Baillie Gifford Japan Trust PLC

Annual Report • Jul 7, 2023

Annual Report and Financial Statements 31 August 2022 THE BAILLIE GIFFORD JAPAN TRUST PLC Cover2 Annual Report 2022 Notes None of the views expressed in this document should be construed as advice to buy or sell a particular investment. Investment trusts are UK public listed companies and as such comply with the requirements of the UK Listing Authority. They are not authorised or regulated by the Financial Conduct Authority (FCA). The Baillie Gifford Japan Trust PLC currently conducts its affairs, and intends to continue to conduct its affairs, so that the Company’s ordinary shares can qualify to be considered as a mainstream investment product and can be recommended by Independent Financial Advisers to ordinary retail investors in accordance with the rules of the FCA in relation to non-mainstream investment products. THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action you should take you should consult your stockbroker, bank manager, solicitor,   If you have sold or otherwise transferred all of your ordinary shares in The Baillie Gifford Japan Trust PLC, please forward this document, together with any accompanying documents, but not your personalised Form of Proxy, as soon as possible to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the sale or transfer was or is being effected for delivery to the purchaser or transferee. Investor Disclosure Document The UK Alternative Investment Fund Managers Regulations requires certain information to be made available to investors prior to their investment in the Company. The Company’s Investor Disclosure Document is available for viewing at japantrustplc.co.uk. 1 Financial Highlights   Chairman’s Statement 4 One Year Summary 5 Five Year Summary 6 Ten Year Record 7 Business Review 13 Managers’ Report 15 Review of Top Ten Investments 17 Distribution of Total Investments 17 Relative Contribution 18 Investment Portfolio by Growth Category  Holding Period  Portfolio Characteristics  List of Investments  Corporate Governance and Sustainability Engagement  Baillie Gifford Statement on Stewardship   Directors and Management  Directors’ Report  Corporate Governance Report 33 Audit Committee Report 35 Directors’ Remuneration Report 37 Statement of Directors’ Responsibilities  38 Independent Auditor’s Report 43 Income Statement 44 Balance Sheet 45 Statement of Changes in Equity 46 Cash Flow Statement 47 Notes to the Financial Statements 57 Glossary of Terms and Alternative Performance Measures   Notice of Annual General Meeting 63 Further Shareholder Information 66 Sustainable Finance Disclosure Regulation (‘SFDR’) 67 Communicating with Shareholders Contents The Baillie Gifford Japan Trust PLC 01 Net Asset Value  † -16.3% 2021: +21.0%   † -23.8% 2021: +25.7% Benchmark  † -3.9% 2021: +16.3% Financial Highlights Source: Baillie Gifford/Refinitiv. Share price NAV†# Benchmark * * The benchmark is the TOPIX total return (in sterling terms). A 2021 S ONDJ FM A M J J A 2022 90 60 80 100 110 70     Share price † NAV †# Benchmark Financial Highlights – Year to 31 August 2022 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. Illustration:   Premium/(Discount) (after deducting borrowings at fair value) Average premium (after deducting borrowings at fair value) A 2021 SO ND JFM A M J J A 2022 (12%) 2% (10%) (8%) (6%) (2%) 0% (4%)  †  #    Premium/(discount) to Net Asset Value    †#  # 02 Annual Report 2022  Chairman’s Statement    Strategic Report Introduction        Performance         Compound annual returns to end August 5 years (%) 10 years (%) Net asset value total return   Share price total return       Gearing and Borrowing            Dividend                     reissue any shares held in treasury for cash on a non pre-emptive                    japantrustplc.co.uk     trustenquiries@bailliegifford.com      The Baillie Gifford Japan Trust PLC 03             Board         Outlook         Chairman  04 Annual Report 2022  31 August 2022 31 August 2021 % change  #   Bank loans      Net asset value per share #†    Share price     #†           #       Active share #   Year to 31 August (%) 2022 2021 Total returns # Net asset value per share †   Share price    *   Year to 31 August 2022 2022 2021 2021 Year’s high and low High Low High Low Net asset value per share #†     Share price      #†     31 August 2022 31 August 2021 Net return per ordinary share Revenue   Capital   Total   *  #  †   One Year Summary     The Baillie Gifford Japan Trust PLC 05    Premium/(Discount) to Net Asset Value    Source: Refinitiv/Baillie Gifford Baillie Gifford Japan premium/(discount) † Baillie Gifford Japan average premium/(discount) † The premium/(discount) † is the difference between Baillie Gifford Japan’s quoted share price and its underlying net asset value (at par). # 2017 Years to 31 August 2019 2020 2021 2022 2018 0% (9%) (3%) 12% 3% 9% 6% (6%)     * Source: Refinitiv/Baillie Gifford. NAV total return relative to the benchmark †# Share price total return relative to the benchmark † 2018 Years to 31 August 2019 2020 2021 2022 (30%) (20%) (10%) 0% 10% 20% Source: Refinitiv/Baillie Gifford. NAV total return †# Share price total return † 2018 Years to 31 August 2019 2020 2021 2022 30% (30%) (15%) 15% 0% 2017 Cumulative to 31 August 2019 2020 2021 2022 2018 Source: Refinitiv/Baillie Gifford. NAV total return (at par) †# Share price total return † Benchmark total return * † 80 140 160 100 120  †  #  Five Year Summary    06 Annual Report 2022 Ten Year Record *   Year to 31 August Gross revenue £’000 Available for ordinary shareholders £’000 Revenue earnings per ordinary share p Dividend paid and proposed per ordinary share p Ongoing charges † % Gearing † % Potential gearing † %     –        –      322  –        –        –        –                    2020       20            11.31   18  Capital At 31 August Total assets * £’000 Bank loans £’000 Shareholders’ funds £’000 Net asset value per ordinary share (par) † p Share price p Premium/ (discount) †# %                                                         2020                    (8.1)  At 31 August Net asset value per share total return †# Share price total return † Benchmark total return ¶ Net asset value per share total return % change †# Share price total return % change † Benchmark total return % change ¶                                           232           2020   