EU by
the AIFM, Baillie Gifford & Co Limited, via the National Private
Placement Regime ('NPPR') the following disclosures have been provided to
comply with the high-level requirements of SFDR.
The AIFM has adopted Baillie Gifford & Co's ESG Principles and Guidelines
as its policy on integration of sustainability risks in investment decisions.
Baillie Gifford & Co believes that a company 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 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 Investment Manager's approach to sustainability can be
found in the ESG Principles and Guidelines document, available publicly on the
Baillie Gifford website bailliegifford.com and by scanning the QR code below.
The underlying investments do not take into account the EU criteria for
environmentally sustainable economic activities established under the EU
Taxonomy Regulation.
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