TIDMBGFD
RNS Number : 9873S
Baillie Gifford Japan Trust PLC
09 November 2023
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 2 November 2023, The Baillie
Gifford Japan Trust PLC ("the Company") announces that the
Company's Annual Report and Financial Statements for the year ended
31 August 2023, 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
It is also available on the Company page of the Baillie Gifford
website at : japantrustplc.co.uk (as is the preliminary statement
of audited annual results announced by the Company on 2 November
2023).
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:
3/4 the Financial Statements, which have been prepared in
accordance with applicable law and United Kingdom Accounting
Standards (United Kingdom Generally Accepted Accounting Practice)
including FRS 102 'The Financial Reporting Standard applicable in
the UK and Republic of Ireland' give a true and fair view of the
assets, liabilities, financial position and net return of the
Company;
3/4 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; and
3/4 the Strategic 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 (as also set out below).
Principal and Emerging Risks relating to the Company
As explained on pages 59 and 60 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. 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 economic environment to be a
factor which exacerbates existing risks, rather than new emerging
risks. Their impact is considered within the relevant risks.
Investment and strategic risks
What is the risk? How is it managed? Current assessment of
risk
Financial Risk: The Board has, in particular, This ri sk is seen as
The Company's assets considered the im pact increasing due to increased
consist of listed of heightened market volatility as a result
securities and its volatility due to macroeconomic of macroeconomic factors
principal financial factors such as inflation, including increasing
risks are therefore interest rates and geopolitical energy prices, interest
market related and concerns. To mitigate and inflation rates.
include market risk this risk the Board
(comprising currency considers various portfolio
risk, interest rate metrics including individual
risk and other price stock performance, the
risk), liquidity composition and diversification
risk and credit risk of the portfolio by
. An explanation growth category, purchases
of those risks and and sales of investments,
how they are managed the holding period of
is contained in note each investment and
19 to the Financial the top and bottom contributors
Statements on pages to performance. The
91 to 94. 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.
----------------------------- --------------------------------- ----------------------------------
What is the risk? How is it managed? Current assessment of
risk
----------------------------- --------------------------------- ----------------------------------
Investment Strategy To mitigate this risk, The risk is increasing
Risk: Pursuing an the Board regularly as the markets appetite
investment strategy reviews and monitors: for growth stocks, typically
to fulfil the Company's the Company's objective held by the Company,
objective which the and investment policy has decreased during
market perceives and strategy; the investment the recent period of
to be unattractive portfolio and its performance; heightened macroeconomic
or inappropriate, the level of premium/discount and geopolitical concern.
or the ineffective to net asset value at
implementation of which the shares trade;
an attractive or and movements in the
appropriate strategy, share register.
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.
----------------------------- --------------------------------- ----------------------------------
What is the risk? How is it managed? Current assessment of
risk
----------------------------- --------------------------------- ----------------------------------
Discount Risk: The Board monitors the The Company's shares
The premium/discount level of premium/discount traded at an average
at which the Company's at which the shares discount of 7.2% throughout
shares trade relative trade and the Company the year and it bought
to its net asset has authority to issue back 851,845 ordinary
value can change. new shares or buy back shares during the year.
The risk of a widening its existing shares
discount is that when deemed by the Board
it may undermine to be in the best interests
investor confidence of the Company and its
in the Company. shareholders.
----------------------------- --------------------------------- ----------------------------------
What is the risk? How is it managed? Current assessment of
risk
----------------------------- --------------------------------- ----------------------------------
Smaller Company To mitigate this risk, Due to increased market
Risk : the Board reviews the volatility resulting
The Company has investments investment portfolio from macroeconomic factors,
in smaller companies at each meeting and share prices may be subject
which are generally discusses the investment to greater volatility.
considered higher case and portfolio weightings
risk as changes in with the Managers. A
their share prices spread of risk is achieved
may be greater and by holding a minimum
the shares may be of 40 stocks.
harder to sell. Smaller
companies may do
less well in periods
of unfavourable economic
conditions.
----------------------------- --------------------------------- ----------------------------------
What is the risk? How is it managed? Current assessment of
risk
----------------------------- --------------------------------- ----------------------------------
Climate and Governance This is mitigated by The Investment Manager
Risk: Perceived problems the Investment Manager's continues to employ strong
on environmental, ESG stewardship and ESG stewardship and engagement
social and governance engagement policies policies.
('ESG') matters in application, which is
an investee company integrated into the
could lead to that investment process,
company's shares as well as the extensive
being less attractive upfront and ongoing
to investors, adversely due diligence which
affecting its share the Investment Manager
price, in addition undertakes on each investee
to potential valuation company. This includes
issues arising from the risk inherent in
any direct impact climate change (see
of the failure to page 33 of the Annual
address the ESG weakness Report and Financial
on the operations Statements). The Directors
or management of have considered the
the investee company impact of climate change
(for example in the on the Financial Statements
event of an industrial of the Company and this
accident of spillage). is included in note
Repeated failure 1a to the Financial
by the Managers to Statements on page 84
identify ESG weaknesses of the Annual Report
in investee companies and Financial Statements.
could lead to the
Company's own shares
being less attractive
to investors, adversely
affecting its own
share price. In addition,
the valuation of
investments could
be impacted by climate
change.