230                  Compound annual returns         *  †  ¶  #        The Baillie Gifford Japan Trust PLC 07      companies and their shares are traded on the London Stock         that the Company has continued to conduct its affairs so as to      Objective and Policy                   of the portfolio are carefully monitored, there are           assets        Business Review         Performance    Key Performance Indicators    The movement in net asset value total return per ordinary share Net asset value total return % Benchmark total return % Percentage point relative return         2020        2022    The movement in share price total return Share price total return % Benchmark total return % Percentage point relative return         2020        2022     per share Premium/(discount) %     2020    2022   Ongoing charges %     2020    2022  *  08 Annual Report 2022 Key Performance Indicators (continued)    Borrowings  Currency Hedging           Risk and Impact How the risk is managed Current assessment of risk Investment and Strategic Risk Financial Risk Impact:   risks are therefore market related and include market      in particular, considered the impact of    Board considers various portfolio metrics               Increasing: This risk is seen as  volatility as a result of the Russian    continues to have an impact on  Investment Strategy Risk:    or the ineffective implementation of an attractive or  shareholders and, as a result, a decreased demand           Stable    The Baillie Gifford Japan Trust PLC 09  Risk and Impact How the risk is managed Current assessment of risk Investment and Strategic Risk (continued) Discount Risk:     The Board monitors the level of premium/      Increasing: shares moved from a premium  Smaller Company Risk: The Company has investments in smaller companies        discusses the investment case and portfolio   Increasing:     Environmental, Social and Governance (ESG) Risk:              Stable:     Leverage Risk:     the Company may have to sell investments to           Glossary of Terms and Alternative Performance  Increasing: This risk is seen as   External Risks Regulatory Risk:   Rules and the Companies Act could lead to       Risk, Internal Audit and Compliance      representation is made to ensure that the special circumstances of investment trusts      to ensure adherence to the Transparency   Stable: All control procedures are      10 Annual Report 2022  Risk and Impact How the risk is managed Current assessment of risk External Risks (continued) Political and Associated Economic Risk:  invests or may invest may have practical     Increasing:  as Governments and consumers  assess the impact of the Russian  sanctions applied in response,     Operational Risks Custody and Depositary Risk: Safe custody of the             is reported to the Audit Committee and any   Stable: Control procedures   Custodian moved seamlessly    Reliance on Third party Service Provider Risk:               key third party service providers have not    Stable: Control procedures   Custodian moved seamlessly to    Cyber Security Risk:        to the Audit Committee on the effectiveness of information security controls in place at Baillie   Baillie Gifford on third party service providers   Increasing: due to recent indications that     pandemic, service providers      Emerging Risks    The Baillie Gifford Japan Trust PLC 11                                                             Governance Code, assessed the prospects of the Company                               fall due, the        Company are outsourced to third party service providers and                        12 Annual Report 2022                  to all stakeholders and that proper consideration of ESG factors                    Company intends to recruit an additional independent                              and all its functions are outsourced, there are no disclosures to                   bailliegifford.com Future Developments of the Company    The Baillie Gifford Japan Trust PLC 13  Managers’ Report                                                                                                             favour companies that supply critical parts and components such   14 Annual Report 2022  , and reduced        Company relative to the Japanese market (EV/EBIT multiple of                            Baillie Gifford   The Baillie Gifford Japan Trust PLC 15 Review of Top Ten Investments  Review of Top Ten Investments           allocator of capital and the discount that the shares trade at to  FANUC                                   Bridgestone                       FANUC 16 Annual Report 2022  Calbee               phase of market consolidation in the past, the top three players          Calbee            CyberAgent              The Baillie Gifford Japan Trust PLC 17  Distribution of Total Investments           Name Portfolio (average weight) % Index (average weight) % Relative contribution %     Istyle    Sumitomo Mitsui Trust        Gree    TKP    Tokyo Tatemono    Keyence    Hoya    Itochu    Name Portfolio (average weight) % Index (average weight) % Relative contribution % M3    SoftBank    Katitas                    Advantest    Itochu    SanBio    Name Portfolio (average weight) % Index (average weight) % Relative contribution % Rakuten    Raksul        Mercari                    Infomart    Misumi    Name Portfolio (average weight) % Index (average weight) % Relative contribution % Rakuten    Toyota Motor    Sato    Lifull        Raksul                     Chemicals and other materials 8.2% (7.6%) Electricals and electronics 14.3% (15.4%) Manufacturing and machinery 21.5% (19.5%) Retail 4.1% (2.2%) Commerce and services 18.0% (21.1%) Pharmaceuticals and food 3.6% (3.6%) Financials 9.4% (9.5%) Information, communication and utilities 16.6% (17.5%) Real estate and construction 4.3% (3.6%) TOPIX Large 70 32.2 % (32.0%) TOPIX Core 30 16.2 % (14.6%) TOPIX Small and Others 15.1 % (22.8%) TOPIX Mid 400 27.9 % (29.9%) Jasdaq 0.8% (0.7%) TOPIX Mothers 7.8 % (nil) Relative Contribution 18 Annual Report 2022      % of total investments % of total investments     Misumi  Rakuten    Nidec Sato  Istyle TKP Topcon Mercari Keyence Raksul SMC  Shimano Toyota Tsusho Broadleaf  Infomart BASE  Noritsu Koki  Nippon Ceramic   Lifull                                    Nintendo Shiseido   Seria  Makita   Secom              Total 45.4 Total 14.3  