REG - Baillie GiffordJapan - Annual Financial Report
06/11/2025 14:00
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RNS Number : 5435G Baillie Gifford Japan Trust PLC 06 November 2025
The Baillie Gifford Japan Trust PLC ('BGFD')
Legal Entity Identifier: 54930037AGTKN765Y741
Regulated Information Classification: Annual Financial and Audit Reports
Annual Report and Financial Statements
Further to the preliminary statement of audited annual results announced to
the Stock Exchange on 21 October 2025, The Baillie Gifford Japan Trust PLC
("the Company") announces that the Company's Annual Report and Financial
Statements for the year ended 31 August 2025, including the Notice of Annual
General Meeting, has been posted to shareholders and submitted electronically
to the National Storage Mechanism where it will shortly be available for
inspection at data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
It is also available on the Company page of the Baillie Gifford website at:
japantrustplc.co.uk (http://www.japantrustplc.co.uk/) (as is the preliminary
statement of audited annual results announced by the Company on 21 October
2025).
Statement of Directors' Responsibilities in respect of the Annual Report and
the Financial Statements
Each of the Directors, whose names and functions are listed within the
Directors and Managers section of the Annual Report and Financial Statements,
confirm that, to the best of their knowledge:
¾ the Financial Statements, which have been prepared in accordance with
applicable law and United Kingdom Accounting Standards, give a true and fair
view of the assets, liabilities, financial position and profit or loss of the
Company;
¾ the Strategic Report and 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 it faces; and
¾ the Annual Report and Financial Statements taken as a whole, is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the Company's performance, business model and strategy.
Principal and Emerging Risks relating to the Company
As explained on pages 46 and 47 of the Annual Report and Financial Statements
there is an ongoing process for identifying, evaluating and managing the
risks, including emerging risks, faced by the Company on a regular basis. The
Directors have carried out a robust assessment of the principal and emerging
risks facing the Company including those that would threaten its business
model, future performance, solvency or liquidity. There have been no material
changes to the principal risks during the year. Baillie Gifford's Business
Risk Department provides regular updates covering the Company's principal and
emerging risks. A description of these risks and how they are being managed or
mitigated is set out below.
The Board considers the current global economic environment to be a factor
which exacerbates existing risks, rather than it being a new emerging risk.
The impact of this is considered within the relevant risks.
Investment and Strategic Risks
Financial risk
What is the risk? How is it managed? Rating and change Current assessment of risk
The Company's assets consist of listed securities and its principal financial The Board has, in particular, considered the impact of heightened market ─ The prospect of market volatility remains, given continuing geopolitical
risks are therefore market related and include market risk (comprising volatility due to macroeconomic factors such as inflation, interest rates and instability.
currency risk, interest rate risk and other price risk), liquidity risk and geopolitical concerns. To mitigate this risk the Board considers various
credit risk. An explanation of those risks and how they are managed is portfolio metrics including individual stock performance, the composition and
contained in note 19 to the Financial Statements and on pages 78 to 81 of the diversification of the portfolio by growth category, purchases and sales of
Annual Report and Financial Statements. investments, the holding period of each investment, liquidity characteristics
and the top and bottom contributors to performance. The Manager provides
rationale for stock selection decisions. A strategy meeting
is held annually.
The value of the Company's investment portfolio would be affected by any
impact, positively or negatively, on sterling but such impact would be
partially offset by the effect of exchange movements on the Company's yen
denominated borrowings.
Discount risk
What is the risk? How is it managed? Rating and change Current assessment of risk
The premium/discount at which the Company's shares trade relative to its net The Board monitors the level of premium/discount at which the shares trade and ─ The Company's shares traded at an average discount of 12.5% throughout the
asset value can change. The risk of a widening discount is that it may the Company has authority to issue new shares or buy back its existing shares year and it bought back 10,041,174 ordinary shares during the year.
undermine investor confidence in the Company. when deemed by the Board to be in the best interests of the Company and
its shareholders.
Investment strategy and smaller company risk
What is the risk? How is it managed? Rating and change Current assessment of risk
Pursuing an investment strategy to fulfil the Company's objective which the To mitigate these risks, the Board regularly reviews and monitors: the ─ During the year, the Company's NAV total return was ahead of the benchmark.
market perceives to be unattractive or inappropriate, or the ineffective Company's objective and investment policy and strategy; the investment Furthermore, there are signs that the market's appetite for growth stocks,
implementation of an attractive or appropriate strategy, may lead to reduced portfolio, discussing the investment case and portfolio weightings with the typically held by the Company, is recovering.
returns for shareholders and, as a result, a decreased demand for the Managers, and its performance; the level of premium/discount to net asset
Company's shares. This may lead to the Company's shares trading at a widening value at which the shares trade; and movements in the share register and
discount to their net asset value. raises any matters of concern with the Managers. A spread of risk is achieved
by holding a minimum of 40 stocks.
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.
