Baillie Gifford Shin - Annual Financial Report
11/04/2023 12:09
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230411:nRSK8380Va&default-theme=true
RNS Number : 8380V Baillie Gifford Shin Nippon PLC 11 April 2023
Baillie Gifford Shin Nippon PLC (BGS)
Legal Entity Identifier: X5XCIPCJQCSUF8H1FU83
Regulated Information Classification: Annual Financial and Audit Reports
Annual Report and Financial Statements
Further to the statement of audited annual results announced to the Stock
Exchange on 22 March 2023, Baillie Gifford Shin Nippon PLC ("the Company")
announces that the Company's Annual Report and Financial Statements for the
year ended 31 January 2023, including the Notice of Annual General Meeting,
has today been posted to shareholders and submitted electronically to the
National Storage Mechanism where it will shortly be available for inspection
at https://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:
shinnippon.co.uk (http://www.shinnippon.co.uk) (as is the statement of audited
annual results announced by the Company on 22 March 2023).
Responsibility Statement of the Directors in respect of the Annual Financial
Report
The Directors confirm that, to the best of their knowledge:
¾ the Financial Statements set out in the Annual Report and Financial
Statements, prepared in accordance with the applicable set of 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/Directors' Report set out in the Annual Report and
Financial Statements includes a fair review of the development and performance
of the business and the position of the issuer, together with a description of
the principal risks and uncertainties that the issuer and business faces (as
also set out below); 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 position and performance, business model
and strategy.
Principal Risks relating to the Company
As explained on pages 36 and 37 of the Annual Report and Financial Statements,
there is an ongoing 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 risks facing the Company including those
that would threaten its business model, future performance, regulatory
compliance, solvency or liquidity. A description of these risks and how they
are being managed or mitigated is set out below.
The Board considers the increasing 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 - the Company's assets consist mainly of quoted securities and
its principal 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 18 to the Financial Statements on pages 61 to 65. 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 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.
Private Company (Unlisted) Investments - the Company's 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. 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.
Investment Strategy Risk - pursuing an investment strategy to fulfil the
Company's objective which the market perceives to be unattractive or
inappropriate, or an 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. 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 premium/discount to Net Asset Value at which the
shares trade; and movements in the share register.
Environmental, Social and Governance Risk - as investors place increased
emphasis on Environmental, Social and Governance (ESG) issues, perceived
problems on 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 Investment Manager 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.
This is mitigated by the Investment Manager's strong ESG stewardship and
engagement policies which are available to view on the Managers' website:
bailliegifford.com
(https://www.bailliegifford.com/en/uk/individual-investors/esg/) and have been
reviewed and endorsed by the Company, and which are fully integrated into the
investment process as well as the extensive up-front and ongoing due diligence
which the Investment Manager undertakes on each investee company. This due
diligence includes assessment of the risks inherent in climate change (see
page 38 of the Annual Report and Financial Statements).
Discount Risk - the premium/discount 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. To manage this risk,
the Board monitors the level of premium/discount 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.
Regulatory 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. 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.
Custody and Depositary Risk - safe custody of the Company's assets may be
compromised through control failures by the Depositary, including breaches of
cyber security. To mitigate this risk, the Board 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. The Custodian's audited internal controls
reports are reviewed by Baillie Gifford's Internal Audit Department and a
summary of the key points is reported to the Audit Committee and any concerns
investigated.
Small Company 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. 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.
Operational 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. To mitigate this
risk, Baillie Gifford has a comprehensive business continuity plan which
facilitates continued operation of the business in the event of a service
disruption or major disaster. The Board reviews Baillie Gifford's Report on
Internal Controls and the reports by other key third party providers are
reviewed by Baillie Gifford on behalf of the Board. In the year under review,
the other key third party service providers have not experienced significant
operational difficulties affecting their respective services to the Company.
Cyber Security 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. 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.
Leverage Risk - the Company may borrow money for investment purposes
(sometimes known as 'gearing' or 'leverage'). If the investments fall in
value, any borrowings will magnify the extent of this loss. If borrowing
facilities are not renewed, the Company may have to sell investments to repay
borrowings. 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. Details of the
Company's borrowings can be found in note 11 on page 59 of the Annual Report
and Financial Statements. The majority of the Company's investments are in
listed securities that are readily realisable. Further information on leverage
can be found on page 75 and in the Glossary of Terms and Alternative
Performance Measures on pages 76 and 77 of the Annual Report and Financial
Statements.
Political Risk - political developments are closely monitored and considered
by the Board. Following the departure of the UK from the European Union and
the subsequent trade agreement between the UK and the European Union, the
Board continues to assess the potential consequences for the Company's future
activities including those that may arise from further constitutional change.
The Board considers that the Company's portfolio of Japanese equities
positions the Company to be suitably insulated from such political risks.
Emerging Risks - as explained on pages 36 and 37 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 emerging threats such as the societal and
financial implications of the escalation of geopolitical tensions and new
coronavirus variants or similar public health threats. These are mitigated by
the Investment Manager's close links to the investee companies and their
ability to ask questions on contingency plans. The Investment Manager believes
the impact of such events may be to impact growth rather than to invalidate
the investment rationale over the long term.
Baillie Gifford & Co Limited
Company Secretaries
11 April 2023
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END ACSSFMFFFEDSESL