Time Time  Investment Portfolio by Growth Category   The Baillie Gifford Japan Trust PLC 19  Cyclical Growth     % of total investments % of total investments SoftBank  Sony  Tokyo Tatemono Colopl          Sumitomo Mitsui Trust  Itochu    Rohm Nifco   Iida  Shima Seiki               Total  Total  Time   TimeTime  20 Annual Report 2022 >10 years % of total investments     Misumi    Itochu  Rakuten    Tokyo Tatemono  Rohm  Nifco  SMC      Lifull  Total  2–5 years % of total investments       Sato      Mercari  Raksul  Shimano    Makita  Noritsu Koki      Total  <2 years % of total investments     Nintendo  Shiseido      TKP      Seria   Paints  Shima Seiki  BASE      Total   5–10 years % of total investments SoftBank    Sumitomo Mitsui Trust    Sony  Sumitomo Metal        Nidec  Istyle    Colopl  Topcon  Keyence    Toyota Tsusho  Broadleaf  Iida    Infomart    Secom  Nippon Ceramic    Total 36.7 —  —   —  —  Portfolio Characteristics Source: UBS, sterling, as at 31 August 2022. * Historic: Trailing 3 years sales growth. ** 12 month forward estimate. Market conditions at the Company’s year end meant the Return on Equity of the portfolio was below that of the benchmark. Japan Trust TOPIX Sales Growth * % p.a. Return on Equity ** % Debt/Equity Ratio Price/ Earnings ** Market Cap (£m) 0 10 40 20 30 Holding Period   The Baillie Gifford Japan Trust PLC 21 Name Sector Value 31 August 2022 £’000 % of total investments Absolute † performance % Relative † performance % SoftBank Information, communication and utilities      Electricals and electronics      Financials      Information, communication and utilities           Sumitomo Mitsui Trust Financials      Pharmaceuticals and food      Financials     Misumi Commerce and services      Commerce and services     Sony Electricals and electronics                 Itochu Commerce and services      Commerce and services     Rakuten Commerce and services      Electricals and electronics      Chemicals and other materials     Nintendo      *   Shiseido        Chemicals and other materials      Commerce and services      Retail     Nidec Electricals and electronics     Tokyo Tatemono Real estate and construction     Sato             Chemicals and other materials     Rohm Electricals and electronics     Istyle Information, communication and utilities      Electricals and electronics     Colopl Information, communication and utilities      Information, communication and utilities     Topcon      Nifco Chemicals and other materials     TKP Real estate and construction     Mercari Information, communication and utilities     Keyence Electricals and electronics            Commerce and services     SMC      Raksul Information, communication and utilities      Retail     *   Toyota Tsusho Commerce and services     List of Investments at 31 August 2022  22 Annual Report 2022  Name Sector Value 31 August 2022 £’000 % of total investments Absolute † performance % Relative † performance % Shimano       Retail     Seria Retail     *    Chemicals and other materials     Broadleaf Information, communication and utilities     Iida Real estate and construction     Makita       Real estate and construction      Chemicals and other materials    *    Information, communication and utilities     Shima Seiki      *   Infomart Commerce and services     Noritsu Koki            *    Pharmaceuticals and food     BASE Information, communication and utilities     Secom Commerce and services      Information, communication and utilities 3,323    *   Nippon Ceramic Electricals and electronics      Commerce and services      Commerce and services      Pharmaceuticals and food     Lifull Commerce and services     Total investments   Net liquid assets  Total assets #  Bank loans  Equity shareholders' funds  †   *  #      Chairman The Baillie Gifford Japan Trust PLC 23 Corporate Governance and Sustainability Engagement                  bailliegifford.com          relations teams to discuss the recent update to its climate  Discussion       discussion covered value chain emissions – most especially the       Outcome         Discussion               Outcome     Climate Change  to our environment, our society and to economies and companies                      24 Annual Report 2022 Baillie Gifford Statement on Stewardship        Prioritisation of Long-term Value Creation          A Constructive and Purposeful Board         We look for remuneration policies that are simple, transparent and                             The Baillie Gifford Japan Trust PLC 25 Baillie Gifford Statement on Stewardship   Directors David Kidd – Chairman  untimely death of Keith Falconer, appointed Chairman in June                Joanna Pitman                           The Company has appointed Baillie Gifford & Co Limited, a                          Directors and Management  26 Annual Report 2022    Corporate Governance 32 and                                                 Depositary           Directors                                   Directors’ Report  The Baillie Gifford Japan Trust PLC 27 Dividend                  Capital Entitlement    Voting       Name No. of ordinary 5p shares held at 31 August 2022 % of issue                                                                           then:       resold from treasury at a premium to net asset value per ordinary            28 Annual Report 2022              result in an increase in net asset value per ordinary share for the   Directors’ Fee Limit    Articles of Association   Continuation of the Company       Financial Instruments   creditors that arise directly from its operations such as sales and     Disclosure of Information to Auditor        Independent Auditor                              Bribery Act            recommend that all shareholders vote in favour of them, as they     Chairman   The Baillie Gifford Japan Trust PLC 29    frc.org.uk and the relevant    theaic.co.uk Compliance          The Board                               Appointments to the Board         Chairman and Directors’ Tenure       Independence of Directors                       Board Audit Committee Nomination Committee Number of meetings 4 3 1  *  3    3    3  Joanna Pitman  3   3 2 –  2  –    Corporate Governance Report  30 Annual Report 2022 Nomination Committee             Diversity          japantrustplc.co.uk Board Composition        Performance Evaluation                                       