Baillie Gifford Japan Trust : Annual Report and Financial Statements 31 August 2021

NAV, Share Price and Benchmark Total Return

(figures rebased to 100 at 31 August 2021)

Share price†

NAV†#

Benchmark*

Premium/(discount) to Net Asset Value

(figures plotted on a weekly basis)

Premium/(discount)†# Average discount#

110

100

90

80

70

60

2%

0%

(2%)

(4%)

(6%)

(8%)

(10%)

(12%)

Chairman's Statement

Introduction

With great sadness, the Board notified shareholders in May of the sudden death of Keith Falconer. Keith joined the Board in 2014 and was appointed Chairman in 2019. He was an effective and widely admired Chairman who will be much missed by the Board and the Managers.

I was appointed interim Chairman in May and then Chairman of the Company in June.

Performance

In the year to 31 August 2022 the net asset value total return was -16.3%. As market sentiment deteriorated, the Company's shares moved to a discount to NAV, leading to a share price total return of -23.8%. The benchmark total return was -3.9% over the same period.

The Company's objective is to achieve long term capital growth, and the NAV returns over longer time periods remain ahead of the benchmark.

Source: Refinitiv, debt at par value.

Gearing and Borrowing

The Board believes that borrowing will enhance returns to investors over the long-term. Net gearing rose from 9.8% to 17.5% over the year to 31 August 2022. This reflected several factors. Firstly, as share prices fell, the Managers used gearing to invest in companies where they saw significant upside. Details of the portfolio changes are contained in the Managers' Report. The Company entered into a new revolving credit facility with Mizuho Bank for ¥2,600 million to provide additional flexibility for the Managers to take advantage of investment opportunities. Additionally, the net asset value fell over the year, which contributed to an increase in the gearing level in percentage terms.

Dividend

The Board is recommending a dividend of 9p per share, an increase of 50% on last year's 6p. This will be put to shareholders for approval at the Annual General Meeting to be held on 15 December 2022 and, if approved, will be paid on 21 December to shareholders on the register at close of business on 11 November 2022. A dividend reinvestment plan (DRIP) is available to shareholders who would prefer to re-invest their dividends in the shares of the Company. For those shareholders electing to receive the DRIP, the last date for receipt of election is 30 November 2022.

Share Capital and Discount Management

Over the course of the year, the share price moved from a 0.9% premium to NAV to an 8.1% discount to NAV. During this period, the Company bought back 428,750 shares at a total cost of approximately £3.3m. 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 so, at the Annual General Meeting, is seeking to renew this facility.

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 issued/reissued only at a premium to net asset value, thereby enhancing net asset value per share for existing shareholders. The Directors are, once again, seeking 10% share issuance authority at the Annual General Meeting. This authority would expire at the conclusion of the Annual General Meeting in 2023.

Annual General Meeting

The Company's AGM is scheduled to take place on 15 December 2022 at Baillie Gifford's offices in Edinburgh. Last year, the Board announced and fully intended to hold a physical meeting but, given uncertainty caused by Covid-19, reverted to a purely administrative meeting held at the Managers' offices, limiting attendance to those required for a quorum.

We very much hope that this year circumstances will permit us to meet the Company's shareholders in person. Nevertheless, given that Covid-19 remains in circulation and new variants may present new challenges, the Board encourages all shareholders to exercise their votes on the AGM resolutions by completing and submitting a form of proxy. We recommend that shareholders monitor the Company's website at japantrustplc.co.uk where any updates will be posted. Market announcements will also 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, as always, to submit them by email to trustenquiries@bailliegifford.com or call 0800 917 2112.

Information on the resolutions can be found on pages 59 and 60 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.