----------------------------- --------------------------------- ----------------------------------
What is the risk? How is it managed? Current assessment of
risk
----------------------------- --------------------------------- ----------------------------------
Leverage Risk: To mitigate this risk. This is seen as increasing
The Company may borrow all borrowings require due to global falls in
money for investment the prior approval of company valuations.
purposes (sometimes the Board and leverage
known as 'gearing' levels are discussed
or 'leverage'). If by the Board and Managers
the investments fall at every meeting. Covenant
in value, any borrowings levels are monitored
will magnify the regularly. The Company
extent of this loss. has a maximum equity
If borrowing facilities gearing level of 30%
are not renewed, of shareholders' funds.
the Company may have The Company's investments
to sell investments are in listed securities
to repay borrowings. that are readily realisable.
Further information
on leverage can be found
on page 108 of the Annual
Report and Financial
Statements and in the
Glossary of Terms and
Alternative Performance
Measures on pages 107
and 108 in the Annual
Report and Financial
Statements.
----------------------------- --------------------------------- ----------------------------------
External risks
----------------------------- --------------------------------- ----------------------------------
What is the risk? How is it managed? Current assessment of
risk
----------------------------- --------------------------------- ----------------------------------
Regulatory Risk: To mitigate this risk, All control procedures
Failure to comply Baillie Gifford's Business are working effectively.
with applicable legal Risk, Internal Audit There have been no material
and regulatory requirements and Compliance Departments regulatory changes that
such as the tax rules provide regular reports have impacted the Company
for investment companies, to the Audit Committee during the year.
the FCA Listing Rules on Baillie Gifford's
and the Companies monitoring programmes.
Act could lead to Major regulatory change
suspension of the could impose disproportionate
Company's Stock Exchange compliance burdens on
listing, financial the Company. In such
penalties, a qualified circumstances representation
audit report or the is made to ensure that
Company being subject the special circumstances
to tax on capital of investment trusts
gains. Changes to are recognised. Shareholder
the regulatory environment documents and announcements,
could negatively including the Company's
impact the Company. 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.
----------------------------- --------------------------------- ----------------------------------
What is the risk? How is it managed? Current assessment of
risk
----------------------------- --------------------------------- ----------------------------------
Political and Associated To mitigate this risk This risk is increasing
Economic Risk: developments are closely as Governments and c
Political change monitored and considered onsumers around the world
in areas in which by the Board and are continue to assess the
the Company invests regularly discussed impact of geopolitical
or may invest may at Board meetings. tensions, increasing
have practical consequences inflation and interest
for the Company. rates.
----------------------------- --------------------------------- ----------------------------------
Operational risks
What is the risk? How is it managed? Current assessment of
risk
----------------------------- --------------------------------- ----------------------------------
Custody and Depositary To mitigate this risk, Control procedures working
Risk: Safe custody the Audit Committee effectively with no interruption
of the Company's receives six monthly to Depositary or Custodian
assets may be compromised reports from the Depositary services during the year.
through control failures confirming safe custody
by the Depositary, of the Company's assets
including cyber security held by the Custodian.
incidents. Cash and portfolio holdings
are independently reconciled
to the Custodian's records
by the Managers. The
Custodian's audited
internal controls reports
are reviewed by Baillie
Gifford's Business Risk
Department and a summary
of the key points is
reported to the Audit
Committee and any concerns
investigated. In addition,
the existence of assets
is subject to annual
external audit.
----------------------------- --------------------------------- ----------------------------------
What is the risk? How is it managed? Current assessment of
risk
----------------------------- --------------------------------- ----------------------------------
Reliance on Third To mitigate this risk, Control procedures working
party Service Provider Baillie Gifford has effectively with no interruption
Risk: a comprehensive business to Depositary, Custodian,
Failure of Baillie continuity plan which Broker or Registrar services
Gifford's systems facilitates continued during the year.
or those of other operation of the business
third party service in the event of a service
providers could lead disruption or major
to an inability to disaster. The Audit
provide accurate Committee reviews Baillie
reporting and monitoring Gifford's Report on
or a misappropriation Internal Controls and
of assets. the reports by other
key third party service
providers are reviewed
by Baillie Gifford on
behalf of the Board.
In the year under review,
the other key third
party service providers
have not experienced
significant operational
difficulties affecting
their respective services
to the Company.
----------------------------- --------------------------------- ----------------------------------
What is the risk? How is it managed? Current assessment of
risk
----------------------------- --------------------------------- ----------------------------------
Cyber Security Risk: To mitigate this risk, This risk is seen as
A cyber attack on the Audit Committee Increasing due to recent
Baillie Gifford's reviews reports on Internal indications that the
network or that of Controls published by continuation of geopolitical
a third party service Baillie Gifford and tensions could lead to
provider could impact other third party service cyber attacks. Emerging
the confidentiality, providers. technologies, including
integrity or availability Baillie Gifford's Business AI, could potentially
of data and systems. Risk Department reports increase information
to the Audit Committee security risks. In addition,
on the effectiveness service providers operate
of information security a hybrid approach of
controls in place at remote and office working,
Baillie Gifford and thereby increasing the
its business continuity potential of a cyber
framework. Cyber security security threat.
due diligence is performed
by Baillie Gifford on
third party service
providers which includes
a review of crisis management
and business continuity
frameworks.
----------------------------- --------------------------------- ----------------------------------
Emerging risks
As explained on pages 59 and 60 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
9 November 2023
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END
ACSFSLFDUEDSEIF
(END) Dow Jones Newswires
November 09, 2023 08:59 ET (13:59 GMT)
Baillie Gifford Japan (LSE:BGFD)
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