Induction and Training            Audit Committee                                  The Baillie Gifford Japan Trust PLC 31                                   summary of the key points is reported to the Audit Committee               are monitored and the sensitivity of the portfolio to key risks is undertaken periodically as appropriate to ascertain the impact of    Going Concern                                                      If the continuation resolution is not passed, the Articles provide      32 Annual Report 2022               at japantrustplc.co.uk    japantrustplc.co.uk   Chairman  The Baillie Gifford Japan Trust PLC 33        japantrustplc.co.uk                        the information necessary for shareholders to assess the     — the appointment/reappointment, remuneration and terms                         Internal Audit  internal control systems and the internal audit function in place                                                 Audit Committee Report  *  34 Annual Report 2022         provide assurance that the Annual Report and Financial Statements are correct in all material respects and that its role is        External Auditor                                               Audit Tender                presentations the Committee recommended the Board appoint                 Accountability and Audit      Audit Committee Chair  The Baillie Gifford Japan Trust PLC 35 Directors’ Remuneration Report     approval every three years or sooner if an alteration to the policy       that the additional fee for the Chairman of the Audit Committee                                   Expected fees for year ending 31 Aug 2023 £ Fees as at 31 Aug 2022 £       Additional fee for Chair of the Audit Committee       200,000 200,000           Name 2022 Fees £ 2022 Taxable benefits * £  Total £ 2021 Fees £ 2021 Taxable benefits * £  Total £      –     31,564  –      – – – Joanna Pitman     –    –   –       –      –    36 Annual Report 2022 Cumulative to 31 August Source: Baillie Gifford/Refinitiv and relevant underlying index providers. See disclaimer on page 65. Share price total return TOPIX total return (in sterling terms) 2012 2015 2016 2019 2021 2013 2014 2017 2018 20222020 0 400 300 200 100 500 600 Annual Percentage Change in Fees   Name % from 2021 to 2022 % from 2020 to 2021          – – Joanna Pitman           Directors’ Interests (audited)     Name Nature of interest Ordinary 5p shares held at 31 August 2022 Ordinary 5p shares held at 31 August 2021            – Joanna Pitman               2022 £’000 2021 £’000 % Change         Company Performance    investment made up of shares in the component parts of the   Company has measured its performance over the period covered  Performance Graph   Approval    Joanna Pitman Remuneration Committee Chair  The Baillie Gifford Japan Trust PLC 37                                           assets of the Company and to prevent and detect fraud and  Statement of Directors’ Responsibilities in Respect of the Annual Report and the Financial Statements                        and      We consider the Annual Report and Financial Statements taken        38 Annual Report 2022  1. Our opinion is unmodified We have audited the financial statements of The Baillie Gifford Japan Trust plc. (“the Company”) for the year ended 31 August 2022 which comprise the Income Statement, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and the related notes, including the accounting policies in note 1. In our opinion the financial statements: — give a true and fair view of the state of the Company’s affairs as at 31 August 2022 and of its return for the year then ended; — have been properly prepared in accordance with UK accounting standards, including FRS 102, The Financial Reporting Standard applicable in the UK and Republic of Ireland; and — have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion is consistent with our report to the audit committee. We were first appointed as auditor by the Directors on 30 November 2017. The period of total uninterrupted engagement is for the five financial years ended 31 August 2022. We have fulfilled our ethical responsibilities under, and we remain independent of the Company in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities. No non-audit services prohibited by that standard were provided. Independent auditor’s report to the members of The Baillie Gifford Japan Trust plc. Overview Materiality: Financial statements as a whole £9.3m (2021:£11m) 1% (2021: 1%) of Total Assets Key audit matters vs 2021 Recurring risks Carrying amount of quoted investments  The Baillie Gifford Japan Trust PLC 39 2. Key audit matters: including our assessment of risks of material misstatement Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. We summarise below the key audit matter, (unchanged from 2021), in arriving at our audit opinion above, together with our key audit procedures to address this matter and our findings from those procedures in order that the Company's members, as a body, may better understand the process by which we arrived at our audit opinion. This matter was addressed, and our findings are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on this matter. The risk Our response Carrying amount of quoted investments (£930.3 million; 2021: £1,053.7 million) Refer to page 33 (Audit Committee Report), page 47 (accounting policy) and note 9 on page 50 (financial disclosures). Low risk, high value: The Company’s portfolio of quoted investments makes up 98.6% (2021: 95.8%) of the Company’s total assets (by value) and is one of the key drivers of results. We do not consider these investments to be at a high risk of significant misstatement, or to be subject to a significant level of judgement because they comprise liquid, quoted investments. However, due to their materiality in the context of the financial statements as a whole, they are considered to be one of the areas which had the greatest effect on our overall audit strategy and allocation of resources in planning and completing our audit. We performed the tests below rather than seeking to rely on any of the Company’s controls, because the nature of the balance is such that we would expect to obtain audit evidence primarily through the detailed procedures described below. Our procedures included: — Test of detail: Agreeing the valuation of 100% of investments in the portfolio to externally quoted prices; and — Enquiry of custodians: Agreeing 100% of quoted investment held in the portfolio to independently received third party confirmations from investment custodians. Our findings We found no differences (2021: no differences) from the third party holdings confirmations nor from the externally quoted prices of a size to require reporting to the audit committee. 