Climate and governance risk
What is the risk? How is it managed? Rating and change Current assessment of risk
Perceived problems on environmental, social and governance ('ESG') matters in This is mitigated by the application of the Manager's ESG stewardship and ─ The Manager continues to employ strong ESG stewardship and
an investee company could lead to that company's shares being less attractive engagement policies, which are integrated into the investment process, as well engagement policies.
to investors, adversely affecting its share price, in addition to potential as the extensive upfront and ongoing due diligence which the Manager
valuation issues arising from any direct impact of the failure to address the undertakes on each investee company. This includes the risk inherent in
ESG weakness on the operations or management of the investee company (for climate change (see page 34 of the Annual Report and Financial Statements).
example in the event of an industrial accident or spillage). Repeated failure The Directors have considered the impact of climate change on the Financial
by the Managers to identify ESG weaknesses in investee companies could lead to Statements of the Company and this is included in note 1a to the Financial
the Company's own shares being less attractive to investors, adversely Statements on page 69 of the Annual Report and Financial Statements.
affecting its own share price. In addition, the valuation of investments could
be impacted by climate change.
Leverage risk
What is the risk? How is it managed? Rating and change Current assessment of risk
The Company may borrow money for investment purposes (sometimes known To mitigate this risk, all borrowings require the prior approval of the Board ─ No significant change in risk level. Proceeds from private placement notes
as 'gearing' or 'leverage'). If the investments fall in value, any borrowings and leverage levels are discussed by the Board and Managers at every meeting. repaid the ING and Mizuho loans that matured in late 2024/early 2025. The
will magnify the extent of this loss. If borrowing facilities are not renewed, Covenant levels are monitored regularly. The Company has a maximum equity Company also entered into a revolving credit facility with Bank of New York
the Company may have to sell investments to repay borrowings. gearing level of 30% of shareholders' funds. The Company's investments are in Mellon to refinance its existing term loan with the same bank. Average gross
listed securities that are readily realisable. Further information on leverage gearing during the year to 31 August 2025 was 20.1%.
can be found on page 84 of the Annual Report and Financial Statements and in
the Glossary of Terms and Alternative Performance Measures on pages 82 to 84
of the Annual Report and Financial Statements.
Custody, Depositary and reliance on third party service provider risk
What is the risk? How is it managed? Rating and change Current assessment of risk
Safe custody of the Company's assets may be compromised through control To mitigate this risk, the Audit Committee receives six monthly reports from ─ Control procedures are working effectively with no interruption to Depositary,
failures by the Depositary, including cyber security incidents. the Depositary confirming safe custody of the Company's assets held by the Custodian, Broker or Registrar services during the year.
Custodian. Cash and portfolio holdings are independently reconciled to the
Failure of Baillie Gifford's systems or those of other third party service Custodian's records by the Managers and the existence of assets is subject to
providers could lead to an inability to provide accurate reporting and annual external audit. Baillie Gifford has a comprehensive business continuity
monitoring or a misappropriation of assets. plan which facilitates continued operation of the business in the event of a
service disruption or major disaster. The Audit Committee reviews Baillie
Gifford's Report on Internal Controls and the reports of the Depositary,
Custodian and other key third party service providers are reviewed by Baillie
Gifford on behalf of the Board and any concerns investigated.
Cyber security risk
What is the risk? How is it managed? Rating and change Current assessment of risk
A cyber attack on Baillie Gifford's network or that of a third party service To mitigate this risk, the Audit Committee reviews reports on Internal ↑ Cyber attacks are on a steep rise globally and could proliferate further.
provider could impact the confidentiality, integrity or availability of data Controls published by Baillie Gifford and other third party service providers. Emerging technologies, including AI, could potentially increase information
and systems. Emerging technologies, including AI and quantum computing Baillie Gifford's Business Risk Department reports to the Audit Committee on security risks.
capabilities, may introduce new, and increase existing information security the effectiveness of information security controls in place at Baillie Gifford
risks that impact operations. 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.
Regulatory risk
What is the risk? How is it managed? Rating and change Current assessment of risk
Failure to comply with applicable legal and regulatory requirements such as To mitigate this risk, Baillie Gifford's Business Risk, Internal Audit and ─ All control procedures are working effectively. There have been no material
the tax rules for investment trust companies, the FCA Listing Rules and the Compliance Departments provide regular reports to the Audit Committee on regulatory changes that have impacted the Company during the year.
Companies Act could lead to suspension of the Company's Stock Exchange Baillie Gifford's monitoring programmes. Should major regulatory change seem
listing, financial penalties, a qualified Audit Report and the Company being likely to impose disproportionate compliance burdens on the Company,
subject to tax on capital gains. Changes to the regulatory environment could representations are made to the relevant authorities to ensure that the
negatively impact the Company. 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.
Political and associated economic risk
What is the risk? How is it managed? Rating and change Current assessment of risk
Political change in areas in which the Company invests or may invest may have To mitigate this risk, developments are closely monitored and considered by ─ The prospect of market volatility remains, given continuing geopolitical
practical consequences for the Company. the Board and are regularly discussed at Board meetings. instability.
Emerging Risks
As explained on pages 46 and 47 of the Annual Report and Financial Statements,
the Board has regular discussions on principal and emerging risks, including
any risks which are not an immediate threat but could arise in the longer
term. The Board considers emerging risks at each Board meeting and discusses
any mitigations required.
↑ Increasing Risk ↓ Decreasing Risk ─ No Change
Baillie Gifford & Co Limited
Company Secretaries
6 November 2025
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