3. Our application of materiality and an overview of the scope of our audit Materiality for the financial statements as a whole was set at £9.3m (2021: £11m), determined with reference to a benchmark of total assets, of which it represents 1% (2021: 1%). In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the financial statements as a whole. Performance materiality was set at 75% (2021: 75%) of materiality for the financial statements as a whole, which equates to £6.9m (2021: £8.2m). We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an elevated level of risk. We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £465k (2021: £550k), in addition to other identified misstatements that warranted reporting on qualitative grounds. Our audit of the Company was undertaken to the materiality and performance materiality levels specified above and was performed by a single audit team. The scope of the audit work performed was fully substantive as we did not place reliance upon the Company’s internal control over financial reporting. Total Assets £943.5m (2021: £1,100.1m) Materiality £9.3m (2021: £11m) £9.3m Whole financial statements materiality (20 21: £11m) £6.9m Performance materiality (2021: £8.2m) £465k Misstatements reported to the audit committee (2021: £550k) Total assets Materiality  40 Annual Report 2022 4. The impact of climate change on our audit In planning our audit we have considered the potential impacts of climate change on the Company’s financial statements. We have performed a risk assessment of how the impact of climate change may affect the financial statements and our audit. Level 1 listed investments make up 98.6% of the Group’s total assets, for which fair value is determined as the quoted market price. Therefore there was no significant impact of this on our key audit matter. We have read the disclosure of climate related narrative in the front half of the financial statements and considered consistency with the financial statements and our audit knowledge. 5. Going concern The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or to cease its operations, and as they have concluded that the Company’s financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over its ability to continue as a going concern for at least a year from the date of approval of the financial statements (“the going concern period”). We used our knowledge of the Company, its industry, and the general economic environment to identify the inherent risks to its business model and analysed how those risks might affect the Company’s financial resources or ability to continue operations over the going concern period. The risks that we considered most likely to adversely affect the Company’s available financial resources and metrics relevant to debt covenants over this period were: — the impact of a significant reduction in the valuation of investments; — the liquidity of the investment portfolio and its ability to meet the liabilities of the Company as and when they fall due; and — the operational resilience of key service organisations. We considered whether these risks could plausibly affect the liquidity or covenant compliance in the going concern period by assessing the degree of downside assumption that, individually and collectively, could result in a liquidity issue, taking into account the Company’s liquid investment position (a reverse stress test). We considered whether the going concern disclosure in note 1 to the financial statements gives a full and accurate description of the Directors’ assessment of going concern, including the identified risks and related sensitivities. Our conclusions based on this work: — We consider that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate; — We have not identified, and concur with the Directors’ assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for the going concern period; 5. Going concern (continued) — We have nothing material to add or draw attention to in relation to the Directors’ statement in note 1 to the financial statements on the use of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the Company’s use of that basis for the going concern period, and we found the going concern disclosure in note 1 to be acceptable; and — The related statement under the Listing Rules set out on page 31 is materially consistent with the financial statements and our audit knowledge. However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Company will continue in operation. 6 Fraud and breaches of laws and regulations – ability to detect Identifying and responding to risks of material misstatement due to fraud To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included: — enquiring of Directors as to the Company’s high-level policies and procedures to prevent and detect fraud, as well as whether they have knowledge of any actual, suspected or alleged fraud; — assessing the segregation of duties in place between the Directors, the Administrator and the Company’s Investment Manager; and — reading Board and Audit Committee minutes. We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit. As required by auditing standards, we perform procedures to address the risk of management override of controls, in particular to the risk that management may be in a position to make inappropriate accounting entries. We evaluated the design and implementation of the controls over journal entries and other adjustments and made inquiries of the Administrator about inappropriate or unusual activity relating to the processing of journal entries and other adjustments. We substantively tested all material post-closing entries and, based on the results of our risk assessment procedures and understanding of the process, including the segregation of duties between the Directors and the Administrator, no further high-risk journal entries or other adjustments were identified. On this audit we do not believe there is a fraud risk related to revenue recognition because the revenue is non-judgemental and straightforward, with limited opportunity for manipulation. We did not identify any additional fraud risks. Identifying and responding to risks of material misstatement related to compliance with laws and regulations We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience and through discussion with the Directors, the Investment Manager and the Administrator (as required by auditing standards) and discussed with the Directors the policies and procedures regarding compliance with laws and regulations. As the Company is regulated, our assessment of risks involved gaining an understanding of the control environment including the entity’s procedures for complying with regulatory requirements.  The Baillie Gifford Japan Trust PLC 41 6. Fraud and breaches of laws and regulations – ability to detect (continued) Identifying and responding to risks of material misstatement related to compliance with laws and regulations (continued) We communicated identified laws and regulations throughout our team and remained alert to any indications of non- compliance throughout the audit. The potential effect of these laws and regulations on the financial statements varies considerably. Firstly, the Company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation (including related companies legislation), distributable profits legislation, and its qualification as an Investment Trust under UK taxation legislation, any breach of which could lead to the Company losing various deductions and exemptions from UK corporation tax, and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items. Secondly, the Company is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation. We identified the following areas as those most likely to have such an effect: money laundering, data protection, bribery and corruption legislation and certain aspects of company legislation recognising the financial and regulated nature of the Company’s activities and its legal form. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the Directors and the Administrator and inspection of regulatory and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach. Context of the ability of the audit to detect fraud or breaches of law or regulation Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non- compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non-detection of fraud, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non- compliance with all laws and regulations. 7. We have nothing to report on the other information in the Annual Report and financial statements The Directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon. 7. We have nothing to report on the other information in the Annual Report and financial statements (continued) Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information. Strategic report and Directors’ report Based solely on our work on the other information: — we have not identified material misstatements in the strategic report and the Directors’ report; — in our opinion the information given in those reports for the financial year is consistent with the financial statements; and — in our opinion those reports have been prepared in accordance with the Companies Act 2006. Directors’ Remuneration Report In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006. Disclosures of emerging and principal risks and longer-term viability We are required to perform procedures to identify whether there is a material inconsistency between the Directors’ disclosures in respect of emerging and principal risks and the viability statement, and the financial statements and our audit know ledge. Based on those procedures, we have nothing material to add or draw attention to in relation to: — the Directors’ confirmation within the Viability Statement on page 11 that they have carried out a robust assessment of the emerging and principal risks facing the Company, including those that would threaten its business model, future performance, solvency and liquidity; — the Principal and Emerging Risks disclosures describing these risks and how emerging risks are identified, and explaining how they are being managed and mitigated; and — the Directors’ explanation in the Viability Statement of how they have assessed the prospects of the Company, over what period they have done so and why they considered that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. We are also required to review the Viability Statement, set out on page 11 under the Listing Rules. Based on the above procedures, we have concluded that the above disclosures are materially consistent with the financial statements and our audit knowledge.  42 Annual Report 2022 7. We have nothing to report on the other information in the Annual Report (continued) Disclosures of emerging and principal risks and longer-term viability (continued) Our work is limited to assessing these matters in the context of only the knowledge acquired during our financial statements audit. As we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the absence of anything to report on these statements is not a guarantee as to the Company’s longer-term viability. Corporate governance disclosures We are required to perform procedures to identify whether there is a material inconsistency between the Directors’ corporate governance disclosures and the financial statements and our audit knowledge. Based on those procedures, we have concluded that each of the following is materially consistent with the financial statements and our audit knowledge: — the Directors’ statement that they consider that 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; — the section of the annual report describing the work of the Audit Committee, including the significant issues that the audit committee considered in relation to the financial statements, and how these issues were addressed; and — the section of the annual report that describes the review of the effectiveness of the Company’s risk management and internal control systems. We are required to review the part of Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified by the Listing Rules for our review. We have nothing to report in this respect. 8. We have nothing to report on the other matters on which we are required to report by exception Under the Companies Act 2006, we are required to report to you if, in our opinion: — adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or — the financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or — certain disclosures of Directors’ remuneration specified by law are not made; or — we have not received all the information and explanations we require for our audit. We have nothing to report in these respects. 9. Respective responsibilities Directors’ responsibilities As explained more fully in their statement set out on page 37, the Directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. A fuller description of our responsibilities is provided on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities . The Company is required to include these financial statements in an annual financial report prepared using the single electronic reporting format specified in the TD ESEF Regulation. This auditor’s report provides no assurance over whether the annual financial report has been prepared in accordance with that format. 10. The purpose of our audit work and to whom we owe our responsibilities This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and the terms of our engagement by the Company. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report, and the further matters we are required to state to them in accordance with the terms agreed with the Company, and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed. John Waterson (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants Saltire Court 20 Castle Terrace Edinburgh EH1 2EG 18 October 2022  The Baillie Gifford Japan Trust PLC 43 Income Statement For the year ended 31 August Notes 2022 Revenue £’000 2022 Capital £’000  Total  2021 Revenue £’000 2021 Capital £’000  Total    –   –     –   –   Income 2  –   –   3  –   –     –   –   and taxation          –   –  Net return before taxation          –   –  Net return after taxation       Net return per ordinary share  11.31p  (164.88p)           44 Annual Report 2022 Balance Sheet   As at 31 August Notes 2022 £’000 2022 £’000 2021 £’000 2021 £’000 Fixed assets     Current assets           Creditors     Net current (liabilities)/assets   Total assets less current liabilities 848,661  Creditors     Net assets   Capital and reserves Share capital    Share premium account    Capital redemption reserve  203 203 Capital reserve    Revenue reserve    Equity shareholders’ funds   Net asset value per ordinary share *       Chairman  The Baillie Gifford Japan Trust PLC 45 Statement of Changes in Equity   Notes Share capital £’000 Share premium account £’000 Capital redemption reserve £’000 Capital reserve £’000 Revenue reserve £’000  funds     203      – – –  –    – – –      – – – –    4,717   556,414    Notes Share capital £’000 Share premium account £’000 Capital redemption reserve £’000 Capital reserve £’000 Revenue reserve £’000  funds     203    Shares issued    –  –    – – –      – – – –    4,717       46 Annual Report 2022  Cash Flow Statement For the year ended 31 August Notes 2022 £’000 2022 £’000 2021 £’000 2021 £’000                     Cash from operations   Interest paid                             –    Decrease in cash and cash equivalents         Cash and cash equivalents at end of period *   *   The Baillie Gifford Japan Trust PLC 47      1 Principal Accounting Policies      (a) Basis of Accounting                                                                    (b) Investments                   (c) Cash and Cash Equivalents     or if they have a maturity or period of notice of not more than one  (d) Income                    of the cash dividend declared is credited to the revenue    (e) Expenses     are added to the cost of the investment or deducted from the sale   (f) Finance Costs          Notes to the Financial Statements  48 Annual Report 2022   2022 £’000 2021 £’000 Income from investments    Other income Miscellaneous income 2 – Total income    – all charged to revenue 2022 £’000 2021 £’000      4 Other Administrative Expenses – all charged to revenue 2022 £’000 2021 £’000           668  (g) Taxation            (h) Foreign Currencies                    cant Estimates and Judgements              Notes to the Financial Statements (continued) The Baillie Gifford Japan Trust PLC 49 5 Finance Costs of Borrowings 2022 £’000 2021 £’000  1,866   6 Tax on Ordinary Activities 2022 £’000 2021 £’000 Analysis of charge in year    Factors affecting tax charge for year             Effects of:                Factors that may affect future tax charges             2022 Revenue 2022 Capital  Total 2021 Revenue 2021 Capital  Total  11.31p  (164.88p)            50 Annual Report 2022 8 Ordinary Dividends    2022 2021 2022 £’000 2021       2022 2021 2022 £’000 2021 £’000     8,451    2022 £’000 2021 £’000        Listed equities        Movements in year: Purchases at cost 196,530 Sales – proceeds                 2022 £’000 2021 £’000  Gains on sales      (174,357) 147,763    The Baillie Gifford Japan Trust PLC 51  Debtors 2022 £’000 2021 £’000     3 –        11 Creditors – amounts falling due within one year 2022 £’000 2021 £’000  –    –         Creditors – amounts falling due after more than one year 2022 £’000 2021 £’000 Bank loans 57,655  Borrowing facilities At 31 August 2022 Drawings At 31 August 2021 Drawings      –  for                 52 Annual Report 2022 13  2022 Number 2022 £’000 2021 Number 2021 £’000        22 – – Total  4,717  4,717           14  Share capital £’000 Share premium account £’000 Capital redemption reserve £’000 Capital reserve £’000 Revenue reserve £’000  funds     203     – – –  –  Gains on investments – – –  –   – – –  –   – – –  –   investment transactions – – –  –   – – –  – (1,863) Revenue return on ordinary activities   – – – –    – – – –    4,717   556,414     15    2022 2021 Shareholders' funds    *   Shareholders' funds per ordinary share       The Baillie Gifford Japan Trust PLC 53 16 Analysis of Change in Net Debt At 1 September 2021 £'000 Cash flows £'000 Other non-cash charges £'000 Exchange movement £'000 At 31 August 2022 £'000    –   Loans due in less than one year –     Loans due in more than one year  –      – 14,443  17 Contingent Liabilities, Guarantees and Financial Commitments                                            54 Annual Report 2022  (continued)      At 31 August 2022 Investments £’000 Cash and cash equivalents £’000 Bank loans £’000 Other debtors and creditors * £’000 Net exposure         –  –         At 31 August 2021 Investments £’000 Cash and cash equivalents £’000 Bank loans £’000 Other debtors and creditors * £’000 Net exposure         –  –                           Financial Assets 2022 Fair value £’000 2022 Weighted average interest rate 2022 Weighted average period until maturity * 2021 Fair value £’000 2021 Weighted average interest rate 2021 Weighted average period until maturity *  Japanese yen   n/a   n/a    n/a   n/a   *     The Baillie Gifford Japan Trust PLC 55  (continued)    Financial Liabilities  2022 Book value £’000 2022 Weighted average interest rate 2022 Weighted average period until maturity 2021 Book value £’000 2021 Weighted average interest rate 2021 Weighted average period until maturity  Yen denominated   17 months                                             2022 £’000 2021 £’000 In less than one year  –                    56 Annual Report 2022  (continued)                 2022 £’000 2021 £’000          Fair Value of Financial Assets and Financial Liabilities    2022 Book value £’000 2022 Fair * value £’000 2021 Book value £’000 2021 Fair * value £’000     144,535 *       Fair Value of Financial Instruments    Level 1 Level 2 and Level 3     The Baillie Gifford Japan Trust PLC 57 Total Assets  Net Asset Value          31 August 2022 31 August 2021     Share price    (Discount)/premium      2022 NAV 2022 Share Price 2021 NAV 2021 Share Price        *                  Total return      *     2022 £’000 2021 £’000       Total expenses  5,544 6,118  *    Ongoing charges    *  Glossary of Terms and Alternative Performance Measures (APM)  58 Annual Report 2022             Gearing * £’000 Potential Gearing † £’000 Gearing * £’000 Potential Gearing † £’000          –  – Shareholders' funds          #   # *  †  #            Gross method £’000 Commitment method £’000 Gross method £’000 Commitment method £’000        –  –            Leverage      #   # #      The Baillie Gifford Japan Trust PLC 59 Notice of Annual General Meeting                 japantrustplc.co.uk   trustenquiries@bailliegifford.com       Ordinary Business                                 JOHN LEWIS A8 PRINCES STREET GE ORGE STREET CALTON SQUARE BUS STATION OMNI CENTRE BALMORAL HOTEL L E I T H S T R E E T QUEEN STREET W A T E R L O O P L A C E C A L T O N H I L L CA L T O N R O A D ST ANDREW SQUARE EDINBURGH WAVERLEY STATION LEITH WALK A7 NORTH BRIDGE YORK PLACE G R E E NS IDE ROW TRAM STOP ST ANDREW SQUARE ST ANDREW SQUARE TRAM STOP    Lothian Buses local services include:    Access to Waverley Train Station on foot 60 Annual Report 2022                                   did not apply to any such allotment or sale, provided that this           treasury shares in pursuance of any such offer or       value of the issued share capital of the Company, as at     unconditionally authorised, pursuant to and in accordance     (either for retention as treasury shares for future reissue,      ordinary share capital of the Company as at the date of the                                 By order of the Board Baillie Gifford & Co Limited   The Baillie Gifford Japan Trust PLC 61  Notes          electronic address provided either in this notice or any related           eproxyappointment.com no later than       euroclear.com/CREST                                                                                62 Annual Report 2022                  japantrustplc.co.uk                    The Baillie Gifford Japan Trust PLC 63 Baillie Gifford Japan is an investment trust.          How to Invest        bailliegifford.com     at japantrustplc.co.uk, Trustnet at trustnet.co.uk and on other             The ordinary shares of the Company are listed on the London   Key Dates The Annual Report and Financial Statements are normally issued     Capital Gains Tax    Cost of each ordinary share          Warrants     Computershare Investor Services PLC maintains the share    This helpline also offers an automated self-service functionality         investorcentre.co.uk              investorcentre.co.uk and enter your Shareholder Reference       investorcentre.co.uk  Electronic Proxy Voting  eproxyappointment.com          2022 Number of shares held 2022 % 2021 Number of shares held 2021 % Institutions     Intermediaries/   Platforms     Individuals     Marketmakers         Further Shareholder Information  64 Annual Report 2022 Data Protection     japantrustplc.co.uk   Baillie Gifford Japan Trust  found at japantrustplc.co.uk Further Information       result, the value of the shares and, any income from those shares,   As The Baillie Gifford Japan Trust PLC invests in overseas                        The Baillie Gifford Japan Trust PLC can make use of derivatives                     japantrustplc.co.uk        The Baillie Gifford Japan Trust PLC 65     bailliegifford.com or on   bailliegifford.com UK Alternative Investment Fund Managers (AIFM) Regulations    and   Leverage Gross method Commitment method    Actual          Gifford Japan Trust PLC must provide information annually to the   Automatic Exchange of Information      holders gov.uk/government/publications/exchange-of- information-account-holders            Third Party Data Provider Disclaimer            Benchmark  66 Annual Report 2022 Sustainable Finance Disclosure Regulation (‘SFDR’)     Baillie Gifford & Co Limited, via the National Private Placement                  bailliegifford.com/en/uk/about-us/literature-library/ corporate-governance/our-stewardshipapproach-esg- principles-and-guidelines-2022/             The Baillie Gifford Japan Trust PLC 67 Trust Trust     Trust  For a copy of Trust, please contact the Baillie Gifford Client  Baillie Gifford Japan on the Web  monthly commentary, recent portfolio information and  japantrustplc.co.uk            telephone, e-mail, or post: Telephone:  E-mail: Website: Client Relations Team    Trust bailliegifford.com/trust japantrustplc.co.uk Trust Communicating with Shareholders  Directors  David Kidd   Joanna Pitman Alternative Investment Fund Managers, Secretaries and     Edinburgh EH1 3AN  bailliegifford.com Registrar Computershare Investor  The Pavilions  Bristol   Brokers Investec Bank plc  London  Independent Auditor    Edinburgh  Depositary  (International) Limited  London E14 5AL  the Company’s Independent    Chartered Accountants and  Atria One  Edinburgh EH3 8EX Company Details japantrustplc.co.uk        Ticker BGFD   Further Information    Edinburgh EH1 3AN   trustenquiries@bailliegifford.com